FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 1995
WEBSTER FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-15213 06-1187536
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
First Federal Plaza, Waterbury, Connecticut 06720
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(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 753-2921
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Not Applicable
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(Former name or former address, if changed since last report)
Item 5 Other Events
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On October 1, 1995, Webster Financial Corporation ("Webster"), through its
subsidiary, Webster Bank,* entered into a Purchase and Assumption Agreement (the
"Shawmut Agreement") with Shawmut Bank Connecticut, National Association
("Shawmut"), as part of the Fleet/Shawmut Divestiture (as defined), to acquire
20 Shawmut branch banking offices in the greater Hartford, Connecticut banking
market (the "Hartford Banking Market"), including deposits and loans at or
allocated to such offices (the "Shawmut Transaction"). Webster anticipates that
the Shawmut Transaction will be completed during the first quarter of 1996, but
this can not be assured. In connection with the Shawmut Transaction, Webster
received an opinion from Merrill Lynch & Co., its financial advisor, to the
effect that the proposed consideration to be paid or delivered in the manner
contemplated in the Shawmut Transaction is fair to Webster from a financial
point of view. A copy of such opinion is attached hereto as Annex A.
THE SHAWMUT TRANSACTION
Acquired Branches, Deposits and Loans
Upon consummation of the Shawmut Transaction, Webster Bank will acquire 20
Shawmut Branches in the Hartford Banking Market, which at June 30, 1995,
included approximately $1.0 billion of deposit liabilities and $683 million of
loans at or allocated to the Shawmut Branches. The Shawmut Branches are located
in the following Connecticut cities or towns in the Hartford Banking Market:
Berlin, Bristol, Cromwell, East Hartford, Elmwood, Enfield, Farmington,
Glastonbury, Hartford (three offices), Manchester, Middletown, New Britain,
Newington, Simsbury, Southington, West Hartford, Wethersfield and Windsor.
Webster Bank will be acquiring consumer time deposits, savings and money market
deposit accounts, NOW and checking accounts, and business checking and deposit
accounts. The loans to be acquired will consist of first mortgage residential
loans, commercial real estate loans, commercial and industrial loans, home
equity loans, and other consumer installment loans. Of the 20 Shawmut Branches,
nine offices are owned and 11 offices are leased. Webster Bank also will
sublease office space at One Constitution Plaza in downtown Hartford as
headquarters for its commercial banking operations.
Strategic Rationale
The Shawmut Transaction will significantly increase Webster Bank's
commercial and retail banking activities in the Hartford Banking Market. After
giving effect to the Shawmut Transaction, Webster Bank will be the second
largest
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* References herein to "Webster Bank" reflect the merger and renaming of
Webster's wholly-owned subsidiary banks, First Federal Bank, a federal savings
bank ("First Federal") and Bristol Savings Bank, which merger and renaming will
occur immediately prior to the Merger with Shelton Savings Bank, Shelton,
Connecticut.
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independent bank in Connecticut and the largest Connecticut-based bank in the
Hartford Banking Market, based on total deposit market share. Webster Bank will
have banking offices extending from the Massachusetts border through central
Connecticut to the Connecticut shoreline. Over the last ten years, Webster Bank
has expanded its commercial banking operations serving small and medium sized
businesses in its market areas. The Shawmut Transaction will enhance Webster
Bank's ability to provide a broad line of deposit, cash management and other
credit services and a full range of loan services for commercial banking
customers with credit needs up to $10 million.
The Shawmut Transaction will expand Webster Bank's lending capacity and
increase its emphasis on commercial and industrial loans, and commercial real
estate loans to small and medium sized businesses as compared to its traditional
emphasis on retail banking. After the Shawmut Transaction, the amount of
commercial loans in Webster Bank's loan portfolio will increase from
approximately 14% to 19%. Residential first mortgage loans will decrease from
approximately 79% to 74% of Webster Bank's loan portfolio. Consumer loans,
including home equity loans, will remain at approximately 7% of Webster Bank's
loan portfolio.
Webster expects that the Shawmut Transaction, including the Capital
Financing (as defined), will have an accretive effect on its net income, while
reducing tangible book value per share because of the tax deductible core
deposit intangible. After giving effect to the Shawmut Transaction and to the
Capital Financing, Webster Bank's capital is expected at the closing date to
satisfy the regulatory capital ratios required for a "well-capitalized" bank.
See "SELECTED SIGNIFICANT STATISTICAL DATA -- PRO FORMA COMBINED" below.
