Filing pursuant to Rule 425 under the Securities Act of 1933, as amended, and
Deemed filed under Rule 14a-12 under the Securities Exchange Act of 1934,
As amended
Filer: FleetBoston Financial Corporation
Subject Company: FleetBoston Financial Corporation
Commission File Number: 1-6366
ON JANUARY 30, 2004, FLEETBOSTON FINANCIAL CORPORATION, A RHODE ISLAND
CORPORATION, MAILED THE FOLLOWING QUARTERLY SHAREHOLDER UPDATE TO ITS
SHAREHOLDERS:
The fourth quarter capped a year of tremendous progress and achievement for
FleetBoston Financial and provided very strong momentum for entering 2004 and
the pending merger with Bank of America. Net income for the fourth quarter
totaled $732 million, or $.68 per share, compared with net income of $261
million, or $.24 per share, in the fourth quarter of last year. Overall, for
2003, net income was $2.6 billion, or $2.45 per share, compared with $1.2
billion, or $1.12 per share, in 2002.
The strong growth in net income was driven by the Corporation's strategy to
concentrate on proven business strengths and improve its risk profile. The
Corporation's three major domestic businesses individually grew their earnings
for each of the past three quarters, reflecting steady improvement in customer
favorability and product usage.
Revenues in the fourth quarter grew by 7% over the prior year. The Corporation's
risk-reduction efforts resulted in an additional decline in nonperforming asset
levels from the third quarter of approximately $400 million, or 16%, bringing
the full-year reduction to 43%. Credit costs continued to decline and were well
below the prior year. Also improving the prior-year comparisons was the return
to profitability of our businesses in Argentina and Principal Investing in the
second half of the year.
By vigorously focusing on our competitive strengths and reducing risks, we were
able to re-ignite the earnings power of this company. One of our key priorities
in 2003 was to leverage our strong brand and seize the potential of our
attractive client base. The growth in revenues and customer satisfaction during
the year and the steady quarter-over-quarter net income improvement in our major
business lines attest to our success in meeting the financial needs of our
customers and shareholders.
As credit losses approach more traditional levels, we are focused on
increasingly driving earnings growth through higher revenue. Looking ahead, the
product benefits brought to our customers by Bank of America add to our
confidence in achieving this growth.
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Among our earnings highlights for the fourth quarter:
o Total revenues were $3.1 billion for 2003, with 7% growth from the fourth
quarter of last year. Growth was driven by improved net interest income and
higher levels of capital markets-related revenue, banking fees and
investment services revenue.
o The net interest margin improved by 23 basis points from the third quarter
to 3.91%, comparable to the prior-year level.
o Net loan chargeoffs, including those from our business in Argentina,
continued to decline and totaled $250 million in the fourth quarter
compared to $321 million in the third quarter and $607 million in the prior
year quarter. Our Argentina business reported total net loan recoveries in
the fourth quarter of $1 million compared to net chargeoffs of $56 million
and $157 million in prior periods respectively.
o Total assets at December 31, 2003 were $200 billion, compared with $190
billion at December 31, 2002, due primarily to higher levels of consumer
loans and securities, partially offset by declines in domestic commercial
loans and Latin American exposures.
o Stockholders' equity amounted to $18 billion at December 31, 2003, with a
common equity-to-assets ratio of 9%.
We are very pleased with our progress and look forward to completing our
announced merger with Bank of America. We remain enthusiastic about the benefits
and growth prospects this combination will bring to our shareholders, customers,
employees and communities.
