-----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, VdQCCknkC9oF7nIfFkg/Wnm6/IF4cWxqP/gHnPf6RGOgqttYxv/vNMT7+FW9zJ5j AvDC0jjPY6TAH0kivWkvnQ== 0001047469-98-030693.txt : 19980813 0001047469-98-030693.hdr.sgml : 19980813 ACCESSION NUMBER: 0001047469-98-030693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-06366 FILM NUMBER: 98683510 BUSINESS ADDRESS: STREET 1: ONE FEDERAL STREET CITY: BOSTON STATE: MA ZIP: 02211 BUSINESS PHONE: 6173464000 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 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ----------------- FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED JUNE 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD _________ TO __________ COMMISSION FILE NUMBER 1-6366 FLEET FINANCIAL GROUP, INC. (Exact name of registrant as specified in its charter) RHODE ISLAND 05-0341324 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) ONE FEDERAL STREET BOSTON, MASSACHUSETTS 02110 (Address of principal executive office) (Zip Code) (617) 346-4000 Registrant's telephone number, including area code 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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO -------- -------- The number of shares of common stock of the Registrant outstanding as of July 31, 1998 was 283,924,673. ================================================================================ FLEET FINANCIAL GROUP, INC. FORM 10-Q FOR QUARTER ENDED JUNE 30, 1998 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT PAGE ---- PART I. ITEM 1. FINANCIAL INFORMATION Consolidated Statements of Income Three Months Ended June 30, 1998 and 1997 3 Six Months Ended June 30, 1998 and 1997 4 Consolidated Balance Sheets June 30, 1998 and December 31, 1997 5 Consolidated Statements of Changes in Stockholders' Equity Six Months Ended June 30, 1998 and 1997 6 Consolidated Statements of Cash Flows Six Months Ended June 30, 1998 and 1997 7 Condensed Notes to Consolidated Financial Statements 8 PART I. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION 21 SIGNATURES 22 EXHIBITS 23 2 FLEET FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited)
====================================================================================================== FOR THE THREE MONTHS ENDED JUNE 30 DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 1998 1997 - ------------------------------------------------------------------------------------------------------ Interest and fees on loans $1,481 $1,329 Interest on securities 179 137 Other 56 41 - ------------------------------------------------------------------------------------------------------ Total interest income 1,716 1,507 - ------------------------------------------------------------------------------------------------------ Interest expense: Deposits 474 407 Short-term borrowings 109 58 Long-term debt 104 84 Other 57 34 - ------------------------------------------------------------------------------------------------------ Total interest expense 744 583 - ------------------------------------------------------------------------------------------------------ Net interest income 972 924 - ------------------------------------------------------------------------------------------------------ Provision for credit losses 118 83 - ------------------------------------------------------------------------------------------------------ Net interest income after provision for credit losses 854 841 - ------------------------------------------------------------------------------------------------------ Noninterest income: Investment services revenue 220 164 Banking fees and commissions 182 178 Processing-related revenue 126 130 Capital markets revenue 107 65 Credit card revenue 98 15 Other 76 223 - ------------------------------------------------------------------------------------------------------ Total noninterest income 809 775 - ------------------------------------------------------------------------------------------------------ Noninterest expense: Employee compensation and benefits 482 443 Occupancy 75 70 Equipment 74 76 Intangible asset amortization 59 41 Legal and other professional 34 35 Other 293 360 - ------------------------------------------------------------------------------------------------------ Total noninterest expense 1,017 1,025 - ------------------------------------------------------------------------------------------------------ Income before income taxes 646 591 Applicable income taxes 253 244 - ------------------------------------------------------------------------------------------------------ Net income $ 393 $ 347 ====================================================================================================== Net income applicable to common shares $ 380 $ 331 Diluted weighted average common shares outstanding 294,380,093 283,814,698 Basic earnings per share $ 1.34 $ 1.20 Diluted earnings per share 1.29 1.17 Dividends declared .49 .45 - ------------------------------------------------------------------------------------------------------ SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3 FLEET FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited)
====================================================================================================== FOR THE SIX MONTHS ENDED JUNE 30 DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS 1998 1997 - ------------------------------------------------------------------------------------------------------ Interest and fees on loans $2,858 $2,638 Interest on securities 342 277 Other 110 82 - ------------------------------------------------------------------------------------------------------ Total interest income 3,310 2,997 - ------------------------------------------------------------------------------------------------------ Interest expense: Deposits 911 823 Short-term borrowings 195 103 Long-term debt 193 174 Other 110 64 - ------------------------------------------------------------------------------------------------------ Total interest expense 1,409 1,164 - ------------------------------------------------------------------------------------------------------ Net interest income 1,901 1,833 - ------------------------------------------------------------------------------------------------------ Provision for credit losses 210 148 - ------------------------------------------------------------------------------------------------------ Net interest income after provision for credit losses 1,691 1,685 - ------------------------------------------------------------------------------------------------------ Noninterest income: Investment services revenue 421 336 Banking fees and commissions 358 352 Capital markets revenue 245 136 Processing-related revenue 186 272 Credit card revenue 154 29 Other 140 263 - ------------------------------------------------------------------------------------------------------ Total noninterest income 1,504 1,388 - ------------------------------------------------------------------------------------------------------ Noninterest expense: Employee compensation and benefits 926 902 Equipment 154 155 Occupancy 149 147 Intangible asset amortization 110 82 Legal and other professional 65 65 Merger-related charges 73 --- Other 537 578 - ------------------------------------------------------------------------------------------------------ Total noninterest expense 2,014 1,929 - ------------------------------------------------------------------------------------------------------ Income before income taxes 1,181 1,144 Applicable income taxes 465 463 - ------------------------------------------------------------------------------------------------------ Net income $ 716 $ 681 ====================================================================================================== Net income applicable to common shares $ 691 $ 648 Diluted weighted average common shares outstanding 293,999,643 286,067,372 Basic earnings per share $ 2.43 $ 2.33 Diluted earnings per share 2.35 2.26 Dividends declared .98 .90 - ------------------------------------------------------------------------------------------------------ SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4
FLEET FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited)
========================================================================================================================== JUNE 30, DECEMBER 31, DOLLARS IN MILLIONS, EXCEPT SHARE AMOUNTS 1998 1997 - -------------------------------------------------------------------------------------------------------------------------- ASSETS Cash, due from banks and interest-bearing deposits $ 5,847 $ 5,076 Federal funds sold and securities purchased under agreements to resell 220 498 Securities (market value: $11,298 and $9,367) 11,293 9,362 Loans 66,754 62,565 Reserve for credit losses (1,551) (1,432) - -------------------------------------------------------------------------------------------------------------------------- Net loans 65,203 61,133 - -------------------------------------------------------------------------------------------------------------------------- Due from brokers/dealers 3,885 3,510 Mortgages held for resale 2,875 1,526 Premises and equipment 1,238 1,205 Mortgage servicing rights 1,668 1,768 Intangible assets 2,758 2,196 Other assets 5,726 4,773 - -------------------------------------------------------------------------------------------------------------------------- Total assets $ 100,713 $ 91,047 ========================================================================================================================== LIABILITIES Deposits: Demand $ 13,101 $13,148 Regular savings, NOW, money market 32,276 30,485 Time 21,615 20,102 - -------------------------------------------------------------------------------------------------------------------------- Total deposits 66,992 63,735 - -------------------------------------------------------------------------------------------------------------------------- Federal funds purchased and securities sold under agreements to repurchase 3,176 3,635 Other short-term borrowings 7,971 3,870 Due to brokers/dealers 4,983 4,316 Long-term debt 5,654 4,500 Accrued expenses and other liabilities 3,076 2,539 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities 91,852 82,595 - -------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Preferred stock 691 691 Common stock (285,584,715 shares issued in 1998 and 285,602,282 shares issued in 1997) 3 3 Common surplus 3,299 3,329 Retained earnings 4,851 4,437 Accumulated other comprehensive income 105 97 Treasury stock, at cost (1,737,498 shares in 1998 and 1,939,464 shares in 1997) (88 ) (105 ) - -------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 8,861 8,452 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $100,713 $ 91,047 ========================================================================================================================== SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5 FLEET FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
=================================================================================================================================== ACCUMULATED OTHER COMMON COMPRE- STOCK AT HENSIVE SIX MONTHS ENDED JUNE 30 PREFERRED $.01 COMMON RETAINED INCOME TREASURY DOLLARS IN MILLIONS, EXCEPT SHARE AMOUNTS STOCK PAR SURPLUS EARNINGS (LOSS) STOCK TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- 1997 - ---- Balance at December 31, 1996 $ 953 $ 3 $3,223 $3,640 $ 31 $ (60) $7,790 Net income 681 681 Other comprehensive loss, net of tax: Adjustment of valuation reserve for securities available for sale (6) (6) -------- Comprehensive income 675 Cash dividends declared on common stock ($0.90 per share) (229) (229) Cash dividends declared on preferred stock (33) (33) Redemption of preferred stock (34) (34) Common stock issued in connection with: Employee benefit and stock option plans (27) 2 70 45 Acquisition of Nash Weiss & Co. 16 16 Adjustment to retained earnings reflecting pooled entity different year-end (23) (23) Treasury stock purchased (693) (693) Exchange of Series V preferred stock for trust preferred securities (84) (84) Other, net (3) (2) 1 (4) - ----------------------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1997 $ 835 $ 3 $3,209 $4,036 $ 25 $ (682) $7,426 - ----------------------------------------------------------------------------------------------------------------------------------- 1998 Balance at December 31, 1997 $ 691 $ 3 $3,329 $4,437 $ 97 $ (105) $8,452 Net income 716 716 Other comprehensive income, net of tax: Adjustment of valuation reserve for securities available for sale 8 8 -------- Comprehensive income 724 Cash dividends declared on common stock ($0.98 per share) (275) (275) Cash dividends declared on preferred stock (25) (25) Common stock issued in connection with employee benefit and stock option plans (30) (2) 50 18 Treasury stock purchased (33) (33) - ----------------------------------------------------------------------------------------------------------------------------------- Balance at June 30, 1998 $ 691 $ 3 $3,299 $4,851 $105 $ (88) $8,861 =================================================================================================================================== SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6 FLEET FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