Background of the Acquisition
As of February 20, 1995, Shawmut National Corporation and Fleet
Financial Group, Inc. ("Fleet") (hereinafter jointly referred to as
"Fleet/Shawmut") entered into an Agreement and Plan of Merger (the
"Fleet/Shawmut Merger"). As a condition of regulatory approval of the
Fleet/Shawmut Merger, Fleet/Shawmut are required to have their subsidiary banks
divest certain branches in Connecticut, Massachusetts, New Hampshire and Rhode
Island to avoid anticompetitive effects that could be caused by the
Fleet/Shawmut Merger (the "Fleet/Shawmut Divestiture"). In August 1995,
Fleet/Shawmut announced guidelines that were designed to foster competition,
preserve jobs and continue to meet customer needs in the states where
divestitures are required. Fleet/Shawmut then solicited preliminary bids from
potential acquirors with respect to the branches to be divested.
In early September 1995, Webster Bank, along with Eagle Federal Savings
Bank, Bristol, Connecticut ("Eagle"), submitted a preliminary joint bid for all
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25 branch banking offices of the Fleet/Shawmut subsidiary banks to be divested
in the Hartford Banking Market. On September 26, 1996, a formal joint bid was
submitted by Webster Bank and Eagle. After extensive negotiations, Fleet/Shawmut
selected Webster Bank and Eagle to acquire all 25 branch banking offices being
divested in the Hartford Banking Market. On October 1, 1995, Webster Bank and
Eagle executed separate purchase and assumption agreements for 20 and five,
respectively, of these offices with Fleet/Shawmut subsidiary banks, which
agreements are required to be consummated concurrently.
Purchase Price
Under the terms of the Shawmut Agreement, Webster Bank will acquire 20
Shawmut Branches for the following purchase price:
(a) Webster Bank will make a cash payment equal to (i) 5.1% of
the average daily balances (including accrued interest) of
assumed deposit liabilities at or allocated to the Shawmut
Branches for the period commencing either 30 days or seven
days prior to the third business day prior to the closing
date, whichever amount is lower, subject to adjustment, as
described below in the last paragraph, less (ii) $2 million;
(b) Webster Bank will pay cash for the stated value of the
real property of the nine owned Shawmut Branches; estimated
payment of approximately $4 million;
(c) Webster Bank will pay cash for the net book value of the
personalty property (excluding automatic teller machines) at
the 20 Shawmut Branches, as of the closing date, based on this
book value; plus the greater of $5,000 or net book value, for
each of the automatic teller machines; estimated payment of
approximately $4 million;
(d) Webster Bank will swap two of its branch banking offices
and related deposits (the "Webster Branches") located in
Fairfield and Stamford, Connecticut to Shawmut (the "Branch
Swap"); Webster Bank to be paid the net book value of the real
and personalty properties (other than automated teller
machines not being transferred) at the two Webster Branches,
but no separate deposit premium;
(e) Webster will issue a five year nontransferable warrant to
Fleet for 300,000 shares of Webster Stock, with an exercise
price of $32.50 per share, subject to certain antidilution
adjustments (see "THE WARRANT" below); and
(f) Webster Bank will agree to make a contingent payment (the
"Contingent Payment") in the event of a Change of Control (as
defined below) of Webster within five years of the closing
date in which Fleet would be entitled to receive a cash
payment from First Federal equal
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to (i) the excess of the offer price per share of Webster
Stock over (ii) $32.50, multiplied by (iii) 150,000 (see
"CONTINGENT PAYMENT" below).
At June 30, 1995, there were approximately $1 billion in deposit
liabilities at or allocated to the 20 Shawmut Branches and $177 million in
deposit liabilities at the two Webster Branches. Webster Bank will receive a
cash payment from Shawmut for the net deposit liabilities at closing date, less
(i) the aggregate cash payments described in (a), (b) and (c) above, less (ii)
the unpaid principal balances (based on the general ledger balances), plus
accrued interest, on approximately $683 million in loans to be acquired that are
at or allocated to the Shawmut Branches, plus (iii) the net book value of the
real and personalty properties at the two Webster Branches as described in (d)
above.
Pursuant to purchase and assumption agreements between Eagle
and Fleet/Shawmut subsidiary banks (the "Eagle Purchase Agreements") and subject
to all required regulatory approvals, Eagle will acquire five branch banking
offices from the subsidiary banks, with estimates of approximately $290 million
in deposit liabilities and $49 million in loans to be acquired. The cash deposit
premium to be paid to the Fleet/Shawmut subsidiary banks by Webster Bank and
Eagle combined is required to average 5.5% of the total amount of the deposit
liabilities to be acquired by both Webster Bank and Eagle combined. The 5.1%
deposit premium referred to above to be paid by Webster Bank will be increased
or decreased so as to achieve the 5.5% average deposit premium with Eagle on a
combined basis.
