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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 2001
[ ] 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
FLEETBOSTON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
RHODE ISLAND 05-0341324
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(Address of principal executive office) (Zip Code)
(617) 434-2200
(Registrant's telephone number, including area code)
(Former name, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
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The number of shares of common stock of the Registrant outstanding as of July
31, 2001 was 1,085,251,056.
2
FLEETBOSTON FINANCIAL CORPORATION
FORM 10-Q FOR QUARTER ENDED JUNE 30, 2001
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PAGE
PART I. FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations 3
Consolidated Statements of Income
Three months and six months ended June 30, 2001 and 2000 18
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000 19
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 2001 and 2000 20
Consolidated Statements of Cash Flows
Six months ended June 30, 2001 and 2000 21
Condensed Notes to Consolidated Financial Statements 22
PART II. OTHER INFORMATION 26
SIGNATURES 27
2
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FleetBoston Financial Corporation (FleetBoston or the Corporation), a
diversified financial services company with over $200 billion in assets
headquartered in Boston, Massachusetts, is currently the seventh-largest
financial holding company in the United States based on total assets. Among its
principal lines of business are commercial banking; consumer banking; investment
banking and investment services; principal investing; securities brokerage,
market-making and clearing services; credit cards; and full service banking in
Latin America.
This discussion and analysis updates, and should be read in conjunction
with, Management's Discussion and Analysis included in both FleetBoston's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and its
Current Report on Form 8-K dated May 4, 2001. Such Form 8-K contains restated
consolidated financial statements for the year ended December 31, 2000 which
give retroactive effect to the merger with Summit Bancorp. (Summit), which was
completed on March 1, 2001 and accounted for as a pooling of interests. All
prior period information included in this discussion and analysis has been
restated to reflect the Summit merger.
FINANCIAL SUMMARY
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Three months Six months
Dollars in millions, ended June 30 ended June 30
except per share amounts 2001 2000 2001 2000
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EARNINGS
Net interest income (FTE)(a) $ 1,918 $ 2,041 $ 3,853 $ 4,107
Noninterest income 1,326 2,467 2,850 5,287
Noninterest expense 2,059 2,466 4,911 5,211
Provision for credit losses 315 335 630 655
Net income 531 971 672 2,047
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PER COMMON SHARE
Basic earnings $ .48 $ .89 $ .60 $ 1.88
Diluted earnings .48 .87 .60 1.84
Cash dividends declared .33 .30 .66 .60
Book value 17.47 16.25 17.47 16.25
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RATIOS
Return on average assets 1.01% 1.74% .64% 1.80%
Return on average common equity 11.05 22.48 6.94 23.90
Total equity to assets (period-end) 9.54 8.23 9.54 8.23
Tangible common equity to assets 7.41 6.05 7.41 6.05
Tier 1 risk-based capital ratio 8.47 7.58 8.47 7.58
Total risk-based capital ratio 12.25 11.50 12.25 11.50
Leverage ratio 8.29 7.54 8.29 7.54
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AT JUNE 30
Total assets $202,100 $220,133 $202,100 $220,133
Loans and leases 129,066 137,473 129,066 137,473
Deposits 124,803 130,897 124,803 130,897
Long-term debt 27,816 31,350 27,816 31,350
Stockholders' equity 19,276 18,109 19,276 18,109
Nonperforming assets 1,394 1,117 1,394 1,117
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(a) The fully taxable equivalent (FTE) adjustment included in net interest
income was $17 million for the three months ended June 30, 2001 and 2000,
respectively, and $33 million and $35 million for the six months ended June
30, 2001 and 2000, respectively.
Results for the three and six months ended June 30, 2001 and 2000 included
the following:
THREE MONTHS ENDED JUNE 30, 2001:
- Gains of $243 million ($151 million after-tax) from branch divestitures
associated with the previously disclosed BankBoston merger.
- Write-downs of $470 million ($290 million after-tax) taken against the
carrying value of the Principal Investing portfolio.
- Summit merger-related costs of $93 million ($58 million after-tax),
composed of $55 million of merger integration costs and $38 million of
accelerated depreciation of assets to be disposed of at a later date.
- An additional loss of $101 million ($60 million after-tax) on the sale of
the mortgage banking business.
THREE MONTHS ENDED JUNE 30, 2000:
- Branch divestiture gains of $313 million ($127 million after-tax).
- Merger integration costs of $87 million ($52 million after-tax) incurred in
connection with the BankBoston merger.
SIX MONTHS ENDED JUNE 30, 2001:
- Gains of $333 million ($204 million after-tax) from branch divestitures
associated with the BankBoston merger.
- Write-downs of $602 million ($370 million after-tax) taken against the
carrying value of the Principal Investing portfolio.
- Summit merger-related charges of $811 million ($511 million after-tax)
consisting of $446 million ($292 million after-tax) of merger- and
restructuring-related charges, $100 million ($61 million after-tax) of merger
integration costs and a $265 million ($158 million after-tax) loss from the sale
of low-margin securities following the merger.
- Restructuring charges of $79 million ($50 million after-tax) primarily
related to a reorganization of capital markets-related businesses.
3
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- An aggregate loss of $428 million ($285 million after-tax) from the sale of
the mortgage banking business.
SIX MONTHS ENDED JUNE 30, 2000:
- Branch divestiture gains of $679 million ($336 million after-tax).
- Merger integration costs of $187 million ($112 million after-tax) incurred
in connection with the BankBoston merger.
In addition to the items listed above, decreases from the prior year in
both the three and six month comparisons resulted from a significant drop in
capital markets revenue, beyond the principal investing write-downs already
mentioned, associated with the pronounced fallout experienced in U.S. capital
markets in the second half of 2000 and the first half of 2001. This drop was
partly offset by improved results in International Banking and Commercial
Finance, lower operating expenses resulting from a corporate-wide cost
containment program, and a drop in revenue-related compensation costs.
RESULTS OF OPERATIONS
NET INTEREST INCOME
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Three months Six months
FTE basis ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Interest income $3,566 $4,063 $7,484 $8,179
Tax-equivalent adjustment 17 17 33 35
Interest expense 1,665 2,039 3,664 4,107
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Net interest income $1,918 $2,041 $3,853 $4,107
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Net interest income decreased 6% in both the three and six month
comparisons, primarily due to the impact of the divestiture of $9 billion of
loans and $13 billion of low-cost deposits throughout 2000 in connection with
the BankBoston merger. Additional factors contributing to the decrease were a
decline in domestic loan volume and lower brokerage volume and margin lending at
Robertson Stephens and Quick & Reilly, respectively. These declines were
partially offset by increases in Latin American units, primarily Brazil, from
higher loan volumes and wider spreads.
NET INTEREST MARGIN AND INTEREST RATE SPREAD
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Three months ended June 30 Six months ended June 30
2001 2000 2001 2000
FTE basis Average Average Average Average
Dollars in millions Balance Rate Balance Rate Balance Rate Balance Rate
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Securities $ 25,590 6.86% $ 34,788 6.62% $ 29,016 6.90% $ 35,165 6.55%
Loans and leases:
Domestic 111,648 8.04 125,982 8.70 113,566 8.41 127,110 8.63
International 19,210 11.32 15,106 13.98 18,738 11.61 14,956 13.99
Due from brokers/dealers 4,440 3.98 3,898 5.63 3,918 4.56 3,911 5.45
Mortgages held for sale 3,315 7.29 1,159 8.26 3,042 7.27 1,209 8.16
Other 16,350 6.24 10,042 6.86 13,667 7.09 13,401 6.16
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Total interest earning assets 180,553 7.95 190,975 8.58 181,947 8.30 195,752 8.43
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Deposits 97,962 3.84 102,451 4.29 98,314 4.12 105,403 4.16
Short-term borrowings 21,090 4.92 23,393 6.11 21,997 5.67 27,235 5.83
Due to brokers/dealers 4,072 4.07 5,574 5.27 3,873 5.10 5,320 5.32
Long-term debt 28,815 5.93 30,926 6.47 29,912 6.28 30,200 6.48
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Interest bearing liabilities 151,939 4.39 162,344 5.00 154,096 4.79 168,158 4.88
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Interest rate spread 3.56 3.58 3.51 3.55
Interest-free sources of funds 28,614 28,631 27,851 27,594
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Total sources of funds $180,553 3.70% $190,975 4.29% $181,947 4.06% $195,752 4.22%
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Net interest margin 4.25% 4.29% 4.24% 4.21%
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The 4 basis point decrease in margin in the quarterly comparison was
primarily attributable to the impact of divestitures throughout 2000, partially
offset by a strategic repositioning of the balance sheet for a lower interest
rate environment.
In the quarterly comparison, average securities decreased $9.2 billion to
$25.6 billion for the three months ended June 30, 2001, primarily due to the
aforementioned sale of $8 billion of low-margin securities.
Average domestic loans and leases decreased $14.3 billion to $111.6 billion
for the second quarter of 2001, primarily driven by the divestiture of loans
throughout 2000, commercial loan sales in the fourth quarter of 2000,
securitization activity, and lower domestic commercial and residential mortgage
loan levels. These declines were offset, in part, by strong growth in lease
financing receivables. Quarter to quarter, average international loans and
leases increased $4.1 billion to $19.2 billion due to commercial loan and lease
growth in several countries, with the largest increase in Brazil.
Average mortgages held for sale increased $2.2 billion compared to the
second quarter of 2000, due to higher mortgage production volume caused by a
decline in mortgage interest rates. The decrease in mortgage rates caused
average yields on mortgages held for sale to decrease 97 basis points. The
Corporation completed the sale of its mortgage banking business in the second
quarter of 2001.
4
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Average other interest earning assets increased $6.3 billion to $16.4
billion for the second quarter of 2001, partly the result of the reinvestment of
proceeds from securities sales after the Summit merger in federal funds sold and
securities purchased under agreements to resell.
The $4.5 billion decrease in average interest bearing deposits compared to
the second quarter of 2000 reflects the impact of the divestitures during the
course of 2000, offset, in part, by an increase in international interest
bearing deposits.
The $2.3 billion decrease in average short-term borrowings in the quarterly
comparison is mainly attributable to a decrease in federal funds purchased and
securities sold under agreements to repurchase and short-term Federal Home Loan
Bank borrowings. An additional factor in the six month comparison was the
elimination of low-yielding liabilities at the end of the first quarter of 2000
that were previously necessary to support investment banking operations.
Average long-term debt decreased $2.1 billion to $28.8 billion for the
three months ended June 30, 2001, as a result of maturities throughout the first
half of 2001.
NONINTEREST INCOME
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Three months Six months
ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Banking fees and commissions $ 406 $ 403 $ 796 $ 808
Investment services revenue 363 450 751 976
Credit card revenue 162 177 327 343
Processing-related revenue 74 153 262 313
Capital markets revenue (100) 820 (6) 1,880
Gains on branch divestitures 263 313 353 679
Other 158 151 367 288
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Total noninterest income $ 1,326 $ 2,467 $ 2,850 $ 5,287
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Noninterest income for the second quarter of 2001 decreased $1.1 billion to
$1.3 billion. This 46% decrease from the prior year quarter primarily reflects
the effect of the slowdown in the U.S. economy on FleetBoston's capital markets
and investment services businesses. Processing-related revenues also declined,
due to the sale of the mortgage banking business in the second quarter of 2001.
These decreases were offset, in part, by $263 million of gains from branch
divestitures.