============================================================================================================ SIX MONTHS ENDED JUNE 30 DOLLARS IN MILLIONS 1998 1997 - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 716 $ 681 Adjustments for noncash items: Depreciation and amortization of premises and equipment 121 106 Amortization and impairment of mortgage servicing rights 253 116 Amortization of other intangible assets 110 79 Provision for credit losses 210 148 Deferred income tax expense 142 156 Securities gains (51) (18) Merger and restructuring-related charges 73 --- Net gains on sales of business units --- (175) Originations and purchases of mortgages held for resale (12,669) (7,568) Proceeds from sales of mortgages held for resale 11,320 7,691 (Increase)/decrease in due from brokers/dealers (374) 10 Increase in accrued receivables, net (88) (164) Increase/(decrease) in due to brokers/dealers 666 (53) Increase in accrued liabilities, net 288 553 Other, net (327) (146) - ------------------------------------------------------------------------------------------------------------ Net cash flow provided by operating activities 390 1,416 - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities available for sale (3,665) (1,790) Proceeds from maturities of securities available for sale 489 421 Proceeds from sales of securities available for sale 1,160 1,256 Purchases of securities held to maturity (577) (560) Proceeds from maturities of securities held to maturity 752 759 Net cash and cash equivalents received from businesses acquired 380 --- Net increase in loans and leases (2,737) (1,785) Net cash received from sale of business units --- 748 Purchases of premises and equipment (92) (75) Purchases of mortgage servicing rights (182) (135) - ------------------------------------------------------------------------------------------------------------ Net cash flow used in investing activities (4,472) (1,161) - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase/(decrease) in deposits 670 (3,842) Net increase in short-term borrowings 3,050 2,159 Proceeds from issuance of long-term debt 1,718 97 Repayments of long-term debt (564) (661) Proceeds from the issuance of common stock 18 45 Repurchase and redemption of common and preferred stock (33) (727) Cash dividends paid (284) (268) - ------------------------------------------------------------------------------------------------------------ Net cash flow provided by/(used in) financing activities 4,575 (3,197) - ------------------------------------------------------------------------------------------------------------ Net increase/(decrease) in cash and cash equivalents 493 (2,942) - ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at beginning of the period 5,574 9,104 - ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of the period $6,067 $ 6,162 ============================================================================================================ SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7 FLEET FINANCIAL GROUP, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 1. FINANCIAL STATEMENTS The unaudited consolidated financial information included herein has been prepared in conformity with the accounting principles and practices in Fleet Financial Group, Inc.'s (Fleet or the corporation) consolidated financial statements included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for the year ended December 31, 1997. On February 1, 1998, the corporation acquired The Quick & Reilly Group, Inc. (Quick & Reilly). Since the Quick & Reilly acquisition was accounted for under the pooling-of-interests method of accounting, all prior periods have been restated to include Quick & Reilly financial information. The corporation's December 31, 1997 Annual Report has been restated for the Quick & Reilly acquisition and has been filed on Form 8-K with the SEC. The accompanying interim consolidated financial statements contained herein are unaudited. However, in the opinion of the corporation, all adjustments consisting of normal recurring items necessary for a fair statement of the operating results for the periods shown have been made. The results of operations for the six months ended June 30, 1998 may not be indicative of operating results for the year ending December 31, 1998. NOTE 2. ACQUISITIONS AND MERGER-RELATED CHARGES During the fourth quarter of 1997, the corporation entered into a definitive agreement to acquire the consumer credit card operations of Advanta Corporation (Advanta). This acquisition closed on February 20, 1998 under the purchase method of accounting and as such, the results of Advanta are included for the period subsequent to the acquisition date. Goodwill of approximately $500 million was recorded in connection with this transaction and is being amortized on a straight-line basis over 15 years. Additionally, purchased credit card intangible of approximately $150 million was recorded. Subject to the level of earnings at Advanta, Fleet may be required to make additional earnout payments up to $100 million over five years, which will be recorded as goodwill. During the first quarter of 1998, the corporation recorded $73 million of merger-related charges in connection with the acquisitions of Quick & Reilly and the consumer credit card operations of Advanta. The merger-related charges pertain primarily to exit costs, severance costs and professional fees. NOTE 3. SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS
Cash-Flow Disclosure - --------------------------------------------------------------- Six months ended June 30 Dollars in millions 1998 1997 - --------------------------------------------------------------- Supplemental disclosure for cash paid during the period for: Interest expense $1,396 $1,271 Income taxes, net of refunds 297 141 - --------------------------------------------------------------- - --------------------------------------------------------------- Supplemental disclosure of noncash investing and financing activities: Transfer of loans to foreclosed property and repossessed equipment 6 19 Reclassification of indirect auto loans to held for sale --- 2,170 Exchange of Series V preferred stock for trust preferred securities --- 84 Adjustment to unrealized gain (loss) on securities available for sale 8 (6) - --------------------------------------------------------------- - --------------------------------------------------------------- Assets acquired and liabilities assumed in business combinations were as follows: Assets acquired, net of cash and cash equivalents received 2,845 -- Net cash and cash equivalents received 380 -- Liabilities assumed 3,225 -- - --------------------------------------------------------------- Divestitures: Assets sold -- 541 Net cash received for divestitures -- 748 Liabilities sold -- 24 - ---------------------------------------------------------------
8 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL SUMMARY
- ------------------------------------------------------------------------ Three months Six months Dollars in millions, ended June 30 ended June 30 except per share data 1998 1997 1998 1997 - ------------------------------------------------------------------------- Earnings Net income $ 393 $ 347 $ 716 $ 681 Net interest income (FTE)(a) 981 933 1,919 1,851 - ------------------------------------------------------------------------- Per Common Share Basic earnings 1.34 1.20 2.43 2.33 Diluted earnings 1.29 1.17 2.35 2.26 Cash dividends declared .49 .45 .98 .90 Book value 28.78 24.11 28.78 24.11 - ------------------------------------------------------------------------- Operating Ratios Return on average assets 1.59 % 1.62 % 1.51 % 1.59 % Return on common equity 18.97 20.14 17.51 19.65 Efficiency ratio 56.8 56.7 56.7 57.9 Equity to assets (period-end) 8.80 8.48 8.80 8.48 - ------------------------------------------------------------------------- At June 30 Total assets $100,713 $87,573 $100,713 $87,573 Stockholders' equity 8,861 7,426 8,861 7,426 Nonperforming assets(b) 337 531 337 531 - ------------------------------------------------------------------------- - -------------------------------------------------------------------------
(a) The FTE adjustment included in net interest income was $9 million for each of the three months ended and $18 for each of the six months ended June 30, 1998 and 1997, respectively. (b) Nonperforming assets and related ratios at June 30, 1998 and 1997 do not include $147 million and $249 million, respectively, of nonperforming assets classified as held for sale or accelerated disposition. Fleet reported net income of $393 million, or $1.29 per diluted share, for the quarter ended June 30, 1998, compared to $347 million, or $1.17 per diluted share, in the second quarter of 1997. Return on average assets (ROA) and return on common equity (ROE) were 1.59% and 18.97%, respectively, for the second quarter of 1998, compared to 1.62% and 20.14%, respectively, for the second quarter of 1997. Net income for the first six months of 1998 was $716 million including merger-related charges of $73 million ($44 million post-tax) pertaining to the acquisitions of Quick & Reilly and the consumer credit card operations of Advanta. Diluted earnings per share rose 4% to $2.35 for the first six months of 1998 compared with $2.26 earned in the first half of 1997. ROA and ROE for the first six months of 1998 were 1.51% and 17.51%, respectively, compared with 1.59% and 19.65%, respectively, for 1997. The second quarter of 1997 results include net gains totaling $175 million (pre-tax) on the corporation's sales of Option One, its nonconforming mortgage banking subsidiary, its Corporate Trust division and its Indirect Auto Lending portfolio. Also included in the other noninterest expense category were $155 million of charges pertaining primarily to the impairment of certain technology investments, severance costs and the settlement of a lawsuit. INCOME STATEMENT ANALYSIS Net Interest Income
- ----------------------------- ----------------- ----------------- Three months Six months FTE Basis ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - ----------------------------- -------- -------- -------- -------- Interest income $1,716 $1,507 $3,310 $2,997 Tax-equivalent adjustment 9 9 18 18 Interest expense 744 583 1,409 1,164 - ----------------------------- -------- -------- -------- -------- Net interest income $ 981 $ 933 $1,919 $1,851 - ----------------------------- -------- -------- -------- --------
Net interest income on a fully taxable equivalent basis (FTE) totaled $981 million for the quarter ended June 30, 1998, compared to $933 million for the same period in 1997. The increase is primarily attributable to the acquisition of Advanta, strong growth in Fleet's earning assets and increased loan fees. 9 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Interest Margin and Interest-Rate Spread - ------------------------------------------------------------------------ Three months ended June 30 1998 1997 FTE Basis Average Average Dollars in millions Balance Rate Balance Rate - ------------------------------------------------------------------------ Securities $11,099 6.58 % $ 8,327 6.72% Loans 66,329 8.68 60,017 8.68 Mortgages held for sale 2,513 7.26 1,444 7.91 Due from brokers/dealers 4,482 4.55 2,628 4.60 Other 1,018 3.82 1,347 5.40 - ------------------------------------------------------------------------ Total interest-earning assets 85,441 8.09 73,763 8.24 - ------------------------------------------------------------------------ Deposits 51,322 3.70 47,614 3.43 Short-term borrowings 9,005 4.77 4,963 4.62 Due to brokers/dealers 5,167 4.62 3,026 4.58 Long-term debt 5,572 7.48 4,611 7.33 - ------------------------------------------------------------------------ Interest-bearing liabilities 71,066 4.20 60,214 3.89 - ------------------------------------------------------------------------ Interest-rate spread 3.89 4.35 Interest-free sources of funds 14,375 13,549 - ------------------------------------------------------------------------ Total sources of funds $85,441 $73,763 - ------------------------------------------------------------------------ Net interest margin 4.60 % 5.07% - ------------------------------------------------------------------------
The corporation's net interest margin for the second quarter of 1998 was 4.60%, a decrease of 47 basis points from the second quarter of 1997. The decrease in net interest margin is primarily attributable to higher-cost sources of funds, principally wholesale time deposits and short-term borrowings, funding the corporation's growth in core commercial loans and the credit card loans obtained as part of the Advanta acquisition, coupled with substantial increases in lower spread activity at the corporation's brokerage subsidiary, Quick & Reilly. Average securities increased $2.8 billion from the second quarter of 1997, due to Fleet's efforts to reposition the corporation's interest-rate sensitivity, while the yield declined slightly as a result of a low interest-rate environment. Average loans increased $8.5 billion to $66.3 billion for the second quarter of 1998, when compared with the second quarter of 1997, excluding $2.2 billion of indirect auto loans sold in the third quarter of 1997. This growth resulted primarily from the acquisition of Advanta which incrementally added approximately $2.2 billion of average credit card loans and increases in the commercial, corporate finance, and lease financing portfolios. Average due from brokers/dealers and due to brokers/dealers both increased approximately $2 billion as a result of increased match book activity and funding of customers' margin accounts at Quick & Reilly. The $3.7 billion increase in average interest-bearing deposits compared to the second quarter of 1997 is due primarily to $2.0 billion of time and savings deposits from the acquisition of Advanta. The net interest rate paid on average deposits increased 27 basis points to 3.70% for the second quarter of 1998 compared to the same period of 1997. The increase in the cost of deposits reflects a shift in the mix of deposits, partially attributable to an influx of wholesale time deposits as a result of the Advanta acquisition. The $4.0 billion increase in average short-term borrowings is attributable to an increase in both federal funds purchased and treasury, tax and loan borrowings as the corporation utilized these favorably priced funding vehicles to fund asset growth. The $961 million increase in average long-term debt was due principally to increases of $737 million in senior and subordinated debt, and the issuance of $225 million in trust preferred securities in order to take advantage of the low interest-rate environment and to strengthen the corporation's regulatory capital ratios. Noninterest Income
- ---------------------------------- -------------- ----------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - ---------------------------------- ------ ------- -------- -------- Investment services revenue $220 $164 $ 421 $ 336 Banking fees and commissions 182 178 358 352 Processing-related revenue 126 130 186 272 Capital markets revenue 107 65 245 136 Credit card revenue 98 15 154 29 Other noninterest income 76 223 140 263 - ---------------------------------- ------ ------- -------- -------- - ---------------------------------- ------ ------- -------- -------- Total noninterest income $809 $775 $1,504 $1,388 - ---------------------------------- ------ ------- -------- --------
Noninterest income for the second quarter of 1998 increased $34 million to $809 million compared to $775 million for the same period of 1997, an increase of 4%. Excluding $175 million of net gains on sales of business units in the second quarter of 1997, noninterest income increased $209 million, or 35%. Increases were noted in several core revenue categories including investment services revenue, capital markets revenue, as well as credit card revenue, partially offset by decreases in processing-related revenue. These increases primarily reflect the acquisition of the consumer credit card operations of Advanta, strong growth at Quick & Reilly, and enhanced revenue growth in the investment management business, which has been positively impacted by the acquisition of Columbia Management Company (Columbia) in late 1997. Investment Services Revenue
- ------------------------------------- -------------- --------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - ------------------------------------- ------- ------ ------- ------- Investment services revenue $136 $ 98 $261 $196 Brokerage fees and commissions 84 66 160 140 - ------------------------------------- ------- ------ ------- ------- Total investment services revenue $220 $164 $421 $336 - ------------------------------------- ------- ------ ------- -------
Investment services revenue, which includes asset management revenues, as well as brokerage fees and commissions, increased $56 million, or 34% over the second quarter of 1997. Brokerage fees and commissions increased $18 million, or 27%, over the second quarter of 1997 due to increased customer trading volumes as a result of the strong performance in the equity markets. 10 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The major components of investment service revenue excluding brokerage revenue are as follows:
- ----------------------------- -------------- --------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - ----------------------------- ------- ------ ------- ------- Private clients group $ 55 $ 49 $106 $ 97 Columbia Management Company 27 --- 50 --- Retail investments 20 15 37 32 Retirement plan services 17 15 33 31 Not-for-profit institutional services 13 12 25 23 Other 4 7 10 13 - ----------------------------- ------- ------ ------- ------- Total $ 136 $ 98 $261 $196 - ----------------------------- ------- ------ ------- -------
Investment services revenue, excluding brokerage revenue for the second quarter of 1998, increased 39% to $136 million compared to $98 million in the second quarter of 1997. This improvement was largely due to the acquisition of Columbia in December 1997, as well as growth in overall assets under management. Assets under management have grown 53%, including the acquisition of Columbia, to $80 billion at June 30, 1998 from $52 billion at June 30, 1997. These increases reflect the corporation's continued focus on developing, acquiring and growing fee-based businesses. The Galaxy funds grew to $13 billion at June 30, 1998 from $10 billion over the same period in 1997, and Columbia mutual funds represented $7 billion in assets under management at June 30, 1998. Processing-Related Revenue
- -------------------------------------------------------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - -------------------------------------------------------------- Mortgage banking revenue, net $ 78 $ 91 $ 96 $194 Student loan servicing fees 30 26 58 52 Other 18 13 32 26 - -------------------------------------------------------------- Total processing-related revenue $126 $130 $186 $272 - --------------------------------------------------------------
Processing-related revenue decreased $4 million when compared to the second quarter of 1997 due primarily to a decline in mortgage banking revenue as a result of the sale of Option One, which contributed $20 million to the second quarter of 1997. Student loan servicing fees increased $4 million, or 15%, at AFSA Data Corporation (AFSA), the corporation's student loan servicing subsidiary. AFSA services 5.8 million accounts nationwide and is the largest third-party student loan servicer in the United States, with over $41 billion in loans serviced. Other processing-related revenue increased $5 million as a result of a full quarter's impact of a recently acquired health care processing company.
Mortgage Banking Revenue, Net - ------------------------------------------------------------------------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - ------------------------------------------------------------------------------- Net loan servicing revenue $113 $114 $230 $225 Mortgage production revenue 58 35 85 75 Gains on sales of mortgage servicing 8 --- 34 10 Mortgage servicing rights amortization (101) (58) (178) (116) Impairment charge --- --- (75) --- - ------------------------------------------------------------------------------- Total mortgage banking revenue, net $ 78 $ 91 $ 96 $194 - -------------------------------------------------------------------------------
Net mortgage banking revenue was $78 million in the second quarter of 1998. Excluding the sale of Option One during the second quarter of 1997, net mortgage banking revenue increased $7 million, or 10%, compared to the second quarter of 1997. Loan servicing revenue, which remained stable during the second quarter of 1998, represents fees received for servicing residential mortgage loans. Mortgage production revenue increased $23 million to $58 million in the second quarter of 1998 as a result of strong loan production volume as loan production volume in the second quarter of 1998 exceeded $9 billion compared to $4.4 billion in the second quarter of 1997. This revenue includes income derived from the loan origination process and net gains on sales of mortgage loans. Mortgage servicing rights (MSRs) amortization increased $43 million to $101 million for the second quarter of 1998 as compared to $58 million for the same period of 1997. The level of amortization increased due to a strong acceleration in prepayments resulting from a decline in mortgage interest rates, coupled with a higher level of amortization of recently purchased mortgage servicing rights with a higher servicing spread. At June 30, 1998, the carrying value and fair value of the corporation's MSRs were $1.7 billion and $1.8 billion, respectively. Capital Markets Revenue
- --------------------------------------------------------------------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - --------------------------------------------------------------------------- Venture capital revenue $ 39 $10 $ 69 $ 28 Brokerage market-making revenue 31 24 62 40 Foreign exchange/interest-rate products 19 11 33 23 Corporate finance fees 12 10 18 16 Securities trading gains 6 6 12 11 Securities gains --- 4 51 18 - -------------------------------------------------------------------------- Total capital markets revenue $107 $65 $245 $136 - --------------------------------------------------------------------------
11 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital markets revenue increased $42 million to $107 million for the quarter ended June 30, 1998 when compared to the same quarter of 1997. This was due primarily to increasing levels of venture capital revenue, increased volume in the corporation's market-making activity at Quick & Reilly, as well as strong foreign exchange and interest-rate product activities. The gains on the investments of Fleet Private Equity, the corporation's venture capital business, increased by $29 million in the second quarter of 1998 when compared with the second quarter of 1997. The corporation's ability to continue to experience increases in the value of these venture capital investments depends on a variety of factors, including the condition of the economy and equity markets. Thus, the likelihood of such gains in the future cannot be predicted. Other noninterest income increased $28 million to $76 million when compared to $48 million, excluding $175 million of gains on sales of certain business units, in the second quarter of 1997. This increase is due primarily to revenues resulting from the Advanta acquisition. Noninterest Expense
- ------------------------------------ ---------------- ----------------- Three months Six months ended June 30 ended June 30 Dollars in millions 1998 1997 1998 1997 - ------------------------------------- -------- ------- -------- -------- Employee compensation and benefits $ 482 $ 443 $ 926 $ 902 Occupancy 75 70 149 147 Equipment 74 76 154 155 Intangible asset amortization 59 41 110 82 Legal and other professional 34 35 65 65 Marketing 35 22 62 44 Telephone 25 21 46 42 Printing and mailing 24 20 46 41 Other 209 297 383 451 - ------------------------------------- -------- ------- -------- -------- Total noninterest expense excluding merger-related charges 1,017 1,025 1,941 1,929 Merger-related charges --- --- 73 --- - ------------------------------------- -------- ------- -------- -------- Total noninterest expense $1,017 $1,025 $2,014 $1,929 - ------------------------------------- -------- ------- -------- --------
Total noninterest expense for the second quarter of 1998 totaled $1,017 million compared to $1,025 million for the same period of 1997. Excluding $155 million of charges in the second quarter of 1997 pertaining primarily to the impairment of certain technology investments, severance costs and the settlement of a lawsuit, noninterest expense increased $147 million in the second quarter of 1998 over the same period in 1997. The increase is primarily attributable to the acquisitions of Advanta and Columbia. Employee compensation and benefits increased $39 million compared with the second quarter of 1997 due to increasing levels of compensation expense attributable primarily to Advanta and annual merit increases, partly offset by divested businesses. Marketing expense increased $13 million over the prior year quarter due to increased marketing initiatives associated with the Advanta and Columbia acquisitions. Intangible asset amortization increased $18 million in the second quarter of 1998 when compared to the second quarter of 1997. This increase was due to the acquisitions of Columbia and Advanta, as well as additional goodwill recorded in the third quarter of 1997 pertaining to the NatWest earnout agreement. Other noninterest expense increased $67 million to $209 million in the second quarter of 1998 compared to $142 million in the second quarter of 1997, excluding $155 million of charges recorded in that quarter, due primarily to the acquisition of Advanta. IMPACT OF THE YEAR 2000 ISSUE The corporation's Year 2000 project is directed by a Year 2000 Executive Management Steering Committee consisting of its President and Vice Chairmen. They provide direct oversight of the Year 2000 initiative and are updated monthly on the project's progress. The corporation's Board of Directors receives project updates on a quarterly basis. The corporation has completed its assessment of Year 2000 issues, developed a plan, and arranged for the required resources to complete the necessary remediation efforts. The corporation will utilize both internal and external resources to reprogram, or replace, and test the software and hardware for Year 2000 modifications. The corporation has remediated, tested and returned to production more than half of its applications. This activity continues to track in accordance with the original plan and the corporation expects to have substantially completed the remediation and testing of all applications by the end of 1998. The corporation has established a separate test environment to accommodate its Year 2000 testing activity and the anticipated need to test with its customers and other third parties during 1999. The corporation relies on several third party service providers for key business processes. It continues to work closely with these companies to monitor the progress of their Year 2000 efforts. The corporation's senior management has conducted on-site visits with its most critical service providers to discuss and assess their Year 2000 readiness. In addition, the corporation is receiving written and verbal verification from its significant third party service providers and vendors as to their Year 2000 readiness. The corporation will begin Year 2000 testing with several of these key vendors in the third quarter of 1998 and plans to complete testing by the end of the first quarter of 1999. Validation of Year 2000 readiness of all the corporation's vendors continues with a particular focus on the readiness and alternatives, where possible, for vendors that have been identified as critical. While the corporation continues to discuss these matters with, obtain written certification from and test the systems of such other companies as to the Year 2000 compliance, there can be no assurance that any potential impact associated with incompatible systems after December 31, 1999 would not have a material adverse effect on the corporation's business, financial condition or results of operations. The corporation had previously established business continuity plans for its lines of business. The corporation is in the process of assessing these plans for the possible impact of Year 2000 anticipated failures. It will adjust its existing business continuity plans where appropriate and possible for those scenarios that may have the most severe impact on its operations. This activity is expected to be substantially complete by the end of the fourth quarter of 1998. The corporation continues to anticipate that the cost of the Year 2000 project will not exceed $150 million. During the quarter, the corporation incurred $19 million of expenses and has incurred $52 million of expenses to date. Income Taxes For the second quarter of 1998, the corporation recognized income tax expense of $253 million, an effective tax rate of 39.2%. Tax expense for the same period of 1997 was $244 million, an effective tax rate of 41.3%. Lines of Business The financial performance of the corporation is monitored by an internal profitability system which provides line of business results and key performance measures. The corporation is managed along the following business lines: retail banking, commercial financial services, national financial services, investment services, and treasury. Management accounting policies are in place for assigning expenses that are not directly incurred by lines of business, such as overhead, operations and technology expense. Additionally, equity, loan loss provision and loan loss reserves are assigned on an economic basis. The corporation has developed risk adjusted methodologies that quantify risk types within business units and assigns capital accordingly. Within business units, assets and liabilities are match-funded utilizing similar maturity, liquidity and repricing information. Management accounting concepts and organizational hierarchies are periodically refined and results may be restated to reflect changes in methodology and organizational structure. 12 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fleet Financial Group Net Income by Line of Business - --------------------------------------------------------------- For the three months ended June 30, June 30, Dollars in millions 1998 1997 - -------------------------------------------------------------- Retail Banking $116 $121 Commercial Financial Services 108 84 National Financial Services 74 20 Investment Services 58 42 Treasury 27 14 All Other 10 66 - --------------------------------------------------------------- Total $393 $347 - ---------------------------------------------------------------
Retail Banking - --------------------------------------------------------------- For the three months ended June 30, June 30, Dollars in millions 1998 1997 - --------------------------------------------------------------- Income statement data: Net interest income $ 451 $ 476 Noninterest income 161 152 Provision 29 29 Noninterest expense 372 377 - --------------------------------------------------------------- Net income $ 116 $ 121 - --------------------------------------------------------------- Balance sheet data: Average loans 10,093 10,735 Average deposits 42,646 43,933 - --------------------------------------------------------------- Return on equity 27% 27% - ---------------------------------------------------------------
Retail Banking includes businesses engaged in consumer retail services through branch banking and direct banking units, as well as small business lending and deposit services. The retail banking unit earned $116 million in the second quarter of 1998, which was down slightly from the same period in the prior year. Lower earnings primarily reflect lower deposit volumes resulting partly from the reconfiguration of the branch network in the second quarter of 1997, as well as customer migration from traditional deposit products towards higher yielding products and mutual funds. The impact of lower deposit volumes was mostly offset by higher noninterest revenue from increased debit card and ATM activity associated with the deployment of almost 300 ATMs late in 1997. Operating costs were down versus the second quarter of 1997 partly due to efficiencies gained in the reconfiguration of the branch network in the second quarter of 1997. These efficiencies helped to fund investments associated with the expansion of alternative delivery channels including remote ATMs, PC banking, and debit card volume.