The Warrant
At the closing of the Shawmut Transaction, Webster will issue to Fleet
a warrant for 300,000 shares of Webster Stock (the "Warrant"). The exercise
price will be $32.50 per share, subject to customary pro rata antidilution
adjustments in the event of an issuance of Webster Stock (or securities
convertible into or exercisable for Webster Stock) at a price per share of less
than $32.50. Such adjustments will not be applicable as to Webster Stock issued
in the Capital Financing, in the Merger involving Shelton, pursuant to
employee/director benefit plans of Webster, upon the conversion of Webster's
Series B convertible preferred stock, or pursuant to Webster's dividend
reinvestment plan. The Warrant may be exercised in whole, but not in part,
within five years of the date of issuance, but not within the first two years
from the closing date, unless a Change of Control of Webster has occurred, as
defined below. The Warrant may not be sold or otherwise transferred by Fleet.
The $32.50 exercise price represents a premium of 25% over the approximately
$26.00 market price of the Webster Stock prevailing at the time of the
negotiation of the Shawmut Transaction.
As defined in the Warrant, a "Change of Control" will be deemed to have
occurred in the event that any person or company: (i) acquires voting rights as
to more than 25% of the outstanding Webster Stock or (ii) executes a definitive
merger or other acquisition agreement with Webster. However, no Change in
Control will
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be deemed to have occurred, if the directors of Webster serving prior to such
acquisition of Webster Stock or execution of such definitive agreement (or
successor directors selected by such continuing directors and unaffiliated with
such acquiror) will continue to constitute at least 50% of the parent holding
company board of directors after such acquisition.
In the event that a Change of Control of Webster is deemed to have
occurred, Fleet would have the right to sell the Warrant to Webster (the "Put").
The price of the Put would be an amount equal to the number of shares issuable
under the Warrant, multiplied by (i) the cash price for the Webster Stock set
forth in the definitive agreement relating to the Change of Control transaction
(or, in the case of a stock for stock transaction, an amount equal to the five
day trailing average closing price of the acquiror's stock following the public
announcement of the transaction, multiplied by the exchange ratio), less (ii)
the then exercise price per share of the shares issuable under the Warrant. The
Put, however, would not be available if the Change of Control transaction would
be accounted for as a pooling of interests and Webster's independent
accountants, within ten business days of the exercise of the Put, issue an
opinion indicating that the exercise of the Put would result in the inability to
account for the Change of Control transaction as a pooling of interests. If
Fleet disagrees with such accounting opinion, Webster, at its expense, will
promptly submit the matter to the accounting staff of the Securities and
Exchange Commission ("SEC") for an interpretation which will be controlling.
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The Standstill Agreement
Webster and Fleet also will enter into a standstill agreement at the
time of the closing of the Shawmut Transaction (the "Standstill Agreement").
Under the Standstill Agreement, for a period of five years, Fleet will (a) vote
all shares of Webster Stock it holds (including shares obtained upon exercise of
the Warrant) on all matters (including the election of directors) as recommended
by the Webster Board of Directors and (b) will not initiate a tender offer for
shares of Webster Stock or participate in a publicly announced tender offer for
Webster that is opposed by the Webster Board of Directors. However, if during
such five year period a bona fide third party announces or makes an unsolicited
offer to acquire more than 25% of the Webster Stock, that is not solicited by
the Webster Board of Directors, Webster will permit Fleet to make an acquisition
proposal to the Webster Board of Directors or release Fleet from the
restrictions set forth in the Standstill Agreement. Fleet also has agreed that
it will not sell the shares of Webster Stock issued upon exercise of the Warrant
in a private sale transaction (i) to any person as to whom Webster has advised
Fleet has filed a Form 13-D or 13-G under the Exchange Act as to beneficial
ownership of more than 5% of the Webster Stock or (ii) to any person whom Fleet
knows or who confirms to Fleet that such person beneficially owns, or would
beneficially own upon such purchase, more than 4.9% of the then outstanding
Webster Stock. All voting restrictions will terminate upon Fleet's sale of the
Webster Stock issued under the Warrant or upon the execution of a definitive
agreement relating to a Change of Control of Webster, as defined in the Warrant.