BANKING FEES AND COMMISSIONS
Banking fees and commissions, which include fees received for cash
management, deposit accounts, electronic banking and other service fees, were
relatively flat in both the quarterly and six month comparisons, primarily the
result of lower deposit fees following the divestiture of deposits throughout
2000, partly offset by a rise in cash management fees resulting from a higher
volume of business.
INVESTMENT SERVICES REVENUE
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Three months Six months
ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Investment management revenue $234 $264 $481 $524
Brokerage fees and commissions 129 186 270 452
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Total investment services revenue $363 $450 $751 $976
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Investment services revenue decreased $87 million, or 19%, to $363 million
for the three months ended June 30, 2001, and decreased $225 million, or 23%, to
$751 million for the first half of 2001.
Investment Management Revenue
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Three months Six months
ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Private Clients Group $ 95 $104 $193 $205
Institutional businesses 38 44 81 88
International 34 39 72 80
Columbia Management Company 26 29 53 56
Quick & Reilly 22 28 44 57
Mutual Fund & Investment 16 17 32 33
Other 3 3 6 5
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Total $234 $264 $481 $524
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Investment management revenue decreased $30 million, or 11%, in the
quarterly comparison and $43 million, or 8%, in the six month comparison, in
both cases driven by adverse market conditions experienced during the 2001
periods, which resulted in a decline in the valuation of assets under
management. At June 30, 2001, assets under management amounted to $129 billion,
compared to $136 billion at June 30, 2000.
In June 2001, FleetBoston announced a definitive agreement to purchase the
asset management businesses of Liberty Financial Companies, Inc. for
approximately $1 billion, consisting of $900 million in cash and the assumption
of $110 million in revolving debt. This transaction will add approximately $50
billion to FleetBoston's assets under management, and FleetBoston will rank as
the world's 29th largest investment management business. The transaction, which
is subject to regulatory approvals, is expected to be completed in the second
half of 2001.
Brokerage Fees and Commissions
Brokerage fees and commissions declined $57 million, or 31%, in the
quarterly comparison, and $182 million, or 40%, in the six month comparison, due
mainly to the impact of adverse market conditions on Quick & Reilly and
Robertson Stephens in the first half of 2001, compared to the exceptionally
strong markets in the first half of 2000. These conditions resulted in lower
stock trading volumes and caused declines in revenue.
CREDIT CARD REVENUE
Credit card revenue decreased $15 million, or 8%, in the second quarter of
2001 compared to the second quarter
5
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of 2000, and $16 million, or 5%, in the six month comparison. Both decreases
were primarily due to lower securitization income, attributable to a higher
level of net charge-offs, as the level of bankruptcy filings increased in the
second quarter of 2001, and lower penalty fee income, partially offset by
improved interchange income driven by increased card usage.
PROCESSING-RELATED REVENUE
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Three months Six months
ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Student loan servicing fees $ 41 $ 39 $ 83 $ 78
Mortgage banking revenue, net -- 83 107 174
Other 33 31 72 61
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Total processing-related revenue $ 74 $153 $262 $313
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Processing-related revenue decreased $79 million in the second quarter of
2001 compared to the second quarter of 2000, and $51 million in the six month
comparison, reflecting the sale of the mortgage banking business in the second
quarter of 2001. Student loan servicing fees increased at AFSA Data Corporation
(AFSA), FleetBoston's student loan servicing subsidiary, as accounts serviced
increased approximately 6% from the second quarter of 2000. AFSA is the largest
student loan servicer in the United States, with 7.7 million accounts and over
$78 billion of loans serviced.
FleetBoston completed the sale of its mortgage banking business in the
second quarter of 2001, and recorded an additional pre-tax loss of $101 million
($60 million after-tax) in other noninterest expense. The loss was substantially
the result of hedge ineffectiveness recorded in accordance with Statement of
Financial Accounting Standards (SFAS) No. 133. FleetBoston will continue to
originate mortgage loans through its retail banking branches.
CAPITAL MARKETS REVENUE
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Three months Six months
ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Market-making revenue $ 144 $ 226 $ 341 $ 447
Foreign exchange revenue 80 54 123 100
Syndication/agency fees 56 43 96 83
Advisory fees 35 58 76 220
Underwriting revenue 29 95 70 351
Securities gains/(losses) 2 10 (211) (48)
Trading profits and commissions (10) 44 (7) 124
Principal investing (436) 290 (494) 603
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Total capital markets revenue $ (100) $ 820 $ (6) $ 1,880
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Capital markets revenue dropped $920 million, or 112%, and $1.9 billion, or
100%, for the second quarter and first six months of 2001, respectively,
compared to the same periods a year ago. These decreases were driven by declines
in nearly all categories of capital markets revenue from the remarkable levels
recorded in the 2000 periods, as a result of the previously mentioned economic
slowdown that began in the second quarter of 2000. Revenues from capital markets
activities are impacted by a variety of factors, including the condition of the
economy, interest rates and equity markets. These markets have experienced a
significant slowdown over the past twelve months, and are expected to recover
slowly. As such, capital markets revenues are not expected to return to the
levels achieved in 2000 in the foreseeable future.
The $82 million, or 36%, decrease in market-making revenue in the quarterly
comparison and the $106 million, or 24%, decrease in the six month comparison
resulted from decreased transaction volumes at Quick & Reilly and Robertson
Stephens, due to the effect of market conditions on these businesses.
Foreign exchange revenue increased $26 million, or 48%, to $80 million for
the three months ended June 30, 2001, and $23 million, or 23%, to $123 million
for the six months ended June 30, 2001. These increases were the result of
favorable positions in Latin America, specifically Argentina, where the
Corporation benefited from volatile market conditions.
The $13 million increase in syndication/agency fees in both comparisons was
due to a higher level of transactions during the second quarter of 2001 compared
to the 2000 quarter. Such fees are a function of the timing and level of
syndication transactions.
Advisory fees decreased $23 million in the second quarter of 2001, and $144
million in the first half of 2001. These decreases reflect a lower level of
merger and acquisition advisory activities at Robertson Stephens during the 2001
periods, reflecting lower demand for these services in the difficult market
environment.
Underwriting revenue declined $66 million, or 69%, in the second quarter of
2001. In the first six months of 2001, underwriting revenue declined $281
million, or 80%. Underwriting revenues are affected by the volume and timing of
public offerings and other transactions. As a result of the slowdown in the
technology sector, transaction volume at Robertson Stephens decreased 63%
compared to the second quarter of 2000, and 80% in the six month comparison.
Securities losses of $211 million for the first six months of 2001 included
a $265 million loss recorded in the first quarter of 2001 on the previously
mentioned sale of securities subsequent to the Summit merger, partly offset by
gains from sales of bonds. Losses in the first six months of 2000 resulted from
bond sales associated with a repositioning of the portfolio.
Trading profits and commissions declined $54 million for the quarter ended
June 30, 2001, and $131 million for the six months ended June 30, 2001. These
decreases were primarily due to the effect of adverse market conditions.
6
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Decreases in principal investing revenues in the three and six month
comparisons resulted primarily from investment write-downs of $470 million and
$602 million in the three and six month 2001 periods, respectively. These
write-downs were recorded to reflect the significant valuation impairment,
particularly in the technology and telecommunications sectors, currently being
experienced in the private equity industry. Of the $470 million of second
quarter write-downs, 55%, or $258 million, related to direct investments in
public and privately held companies. In addition, gains from sales of direct
investments declined significantly. During the second quarter and first six
months of 2001, FleetBoston made new investments of $215 million and $430
million, respectively. As of June 30, 2001, the Principal Investing portfolio
had an aggregate carrying value of approximately $4.1 billion, composed of
indirect investments in primary or secondary funds, direct investments in
privately held companies and direct investments in companies whose stocks are
publicly traded.
OTHER
Branch divestiture gains of $263 million and $353 million recorded in the
three and six months ended June 30, 2001, respectively, resulted primarily from
the divestitures required in connection with the BankBoston merger. In 2000,
$313 million and $679 million of gains relating to these divestitures were
recorded in the second quarter and first six months, respectively.
In the six month comparison, other noninterest income increased $79
million, primarily as a result of gains from sales of several small businesses
in the 2001 period.
NONINTEREST EXPENSE
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Three months Six months
ended June 30 ended June 30
In millions 2001 2000 2001 2000
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Employee compensation and benefits $ 985 $1,273 $2,029 $2,817
Occupancy and equipment 277 298 563 610
Intangible asset amortization 98 97 198 194
Legal and other professional 62 90 131 178
Marketing and public relations 58 77 121 156
Merger- and restructuring-related charges 38 25 525 62
Loss on sale of mortgage banking business 101 -- 428 --
Other 440 606 916 1,194
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Total noninterest expense $2,059 $2,466 $4,911 $5,211
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The $407 million, or 17%, and $300 million, or 6%, decreases in the
quarterly and six month comparisons, respectively, were primarily due to lower
compensation and benefits costs directly attributable to lower levels of
revenue, as well as lower operating expenses resulting from merger integration
activities and the previously disclosed corporate-wide program to contain
expenses in light of the slower economic environment.
Employee compensation and benefits costs in the 2001 periods decreased $288
million compared to the second quarter of 2000 and $788 million compared to the
first half of 2000, due primarily to revenue-related decreases in incentive
compensation at Robertson Stephens, Quick & Reilly and the Principal Investing
business, as well as expense reductions achieved from merger integration
activities and corporate-wide cost containment.
Occupancy and equipment, legal and other professional costs, marketing and
public relations and other noninterest expense all decreased in both the three
month and six month comparisons. These decreases were generally the result of
the aforementioned corporate-wide cost containment effort, cost savings from
merger integration activities and divestitures.
The second quarter of 2001 included $93 million of costs associated with
the Summit merger, composed of $55 million of merger integration costs, included
in the preceding table by type of expense, and $38 million of incremental
depreciation on certain assets that will be used in the merger integration and
then disposed of. Noninterest expense for the second quarter of 2000 included
$62 million of merger integration costs incurred in connection with the
BankBoston merger and $25 million of incremental depreciation on certain assets
that were used in the merger integration and then disposed of.
For the first six months of 2001, noninterest expense included $525 million
of merger and restructuring costs, composed of $446 million recorded in
connection with the Summit merger, to accrue for merger-related costs and a
restructuring plan, and $79 million related to a reorganization of capital
markets businesses. Summit merger integration costs totaling $100 million were
also incurred during the six month period. Noninterest expense for the 2000
period included $125 million of BankBoston merger integration costs and $62
million of incremental depreciation on certain assets that were used in the
merger integration and were then disposed of.
The Summit merger integration produced $7 million of incremental cost
savings in the second quarter of 2001. FleetBoston expects to achieve $300
million in annualized cost savings by the end of the first quarter of 2002, and
has achieved $52 million of annualized cost savings to date. The Corporation's
cost containment program produced approximately $100 million of incremental cost
savings in the second quarter of 2001. FleetBoston expects to achieve $500
million to $600 million of annualized cost savings by the end of 2001, and has
achieved approximately $460 million of annualized cost savings to date. Because
the cost containment program and integration are ongoing, actual savings in 2001
will be less than the annualized amounts.
7
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INCOME TAXES
The Corporation recorded income tax expense of $322 million for the second
quarter of 2001, compared to $719 million for the same period a year ago.
FleetBoston's effective tax rate was 37.8% and 42.5% for the second quarters of
2001 and 2000, respectively, and 40.5% and 41.4% for the respective six month
periods. The higher tax rate reported for the second quarter of 2000 generally
resulted from the write-off of nondeductible goodwill in connection with branch
divestitures.