Commercial Financial Services - ----------------------------------------------------------------- For the three months ended June 30, June 30, Dollars in millions 1998 1997 - ----------------------------------------------------------------- Income statement data: Net interest income $ 320 $ 292 Noninterest income 102 99 Provision 52 53 Noninterest expense 191 192 - ----------------------------------------------------------------- Net income $ 108 $ 84 - ----------------------------------------------------------------- Balance sheet data: Average loans 38,958 33,996 Average deposits 11,395 11,174 - ----------------------------------------------------------------- Return on equity 20% 15% - -----------------------------------------------------------------
Commercial financial services includes traditional commercial banking, national, specialized and asset-based lending, as well as investment banking, government banking, trade finance and cash management services. Commercial financial services earned $108 million in the second quarter of 1998. Compared to the second quarter of 1997, earnings increased $24 million, or 29%, driven mostly by strong loan growth and continued tight expense control. Compared to the prior year, loans increased 15%, or $5.0 billion, reflecting strong loan growth within the commercial banking, specialty lending, and asset-based lending sectors. Despite overall loan growth of 15%, the provision for loan loss was slightly lower than the second quarter of 1997 due to improving credit quality. Increased noninterest income was largely influenced by the continued success of corporate finance activities and the ability to effectively cross sell existing corporate accounts. As a result, corporate finance fees increased by 30%, while cash management and trade services activities increased 12%. These increases were partly offset by several large transactional items recorded in the second quarter of 1997. 13 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
National Financial Services - ---------------------------------------------------------------- For the three months ended June 30, June 30, Dollars in millions 1998 1997 - ---------------------------------------------------------------- Income statement data: Net interest income $ 128 $ 71 Noninterest income 280 121 Provision 75 49 Noninterest expense 213 110 - ---------------------------------------------------------------- Net income $ 74 $ 20 - ---------------------------------------------------------------- Balance sheet data: Average loans 4,976 3,079 Average deposits 2,651 1,799 - ---------------------------------------------------------------- Return on equity 13% 9% - ---------------------------------------------------------------- - ----------------------------------------------------------------
National financial services includes mortgage banking, credit card services, student loan processing, and venture capital services. The following table presents comparative data for the four principal businesses which comprise national financial services.
National Financial Services Net Income by Unit - ---------------------------------------------------------------- For the three months ended June 30, June 30, Dollars in millions 1998 1997 - ---------------------------------------------------------------- Venture capital $ 26 $ 4 Mortgage banking 23 12 Student loan processing 5 5 Credit card 20 (1) - ---------------------------------------------------------------- Total $ 74 $ 20 - ---------------------------------------------------------------- - ----------------------------------------------------------------
Second quarter earnings of $74 million increased $54 million compared to the same quarter a year ago. Improved earnings were only partly the result of the Advanta acquisition. Mortgage banking and venture capital each recognized increased earnings from higher levels of noninterest revenue. Mortgage banking earnings increased due to higher loan production volumes, driven by refinancing activity and new mortgage volumes as consumers seek to lock in low mortgage interest rates. Increased venture capital income resulted from gains on several managed investments. The growth in credit card earnings reflects the impact of the acquisition of Advanta's credit card unit in the first quarter of 1998.
Investment Services - ------------------------------------------------------------ For the three months ended June 30, June 30, Dollars in millions 1998 1997 - ------------------------------------------------------------ Income statement data: Net interest income $ 45 $ 42 Noninterest income 257 189 Provision 1 1 Noninterest expense 201 158 - ------------------------------------------------------------ Net income $ 58 $ 42 - ------------------------------------------------------------ Balance sheet data: Average loans 3,897 3,006 Average deposits 2,117 2,290 - ------------------------------------------------------------ Return on equity 22% 27% - ------------------------------------------------------------ Assets under management $80,007 $52,409 - ------------------------------------------------------------ - ------------------------------------------------------------
Investment services provides asset management services to institutional and wealthy market clients, retail mutual fund and annuity sales, and discount brokerage services. Investment services earned $58 million in the second quarter of 1998 compared to $42 million in the second quarter of 1997, an increase of 38%. Improved earnings reflect Fleet's continued emphasis on high growth noninterest income generating business lines. Noninterest income increased by $68 million, or 36% reflecting strong growth in brokerage activity and sales of investment products, as well as significant increases in assets under management. Net interest income also increased due to loan growth in both the brokerage and private clients group. Assets under management totaled $80 billion at June 30, 1998, an increase of 53% compared to $52 billion at June 30,1997. This growth reflects the acquisition of Columbia, which had $20 billion in assets under management at June 30, 1998. The return on equity of 22% in the second quarter of 1998 reflects the impact of the premium paid in connection with the acquisition of Columbia. Excluding the impact of the goodwill associated with that transaction, return on equity would have been 40% in the second quarter of 1998.
Treasury - -------------------------------------------------------------- For the three months ended June 30, June 30, Dollars in millions 1998 1997 - -------------------------------------------------------------- Income statement data: Net interest income $ 29 $ 27 Noninterest income 22 9 Provision 4 3 Noninterest expense 15 16 - -------------------------------------------------------------- Net income $ 27 $ 14 - -------------------------------------------------------------- Balance sheet data: Average loans 7,312 5,975 Average securities 9,993 7,347 Average deposits 6,953 4,097 - -------------------------------------------------------------- Return on equity 35% 22% - -------------------------------------------------------------- - --------------------------------------------------------------
Treasury is responsible for managing the corporation's securities and residential mortgage portfolios, trading operations, asset-liability management function and wholesale funding needs. The Treasury unit earned $27 million compared to second quarter 1997 earnings of $14 million. The increase in earnings of $13 million reflect increased fee income from the sale of foreign exchange and interest-rate protection products, as well as increased residential loan and investment portfolio balances. 14 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All Other This unit includes allocated support units, the management accounting control units, and certain transactions or events not driven by specific business lines. Similarly, for comparative purposes, certain businesses sold in late 1997 have also been moved out of their business lines and into this unit. Accordingly earnings in this unit can fluctuate with changes affecting total company loan loss provision, one time charges, gains and other actions not driven by specific business units. Earnings were $10 million compared to $66 million in the second quarter of 1997. Lower earnings result from certain businesses sold and transactional gains recorded in the second quarter of 1997. Earnings for the second quarter of 1997 included operating income from discontinued operations, as well as gains associated with the sale of these units.
Securities - ------------------------------------------------------------------------------------------------------------------------- June 30, 1998 March 31, 1998 December 31, 1997 ------------------------- ------------------------- ------------------------- Amortized Market Amortized Market Amortized Market Dollars in millions Cost Value Cost Value Cost Value - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Securities available for sale: US Treasury and government agencies $ 1,091 $ 1,106 $ 1,204 $ 1,211 $1,126 $1,134 Mortgage-backed securities 7,941 8,094 7,981 8,096 6,177 6,298 Other debt securities 494 496 255 255 186 189 - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Total debt securities 9,526 9,696 9,440 9,562 7,489 7,621 - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Marketable equity securities 315 314 289 288 256 282 Other securities 209 209 158 158 210 210 - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Total securities available for sale 10,050 10,219 9,887 10,008 7,955 8,113 - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Total securities held to maturity 1,074 1,079 1,271 1,276 1,249 1,254 - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Total securities $11,124 $11,298 $11,158 $11,284 $9,204 $9,367 - --------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- - --------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
The amortized cost of securities available for sale increased $2.1 billion to $10.1 billion at June 30, 1998 compared to December 31, 1997 due to a program designed to reposition the corporation's interest-rate sensitivity. The valuation adjustment on securities available for sale increased $11 million during this period to an unrealized gain position of $169 million at June 30, 1998.
Loans - ---------------------------------------------------------------------- June 30, March 31, Dec. 31, Dollars in millions 1998 1998 1997 - ---------------------------------------------------------------------- Commercial and industrial $34,360 $33,397 $32,000 Lease financing 3,775 3,458 3,376 Commercial real estate 5,280 5,484 5,677 Residential real estate 9,768 9,344 10,019 Consumer 13,571 13,303 11,493 - ---------------------------------------------------------------------- Total loans $66,754 $64,986 $62,565 - ----------------------------------------------------------------------
Total loans increased $4.2 billion from December 31, 1997 to $66.8 billion at June 30, 1998, resulting primarily from loan growth in the commercial and industrial and lease financing portfolios, as well as the acquisition of the consumer credit card operations of Advanta. Commercial and industrial (C&I) loans increased $2.4 billion from December 31, 1997 to June 30, 1998, due primarily to growth in asset-based lending, large corporate loans, and continued participation in the syndication market within the corporation's corporate finance group. Commercial real estate (CRE) loans decreased $397 million from December 31, 1997 to June 30, 1998 due to pay-downs. The corporation continues to monitor the financial developments in the Asian economies. The corporation has certain relationships with customers in the Asian marketplace. These relationships contain both market and credit risks. Fleet's exposure to the Asian market as of June 30, 1998 was approximately $125 million and related primarily to short-term trade related financings. Outstanding residential real estate loans secured by one- to four-family residences decreased $251 million to $9.8 billion at June 30, 1998 compared to $10.0 billion at December 31, 1997. This decline is the result of accelerated prepayments coupled with the sale of residential loans anticipated to prepay in the near future. 15 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consumer Loans - --------------------------------------------------------------- June 30, March 31, Dec. 31, Dollars in millions 1998 1998 1997 - --------------------------------------------------------------- Home equity $ 4,523 $ 4,662 $ 4,851 Credit card 5,032 4,741 2,742 Student loans 984 1,046 1,029 Installment/Other 3,032 2,854 2,871 - --------------------------------------------------------------- Total $13,571 $13,303 $11,493 - ---------------------------------------------------------------
Consumer loans increased $2.1 billion from December 31, 1997. The increase is primarily the result of the acquisition of the consumer credit card portfolio of Advanta.