Chad Gifford Gene McQuade
Chairman and CEO President and COO
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
estimates. These risks and uncertainties include, among other things, (1) the
Bank of America/FleetBoston merger does not occur, or does not close within the
expected time frame; (2) expected cost savings from the merger may not be fully
realized or realized within the expected time frame; (3) revenues following the
merger may be lower than expected; (4) costs or difficulties related to the
integration of the businesses of Bank of America and FleetBoston may be greater
than expected; (5) changes in general political and economic conditions, either
domestically or internationally; (6) continued economic, political and social
uncertainties in Latin America; (7) developments concerning credit quality,
including the resultant effect on the levels of the provision for credit losses,
nonperforming assets, net charge-offs and reserve for credit losses of
FleetBoston or the combined company; (8) continued weakness in domestic
commercial loan demand, and the impact of that weakness on the corporate lending
activities of FleetBoston or the combined company; (9) changes in customer
borrowing, repayment, investment and deposit practices; (10) interest rate and
currency fluctuations, equity and bond market fluctuations and inflation; (11)
changes in the mix of interest rates and maturities of interest earning assets
and interest bearing liabilities of FleetBoston or the combined
Page 3 of 4
company; (12) developments concerning the global capital markets and the
resultant impact on the principal investing and other capital markets-related
businesses of FleetBoston or the combined company and the wealth management and
brokerage businesses of FleetBoston or the combined company, as well as the
availability and terms of funding necessary to meet FleetBoston's or the
combined company's liquidity needs; (13) changes in competitive product and
pricing pressures within the markets of FleetBoston or the combined company;
(14) legislative or regulatory developments, including changes in laws or
regulations concerning taxes, banking, securities, capital requirements and
risk-based capital guidelines, reserve methodologies, deposit insurance and
other aspects of the financial services industry; (15) changes in accounting
rules, policies, practices and procedures; (16) legal and regulatory proceedings
and related matters with respect to the financial services industry, including
those directly involving FleetBoston, the combined company and their respective
subsidiaries; (17) the effectiveness of instruments and strategies used to hedge
or otherwise manage exposure to various types of market and credit risk; and
(18) the effects of terrorist activities or other hostilities, including
geopolitical stresses in the Middle East and other areas. For further
information, please refer to FleetBoston's reports filed with the SEC.
ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER
Bank of America and FleetBoston have filed a Joint Proxy Statement/Prospectus
and other documents regarding the merger between them (the "Merger") with the
Securities and Exchange Commission ("SEC"). Bank of America and FleetBoston will
be mailing the Joint Proxy Statement/Prospectus to their respective
stockholders. This document, and documents incorporated into that document by
reference, will contain important information about the Merger, and Bank of
America and FleetBoston urge you to read them.
You may obtain copies of all documents filed with the SEC regarding the Merger,
free of charge, at the SEC's website (www.sec.gov). You may also obtain these
documents, free of charge, from Bank of America's website
(www.bankofamerica.com) under the tab "About Bank of America" and then under the
heading "SEC Documents." You may also obtain these documents, free of charge,
from FleetBoston's website (www.fleet.com) under the tab "About Fleet" and then
under the heading "Investor Relations" and then under the item "SEC Filings."
PARTICIPANTS IN THE MERGER
Bank of America and FleetBoston and their respective directors and executive
officers may be deemed participants in the solicitation of proxies from
stockholders in connection with the Merger. Information about the directors and
executive officers of Bank of America and FleetBoston and information about
other persons who may be deemed participants in this transaction will be
included in the Joint Proxy Statement/Prospectus. You can find information about
Bank of America's executive officers and directors in their definitive proxy
statement filed with the SEC on March 27, 2003. You can find information about
FleetBoston's executive officers and directors in their definitive proxy
statement filed with the SEC on March 17, 2003. You can obtain free copies of
these documents from Bank of America and FleetBoston using the contact
information above.
Page 4 of 4
FLEETBOSTON FINANCIAL
SELECTED FINANCIAL HIGHLIGHTS
DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA
THREE MONTHS ENDED DECEMBER 31, 2003 2002
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INCOME STATEMENT DATA
Net income (loss) $ 732 $ 261
Continuing operations 732 297
Discontinued operations --- (36)
Total revenue 3,067 2,874
Noninterest expense 1,723 1,665
Provision for credit losses 195 750
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PER COMMON SHARE
Market value (period-end) $ 43.65 $ 24.30
Cash dividends declared .35 .35
Book value (period-end) 16.94 15.78
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AT DECEMBER 31
Assets $ 200,235 $ 190,453
Securities 31,370 30,425
Loans and leases 128,949 120,380
Reserve for credit losses (3,074) (3,864)
Deposits 137,764 125,814
Total stockholders' equity 18,280 16,833
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RATIOS
Return on assets 1.49 % .55 %
Return on equity 16.36 6.12
Net interest margin 3.91 3.90
Efficiency ratio 56.2 57.9
Total equity/assets (period-end) 9.13 8.84
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NET INCOME (LOSS) PER COMMON SHARE
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Diluted 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD
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2003 .54 .59 .64 .68 2.45
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2002 .70 (.37) .55 .24 1.12
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2001 .12 .48 .70 (.49) .83
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