LINE OF BUSINESS INFORMATION
FleetBoston is organized and managed along three principal lines of
business: Wholesale and Global Banking, Consumer and Investment Services and
Capital Markets. These business lines conform to the Corporation's
customer-focused organizational structure implemented on January 1, 2001. For
additional information about the products and services offered by each line of
business, refer to the "Line of Business Information" section of Management's
Discussion and Analysis included in the Corporation's Current Report on Form 8-K
dated May 4, 2001. Information for the quarter and six months ended June 30,
2001 and 2000 is presented below. Prior period information has been restated for
comparative purposes to reflect changes in management reporting implemented in
2001. The information is presented on a fully taxable equivalent basis.
LINE OF BUSINESS EARNINGS SUMMARY
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Three months ended June 30 2001 2000 2001 2000 2001 2000
Dollars in millions Net Income Total Revenue Return on Equity
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Wholesale and Global Banking $ 423 $ 370 $ 1,437 $ 1,429 23% 20%
Consumer and Investment Services 299 358 1,692 1,986 19 21
Capital Markets (284) 183 (283) 634 nm 36
All Other 93 60 398 459 nm nm
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Total $ 531 $ 971 $ 3,244 $ 4,508 11% 22%
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Six months ended June 30 2001 2000 2001 2000 2001 2000
Dollars in millions Net Income Total Revenue Return on Equity
------------------------------------------------------------------------------------------------------------------------------
Wholesale and Global Banking $ 797 $ 714 $ 2,814 $ 2,816 22% 20%
Consumer and Investment Services 594 717 3,413 4,001 18 21
Capital Markets (324) 480 (118) 1,635 nm 46
All Other (395) 136 594 942 nm nm
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Total $ 672 $ 2,047 $ 6,703 $ 9,394 7% 24%
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nm - not meaningful
The following discussion focuses on the components of each of the three
major business lines, and explains results in terms of their underlying
businesses.
WHOLESALE AND GLOBAL BANKING
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Three months ended Six months ended
June 30 June 30
Dollars in millions 2001 2000 2001 2000
-------------------------------------------------------------------------------------------------
Income statement data:
Net interest income $ 949 $ 965 $ 1,883 $ 1,909
Noninterest income 488 464 931 907
Provision 166 144 333 288
Noninterest expense 567 663 1,158 1,327
Taxes 281 252 526 487
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Net income $ 423 $ 370 $ 797 $ 714
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Balance sheet data:
Average assets $115,338 $118,580 $116,251 $122,953
Average loans 96,498 97,616 97,196 97,056
Average deposits 31,008 30,001 30,749 29,948
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Return on equity 23% 20% 22% 20%
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Wholesale and Global Banking earned $423 million in the second quarter of
2001, a 14% increase over the $370 million earned in the second quarter of 2000.
Increased earnings were driven by strong results in Commercial Finance and
International Banking, partly offset by a decline in Corporate Banking.
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Three months ended June 30 2001 2000 2001 2000 2001 2000
Dollars in millions Net Income Total Revenue Return on Equity
-----------------------------------------------------------------------------------------------------------------------
Commercial Finance $ 142 $ 126 $ 399 $ 380 20% 18%
International Banking 128 80 482 425 32 22
Corporate Banking 97 108 308 351 22 24
Middle Market 56 56 248 273 18 16
-----------------------------------------------------------------------------------------------------------------------
Total $ 423 $ 370 $1,437 $1,429 23% 20%
-----------------------------------------------------------------------------------------------------------------------
Commercial Finance
Commercial Finance earned $142 million in the second quarter of 2001,
compared to $126 million a year ago, an increase of 13%. Increased earnings were
driven primarily by higher leasing income and investment banking fees, combined
with lower operating expenses which resulted from cost saving initiatives.
8
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
International Banking
Compared to the second quarter of 2000, International Banking earnings
increased $48 million, or 60%, mainly due to continued strong loan growth in key
Latin American markets, primarily Brazil, coupled with effective control of
operating expenses. In addition, strong foreign exchange revenue and improved
spreads in Argentina contributed to the quarter over quarter increase in
International Banking's earnings. Average deposit balances grew $1.2 billion,
while average loan balances grew $3.2 billion, over the second quarter of 2000.
Corporate Banking
Corporate Banking recorded earnings of $97 million in the second quarter of
2001, a decrease of $11 million, or 10%, compared to the second quarter of 2000.
This decline was driven by decreases in loan volumes resulting, in part, from
repositioning of the portfolio to reduce credit exposure, and capital
markets-related revenues associated with the adverse conditions in the financial
markets, partially offset by a decrease in operating expenses.
Middle Market
For the second quarter of 2001, Middle Market earned $56 million,
consistent with the prior year quarter. Higher cash management fees and cost
saving initiatives offset the impact of decreases in the loan portfolio, a
portion of which was attributable to divestitures resulting from the BankBoston
merger. Average loan and deposit balances were $16.5 billion and $11.4 billion,
respectively, for the second quarter of 2001, compared to $18.8 billion and
$11.1 billion, respectively, for the 2000 period.
CONSUMER AND INVESTMENT SERVICES
---------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
Dollars in millions 2001 2000 2001 2000
---------------------------------------------------------------------------------------------
Income statement data:
Net interest income $ 863 $ 1,042 $ 1,750 $ 2,110
Noninterest income 829 944 1,663 1,891
Provision 101 107 197 243
Noninterest expense 1,092 1,273 2,226 2,544
Taxes 200 248 396 497
---------------------------------------------------------------------------------------------
Net income $ 299 $ 358 $ 594 $ 717
---------------------------------------------------------------------------------------------
Balance sheet data:
Average assets $45,300 $48,775 $45,398 $49,729
Average loans 32,950 35,256 33,470 36,059
Average deposits 83,260 89,966 82,978 91,180
---------------------------------------------------------------------------------------------
Return on equity 19% 21% 18% 21%
---------------------------------------------------------------------------------------------
Consumer and Investment Services, which includes domestic banking to
consumer and small business customers, investment management and retail
brokerage services, as well as the domestic credit card business, earned $299
million in the second quarter of 2001, down from $358 million in the second
quarter of 2000. Results reflect the impact of divestitures--primarily affecting
the Consumer Businesses and Small Business units--as well as lower earnings in
the Wealth Management and Brokerage units stemming from declines in the equity
markets.
---------------------------------------------------------------------------------------------------------------------------------
Three months ended
June 30 2001 2000 2001 2000 2001 2000
Dollars in millions Net Income Total Revenue Return on Equity
---------------------------------------------------------------------------------------------------------------------------------
Consumer Businesses $ 168 $ 171 $ 818 $ 916 27% 25%
Wealth Management and Brokerage 51 94 385 529 12 23
Small Businesses 52 63 261 301 26 28
Credit Card 28 30 228 240 8 7
---------------------------------------------------------------------------------------------------------------------------------
Total $ 299 $ 358 $1,692 $1,986 19% 21%
---------------------------------------------------------------------------------------------------------------------------------
Consumer Businesses
The Consumer Businesses unit is composed of the retail distribution
network, community banking, consumer lending and student loan processing. The
results of the mortgage banking unit, which was sold in the second quarter of
2001, are included in All Other. The Consumer Businesses unit earned $168
million in the second quarter of 2001, a slight decrease from the prior year.
Lower earnings were primarily driven by the impact of 2000 divestitures and
lower deposit spreads arising from the declining interest rate environment.
Wealth Management and Brokerage
Wealth Management and Brokerage includes the Investment Services units: the
Private Clients Group, Columbia Management, the Mutual Funds & Investments Group
and several businesses offering retirement planning, large institutional asset
management and not-for-profit investment services, as well as the Quick & Reilly
retail brokerage and clearing units. Wealth Management and Brokerage earned $51
million in the second quarter of 2001, compared to $94 million in the second
quarter of 2000, a decrease of $43 million, or 46%. These lower results were due
to a significant decline in net income at Quick & Reilly ($41 million), as
brokerage-related revenues continued to be negatively impacted by market
conditions. In addition, the market value of domestic assets under management
declined $6 billion from June 30, 2000 to approximately $121 billion at June 30,
2001, reflecting declines in the overall valuation of the stock market.
Small Businesses
Earnings were $52 million in the second quarter of 2001, $11 million, or
17%, lower than the second quarter of 2000, largely the result of 2000
divestitures. For the second quarter of 2001, average loans were $4.2 billion
9
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
while average deposits were $12.8 billion, reflecting decreases of approximately
$900 million and $1.7 billion, respectively, from a year ago, again primarily
due to divestitures.
Credit Card
FleetBoston's credit card subsidiary is the tenth largest bank credit card
issuer in the nation in terms of managed credit card receivables. This unit
earned $28 million for the second quarter of 2001, a slight decline from a year
ago. Decreasing penalty fee income and securitization income due to increased
charge-offs from a higher level of bankruptcy filings was partially offset by
lower operating expenses and increased interchange income.
CAPITAL MARKETS
----------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
Dollars in millions 2001 2000 2001 2000
----------------------------------------------------------------------------------------------
Income statement data:
Net interest income $ (29) $ 11 $ (47) $ 17
Noninterest income (254) 623 (71) 1,618
Provision -- -- -- --
Noninterest expense 182 327 415 839
Taxes (181) 124 (209) 316
----------------------------------------------------------------------------------------------
Net income $ (284) $ 183 $ (324) $ 480
----------------------------------------------------------------------------------------------
Balance sheet data:
Average assets $ 8,278 $ 9,673 $ 8,721 $ 9,958
Average loans 225 389 255 417
Average deposits 73 40 68 31
----------------------------------------------------------------------------------------------
Return on equity nm 36% nm 46%
----------------------------------------------------------------------------------------------
nm - not meaningful
Capital Markets includes Fleet Meehan Specialist, Robertson Stephens and
Principal Investing. This group incurred a loss of $284 million for the second
quarter of 2001, compared to net income of $183 million for the same quarter a
year ago.
-----------------------------------------------------------------------------------------------------------------
Three months ended
June 30 2001 2000 2001 2000 2001 2000
Dollars in millions Net Income Total Revenue Return on Equity
-----------------------------------------------------------------------------------------------------------------
Fleet Meehan Specialist $ 23 $ 33 $ 82 $ 96 27% 76%
Robertson Stephens (14) 25 104 294 nm 16
Principal Investing (293) 125 (469) 244 nm 41
-----------------------------------------------------------------------------------------------------------------
Total $(284) $ 183 $(283) $ 634 nm 36%
-----------------------------------------------------------------------------------------------------------------
nm - not meaningful
Fleet Meehan Specialist
Fleet Meehan Specialist, one of the largest specialist firms on the NYSE
representing the equity securities of approximately 500 companies, earned $23
million for the second quarter of 2001, a decrease of $10 million from the
second quarter of 2000. Decreased volatility in market prices and the impact of
the conversion to decimal price quotes adopted by the NYSE reduced profit
opportunities and narrowed spreads, compared to the second quarter of last year.
Robertson Stephens
Robertson Stephens is a full-service investment banking firm focused on
providing growth companies with a comprehensive set of investment banking
products and services, including equity underwriting, sales and trading,
research, advisory services, convertible securities and equity derivatives.
Robertson Stephens channels capital to companies by providing investment
banking, brokerage services and research to investors. This unit incurred a net
loss of $14 million in the second quarter of 2001, compared to net income of $25
million in the second quarter of 2000. Lower earnings were mainly a result of
declining underwriting activities. The number of underwriting transactions that
went to market in the 2001 period decreased 63% from the second quarter of 2000.