Nonperforming Assets(a)(b) - --------------------------------------------------------------------------- Dollars in millions C&I CRE Consumer Total - --------------------------------------- ------ ------- ---------- ------- Nonperforming loans: Current or less than 90 days past due $ 87 $44 $ 5 $136 Noncurrent 93 31 56 180 OREO 1 4 16 21 - --------------------------------------- ------ ------- ---------- ------- Total NPAs June 30, 1998 $181 $79 $77 $337 - --------------------------------------- ------ ------- ---------- ------- Total NPAs March 31, 1998 $200 $91 $82 $373 - --------------------------------------- ------ ------- ---------- ------- Total NPAs December 31, 1997 $257 $83 $76 $416 - --------------------------------------- ------ ------- ---------- -------
(a) Throughout this document, NPAs and related ratios do not include loans greater than 90 days past due and still accruing interest ($208 million, $225 million, and $202 million at June 30, 1998, March 31, 1998, and December 31, 1997, respectively). Included in the 90 days past due and still accruing interest were $183 million, $194 million, and $172 million of consumer and residential loans at June 30, 1998, March 31, 1998, and December 31, 1997, respectively. (b) Nonperforming assets and related ratios at June 30, 1998 and 1997 do not include $147 million and $249 million, respectively, of nonperforming assets classified as held for sale or accelerated disposition. Nonperforming assets (NPAs) decreased $79 million from December 31, 1997 to $337 million at June 30, 1998. NPAs at June 30, 1998, as a percentage of total loans and OREO and as a percentage of total assets improved to 0.50% and 0.33%, respectively, compared to 0.66% and 0.46%, respectively, at December 31, 1997. This improvement was due primarily to declining levels of nonperforming assets in the commercial and industrial portfolio.
Reserve for Credit Loss Activity - ---------------------------------------------------------------- Six months ended June 30 Dollars in millions 1998 1997 - ---------------------------------------------------------------- Balance at beginning of year $1,432 $1,488 Provision charged against income 210 148 Loans charged off (274) (262) Recoveries of loans charged off 64 70 - ---------------------------------------------------------------- Net charge-offs (210) (192) Acquisitions/Other 119 (1) - ---------------------------------------------------------------- Balance at end of period $1,551 $1,443 - ---------------------------------------------------------------- Ratio of net charge-offs to average loans .66% .65% - ---------------------------------------------------------------- Ratio of reserve for credit losses to period-end loans 2.32 2.44 - ---------------------------------------------------------------- Ratio of reserve for credit losses to period-end nonperforming loans 491 290 - ----------------------------------------------------------------
Fleet's reserve for credit losses increased from $1.432 billion at December 31, 1997 to $1.551 billion at June 30, 1998. The overall increase in the reserve for credit losses from the second quarter of 1997 is a result of reserves acquired as part of the acquisition of Advanta. The provision for credit losses for the first six months of 1998 was $210 million, $62 million higher than the prior year's first six months. The increase is a result of increased net charge-offs, principally in the credit card portfolio.
Funding Sources - ----------------------------------- --------- ---------- ---------- June 30, March 31, Dec. 31, Dollars in millions 1998 1998 1997 - ----------------------------------- --------- ---------- ---------- Deposits: Demand $13,101 $13,006 $13,148 Regular savings, NOW, money market 32,276 31,898 30,485 Time: Domestic 17,948 19,429 16,258 Foreign 3,667 3,832 3,844 - ----------------------------------- --------- ---------- ---------- Total deposits 66,992 68,165 63,735 - ----------------------------------- --------- ---------- ---------- Short-term borrowed funds: Federal funds purchased 722 1,456 1,004 Securities sold under agree- ments to repurchase 2,454 2,451 2,630 Commercial paper 745 834 811 Other 7,226 3,497 3,060 - ----------------------------------- --------- ---------- ---------- Total short-term borrowed funds 11,147 8,238 7,505 - ----------------------------------- --------- ---------- ---------- Due to brokers/dealers 4,983 4,433 4,316 - ----------------------------------- --------- ---------- ---------- Long-term debt 5,654 5,095 4,500 - ----------------------------------- --------- ---------- ---------- Total $88,776 $85,931 $80,056 - ----------------------------------- --------- ---------- ----------
Total deposits increased $3.3 billion to $67.0 billion at June 30, 1998 when compared to December 31, 1997 due principally to a $1.9 billion increase in money market deposits as a result of rates aimed at attracting new sources of funds as well as time and savings deposits acquired as part of the Advanta acquisition. The $3.6 billion increase in short-term borrowings since December 31, 1997 is due to increasing levels of treasury, tax and loan borrowings as the corporation utilized this favorably priced funding vehicle. Long-term debt increased $1.2 billion to $5.7 billion at June 30, 1998 when compared to December 31, 1997 due to the issuance of $1 billion of subordinated debt and $270 million of trust preferred securities, as the corporation took advantage of the low interest-rate environment. ASSET-LIABILITY MANAGEMENT The goal of asset-liability management is the prudent control of market risk, liquidity, and capital. 16 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Market Risk Market risk is the sensitivity of income to variations in interest rates, foreign exchange rates, commodity prices, and other market-driven rates or prices. As discussed below, the corporation is exposed to market risk in both its non-trading and trading operations. Non-trading Market Risk Interest-rate risk, including mortgage prepayment risk, is by far the most significant non-trading market risk to which the corporation is exposed. Interest-rate risk is the sensitivity of income to variations in interest rates. The major source of the corporation's non-trading interest-rate risk is the difference in the repricing characteristics of the corporation's core banking assets and liabilities - loans and deposits. This difference or mismatch is a risk to net interest income. The corporation's Board limits on interest-rate risk specify that if interest rates were to shift immediately up or down 200 basis points, estimated net interest income for the subsequent 12 months should decline by less than 7.5%. The corporation was in compliance with this limit at June 30, 1998. The following table reflects the estimated exposure of the corporation's net interest income for the next 12 months, assuming an immediate shift in interest rates.
- ------------------------- ---------------------------- Estimated Exposure to Rate Change Net Interest Income (Basis Points) (Dollars in millions) - ------------------------------------------------------ +200 $(10) -200 8 - ------------------------------------------------------
The most significant factors affecting the estimated risk exposure of net interest income during the second quarter were the additions of fixed rate assets and swaps plus modifications of assumptions concerning the repricing of noncontractual deposits. In its management of these and other factors influencing the current environment, the corporation has attempted to maintain a near neutral position. Gap analysis provides a static view of the maturity and repricing characteristics of the on- and off-balance sheet positions. The interest-rate gap is prepared by scheduling all assets, liabilities, and off-balance sheet positions according to scheduled or anticipated repricing or maturity. Interest-rate gap analysis can be viewed as a complement to simulation analysis. The corporation's Board limits on interest-rate risk specify that the cumulative one-year gap should be less than 10% of total assets. As of June 30, 1998, the estimated exposure was 0.9% liability-sensitive (see the following table).
Interest-Rate Gap Analysis - ----------------------------------------------------------------------------------------------------------------------------------- Cumulatively Repriced Within June 30, 1998 3 months 4 to 12 12 to 24 2 to 5 After 5 Dollars in millions, by repricing date or less months months years years Total - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $61,144 $8,077 $5,194 $10,602 $15,696 $100,713 Total liabilities and stockholders' equity 49,964 9,962 6,079 2,702 32,006 100,713 Net off-balance sheet (13,923) 3,762 4,694 3,956 1,511 --- - ----------------------------------------------------------------------------------------------------------------------------------- Periodic gap (2,743) 1,877 3,809 11,856 (14,799) Cumulative gap (2,743) (866) 2,943 14,799 --- - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative gap as a percent of total assets-June 30, 1998 (2.7)% (0.9)% 2.9% 14.7% - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative gap as a percent of total assets-March 31, 1998 (4.1) 1.8 3.7 15.4 - -----------------------------------------------------------------------------------------------------------------------------------
A second major source of the corporation's non-trading interest-rate risk is the sensitivity of its MSRs to prepayments. Since MSRs represent the right to service mortgage loans, a decline in interest rates and an actual (or probable) increase in mortgage prepayments shorten the expected life of the MSR asset and reduce its economic value. Valuation analysis involves projecting future cash flows from the corporation's assets, liabilities and off-balance sheet positions over a very long-term horizon, discounting those cash flows at appropriate interest rates, and then summing the discounted cash flows. The corporation's "economic value of equity" (EVE) is the estimated net present value of the discounted cash flows. The corporation's Board limits on interest-rate risk specify that if interest rates were to shift immediately up or down 200 basis points, the estimated economic value of equity should decline by less than 10%. The corporation was in compliance with this limit at June 30, 1998. The following table reflects the corporation's estimated exposure to economic value assuming an immediate shift in interest rates. 17 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------- ---------------------------- Estimated Exposure to Rate Change Economic Value (Basis Points) (Dollars in millions) - ------------------------------------------------------ +200 $(150) +100 35 -100 (127) -200 (234) - ------------------------------------------------------
Off-balance sheet interest-rate instruments used to manage net interest income are designated as hedges of specific assets and liabilities. Accrual accounting is applied to these hedges, and the income or expense is recorded in the same category as that of the related balance sheet item. The periodic net settlement of the interest-rate risk-management instruments is recorded as an adjustment to net interest income. As of June 30, 1998, the corporation had net deferred income of $15 million relating to terminated interest-rate swap contracts, which will be amortized over the remaining life of the underlying terminated interest-rate contracts of approximately 6.5 years. During the second quarter of 1998, the corporation entered into $1.4 billion of receive-fixed/pay-variable swaps to offset swap run-off and control asset sensitivity. Off-balance sheet interest-rate instruments used to manage potential impairment of MSRs are designated as hedges of the MSRs. Changes in fair value of the hedges are recorded as adjustments to the carrying value of the MSRs. At June 30, 1998, net hedge gains of $172 million have been deferred and recorded as adjustments to the carrying value of the MSRs. Deferred hedge gains include $4 million of realized hedge losses related to the termination of certain risk-management instruments. Amounts paid for interest-rate contracts are amortized over the life of the contracts and are included as a component of MSR amortization. At June 30, 1998, the carrying value and fair value of the corporation's MSRs were $1.7 billion and $1.8 billion, respectively. During the first half of 1998, the corporation terminated $10.1 billion of interest-rate floor agreements and added $6.3 billion and $4.3 billion of interest-rate floors and swap contracts in its management of the mortgage servicing rights hedge program. These actions were taken to preserve the value of the option hedge position which had appreciated as interest rates declined.
Risk-Management Instrument Analysis - --------------------------------------------------------------------------------------------------------------------------------- Weighted Weighted Average Assets- Average Rate Notional Liabilities Maturity Fair ----------------- Dollars in millions Value Hedged (Years) Value Receive Pay - --------------------------------------------------------------------------------------------------------------------------------- Interest-rate risk-management instruments Interest-rate swaps: Receive-fixed/pay-variable $10,980 Variable-rate loans 616 Fixed-rate deposits 2,117 Long-term debt 175 Short-term borrowings ------------- 13,888 2.8 $ 47 6.69% 6.50% - --------------------------------------------------------------------------------------------------------------------------------- Basis swaps 2,729 Deposits .8 (1) 5.69 5.69 - --------------------------------------------------------------------------------------------------------------------------------- Total hedges of net interest income 16,617 2.5 46 6.52 6.37 - --------------------------------------------------------------------------------------------------------------------------------- Mortgage banking risk-management instruments Interest rate swaps: Mortgage servicing Receive-fixed/pay-variable, PO swaps 6,721 rights and escrow deposits 3.9 46 5.96 5.48 Options: Interest-rate floors, synthetic floors and swaptions purchased 20,145 Mortgage servicing rights 3.4 131 - (a) - (a) Interest-rate cap corridors sold 4,309 Mortgage servicing rights 2.0 --- - (a) - (a) Call options purchased 180 Mortgage servicing rights .3 1 - - - --------------------------------------------------------------------------------------------------------------------------------- Total options 24,634 132 - - - --------------------------------------------------------------------------------------------------------------------------------- Total hedges of mortgage servicing rights and escrow deposits 31,355 3.6 178 5.96 5.48 - --------------------------------------------------------------------------------------------------------------------------------- Total risk-management instruments $47,972 3.2 $224 6.36 % 6.11 % - ---------------------------------------------------------------------------------------------------------------------------------
(a) The mortgage-banking risk-management interest-rate floors, synthetic floors and swaptions purchased, and interest-rate cap corridors sold have weighted average strike rates of 5.62% and 7.69%, respectively. Trading Market Risk The corporation's trading portfolios are exposed to market risk due to variations in interest rates, currency exchange rates, precious metals prices, and related market volatilities. This exposure arises in the normal course of the corporation's business as a financial intermediary. The corporation uses an "earnings at risk" (EAR) system, based on an industry-standard risk measurement methodology, to measure the overall market risk inherent in its trading activities. The average daily 18 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS exposure to this market risk was $8.1 million, and the maximum daily exposure was $14.7 million during the second quarter of 1998. The increase in EAR from December 31, 1997 was due principally to the first quarter acquisition of Quick & Reilly. Liquidity Risk Liquidity risk-management's objective is to assure the ability of the corporation and its subsidiaries to meet their financial obligations. These obligations are the withdrawal of deposits on demand or at their contractual maturity, the repayment of borrowings as they mature, the ability to fund new and existing loan commitments and the ability to take advantage of new business opportunities. Liquidity is achieved by the maintenance of a strong base of core customer funds, maturing short-term assets, the ability to sell marketable securities, committed lines of credit and access to capital markets. Liquidity may also be enhanced through the securitization of consumer asset receivables. Liquidity at Fleet is measured and monitored daily, allowing management to better understand and react to balance sheet trends. Asset-Liability Management Committee (ALCO) is responsible for implementing the Board's policies and guidelines governing liquidity. Liquidity at the bank level is managed through the monitoring of anticipated changes in loans, core deposits, and wholesale funds. Diversification of liquidity sources by maturity, market, product, and counterparty are mandated through ALCO guidelines. The corporation's banking subsidiaries routinely model liquidity under three economic scenarios, two of which involve increasing levels of economic difficulty and financial market strain. Management also maintains a detailed contingency liquidity plan designed to respond either to an overall decline in the condition of the banking industry or a problem specific to Fleet. The strength of Fleet's liquidity position is a result of its base of core customer deposits. These core deposits are supplemented by wholesale funding sources in the capital markets, as well as from direct customer contacts. Wholesale funding sources include large certificates of deposit, foreign branch deposits, federal funds, collateralized borrowings, and a bank-note program. The primary sources of liquidity for the parent company are interest and dividends from subsidiaries, committed lines of credit and access to the money and capital markets. Dividends from banking subsidiaries are limited by various regulatory requirements related to capital adequacy and earning trends. The corporation's subsidiaries rely on cash flows from operations, core deposits, borrowings, short-term high-quality liquid assets, and, in the case of nonbanking subsidiaries, funds from the parent company. At June 30, 1998 and December 31, 1997, the corporation had commercial paper outstanding of $745 million and $811 million, respectively. The corporation has a backup line of credit to ensure that funding is not interrupted if commercial paper is not available. The total amount of funds available under this agreement was $1 billion at June 30, 1998, with no outstanding balance under this line of credit. Fleet has shelf registration statements that provide for the issuance of common and preferred stock, senior or subordinated debt securities, and other securities with total amounts of funds available of approximately $1.087 billion at June 30, 1998. Subsequent to June 30, 1998, the corporation issued $250 million of subordinated debt, bringing the availability of the shelf registration to $837 million. As shown in the consolidated statement of cash flows, cash and cash equivalents increased by $493 million during the first half of 1998. The increase was due to cash provided by operating activities of $390 million and by financing activities of $4.6 billion, offset by cash used in investing activities of $4.5 billion. Net cash provided by financing activities was principally due to a net increase in short-term borrowings of $3.1 billion and a net increase in long-term debt of $1.2 billion. Net cash used in investing activities was attributable to net purchases of securities and a net increase in loans resulting primarily from loan growth in the commercial and industrial and consumer credit card portfolios.
CAPITAL - --------------------------------------------------------------- June 30, March 31, June 30, Dollars in millions 1998 1998 1997 - --------------------------------------------------------------- Risk-adjusted assets $99,464 $100,087 $84,333 Tier 1 risk-based capital (4% minimum) 6.84% 6.39% 7.28% Total risk-based capital (8% minimum) 10.95 10.37 10.76 Leverage ratio (4% minimum) 7.05 7.19 7.25 Common equity-to-assets 8.11 8.12 7.53 Total equity-to-assets 8.80 8.82 8.48 Tangible common equity- to-assets 5.53 5.39 5.73 Tangible total equity-to- assets 6.23 6.12 6.70 - ---------------------------------------------------------------
At June 30, 1998, the corporation exceeded all regulatory required minimum capital ratios as Fleet's Tier 1 and Total risk-based capital ratios were 6.84 percent and 10.95 percent, respectively, compared with 6.39 percent and 10.37 percent, respectively, at March 31, 1998. The leverage ratio, a measure of Tier 1 capital to average quarterly assets, was 7.05 percent at 19 PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS June 30, 1998 compared with 7.19 percent at March 31, 1998. CAUTIONARY STATEMENT This Quarterly Report on Form 10-Q contains statements relating to future results of the corporation (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in political and economic conditions, interest rate fluctuations, competitive product and pricing pressures within the corporation's market, equity and bond market fluctuations, personal and corporate customers' bankruptcies, inflation, acquisitions and integrations of acquired businesses, risks relating to Year 2000 issues (particularly with respect to compliance by third parties on which the corporation relies), as well as other risks and uncertainties detailed from time to time in the filings of the corporation with the Securities and Exchange Commission. 20 PART II. OTHER INFORMATION PART II. ITEM 6. (a) Exhibit Index
Exhibit Number ------- 4* Instruments defining the rights of security holders, including Debentures 10(a) Amendment One to Amended and Restated Agreement for Eugene M. McQuade 10(b) Amendment Two to Supplemental Executive Retirement Plan 10(c) Amendment Three to Supplemental Executive Retirement Plan 10(d) Amendment One to Retirement Income Assurance Plan 11 Statement re: computation of per share earnings 12 Statement re: computation of ratios 27 Financial data schedule
* Registrant has no instruments defining the rights of holders of equity or debt securities where the amount of securities authorized thereunder exceeds 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request. (b) Six Form 8-K's were filed during the period from April 1, 1998 to the date of the filing of this report. - Current Report on Form 8-K dated April 15, 1998 announcing first quarter earnings. - Current Report on Form 8-K dated April 28, 1998 reporting the sale of 6,000,000 7.17% Trust Originated Preferred Securities. - Current Report on Form 8-K dated May 5, 1998 filing the Restated Audited Financial Statements and Notes thereto as of December 31, 1997 reflecting the merger of the registrant and The Quick & Reilly Group, Inc. - Current Report on Form 8-K dated May 20, 1998 reporting the issuance of $250 million of 6.375% Subordinated Notes. - Current Report on Form 8-K dated July 10, 1998 reporting the issuance of $250 million of 6.70% Subordinated Debentures. - Current Report on Form 8-K dated July 15, 1998 announcing second quarter earnings and a two-for-one stock split. 21 SIGNATURES Pursuant to the requirement 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. Fleet Financial Group, Inc. --------------------------- (Registrant) /s/ Eugene M. McQuade --------------------------- Eugene M. McQuade Vice Chairman Chief Financial Officer /s/ Robert C. Lamb, Jr. -------------------------- Robert C. Lamb, Jr. Controller Chief Accounting Officer DATE: August 12, 1998 22 EX-10.(A) 2 EXHIBIT 10(A) EXHIBIT 10(a) AMENDMENT ONE TO AMENDED AND RESTATED AGREEMENT In accordance with a resolution adopted by the Human Resources and Planning Committee of the Board of Directors of Fleet Financial Group, Inc. on June 17, 1998, Section 6(d)(i)(C) of the Amended and Restated Agreement (the "Agreement") between Fleet Financial Group, Inc. and Eugene M. McQuade, dated as of October 15, 1997, shall be amended to read as follows: a lump sum retirement benefit equal to the difference between (a) the actuarial equivalent of the benefit under the Fleet Financial Group, Inc. Pension Plan (the "Pension Plan"), as supplemented by the Retirement Income Assurance Plan or any successor to such plan (the "RIAP") and the Supplemental Executive Retirement Plan or any successor to such plan (the "SERP"; and together with the RIAP and the Pension Plan, collectively referred to as the "Retirement Plans"), which the Executive would receive if the Executive was fully vested in the Retirement Plans and the Executive's employment continued at the compensation level provided for in Sections 4(b)(i) and 4(b)(ii) for the additional years (if any) from the Date of Termination until he reached age 52 ("Age 52 Benefit"), and for three additional years from the later of age 52 and the Date of Termination, and all such additional years after the Date of Termination shall be credited to the Executive for purposes of calculating the Executive's age, final average salary and years of service accrued under the Retirement Plans, provided, however, that any benefit to the Executive under any one or more of the Retirement Plans shall be included in the foregoing calculation only to the extent the Executive participated in such Retirement Plans immediately prior to the Effective Date and provided, however, that the Age 52 Benefit shall be offset (but not below 0) by the actuarial equivalent of the Executive's retirement benefits (paid or payable) under qualified and nonqualified plans maintained by Manufacturer's Hanover Trust, and (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plans; and IN WITNESS WHEREOF, the Executive has executed this Amendment One to the Agreement ("Amendment One") and the Company has caused this Amendment One to be executed by its duly authorized officer effective as of June 17, 1998. /s/ Eugene M. McQuade --------------------- Eugene M. McQuade FLEET FINANCIAL GROUP, INC. By /s/ M. Anne Szostak ---------------------- M. Anne Szostak Executive Vice President 23 EX-10.