Principal Investing
Principal Investing provides capital and debt financing to business
ventures that are predominantly privately or closely held companies, and also
invests in primary or secondary funds. The Principal Investing business recorded
a loss of $293 million in the second quarter of 2001, a decrease of $418 million
from the same quarter last year. Principal Investing's earnings were affected by
write-downs ($470 million, $290 million after-tax) taken by the Corporation
against this portfolio, reflecting the impairment of value, particularly in the
technology and telecommunications sectors, that has resulted from the slowdown
in the U.S. economy, coupled with sharp declines in realized gains from sales of
direct investments. At June 30, 2001, the aggregate carrying value of the
Principal Investing portfolio was $4.1 billion.
ALL OTHER
All Other includes transactions not allocated to the principal business
lines and the residual impact of methodology allocations, such as the provision
for credit losses, credit loss reserves and equity allocations, combined with
transfer pricing offsets. The business activities of FleetBoston's Treasury unit
are also included in All Other. The Treasury unit is responsible for managing
the Corporation's securities and residential mortgage portfolios, the balance
sheet management function and wholesale funding needs. Earnings in All Other can
fluctuate with changes affecting the consolidated provision for credit losses,
one-time charges, gains and other corporate actions not driven by specific
business units. All Other had net income of $93 million in the second quarter of
2001, compared to $60 million in the second quarter of 2000. The second quarter
of 2001 included $93 million of net after-tax profits related to divestiture and
integration activities, as well as after-tax charges of $60 million primarily
related to hedge ineffectiveness recorded in
10
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
conjunction with the sale of the mortgage banking unit. The second quarter of
2000 benefited from $75 million of after-tax divestiture gains, net of merger
integration expenses, related to the BankBoston merger.
FINANCIAL CONDITION
Total assets were $202.1 billion as of June 30, 2001 compared to $219.1
billion at December 31, 2000. This $17 billion decline reflected a $10.4 billion
decrease in securities resulting primarily from the previously discussed sale of
$8 billion of low-margin securities, and a $5.8 billion decrease in loans and
leases as a result of securitization transactions, loan runoff and lower
business volume. In addition, the sale of the mortgage banking business in the
second quarter of 2001 removed approximately $8 billion of assets. These
decreases were offset, in part, by a rise in federal funds sold and securities
purchased under agreements to resell, due primarily to excess funds following
the securities sales.
Total deposits decreased from December 31, 2000 by $3.9 billion to $124.8
billion at June 30, 2001, primarily the result of the transfer of escrow
deposits in connection with the mortgage banking business sale, partially offset
by a $2.2 billion increase in international deposits.
Short-term borrowings decreased $7.7 billion from December 31, 2000 to June
30, 2001, attributable to decreased use of federal funds purchased and
securities sold under agreements to repurchase, Federal Home Loan Bank
borrowings as well as treasury, tax and loan borrowings. The $3.9 billion
decrease in long-term debt was due to maturities during the first half of the
year.
SECURITIES
---------------------------------------------------------------------------------------------------------------------------------
June 30, 2001 March 31, 2001 Dec. 31, 2000
Amortized Market Amortized Market Amortized Market
In millions Cost Value Cost Value Cost Value
---------------------------------------------------------------------------------------------------------------------------------
Securities available for sale:
U.S. Treasury and government agencies $ 558 $ 563 $ 815 $ 827 $ 1,770 $ 1,769
Mortgage-backed securities 14,778 14,840 15,256 15,484 19,327 19,411
Foreign debt securities 3,258 3,254 2,840 2,810 2,734 2,754
Other debt securities 2,518 2,519 2,997 3,017 2,843 2,832
---------------------------------------------------------------------------------------------------------------------------------
Total debt securities 21,112 21,176 21,908 22,138 26,674 26,766
---------------------------------------------------------------------------------------------------------------------------------
Marketable equity securities 651 641 846 757 1,099 1,072
Other equity securities 2,192 2,192 2,129 2,129 2,067 2,067
---------------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 23,955 24,009 24,883 25,024 29,840 29,905
---------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 578 582 585 588 5,059 5,027
---------------------------------------------------------------------------------------------------------------------------------
Total securities $24,533 $24,591 $25,468 $25,612 $34,899 $34,932
---------------------------------------------------------------------------------------------------------------------------------
The amortized cost of securities available for sale decreased to $24
billion at June 30, 2001, compared to $29.8 billion at December 31, 2000, due to
the previously-mentioned securities sales and the write-down of certain
securities available for sale to reflect impairment in value that was deemed
other than temporary. The overall valuation of securities available for sale
decreased $11 million from December 31, 2000 to a net unrealized (pre-tax) gain
position of $54 million at June 30, 2001. The $4.5 billion decrease in
securities held to maturity from December 31, 2000 resulted from a one-time
reclassification of $5 billion of securities held to maturity to securities
available for sale in connection with the adoption of SFAS No. 133.
LOANS AND LEASES
-----------------------------------------------------------------------------------------------
June 30, March 31, Dec. 31,
In millions 2001 2001 2000
-----------------------------------------------------------------------------------------------
Domestic:
Commercial and industrial $ 51,642 $ 54,249 $ 56,147
Commercial real estate 11,447 11,336 11,641
Consumer 32,244 34,424 36,323
Lease financing 13,796 13,296 13,567
-----------------------------------------------------------------------------------------------
Total domestic loans and leases 109,129 113,305 117,678
-----------------------------------------------------------------------------------------------
International:
Commercial 17,061 15,415 14,221
Consumer 2,876 2,920 2,935
-----------------------------------------------------------------------------------------------
Total international loans and leases 19,937 18,335 17,156
-----------------------------------------------------------------------------------------------
Total loans and leases $129,066 $131,640 $134,834
-----------------------------------------------------------------------------------------------
Total loans and leases decreased $5.8 billion to $129.1 billion from
December 31, 2000. This decrease was due to declines of $4.5 billion in domestic
commercial & industrial (C&I) loans, resulting from loan runoff and lower
business volume, and $4.1 billion in domestic consumer loans. These decreases
were offset, in part, by a $2.8 billion increase in FleetBoston's international
loan portfolio, principally in Brazil.
11
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consumer Loans
----------------------------------------------------------------------------
June 30, March 31, Dec. 31,
In millions 2001 2001 2000
----------------------------------------------------------------------------
Domestic:
Home equity $11,662 $12,375 $12,507
Residential real estate 9,917 11,051 11,425
Credit card 4,891 4,587 5,126
Student loans 1,058 1,202 1,109
Installment/other 4,716 5,209 6,156
----------------------------------------------------------------------------
Total domestic loans 32,244 34,424 36,323
----------------------------------------------------------------------------
International 2,876 2,920 2,935
----------------------------------------------------------------------------
Total consumer loans $35,120 $37,344 $39,258
----------------------------------------------------------------------------
Compared to December 31, 2000, domestic consumer loans decreased $4.1
billion, or 11%, to $32.2 billion at June 30, 2001. The $845 million, or 7%,
decline in home equity loans from year-end resulted primarily from a $750
million securitization transaction completed in the second quarter, while the
$1.5 billion decline in residential real estate loans was mainly attributable to
loan runoff. The $235 million decrease in credit card loans was attributable to
new securitizations of approximately $1.7 billion during the first half of 2001,
offset, in part, by growth in the owned portfolio and activity related to prior
year securitizations. The decrease of $1.4 billion in installment/other consumer
loans was primarily attributable to lower margin lending at Quick & Reilly.
Cross-Border Outstandings
In accordance with bank regulatory rules, cross-border outstandings are
amounts payable to FleetBoston by residents of foreign countries, regardless of
the currency in which the claim is denominated, and local country claims in
excess of local country obligations. At June 30, 2001, total cross-border
outstandings were $14.2 billion, compared with $13.2 billion at December 31,
2000, which included $6.8 billion and $6.5 billion, respectively, of
cross-border outstandings to Latin America. Further information with respect to
FleetBoston's cross-border outstandings is included in the "Cross-Border
Outstandings" section of Management's Discussion and Analysis, contained in its
Current Report on Form 8-K dated May 4, 2001.
In addition to credit risk, cross-border outstandings have the risk that,
as a result of political or economic conditions in a country, borrowers may be
unable to meet their contractual repayment obligations of principal and/or
interest when due because of the unavailability of, or restrictions on, foreign
exchange needed by borrowers to repay their obligations. FleetBoston manages its
cross-border outstandings using country exposure limits established by the
Country Exposure Committee.
The following table details by country FleetBoston's approximate
cross-border outstandings that individually amounted to 1% or more of its
consolidated total assets at June 30, 2001 and December 31, 2000.
Significant Cross-Border Outstandings(a)(b)
--------------------------------------------------------------------------
June 30, Dec. 31,
Dollars in millions 2001(c)(d) 2000(c)(d)
--------------------------------------------------------------------------
Argentina:
Banks $ 189 $ 115
Government entities and agencies 556 835
Other 1,497 1,425
--------------------------------------------------------------------------
Total $2,242 $2,375
--------------------------------------------------------------------------
Percentage of total assets 1.1% 1.1%
--------------------------------------------------------------------------
Commitments(e) $ 50 $ 13
--------------------------------------------------------------------------
Brazil:
Banks $ 31 --
Government entities and agencies 1,212 --
Other 809 --
--------------------------------------------------------------------------
Total $2,052 --
--------------------------------------------------------------------------
Percentage of total assets 1.0% --
--------------------------------------------------------------------------
Commitments(e) $ 126 --
--------------------------------------------------------------------------
(a) Cross-border outstandings include deposits in other banks, resale
agreements, trading securities, securities available for sale and held to
maturity, loans and leases, amounts due from customers on acceptances,
accrued interest receivable and revaluation gains on trading derivatives.
Excluded from cross-border outstandings are claims reallocated as a result
of external guarantees, cash collateral and insurance contracts primarily
issued by U.S. government agencies.
(b) Cross-border outstandings in countries which totaled between .75% and 1% of
consolidated total assets were approximately as follows: June 30,
2001-none; December 31, 2000-Brazil-$2 billion.
(c) Local country assets and local country liabilities for Argentina and Brazil
are summarized below. Local country assets in excess of local country
liabilities are included in cross-border outstandings presented in the
table above.
-----------------------------------------------------------------------------
June 30, 2001 December 31, 2000
Local Country Local Country
In billions Assets Liabilities Assets Liabilities
-----------------------------------------------------------------------------
Argentina $ 5.8 $ 5.2 $ 6.2 $ 5.5
Brazil 7.7 6.2 6.5 5.2
-----------------------------------------------------------------------------
Included in local country liabilities are liabilities where the provider of
funds assumes the risk of nonpayment due to currency exchange restrictions
in a given country. Such liabilities were $4 billion at June 30, 2001 and
$3.5 billion at December 31, 2000.
(d) Excluding net local country outstandings, cross-border outstandings with a
remaining maturity of less than one year, as a percentage of total
outstandings, were approximately 59% for Argentina and 50% for Brazil at
June 30, 2001 and 55% for Argentina and 70% for Brazil at December 31,
2000.
(e) Commitments include legally binding cross-border letters of credit,
guarantees and other commitments defined by the FFIEC guidelines.
The Argentine economy continues to be impacted by the recession that began
in 1999, and financial markets have recently experienced periods of significant
volatility. While the Corporation's overall financial results relating to its
Argentine operations have not been significantly impacted by this situation to
date, it is not possible to predict what effect, if any, the economic and
political events in Argentina will ultimately have on that country's economic
growth or on FleetBoston's operations in Argentina and other Latin American
countries. The Corporation will continue to closely monitor the Argentine
economic and political situation and the potential impact future developments
may have on its Argentine and other Latin American operations.
12
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NONPERFORMING ASSETS (a)
---------------------------------------------------------------------------------------------------------------------------------
June 30, 2001 March 31, 2001 December 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
Current or Current or Current or
less than less than less than
90 days 90 days 90 days
In millions past due Noncurrent Total past due Noncurrent Total past due Noncurrent Total
---------------------------------------------------------------------------------------------------------------------------------
Domestic:
Commercial and industrial $ 705 $ 294 $ 999 $ 614 $ 255 $ 869 $ 578 $ 187 $ 765
Commercial real estate 27 34 61 27 21 48 3 25 28
Consumer 5 57 62 5 68 73 4 83 87
OREO -- 21 21 -- 29 29 -- 30 30
---------------------------------------------------------------------------------------------------------------------------------
Total Domestic $ 737 $ 406 $1,143 $ 646 $ 373 $1,019 $ 585 $ 325 $ 910
---------------------------------------------------------------------------------------------------------------------------------
International:
Commercial and industrial $ 1 $ 84 $ 85 $ -- $ 75 $ 75 $ 3 $ 78 $ 81
Commercial real estate 3 83 86 4 73 77 2 64 66
Consumer -- 66 66 -- 59 59 -- 55 55
OREO -- 14 14 -- 15 15 -- 18 18
---------------------------------------------------------------------------------------------------------------------------------
Total International $ 4 $ 247 $ 251 $ 4 $ 222 $ 226 $ 5 $ 215 $ 220
---------------------------------------------------------------------------------------------------------------------------------
Total NPAs $ 741 $ 653 $1,394 $ 650 $ 595 $1,245 $ 590 $ 540 $1,130
---------------------------------------------------------------------------------------------------------------------------------
(a) Throughout this Report, NPAs and related ratios do not include loans
greater than 90 days past due and still accruing interest ($384 million,
$352 million, and $361 million at June 30, 2001, March 31, 2001, and
December 31, 2000, respectively). Included in these 90 days past due and
still accruing amounts were $279 million, $264 million, and $276 million of
consumer loans at June 30, 2001, March 31, 2001, and December 31, 2000,
respectively. NPAs and related ratios also do not include assets held for
sale by accelerated disposition (AHAD).
Nonperforming assets (NPAs) at June 30, 2001 increased $264 million to $1.4
billion compared with December 31, 2000, and increased $149 million compared to
March 31, 2001. The six month rise in NPAs was due primarily to additions to
domestic C&I nonperforming loans (NPLs). NPAs at June 30, 2001, as a percentage
of total loans, leases and OREO, and as a percentage of total assets, were 1.08%
and .69%, respectively, compared to .84% and .52%, respectively, at December 31,
2000. FleetBoston had no significant outstanding commitments to lend additional
funds to customers whose loans have been placed on nonaccrual status or the
terms of which have been modified.
As noted in previous public comments and prior filings with the Securities
and Exchange Commission (the SEC), FleetBoston anticipates further increases in
NPAs during 2001, primarily related to domestic C&I loans. Future levels of NPAs
will be influenced by the economic environment, interest rates and other
internal and external factors existing at the time. As such, no assurance can be
given as to future levels of NPAs.
Impaired Loans
FleetBoston accounts for impaired loans in accordance with SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." As such, when the recorded
investment in a loan exceeds the value of the loan measured using discounted
cash flows or, in the case of collateral-dependent loans, the fair value of the
collateral, the loan is classified as impaired. Such impairment is recognized as
a valuation reserve, which is included as part of the Corporation's overall
reserve for credit losses. Impaired loans, which are included in NPAs presented
in the table above, are primarily commercial and commercial real estate loans on
nonaccrual status. The following table presents the status of impaired loans.
The amount of interest income recognized on impaired loans was not significant.
---------------------------------------------------------------------------
June 30, Dec. 31,
In millions 2001 2000
---------------------------------------------------------------------------
Impaired loans with a reserve $ 852 $ 722
Impaired loans without a reserve 304 164
---------------------------------------------------------------------------
Total impaired loans $1,156 $ 886
---------------------------------------------------------------------------
Reserve for impaired loans (a) $ 348 $ 268
---------------------------------------------------------------------------
Quarterly average balance of impaired loans $1,069 $1,007
---------------------------------------------------------------------------
(a) The reserve for impaired loans is part of the Corporation's overall reserve
for credit losses.
At June 30, 2001 and March 31, 2001, FleetBoston had AHAD with a net
carrying value of $125 million and $177 million, respectively, none of which
were accruing interest. At December 31, 2000, the net carrying value of AHAD was
$138 million, of which approximately $136 million was not accruing interest.
Transfers to this category are made in accordance with management's intention to
focus appropriate resources on the disposition of these assets. Such assets are
classified as other assets in the consolidated balance sheet.
13
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESERVE FOR CREDIT LOSSES ACTIVITY
-------------------------------------------------------------------------------------------
Six months ended June 30 2001 2000
Dollars in millions
-------------------------------------------------------------------------------------------
Balance at beginning of year $ 2,709 $ 2,816
Loans charged off (717) (710)
Recoveries of loans charged off 125 107
-------------------------------------------------------------------------------------------
Net charge-offs (592) (603)
Provision for credit losses 630 655
Divestitures/Acquisitions/Other (1) (62)
-------------------------------------------------------------------------------------------
Balance at end of period $ 2,746 $ 2,806
-------------------------------------------------------------------------------------------
Ratios of net charge-offs to average loans .90% .85%
-------------------------------------------------------------------------------------------
Ratios of reserve for credit losses to period-end loans 2.13 2.04
-------------------------------------------------------------------------------------------
Ratios of reserve for credit losses to period-end NPLs 202 264
-------------------------------------------------------------------------------------------
The reserve for credit losses to period-end loans at June 30, 2001
increased to 2.13% from 2.04% at June 30, 2000. The increase was the result of
the provision for credit losses exceeding net charge-offs by $38 million in
2001, coupled with a lower level of loans. Further information with respect to
the reserve for credit losses is included in the "Reserve for Credit Losses"
section of Management's Discussion and Analysis contained in FleetBoston's
Current Report on Form 8-K dated May 4, 2001.
ASSET AND LIABILITY MANAGEMENT
The goal of asset and liability management is the prudent control of market
risk, liquidity risk and use of capital. Further information with respect to
asset and liability management, including related policies, is included in the
"Asset and Liability Management" section of Management's Discussion and Analysis
contained in FleetBoston's Current Report on Form 8-K dated May 4, 2001.
MARKET RISK MANAGEMENT
FleetBoston is exposed to market risk both in its balance sheet management
activities and its trading activities. The market risk management process for
these activities applies to both balance sheet and off-balance sheet exposures.
Balance Sheet Management -
U.S. Dollar Denominated Risk
U.S. dollar denominated assets and liabilities comprise the majority of the
consolidated balance sheet. Interest rate risk is by far the most significant
non-trading market risk to which the U.S. dollar denominated positions are
exposed, and results almost entirely from domestic operations.
To measure interest rate risk, FleetBoston performs net interest income
simulation analysis, which involves projecting future net interest income from
assets, liabilities, and derivative positions over a 1-3 year horizon in various
interest rate scenarios.
The following table reflects the estimated exposure of net interest income
for the next 12 months due to an immediate shift in forecasted interest rates.
Estimated Exposure to
Rate Change Net Interest Income
(Basis Points) (In millions)
--------------------------------------------------------
June 30, March 31, Dec. 31,
2001 2001 2000
--------------------------------------------------------
+200 $ 92 $ 68 $(121)
-200 339 (137) 97
--------------------------------------------------------
Management believes that the exposure of the Corporation's net interest
income to modest changes in interest rates, such as the easing by the Federal
Reserve Board currently built into the base forecast scenario, is insignificant.
Furthermore, the current balance sheet position would tend to benefit from any
sudden, severe change in interest rates.
Estimated net interest income exposures changed materially from the prior
quarter-end, especially in a scenario of declining interest rates. These changes
were a direct result of interest rate risk management strategy. During the
quarter, FleetBoston added interest rate floors and principal-only
mortgage-backed securities to hedge exposures to lower short- and long-term
interest rates.
FleetBoston also performs valuation analysis, which involves projecting
future cash flows from assets, liabilities and derivative positions over a very
long-term horizon, discounting those cash flows at appropriate interest rates,
and then aggregating the discounted cash flows. The "Economic Value of Equity"
(EVE) is the estimated net present value of these discounted cash flows.
The following table reflects estimated EVE exposures assuming an immediate
shift in interest rates. While an immediate shift in interest rates is used in
this analysis to provide an estimate of exposure under an extremely adverse
scenario, management believes that a gradual shift in interest rates would have
a much more modest impact.
Estimated Exposure to
Rate Change Economic Value
(Basis Points) (In millions)
---------------------------------------------------------
June 30, March 31, Dec. 31,
2001 2001 2000
---------------------------------------------------------
+200 $(231) $(399) $(611)
+100 (152) (372) (155)
-100 92 150 (315)
-200 (277) (343) (451)
---------------------------------------------------------
As indicated, an immediate 200 basis point change in interest rates in
either direction would reduce EVE, but by an amount that is well within
Board-approved limits.
Estimated EVE exposures at June 30, 2001 are more modest compared to those
at March 31, 2001. These changes reflect the sale of the mortgage banking
business, which eliminated exposure to the prepayment risk associ-
14
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ated with mortgage servicing rights, as well as the impact of the aforementioned
risk management strategy.
Risk Management Instruments
----------------------------------------------------------------------------------------------------------------
Weighted
Average Weighted Average
June 30, 2001 Notional Maturity Fair Rate
Dollars in millions Value (Years) Value Receive Pay
----------------------------------------------------------------------------------------------------------------
DOMESTIC INTEREST RATE RISK
MANAGEMENT INSTRUMENTS
Interest rate swaps:
Receive fixed/ pay variable
hedging:
variable-rate loans $10,100
fixed-rate deposits 340
short-term debt 430
long-term debt 3,835
-------
14,705 3.4 $ 860 6.33% 4.54%
-------
Options hedging:
variable-rate loans 12,000
securities 500
fixed-rate deposits 105
long-term debt 250
-------
12,855 4.0 155 -- --
----------------------------------------------------------------------------------------------------------------
Total domestic interest rate risk
management instruments 27,560 3.7 1,015 6.33% 4.54%
----------------------------------------------------------------------------------------------------------------
INTERNATIONAL INTEREST RATE RISK
MANAGEMENT INSTRUMENTS
Interest rate swaps hedging
foreign currency denominated
variable-rate deposits 145 1.8 (1) 4.98% 5.44%
----------------------------------------------------------------------------------------------------------------
Total international interest rate
risk management instruments 145 1.8 (1) 4.98% 5.44%
----------------------------------------------------------------------------------------------------------------
Total hedges of net interest income $27,705 3.7 $1,014 6.32% 4.55%
----------------------------------------------------------------------------------------------------------------
FOREIGN EXCHANGE RISK MANAGEMENT
INSTRUMENTS
Swaps hedging foreign currency
denominated repurchase and resale
agreements $ 602 2.0 $ 26 -- --
Forward contracts hedging foreign
currency denominated fixed-
rate loans; fixed-rate deposits 826 .9 (4) -- --
Futures hedging foreign
currency denominated resale
agreements 1,736 .8 -- -- --
----------------------------------------------------------------------------------------------------------------
Total hedges of foreign
exchange $ 3,164 1.1 $ 22 -- --
----------------------------------------------------------------------------------------------------------------
Total risk management instruments $30,869 3.4 $1,036 6.32% 4.55%
----------------------------------------------------------------------------------------------------------------
Trading Activities
FleetBoston's trading activities create exposure to price risk, or the risk
of loss in earnings arising from adverse changes in the value of trading
portfolios of financial instruments. Price risk arises from market-making,
dealing and position-taking in interest rate, equity, currency exchange rate and
precious metals markets.