(B) 3 EXHIBIT 10(B) EXHIBIT 10(b) AMENDMENT TWO TO THE FLEET FINANCIAL GROUP, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (1996 Restatement) Sections 5.1 and 5.2 are amended effective October 15, 1997 to read as follows: 5.1 Amount of Benefits. The amount of the benefit payable under the Plan to a Participant will be equal to (a) minus (b), but not less than zero, where (a) is the amount of benefit the Participant would have been entitled to receive under the Basic Plan in the form of a "Single Life Annuity" commencing on his "Annuity Starting Date" if (i) under Section 5.1(a)(i) of the Basic Plan, "52.5%" were replaced by "60%", (ii) the term "Compensation" under the Basic Plan included bonus awards to which the Participant is entitled under the Corporate Executive Incentive Plan or other incentive award program, (iii) the limitations of sections 401(a)(17) and 415 of the Code (and the provisions of the Basic Plan applying those limitations) did not exist, and (iv) the Participant were treated under the Basic Plan as a "Participant" who is not a "Cash Balance Participant"; and (b) is the sum of (i) the benefit payable to the Participant under the Basic Plan, and (ii) the benefit payable to the Participant under the Fleet Financial Group, Inc. Retirement Income Assurance Plan, as in effect from time to time; provided that the amounts determined in (i) and (ii) shall be expressed in the form of a "Single Life Annuity" commencing on the Participant's "Annuity Starting Date" (with such quoted terms having the meaning set forth in the Basic Plan). 5.2 Calculation and Payment of Benefits. Except with respect to a Participant who is a "Cash Balance Participant" under the Basic Plan, benefits payable under the Plan shall be calculated in the same manner, paid in the same form, commence at the same time, and paid under the same terms and conditions as the benefits payable to the Participant (or Beneficiary) under the Basic Plan. A Participant who is a "Cash Balance Participant" under the Basic Plan shall have the right to elect benefits under the Plan under the same terms and conditions (and only under the same terms and conditions), including but not limited to manner of calculation, form of payment and time of commencement, as the Participant would under the Basic Plan if the Participant were not a "Cash Balance Participant." Except as otherwise provided herein, the rights of a Participant are determined based on the terms of the Plan in effect at the time the Participant terminated employment. IN WITNESS WHEREOF, this Amendment Two has been adopted by the Human Resources and Planning Committee on the 15th day of October, 1997 and is executed by a duly authorized officer of Fleet Financial Group, Inc. FLEET FINANCIAL GROUP, INC. By: /s/ William C. Mutterperl ------------------------- William C. Mutterperl Executive Vice President, Secretary and General Counsel 24 EX-10.(C) 4 EXHIBIT 10(C) EXHIBIT 10(c) AMENDMENT THREE TO THE FLEET FINANCIAL GROUP, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 1. Section 5.1 is amended effective July 1, 1998 to read as follows: 5.1 Amount of Benefits. The amount of the benefit payable under the Plan to a Participant will be equal to (a) minus (b), but not less than zero, where (a) is the amount of benefit the Participant would have been entitled to receive under the Basic Plan in the form of a "Single Life Annuity" commencing on his "Annuity Starting Date" if (i) under Section 5.1(a)(i) of the Basic Plan, "52.5%" were replaced by "60%", (ii) the term "Compensation" under the Basic Plan included bonus awards (A) paid to the Participant on or after January 1, 1994 under the Corporate Executive Incentive Plan or other short-term incentive award program of the Company and (B) paid while the Employee is a Participant in the Plan, (iii) the limitations of sections 401(a)(17) and 415 of the Code (and the provisions of the Basic Plan applying those limitations) did not exist, and (iv) the Participant were treated under the Basic Plan as a "Participant" who is not a "Cash Balance Participant", and (b) is the sum of (i) the benefit payable to the Participant under the Basic Plan, and (ii) the benefit payable to the Participant under the Fleet Financial Group, Inc. Retirement Income Assurance Plan, as in effect from time to time; provided that the amounts determined in (i) and (ii) shall be expressed in the form of a "Single Life Annuity" commencing on the Participant's "Annuity Starting Date" (with such quoted terms having the meaning set forth in the Basic Plan). 2. Section 8.8 is added effective July 1, 1998 to read as follows: 8.8 Nonduplication of Benefits. The benefits payable to a Participant under this Plan shall be reduced on an Actuarial Equivalent basis by the benefit such Participant earned under any other nonqualified defined benefit plan, which counts bonuses as part of compensation under the plan formula, and which does not provide for a reduction of benefits under such plan, for benefits payable under this Plan, to the extent that the benefits under such plan were accrued upon the Participant's service that was included as Credited Service under this Plan. 3. 5.5 Effect of Disregard of Service. To the extent that service for a calendar year is not taken into account in determining the amount of benefit under Section 5.1(a), such year shall also be disregarded for purposes of determining the amount of benefit under Section 5.1(b). 4. Appendix A is added to read as follows: APPENDIX A SPECIAL RULES This Appendix A is part of the Plan and contains special rules applicable only to the Participants described herein. If provisions of this Appendix A conflict with any other provisions of the Plan with respect to such Participants, the provisions of this Appendix A shall govern. 25 A. Provisions Applicable to Named Fleet Executives 1. Mr. Zucchini: The minutes of the September 14, 1993 meeting of the Executive Compensation Committee of the Company include the following statement: "The Committee approved the crediting of 5 additional years service in 1998 and an additional 5 years of service in 2003 to Michael Zucchini's, non-qualified retirement plan benefit, based on continuous employment to the years 1998 and 2003, respectively; and the acceleration of the additional credited service in the event of a change of control." 2. Mr. Breitman: Leo Breitman shall become a Participant in this Plan effective January 1, 1997, and bonuses paid to him on or after that date shall be counted as part of his Compensation. Mr. Breitman's Credited Service shall be based on an Employment Commencement Date of July 1, 1991. B. Shawmut National Corporation 1. The Shawmut National Corporation Executive Supplement Retirement Plan ("Shawmut SERP") terminated effective November 30, 1995. This Section B of Appendix A shall apply solely to former participants in the Shawmut SERP or the Shawmut National Corporation Excess Benefit Plan ("Shawmut Excess Plan") who are Participants in this Plan (collectively, "Shawmut Participants"). 2. Unless otherwise provided in this Appendix A or by the Company in writing, (1) Shawmut Participants shall become Participants in this Plan effective December 1, 1995, (2) the base compensation, but not bonuses, paid by Shawmut National Corporation to Shawmut Participants shall be treated as Compensation under this Plan, and (3) only the Company service of Shawmut Participants shall be treated as Credited Service under the Plan. 3. A Participant's benefit under the Shawmut SERP that is attributable to service that is also treated as Credited Service under this Plan shall be offset against the benefit otherwise payable under this Plan with respect to such Credited Service. 4. Mr. Overstrom: For purposes of Section 5.1(a), Mr. Gunnar Overstrom's Credited Service shall be determined by counting service taken into account under the Shawmut SERP. Mr. Overstrom's Employment Contract with the Company has special provisions that must be taken into account in determining his pension benefit under the combination of this Plan and his Employment Contract. 5. Mr. Eyles: For purposes of Section 5.1(a), Mr. David Eyles' Credited Service shall be determined as if he became a Participant on March 2, 1992. For purposes of the offset under Section 8.8, no amount in excess of the age 62 Actuarial Equivalent of Mr. Eyles' Shawmut SERP benefit shall be taken into account if Mr. Eyles begins receiving his Plan benefit after age 62. 6. The liability for the benefits under the Shawmut SERP of the following former participants, or beneficiary of a former participant, in the Shawmut SERP shall be transferred to this Plan as of the date of termination of the Shawmut SERP.
- -------------------------------- ----------------- ------------------------- ------------------------ Name Birth Date Payment Form Annual Benefit - -------------------------------- ----------------- ------------------------- ------------------------ Kalchbrenner, Patricia 01/01/33 Single life annuity 1,591.44 - -------------------------------- ----------------- ------------------------- ------------------------ Spencer, Jr. Harry 02/03/25 50% J&S 1,319.04 - -------------------------------- ----------------- ------------------------- ------------------------
26 IN WITNESS WHEREOF, this Amendment Three has been adopted by the Human Resources and Planning Committee on the 17th day of June, 1998 and is executed by a duly authorized officer of Fleet Financial Group, Inc. FLEET FINANCIAL GROUP, INC. By: /s/ William C. Mutterperl -------------------------------- William C. Mutterperl Executive Vice President, Secretary and General Counsel 27 EX-10.(D) 5 EXHIBIT 10(D) EXHIBIT 10(d) AMENDMENT ONE TO THE FLEET FINANCIAL GROUP, INC. RETIREMENT INCOME ASSURANCE PLAN 1. Section 7.8 is added effective January 1, 1997 to read as follows: 7.8 NONDUPLICATION OF BENEFITS The benefits payable to a Participant under this Plan shall be reduced on an Actuarial Equivalent basis by the benefit such Participant earned under any other similar nonqualified excess defined benefit plan that does not provide for a reduction of benefits under such plan, for benefits payable under this Plan, to the extent that the benefits under such plan were accrued upon the Participant's service that was included as Credited Service under this Plan. 2. Appendix A is added to read as follows: APPENDIX A SPECIAL RULES FOR SERVICE WITH ACQUIRED ENTITIES This Appendix A is part of the Plan and contains special rules applicable only to the Participants described herein. If provisions of this Appendix A conflict with any other provisions of the Plan with respect to such Participants, the provisions of this Appendix A shall govern. A. SHAWMUT NATIONAL CORPORATION 1. The Shawmut National Corporation Excess Benefit Plan ("Shawmut Excess Plan") shall merge into the Plan effective as of January 1, 1997. As of that date, the liabilities of the Shawmut Excess Plan shall become the liabilities of the Plan and the Shawmut Excess Plan shall cease to exist. Notwithstanding anything in the Plan to the contrary, the benefit under this Plan of a Participant who was a former participant in the Shawmut Excess Plan shall not be less than the benefit such participant would be deemed to have accrued under the terms of the Shawmut Excess Plan as of the date this Appendix A was adopted. 2. Each individual who was a participant in the Shawmut Excess Plan or the Shawmut National Corporation Executive Supplemental Retirement Plan ("Shawmut SERP") immediately prior to the date as of which Shawmut National Corporation merged with Fleet Financial Group, Inc., and who became an employee of the Company or a subsidiary or affiliate as of said merger date, shall become a Participant in the Plan as of January 1, 1997. This Section A of Appendix A shall apply solely to former participants in the Shawmut Excess Plan or Shawmut SERP ("Shawmut Participants"). 