FleetBoston uses a VAR methodology, based on industry-standard risk
measurement techniques, to measure the overall price risk inherent in its
activities. This methodology is more fully described on page 21 of the
Corporation's Current Report on Form 8-K dated May 4, 2001. Under this
methodology, aggregate VAR averaged $40 million daily for the six months ended
June 30, 2001, essentially unchanged from the daily average for all of 2000. At
June 30, 2001, total VAR usage measured $38 million. In no instance during the
current year did FleetBoston's daily VAR measure exceed the approved limit.
For the six months ended June 30, 2001, most of the price risk in the
Corporation's trading activities arose from interest rate risk, which includes
directional and spread components, and averaged $23 million, or 59% of
aggregate VAR. Interest rate risk arises primarily from trading activity in
various domestic fixed-income markets, and in the Argentine and Brazilian
sovereign and high-end corporate bond markets.
The contribution to FleetBoston's VAR from equity trading activities for
the first half of 2001 decreased somewhat, to an average of $9 million, or 23%
of aggregate VAR. The individual activities that generate most of these risks
include the Corporation's large NYSE specialist firm, as well as NASDAQ
market-making, equity trading and a convertible bond trading and underwriting
business.
Risk from foreign exchange trading activities for the six months ended June
30, 2001 remained moderate at an average of $7 million, or 18% of aggregate
VAR. The majority of foreign exchange risk arises from the Corporation's
Argentine and Brazilian operations, which establish currency positions with the
intention of taking advantage of expected movements in currency exchange rates
and/or interest rates. During the first half of 2001, the Corporation primarily
maintained local currency assets funded with U.S. dollars. The daily average for
the Argentine exposure measured $247 million, while the daily average for the
Brazilian exposure measured $17 million. This compares with a daily average of
$366 million and $11 million, respectively, for the first six months of 2000.
FleetBoston's independent Market Risk Management function routinely
validates FleetBoston's measurement framework by conducting backtests, which
compare the actual daily trading-related results against the estimated VAR with
a one-day holding period. In no instance during the current year did a daily
aggregate trading loss exceed the one-day aggregate VAR measure associated with
that date.
For the six months ended June 30, 2001, daily trading-related revenues,
which include certain components of capital markets revenue (trading profits and
commissions, foreign exchange revenue and market-making revenue), as well as net
interest income from these trading positions, ranged from a loss of $19.7
million to a profit of $22.6 million. For the 2000 period, such revenues ranged
from a loss of $.9 million to a profit of $18 million. Over the 2001 period, VAR
with a one-day holding period ranged from $21 million to $36 million.
15
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY RISK MANAGEMENT
The objective of liquidity risk management is to assure the ability of
FleetBoston and its subsidiaries to meet their financial obligations, including
the payment 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. Further information with respect to liquidity risk management,
including sources of liquidity for FleetBoston and its banking and nonbanking
subsidiaries, is included in the "Liquidity Risk Management" section of
Management's Discussion and Analysis contained in FleetBoston's Current Report
on Form 8-K dated May 4, 2001.
At June 30, 2001, the parent company had commercial paper outstanding of
$1.2 billion, compared with $1 billion at December 31, 2000. The parent company
had excess funds at June 30, 2001 of $1 billion compared to $1.7 billion at
December 31, 2000. The parent company has backup lines of credit totaling $1
billion to provide funding should commercial paper not be available. At June 30,
2001 and December 31, 2000, the parent company had no outstanding balances under
these lines of credit.
At June 30, 2001, the parent company had $1.6 billion available for the
issuance of senior or subordinated debt securities and other debt securities,
common stock, preferred stock or trust preferred securities, under a shelf
registration statement filed with the SEC. Management believes the Corporation
has sufficient liquidity to meet its liabilities to customers and debt holders.
CAPITAL MANAGEMENT
Capital Ratios
----------------------------------------------------------------------------------------
June 30, Dec. 31, June 30,
2001 2000 2000
----------------------------------------------------------------------------------------
Risk-adjusted assets
(in millions) $201,757 $212,438 $218,505
Tier 1 risk-based capital ratio
(4% minimum) 8.47% 8.08% 7.58%
Total risk-based capital ratio
(8% minimum) 12.25 11.87 11.50
Leverage (3% minimum) 8.29 8.01 7.54
Common equity to assets 9.38 8.58 7.97
Total equity to assets 9.54 8.84 8.23
Tangible common equity
to assets 7.41 6.64 6.05
Tangible common equity to
managed assets 6.84 6.18 5.68
Tangible total equity to assets 7.57 6.90 6.31
----------------------------------------------------------------------------------------
At June 30, 2001, FleetBoston exceeded all regulatory required minimum
capital ratios, as its Tier 1 and Total risk-based capital ratios were 8.47% and
12.25%, respectively, compared with 8.08% and 11.87%, respectively, at December
31, 2000. The leverage ratio, a measure of Tier 1 capital to average quarterly
assets, was 8.29% at June 30, 2001 compared with 8.01% at December 31, 2000.
On April 15, 2001, the Corporation redeemed all of the outstanding shares
of its 7.25% Series V perpetual preferred stock at its aggregate liquidation
value of $191 million. On April 25, 2001, FleetBoston repurchased 189,420 of the
600,000 outstanding shares of its 6.75% Series VI perpetual preferred stock,
having an aggregate liquidation value of $47.4 million, and on July 11, 2001,
repurchased an additional 28,130 shares having an aggregate liquidation value of
$7 million. The Corporation may repurchase additional shares of its preferred
stock from time to time, subject to market conditions, capital requirements and
other factors.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements relating to future
results of FleetBoston (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
contemplated as a result of certain risks and uncertainties. These risks and
uncertainties include, but are not limited to (1) changes in general political
and economic conditions, either domestically or internationally, including the
continuing weakness in the Latin American economies, particularly Argentina, and
the potential impact of those economies on the economies of other countries; (2)
further deterioration in credit quality, including the resultant effect on the
level of the Corporation's NPA's and charge-offs; (3) interest rate and currency
fluctuations, equity and bond market fluctuations and perceptions, including
continued weakness in the global capital markets and the impact of such weakness
on the Corporation's Principal Investing and other capital markets businesses;
(4) changes in the competitive environment for financial services organizations
and the Corporation's ability to manage those changes and to continue to develop
competitive products and services; (5) legislative or regulatory developments,
including changes in laws concerning taxes, banking, securities, insurance and
other aspects of the financial services industry; (6) technological changes,
including the impact of the Internet on the Corporation's businesses; (7) the
ability of the Corporation to fully realize expected cost savings and to realize
those savings within the expected timeframes; and (8) the level of costs related
to the integration of acquired businesses.
16
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT ACCOUNTING DEVELOPMENTS
The FASB recently issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Intangible Assets." SFAS No. 141 requires that all business
combinations initiated after June 30, 2001 be accounted for using the purchase
method of accounting, and prohibits the use of the pooling-of-interests method
for such transactions. The new standard also requires identified intangible
assets acquired in a business combination to be recognized as an asset apart
from goodwill if they meet certain criteria.
SFAS No. 142 applies to all goodwill and identified intangible assets
acquired in a business combination. Under the new standard, all goodwill,
including that acquired before initial application of the standard, should not
be amortized but should be tested for impairment at least annually. Identified
intangible assets should be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Within six
months of initial application of the new standard, a transitional impairment
test must be performed on all goodwill. Any impairment loss recognized as a
result of the transitional impairment test should be reported as a change in
accounting principle. In addition to the transitional impairment test, the
required annual impairment test should be performed in the year of adoption of
the standard.
The new standard is effective for fiscal years beginning after December 15,
2001, and must be adopted as of the beginning of a fiscal year. Retroactive
application is not permitted. The Corporation will adopt the new standard on
January 1, 2002, and is currently evaluating the potential impact of the
standard on its financial position and results of operations.