3. The benefits of Shawmut Participants shall be determined by taking into account the principles and provisions of Specification Schedule J of the Basic Plan. For Participants who are not Cash Balance Participants, this includes adjustment of their 12/31/96 benefit, transferred from the Shawmut Excess Plan, for increases in Average Annual Compensation after 1996. 4. As of January 1, 1997, the following Cash Balance Participants shall have the following opening amounts credited to their Cash Balance Accounts under this Plan, which represents the total value of their benefits under the Shawmut Excess Plan as of December 31, 1996, reduced by the deemed Shawmut Excess Plan offset described in Section 5 below, where applicable, expressed as a single sum: ---------------------- ---------------------- --------------------------- OPENING CASH NAME SOC. SEC.# BALANCE ---------------------- ---------------------- --------------------------- CLAFFEE, JAMES ###-##-#### $ 2,418.50 ---------------------- ---------------------- --------------------------- DELFINO, PAUL ###-##-#### $ 6,747.34 ---------------------- ---------------------- --------------------------- EYLES, DAVID ###-##-#### $ 17,775.70 ---------------------- ---------------------- --------------------------- FALK, MICHAEL ###-##-#### $ 1,509.82 ---------------------- ---------------------- --------------------------- HEDGES JR., ROBERT ###-##-#### $ 3,074.22 ---------------------- ---------------------- --------------------------- HUSTON, JOHN ###-##-#### $ 7,843.30 ---------------------- ---------------------- --------------------------- MALLON, WILLIAM ###-##-#### $ 4,567.26 ---------------------- ---------------------- --------------------------- 5. Because participants in the Shawmut SERP were not also participants in the Shawmut Excess Plan, their benefit under the Plan, which is calculated by taking into account their service with Shawmut, shall be reduced by the following amounts, or the Actuarial Equivalent thereof, which are the benefits that they would have accrued under the Shawmut Excess Plan as of December 31, 1996, with Credited Service frozen as of December 1, 1995, if they had been participants in the Shawmut Excess Plan: ---------------------- ---------------------- --------------------------- EXCESS PLAN OFFSET OF MONTHLY NORMAL NAME SOC. SEC.# RETIREMENT BENEFIT ---------------------- ---------------------- --------------------------- BERGER, JOHN ###-##-#### $ 382.62 ---------------------- ---------------------- --------------------------- BROMAGE, WILLIAM ###-##-#### $ 364.00 ---------------------- ---------------------- --------------------------- KRAUS, EILEEN ###-##-#### $ 2,294.25 ---------------------- ---------------------- --------------------------- OVERSTROM, GUNNAR ###-##-#### $ 8,170.96 ---------------------- ---------------------- --------------------------- ROTTNER, SUSAN ###-##-#### $ 565.74 ---------------------- ---------------------- --------------------------- IN WITNESS WHEREOF, this Amendment One has been adopted by the Human Resources and Planning Committee on the 17th day of June, 1998 and is executed by a duly authorized officer of Fleet Financial Group, Inc. FLEET FINANCIAL GROUP, INC. By: /s/ William C. Mutterperl ----------------------------- William C. Mutterperl Executive Vice President, Secretary and General Counsel EX-11 6 EXHIBIT 11 EXHIBIT 11 FLEET FINANCIAL GROUP, INC. COMPUTATION OF EQUIVALENT SHARES AND PER SHARE EARNINGS ($ in millions, except per share data)
For the Three Months ended June 30, ---------------------------------------------------------------------------------------- 1998 1997 ----------------------------------- ------------------------------------------ BASIC DILUTED BASIC DILUTED ---------------- ----------------- ---------------- ----------------- Equivalent shares: Average shares outstanding 284,097,205 284,097,205 275,715,284 275,715,284 Additional shares due to: Stock options --- 3,966,957 --- 2,782,689 Warrants --- 6,315,931 --- 5,316,725 ---------------- ----------------- ---------------- ----------------- Total equivalent shares 284,097,205 294,380,093 275,715,284 283,814,698 ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- Earnings per share Net income $ 393 $ 393 $ 347 $ 347 Less: Preferred stock dividends (13) (13) (16) (16) ---------------- ----------------- ---------------- ----------------- Adjusted net income $ 380 $ 380 $ 331 $ 331 ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- Total equivalent shares 284,097,250 294,380,093 275,715,284 283,814,698 ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- Earnings per share on net income $ 1.34 $ 1.29 $ 1.20 $ 1.17 ---------------- ----------------- ---------------- ----------------- ---------------- ----------------- ---------------- -----------------
28 EXHIBIT 11 FLEET FINANCIAL GROUP, INC. COMPUTATION OF EQUIVALENT SHARES AND PER SHARE EARNINGS ($ in millions, except per share data)
For the Six Months ended June 30, ---------------------------------------------------------------------------------------- 1998 1997 --------------------------------------- ------------------------------------------ BASIC DILUTED BASIC DILUTED ------------------- -------------------- ---------------- -------------------- Equivalent shares: Average shares outstanding 283,993,709 283,993,709 278,204,190 278,204,190 Additional shares due to: Stock options --- 3,803,518 --- 2,675,960 Warrants --- 6,202,416 --- 5,187,222 ------------------- -------------------- ------------------ -------------------- Total equivalent shares 283,993,709 293,999,643 278,204,190 286,067,372 ------------------- -------------------- ------------------ -------------------- ------------------- -------------------- ------------------ -------------------- Earnings per share Net income $ 716 $ 716 $ 681 $ 681 Less: Preferred stock dividends (25) (25) (33) (33) ------------------- -------------------- ------------------ -------------------- Adjusted net income $ 691 $ 691 $ 648 $ 648 ------------------- -------------------- ------------------ -------------------- ------------------- -------------------- ------------------ -------------------- Total equivalent shares 283,993,709 293,999,643 278,204,190 286,067,372 ------------------- -------------------- ------------------ -------------------- ------------------- -------------------- ------------------ -------------------- Earnings per share on net income $ 2.43 $2.35 $ 2.33 $ 2.26 ------------------- -------------------- ------------------ -------------------- ------------------- -------------------- ------------------ --------------------
29 EX-12 7 EXHIBIT 12
EXHIBIT 12 FLEET FINANCIAL GROUP, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS EXCLUDING INTEREST ON DEPOSITS (dollars in millions) Six Three Months Months Ended Ended June 30, June 30, Year ended December 31, - -------------------------------------------------------------------- ------------------------------------------------------- 1998 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------- ------------------------------------------------------- Earnings: Income before income taxes and cumulative effect of accounting changes $1,181 $ 646 $2,294 $2,070 $1,156 $1,460 $1,173 Adjustments: (a) Fixed charges: (1) Interest on borrowed funds 497 271 737 813 1,413 1,074 790 (2) 1/3 of rent 27 13 53 55 52 53 54 (b) Preferred dividends 42 21 104 117 62 51 54 ---------- ---------- ------- ------- ------- ------- ------- (c) Adjusted earnings $1,747 $ 951 $3,188 $3,055 $2,683 $2,638 $2,071 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Fixed charges and preferred dividends $ 566 $ 305 $ 894 $ 985 $1,527 $1,178 $ 898 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Adjusted earnings/Fixed charges and preferred dividends 3.09x 3.12x 3.57x 3.10x 1.76x 2.24x 2.31x ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- -------
INCLUDING INTEREST ON DEPOSITS (dollars in millions)
Six Three Months Months Ended Ended June 30, June 30, Year ended December 31, - -------------------------------------------------------------------- ---------- ------------------------------------------- 1998 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------- ------------------------------------------------------- Earnings: Income before income taxes and cumulative effect of accounting changes $ 1,181 $ 646 $ 2,294 $ 2,070 $ 1,156 $ 1,460 $ 1,173 Adjustments: (a) Fixed charges: (1) Interest on borrowed funds 497 271 737 813 1,413 1,074 790 (2) 1/3 of rent 27 13 53 55 52 53 54 (3) Interest on deposits 912 474 1,654 1,754 1,726 1,170 1,165 (b) Preferred dividends 42 21 104 117 63 51 54 ---------- ---------- ------- ------- ------- ------- ------- (c) Adjusted earnings $2,659 $1,425 $4,842 $4,809 $4,410 $3,808 $3,236 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Fixed charges and preferred dividends $1,478 $ 779 $2,548 $2,739 $3,254 $2,348 $2,063 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Adjusted earnings/Fixed charges and preferred dividends 1.80x 1.83x 1.90x 1.76x 1.36x 1.62x 1.57x ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- -------
30
EXHIBIT 12 (continued) FLEET FINANCIAL GROUP, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS (dollars in millions) Six Three Months Months Ended Ended June 30, June 30, Year ended December 31, - -------------------------------------------------------------------- ------------------------------------------------------ 1998 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------- ------------------------------------------------------ Earnings: Income before income taxes and cumulative effect of accounting changes $ 1,181 $ 646 $ 2,294 $ 2,070 $ 1,156 $ 1,460 $ 1,173 Adjustments: (a) Fixed charges: (1) Interest on borrowed funds 497 271 737 813 1,413 1,074 790 (2) 1/3 of rent 27 13 53 55 52 53 54 ---------- ---------- ------- ------- ------- ------- ------- (b) Adjusted earnings $ 1,705 $ 930 $ 3,084 $ 2,938 $ 2,621 $ 2,587 $ 2,017 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Fixed charges $ 524 $ 284 $ 790 $ 868 $ 1,465 $ 1,127 $ 844 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Adjusted earnings/Fixed charges 3.27x 3.30x 3.90x 3.38x 1.79x 2.30x 2.39x ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- -------
INCLUDING INTEREST ON DEPOSITS (dollars in millions)
Six Three Months Months Ended Ended June 30, June 30, Year ended December 31, - -------------------------------------------------------------------- ------------------------------------------------------ 1998 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------- ------------------------------------------------------ Earnings: Income before income taxes and cumulative effect of accounting changes $1,181 $ 646 $2,294 $2,070 $1,156 $1,460 $1,173 Adjustments: (a) Fixed charges: (1) Interest on borrowed funds 497 271 737 813 1,413 1,074 790 (2) 1/3 of rent 27 13 53 55 52 53 54 (3) Interest on deposits 912 474 1,654 1,754 1,726 1,170 1,165 ---------- ---------- ------- ------- ------- ------- ------- (b) Adjusted earnings $2,617 $1,404 $4,738 $4,692 $4,347 $3,757 $3,182 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Fixed charges $1,436 $ 758 $2,444 $2,622 $3,191 $2,297 $2,009 ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- ------- Adjusted earnings/Fixed charges 1.83x 1.86x 1.94x 1.79x 1.36x 1.64x 1.58x ---------- ---------- ------- ------- ------- ------- ------- ---------- ---------- ------- ------- ------- ------- -------
31 EX-27 8 EXHIBIT 27 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1998 CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINED IN THE FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-30-1998 JUN-30-1998 5,567 280 220 355 10,219 1,074 1,079 66,754 (1,551) 100,713 66,992 11,147 8,059 5,654 0 691 3,302 4,868 100,713 2,858 342 110 3,310 911 1,409 1,900 210 51 2,014 1,180 716 0 0 716 2.43 2.35 4.60 316 208 0 0 1,432 274 64 1,551 1,551 0 359
EX-27.(A) 9 EXIHIBIT 27(A)
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1998 CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINED IN THE FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-30-1997 JUN-30-1998 5,726 216 220 279 7,665 1,039 1,044 59,177 (1,443) 87,573 63,229 6,393 5,975 4,550 0 835 3,212 3,379 87,573 2,638 277 82 2,997 823 1,164 1,833 148 18 1,929 1,144 681 0 0 681 2.33 2.26 5.03 498 252 0 0 1,488 (262) 70 1,443 1,443 0 221
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