17
18
FLEETBOSTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
----------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
Dollars in millions, except per share amounts 2001 2000 2001 2000
----------------------------------------------------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans and leases $ 2,836 $ 3,274 $ 5,916 $ 6,542
Interest on securities and trading assets 477 641 1,090 1,257
Other 253 148 478 380
----------------------------------------------------------------------------------------------------------------------------------
Total interest income 3,566 4,063 7,484 8,179
----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits of domestic offices 662 795 1,434 1,585
Deposits of international offices 276 297 576 594
Short-term borrowings 259 375 620 810
Long-term debt 427 499 937 977
Other 41 73 97 141
----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 1,665 2,039 3,664 4,107
----------------------------------------------------------------------------------------------------------------------------------
Net interest income 1,901 2,024 3,820 4,072
----------------------------------------------------------------------------------------------------------------------------------
Provision for credit losses 315 335 630 655
----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 1,586 1,689 3,190 3,417
----------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Banking fees and commissions 406 403 796 808
Investment services revenue 363 450 751 976
Credit card revenue 162 177 327 343
Processing-related revenue 74 153 262 313
Capital markets revenue (100) 820 (6) 1,880
Gains on branch divestitures 263 313 353 679
Other 158 151 367 288
----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,326 2,467 2,850 5,287
----------------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Employee compensation and benefits 985 1,273 2,029 2,817
Occupancy and equipment 277 298 563 610
Intangible asset amortization 98 97 198 194
Legal and other professional 62 90 131 178
Marketing and public relations 58 77 121 156
Merger- and restructuring-related charges 38 25 525 62
Loss on sale of mortgage banking business 101 -- 428 --
Other 440 606 916 1,194
----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,059 2,466 4,911 5,211
----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 853 1,690 1,129 3,493
Applicable income taxes 322 719 457 1,446
----------------------------------------------------------------------------------------------------------------------------------
Net income $ 531 $ 971 $ 672 $ 2,047
----------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average common shares outstanding (in millions) 1,094.5 1,101.8 1,095.2 1,099.5
Net income applicable to common shares $ 523 $ 961 $ 655 $ 2,028
Basic earnings per share .48 .89 .60 1.88
Diluted earnings per share .48 .87 .60 1.84
Dividends declared .33 .30 .66 .60
----------------------------------------------------------------------------------------------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
18
19
FLEETBOSTON FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
---------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
Dollars in millions, except per share amounts 2001 2000
---------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash, due from banks and interest-bearing deposits $ 12,586 $ 12,826
Federal funds sold and securities purchased under agreements to resell 6,994 1,959
Trading assets 5,261 7,108
Mortgages held for sale 690 2,138
Securities (market value: $24,591 and $34,932) 24,587 34,964
Loans and leases 129,066 134,834
Reserve for credit losses (2,746) (2,709)
---------------------------------------------------------------------------------------------------------------------------
Net loans and leases 126,320 132,125
---------------------------------------------------------------------------------------------------------------------------
Due from brokers/dealers 4,701 2,987
Premises and equipment 2,878 2,867
Mortgage servicing rights -- 2,695
Intangible assets 4,294 4,557
Other assets 13,789 14,859
---------------------------------------------------------------------------------------------------------------------------
Total assets $ 202,100 $ 219,085
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Domestic:
Noninterest bearing $ 25,166 $ 29,707
Interest bearing 78,438 80,073
International:
Noninterest bearing 2,412 1,628
Interest bearing 18,787 17,331
---------------------------------------------------------------------------------------------------------------------------
Total deposits 124,803 128,739
---------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase 8,666 12,955
Other short-term borrowings 6,729 10,151
Trading liabilities 1,858 2,540
Due to brokers/dealers 4,479 4,122
Long-term debt 27,816 31,684
Accrued expenses and other liabilities 8,473 9,533
---------------------------------------------------------------------------------------------------------------------------
Total liabilities 182,824 199,724
---------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 8)
STOCKHOLDERS' EQUITY
Preferred stock 328 566
Common stock, par value $.01 (1,086.0 million shares issued in 2001 and
1,100.1 million shares issued in 2000) 11 11
Common surplus 4,019 4,814
Retained earnings 14,562 14,561
Accumulated other comprehensive income 422 40
Treasury stock, at cost (1.0 million shares in 2001 and 14.6 million shares in 2000) (66) (631)
---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 19,276 19,361
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 202,100 $ 219,085
---------------------------------------------------------------------------------------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
19
20
FLEETBOSTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Six months ended June 30 Preferred Common Common Retained Comprehensive Treasury
Dollars in millions, except per share amounts Stock Stock Surplus Earnings Income/(Loss) Stock Total
-----------------------------------------------------------------------------------------------------------------------------------
2000
----
Balance at December 31, 1999 $ 691 $ 11 $ 5,273 $12,020 $ 301 $ (222) $18,074
Net income 2,047 2,047
Other comprehensive income, net of taxes:
Change in unrealized gain on securities
available for sale, net of taxes and
reclassification adjustment (628)
Change in translation adjustment, net of
taxes 5
-------
Other comprehensive income (623) (623)
-------
Total comprehensive income 1,424
Cash dividends declared on common stock
($.60 per share) (541) (541)
Cash dividends declared by pooled company
prior to merger (119) (119)
Cash dividends declared on preferred stock (19) (19)
Common stock issued in connection with
dividend reinvestment and employee
benefit plans (26) 3 109 86
Business combinations (26) 130 104
Redemption of preferred stock (125) (125)
Treasury stock purchased (86) (86)
Settlement of forward purchase contracts (679) (679)
Other, net (11) 1 (10)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000 $ 566 $ 11 $ 5,210 $13,391 $ (322) $ (747) $18,109
-----------------------------------------------------------------------------------------------------------------------------------
2001
----
Balance at December 31, 2000 $ 566 $ 11 $ 4,814 $14,561 $ 40 $ (631) $19,361
Net income 672 672
Other comprehensive income, net of taxes:
Change in unrealized gain on securities
available for sale, net of taxes and
reclassification adjustment (9)
Change in translation adjustment, net of
taxes 2
Change in derivative instruments, net of taxes:
Cumulative effect of adopting SFAS No. 133 204
Net change in fair values of derivatives 61
Net losses reclassified to statement of
income 124
-------
Other comprehensive income 382 382
-------
Total comprehensive income 1,054
Cash dividends declared on common stock
($.66 per share) (716) (716)
Cash dividends declared on preferred stock (17) (17)
Common stock issued in connection with
dividend reinvestment and employee benefit
plans 160 62 114 336
Redemption and repurchase of preferred stock (238) (238)
Exercise of common stock warrants 77 77
Treasury stock purchased (581) (581)
Retirement of treasury stock (1,033) 1,033 --
Other, net 1 (1) --
-----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 $ 328 $ 11 $ 4,019 $14,562 $ 422 $ (66) $19,276
-----------------------------------------------------------------------------------------------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
20
21
FLEETBOSTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
---------------------------------------------------------------------------------------------------------------------------
Six months ended June 30 2001 2000
In millions
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 672 $ 2,047
Adjustments for noncash items:
Depreciation and amortization of premises and equipment 299 307
Amortization of mortgage servicing rights 122 192
Amortization of other intangible assets 198 194
Provision for credit losses 630 655
Deferred income tax (benefit)/expense (388) 231
Securities losses 211 48
Merger- and restructuring-related charges 525 62
Gains on branch divestitures (353) (679)
Loss on sale of mortgage banking business 428 --
Write-downs of principal investing investments 602 --
Originations and purchases of mortgages held for sale (9,211) (7,343)
Proceeds from sales of mortgages held for sale 6,086 7,514
Decrease/(increase) in trading assets 1,834 (356)
Decrease in trading liabilities (682) (329)
Increase in due from brokers/dealers (1,714) (152)
Decrease in accrued receivables, net 1,028 156
Increase in due to brokers/dealers 357 305
(Decrease)/increase in accrued liabilities, net (1,168) 1,439
Other, net 559 (2,234)
---------------------------------------------------------------------------------------------------------------------------
Net cash flow provided by operating activities 35 2,057
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in federal funds sold and securities purchased under agreements to resell (5,035) (289)
Purchases of securities available for sale (13,408) (6,738)
Proceeds from sales of securities available for sale 18,277 5,480
Proceeds from maturities of securities available for sale 4,763 1,498
Purchases of securities held to maturity (386) (407)
Proceeds from maturities of securities held to maturity 434 1,264
Net cash and cash equivalents received from businesses acquired -- 15
Proceeds from sales of loan portfolios by banking subsidiary 2,497 1,400
Net decrease/(increase) in loans and leases 2,606 (3,537)
Net cash received in conjunction with branch divestitures and sales of businesses 6,849 313
Purchase of investment in corporate-owned life insurance -- (192)
Purchases of premises and equipment (396) (333)
Purchases of mortgage servicing rights (53) (79)
---------------------------------------------------------------------------------------------------------------------------
Net cash flow provided by/(used in) investing activities 16,148 (1,605)
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (3,660) (765)
Net decrease in short-term borrowings (7,711) (1,225)
Proceeds from issuance of long-term debt 979 5,602
Repayments of long-term debt (4,847) (3,521)
Proceeds from issuance of common stock and exercise of warrants 413 86
Repurchase of common stock (581) (86)
Settlement of forward purchase contracts -- (679)
Redemption and repurchase of preferred stock (238) (125)
Cash dividends paid (723) (680)
---------------------------------------------------------------------------------------------------------------------------
Net cash flow used in financing activities (16,368) (1,393)
---------------------------------------------------------------------------------------------------------------------------
Effect of foreign currency translation on cash (55) (4)
---------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (240) (945)
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 12,826 11,860
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,586 $ 10,915
---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Interest paid $ 3,581 $ 4,317
Income taxes paid 605 1,105
---------------------------------------------------------------------------------------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
21
22
FLEETBOSTON FINANCIAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements of FleetBoston
Financial Corporation (FleetBoston or the Corporation) are unaudited. In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results of operations
contained herein have been made. Certain amounts reported in prior periods have
been reclassified to conform to current period classifications.
Prior period financial statements reflect the acquisition of Summit
Bancorp. (Summit), which was completed in March 2001 and accounted for as a
pooling of interests. This information should be read in conjunction with
FleetBoston's Current Report on Form 8-K dated May 4, 2001, which contains
restated consolidated financial statements for the year ended December 31, 2000
reflective of the Summit acquisition, and its Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001.
NOTE 2. MERGER, ACQUISITION AND DIVESTITURE ACTIVITIES
In connection with the Summit acquisition, aggregate charges totaling $718
million were recorded in the first quarter of 2001. These charges were composed
of $453 million of merger- and restructuring-related charges and integration
costs, and $265 million of losses on sales of securities available for sale,
which were completed as part of a repositioning of the combined balance sheet.
An additional $93 million of merger-related costs were recorded in the second
quarter of 2001. The merger- and restructuring-related charges and integration
costs are more fully described in Note 5.
FleetBoston completed the sale of its mortgage banking business in the
second quarter of 2001. An additional pre-tax loss on the sale of approximately
$101 million was recorded in other noninterest expense.
In June 2001, FleetBoston announced a definitive agreement to purchase the
asset management businesses of Liberty Financial Companies, Inc. for
approximately $1 billion, consisting of $900 million in cash and the assumption
of $110 million in revolving debt. This transaction, which is expected to add
approximately $50 billion to FleetBoston's assets under management, is subject
to regulatory approvals, and is expected to be completed in the second half of
2001.
In the second quarter of 2001, FleetBoston recorded gains of $243 million
on branch divestitures associated with the BankBoston merger, and a total of
$333 million during the six months ended June 30, 2001.
NOTE 3. LOANS AND LEASES
The following table presents details of loan and lease financing balances:
-------------------------------------------------------------------
June 30, Dec. 31,
In millions 2001 2000
-------------------------------------------------------------------
Domestic:
Commercial and industrial $ 51,642 $ 56,147
Commercial real estate 11,447 11,641
Home equity 11,662 12,507
Residential real estate 9,917 11,425
Credit card 4,891 5,126
Other consumer 5,774 7,265
Lease financing 13,796 13,567
-------------------------------------------------------------------
Total domestic loans and leases 109,129 117,678
-------------------------------------------------------------------
International loans and leases 19,937 17,156
-------------------------------------------------------------------
Total loans and leases $129,066 $134,834
-------------------------------------------------------------------
NOTE 4. RESERVE FOR CREDIT LOSSES
A summary of activity in the reserve for credit losses follows:
------------------------------------------------------------------
Six months ended June 30 2001 2000
In millions
------------------------------------------------------------------
Balance at beginning of year $ 2,709 $ 2,816
Gross charge-offs:
Domestic:
Commercial and industrial 415 379
Commercial real estate 2 5
Residential real estate 1 4
Credit card 146 159
Other consumer 51 68
Lease financing 28 15
International 74 80
------------------------------------------------------------------
Total gross charge-offs 717 710
------------------------------------------------------------------
Recoveries:
Domestic:
Commercial and industrial 56 36
Commercial real estate 5 5
Residential real estate 1 1
Credit card 18 18
Other consumer 14 22
Lease financing 5 3
International 26 22
------------------------------------------------------------------
Total recoveries 125 107
------------------------------------------------------------------
Net charge-offs 592 603
Provision for credit losses 630 655
Divestitures/Acquisitions/Other (1) (62)
------------------------------------------------------------------
Balance at end of period $ 2,746 $ 2,806
------------------------------------------------------------------
NOTE 5. MERGER- AND RESTRUCTURING- RELATED CHARGES
In the first quarter of 2001, FleetBoston recorded aggregate merger- and
restructuring-related charges of $487 million in connection with the Summit
merger and a restructuring of its capital markets-related businesses. Of the
$487 million, $408 million related to Summit and $79
22
23
FLEETBOSTON FINANCIAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
million primarily related to capital markets. The $408 million charge was
composed of $73 million of merger charges, $322 million of restructuring-related
charges, and $13 million of accelerated depreciation of assets to be disposed of
at a later date, which resulted from revisions to the estimated useful lives of
assets currently in use that will be disposed when the Summit integration has
been completed.
In addition to the merger- and restructuring-related charges, FleetBoston
incurred $45 million of merger integration costs in the first quarter. These
integration costs, which are expensed as incurred, include the costs of
converting duplicate computer systems, training and relocation of employees and
departments, consolidation of facilities and customer communications.
During the second quarter of 2001, aggregate costs of $93 million, composed
of $38 million and $55 million of additional accelerated depreciation and
integration costs, respectively, were recorded.
In 1999, the Corporation recorded $467 million of restructuring charges in
connection with the BankBoston merger. Additional information concerning these
1999 charges is included in Note 14 to the Consolidated Financial Statements
included in the Corporation's Current Report on Form 8-K dated May 4, 2001.
During the second quarter of 2001, $14 million of such charges were reversed,
primarily related to severance and facilities accruals which were not fully
utilized.
RESTRUCTURING-RELATED CHARGES
Summit
Of the $322 million restructuring-related charge, $150 million related to
personnel, $96 million related to asset write-downs and contract cancellations,
$60 million related to facilities and $16 million related to other restructuring
expenses.
Personnel-related costs of $150 million included severance, benefit program
changes and outplacement services for approximately 2,700 positions identified
during the first quarter for elimination in connection with restructuring,
principally as a result of the elimination of duplicate functions within the
combined company. During the first six months of 2001, approximately $35 million
of personnel-related benefits were paid and approximately 890 employees were
terminated and left the Corporation.
Asset write-downs and contract cancellation costs of $96 million related to
costs to dispose of duplicate or obsolete equipment and computer software, and
penalties incurred to cancel leases and other contracts. During the first six
months of 2001, $6 million of costs were paid and $49 million of write-downs
were recorded.
Facilities charges of $60 million represented minimum lease payments
related to duplicate branch and other facilities. Other costs of $16 million
included expenses and various other costs incurred to merge the two companies.
During the first six months of 2001, $9 million of other costs were paid.
Capital Markets
Of the $79 million charge, $52 million related to severance, benefit
program changes and outplacement services for approximately 750 positions
identified during the first quarter for elimination in connection with the
restructuring; $23 million of costs related to future lease obligations and
write-downs of capitalized assets; and $4 million of other restructuring
expenses. During the first six months of 2001, approximately 675 employees were
terminated and left the Corporation, and $25 million of related benefits were
paid.
The following table presents activity in restructuring-related accruals
during the six months ended June 30, 2001.
Restructuring Accrual Activity
-------------------------------------------------------------------
Summit & Capital
Markets BankBoston
-------------------------------------------------------------------
Balance at December 31, 2000 $ -- $ 146
Restructuring accrual/(reversal) 401 (14)
Cash payments (75) (84)
Noncash write-downs (49) --
-------------------------------------------------------------------
Balance at June 30, 2001 $ 277 $ 48
-------------------------------------------------------------------
The $84 million of cash payments included in the table above related to the
BankBoston merger consisted of $70 million of personnel benefits, $13 million in
facilities charges, and $1 million of other restructuring expenses. The
remaining accrual at June 30, 2001 is composed primarily of expected cash
outlays related to severance and facilities obligations.
NOTE 6. LINE OF BUSINESS INFORMATION
Information about operating segments for the quarters and six months ended
June 30, 2001 and 2000 is included in the "Line of Business Information" section
of Management's Discussion and Analysis included in this Report.
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FLEETBOSTON FINANCIAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 7. EARNINGS PER SHARE
A summary of the calculation of earnings per common share follows:
------------------------------------------------------------------------------------------------------------------------------
Three months ended June 30 2001 2000
------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per share amounts BASIC DILUTED BASIC DILUTED
------------------------------------------------------------------------------------------------------------------------------
Average shares outstanding 1,083,752,849 1,083,752,849 1,080,746,859 1,080,746,859
Additional shares due to:
Stock options -- 10,766,704 -- 9,224,658
Warrants -- -- -- 11,834,503
------------------------------------------------------------------------------------------------------------------------------
Total equivalent shares 1,083,752,849 1,094,519,553 1,080,746,859 1,101,806,020
==============================================================================================================================
Earnings per share:
Net income $531 $531 $971 $971
Less preferred stock dividends (8) (8) (10) (10)
------------------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders $523 $523 $961 $961
==============================================================================================================================
Total equivalent shares 1,083,752,849 1,094,519,553 1,080,746,859 1,101,806,020
==============================================================================================================================
Earnings per share $.48 $.48 $.89 $.87
==============================================================================================================================
------------------------------------------------------------------------------------------------------------------------------
Six months ended June 30 2001 2000
------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per share amounts BASIC DILUTED BASIC DILUTED
------------------------------------------------------------------------------------------------------------------------------
Average shares outstanding 1,083,626,155 1,083,626,155 1,080,649,280 1,080,649,280
Additional shares due to:
Stock options -- 11,296,677 -- 7,599,817
Warrants -- 274,706 -- 11,249,023
------------------------------------------------------------------------------------------------------------------------------
Total equivalent shares 1,083,626,155 1,095,197,538 1,080,649,280 1,099,498,120
==============================================================================================================================
Earnings per share:
Net income $672 $672 $2,047 $2,047
Less preferred stock dividends (17) (17) (19) (19)
------------------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders $655 $655 $2,028 $2,028
==============================================================================================================================
Total equivalent shares 1,083,626,155 1,095,197,538 1,080,649,280 1,099,498,120
==============================================================================================================================
Earnings per share $.60 $.60 $1.88 $1.84
==============================================================================================================================
NOTE 8. COMMITMENTS AND CONTINGENCIES
FleetBoston and its subsidiaries are involved in various legal proceedings
arising out of, and incidental to, their respective businesses. Management,
based on its review with counsel of the development of these matters to date,
considers that the aggregate loss resulting from the final outcome, if any, of
these proceedings should not be material to FleetBoston's financial condition or
results of operations.
NOTE 9. SECURITIZATIONS OF ASSETS
During the first six months of 2001, FleetBoston sold approximately $1.7
billion of credit card receivables and approximately $750 million of home equity
loans in new securitization transactions. The Corporation will receive annual
servicing fees as compensation for servicing the outstanding balances. The
Corporation's aggregate retained interests related to these new transactions are
subordinate to investors' interests, and the values of the retained interests
are subject to credit, prepayment and interest rate risks related to the
transferred assets. Gains recognized on the securitizations were not
significant.
NOTE 10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
FleetBoston adopted Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities," as of
January 1, 2001. The adoption resulted in an after-tax increase to other
comprehensive income, a component of stockholders' equity, of approximately $200
million, and an increase of approximately $14 million to other noninterest
income ($8 million after-tax). Concurrent with adoption of the Standard, and as
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FLEETBOSTON FINANCIAL CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
permitted by its provisions, approximately $5 billion of securities held to
maturity were reclassified as securities available for sale. This
reclassification resulted in an after-tax loss of approximately $160 million,
which was recorded in other comprehensive income.
In the normal course of business, FleetBoston enters into a variety of
interest rate and foreign exchange derivative contracts in connection with its
balance sheet management activities, which involve the management of interest
rate and foreign exchange rate risk, and its trading activities. These contracts
involve, to varying degrees, credit (repayment) risk and market risk. For
additional information with respect to the Corporation's use of derivatives,
including related accounting policies, refer to Notes 2 and 11 of the Condensed
Notes to Consolidated Financial Statements included in FleetBoston's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001.
BALANCE SHEET MANAGEMENT ACTIVITIES
In connection with balance sheet management activities, non-trading
derivative financial instruments are used to manage market risk, primarily
interest rate risk.
FAIR VALUE HEDGES. Derivatives categorized as fair value hedges are
utilized to convert fixed-rate debt to floating-rate debt, as part of the
Corporation's overall interest rate risk management process.
For the quarter and six months ended June 30, 2001, FleetBoston recognized
net pre-tax losses of approximately $115 million and $131 million, respectively,
which represented the ineffective portion of all fair value hedges, primarily
hedges of mortgage servicing rights, excluding the time value of option
contracts and the interest rate differential on foreign currency forward
contracts. The components of fair value excluded from the assessment of fair
value hedge effectiveness for the quarter and six months ended June 30, 2001
were losses of approximately $5 million and $19 million, respectively. All
components of each derivative's gain or loss are included in the assessment of
hedge effectiveness, unless otherwise noted.
CASH FLOW HEDGES. Derivatives categorized as cash flow hedges are utilized
primarily to convert floating-rate loans to fixed-rate loans; and to convert
floating-rate, non-functional currency denominated assets to fixed-rate,
functional currency denominated assets.
For the quarter and six months ended June 30, 2001, FleetBoston recognized
net pre-tax gains of approximately $.1 million and $.5 million, respectively,
which represented the total ineffectiveness of all cash flow hedges.
Gains and losses on derivative contracts that are reclassified from
accumulated other comprehensive income to current period earnings are included
in the line item in which the hedged item is recorded. As of June 30, 2001,
approximately $214 million of the deferred net after-tax gains on derivative
instruments included in accumulated other comprehensive income is expected to be
reclassified to earnings during the next twelve months. This expectation is
based on the net discounted cash flows from derivative instruments hedging
variable-rate assets, as well as the amortization of gains from the termination
of cash flow hedge derivatives.
HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS. Derivatives categorized as
hedges of net investments in foreign operations are utilized to protect the
value of an investment against adverse exchange rate fluctuations. For the
quarter and six months ended June 30, 2001, net after-tax gains related to these
derivatives, recorded in other comprehensive income, were approximately $6
million.
CREDIT RISK
The use of non-trading and trading derivatives creates exposure to credit
risk. This credit exposure relates to accounting losses that would be recognized
if the counterparties completely failed to perform their obligations. The amount
of credit exposure can be estimated by calculating the cost to replace all
profitable derivative contracts, on a present value basis and at current market
prices. To manage its level of credit exposure, FleetBoston deals only with
counterparties of good credit standing, establishes counterparty credit limits,
in certain cases has the ability to require securities collateral, and enters
into master netting agreements whenever possible. Reserves related to credit
exposure associated with derivative instruments are included in other
liabilities in the consolidated balance sheet.
Non-trading derivative instruments, other than those used for foreign
exchange, had credit exposure of $1,063 million at June 30, 2001, versus $690
million at March 31, 2001. Foreign exchange derivative instruments had credit
exposure of $43 million at June 30, 2001, versus $103 million at March 31, 2001.
Trading derivatives had credit exposure of $2.2 billion at June 30, 2001, versus
$2.7 billion at March 31, 2001.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Index
Exhibit
Number
3(a) Certificate of Correction filed with the Rhode Island Secretary
of State correcting a typographical error in the Corporation's
Restated Articles of Incorporation.
3(b) Certificate of Votes filed with the Rhode Island Secretary of
State reducing the number of reserved shares of the Corporation's
Cumulative Participating Junior Preferred Stock.
3(c) Statement of Resolutions establishing the Corporation's
Cumulative Participating Junior Preferred Stock (Series 2000) as
a Series of Preferred Stock, filed with the Rhode Island
Secretary of State.
12 Computation of Consolidated Ratios of Earnings to Fixed Charges.
(b) Current Reports on Form 8-K
FleetBoston filed three Current Reports on Form 8-K during the period from
April 1, 2001 to the date of the filing of this report.
- Current Report on Form 8-K, dated April 17, 2001, announcing the
Corporation's first quarter 2001 earnings.
- Current Report on Form 8-K, dated May 4, 2001, containing restated
consolidated financial statements of the Corporation reflecting the
merger with Summit Bancorp, which was completed on March 1, 2001.
- Current Report on Form 8-K, dated July 18, 2001, announcing the
Corporation's second quarter 2001 earnings.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FleetBoston Financial Corporation
---------------------------------
(Registrant)
/s/ Eugene M. McQuade /s/ Ernest L. Puschaver
----------------------- ------------------------
Eugene M. McQuade Ernest L. Puschaver
Vice Chairman and Chief Accounting Officer
Chief Financial Officer
DATE: August 13, 2001
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