Contingent Payment
Pursuant to the Shawmut Agreement, Webster Bank and Fleet will enter
into a contingent payment agreement at the time of the closing of the Shawmut
Transaction (the "Contingent Payment Agreement."). If Webster executes a
definitive agreement that would result, if completed, in a Change of Control of
Webster (as defined in the Warrant), Fleet would be entitled to a cash payment
from Webster Bank equal to 150,000 times an amount equal to (i) the cash price
per share for the Webster Stock as set forth in the definitive agreement
relating to the Change of Control transaction (or in the case of a stock for
stock transaction, the five day trailing average closing price of the acquiror's
stock following the public announcement of the transaction multiplied by the
exchange ratio, as defined in the definitive agreement relating to the Change of
Control transaction), less (ii) $32.50 (the "Contingent Payment"). The
Contingent Payment also will be due (a) within 30 days of the public
announcement of a tender offer supported by the Webster Board of Directors or
(b) upon the consummation of a tender offer that the Webster Board of Directors
has not recommended to its shareholders.
Fleet would not be entitled to receive the Contingent Payment in cash
as to any Change of Control transaction that would be accounted for as a pooling
of interests, if Fleet receives an opinion from Webster's independent
accountants, within ten business days of Fleet's written request for payment,
indicating that
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payment of the Contingent Payment would result in the inability to account for
the Change of Control transaction as a pooling of interests. In such event, the
Contingent Payment would be made, at Fleet's option, either (a) by Webster
issuing Webster Stock to Fleet immediately before the consummation of the Change
of Control transaction, having a market value equal to the cash amount of the
Contingent Payment, or (b) in cash, plus interest at the "prime rate" as
published from time to time by The Wall Street Journal, at such time as
Webster's independent accountants certify that a cash payment by Webster Bank of
the Contingent Payment would not result in the inability to treat the Change of
Control transaction as a pooling of interests method of accounting.
The Sublease Agreement
Pursuant to the Shawmut Agreement, Webster Bank and Fleet Bank,
National Association ("Fleet Bank") will enter into a sublease agreement with
respect to a total of 50,000 square feet of office space in One Constitution
Plaza in downtown Hartford (the "Sublease Agreement") at the time of the closing
of the Shawmut Transaction. The Sublease Agreement will provide that Webster
Bank will sublease office space from Fleet Bank at One Constitution Plaza until
December 31, 2003. Under the terms of the Sublease Agreement, Webster Bank will
sublease 20,000 square feet of office space commencing on the closing date, and
will add an additional 10,000 square feet on each of January 1, 1997, January 1,
1998 and January 1, 1999. The Sublease Agreement will provide that Webster Bank
will assume and pay its pro rata portion of taxes and operating expenses over
base rent, based on its sublease percentage of the total square footage leased
by Fleet Bank. Webster Bank will also be entitled to its pro rata portion of the
build-out provisions contained in the master lease agreement relating to One
Constitution Plaza.
Capital Financing
Webster intends to raise additional capital through an issuance of
equity and/or debt securities prior to the consummation of the Shawmut
Transaction ("Capital Financing") so as to assure that Webster Bank will have
sufficient capital to obtain the regulatory approvals required for the Shawmut
Transaction. Webster currently expects to raise net proceeds of approximately
$27 million through the sale of approximately 1.1 million additional shares of
Webster Stock in an underwritten public offering. The net proceeds will be
contributed by Webster as equity capital to Webster Bank in order to increase
its regulatory capital ratios, which would otherwise have decreased as a result
of its increase in size due to the Shawmut Transaction. There can be no
assurance as to the amount of capital that will be raised or the number of
shares of Webster Stock or other securities that will be issued.
Pursuant to the Shawmut Agreement, Webster has agreed to file a
registration statement with the SEC relating to the Capital Financing by
November 15, 1995, and to have the registration statement declared effective by
January 31, 1996, unless prior to such date Webster obtains a "firm commitment
underwriting
8
letter" from a reputable investment banking firm as to the Capital Financing.
Webster has selected a nationally recognized investment banking firm as lead
manager for the underwritten public offering of additional shares of Webster
Stock. Webster intends to file the registration statement prior to November 15,
1995. Webster expects to have the registration statement declared effective
prior to January 31, 1996, provided that Webster has then entered into an
underwriting agreement with the investment banking firms that would underwrite
the sale of the additional shares of Webster Stock. While this cannot be
assured, Webster anticipates entering into the underwriting agreement and
commencing the public offering prior to January 31, 1996 or alternatively
receiving a firm commitment underwriting letter from the lead manager by such
date.
Shawmut could terminate the Shawmut Agreement if the Merger with
Shelton is not consummated by December 31, 1995, unless Webster obtains a
"highly confident letter" by January 15, 1996 from a reputable investment
banking firm as to Webster being able to raise the capital necessary to complete
the Shawmut Transaction. While this cannot be assured, Webster expects to obtain
such letter by January 15, 1996, if necessary. Webster has not conditioned its
obligation to complete the Shawmut Transaction upon the consummation of the
Merger with Shelton.
Effect of Shawmut Transaction on Proportion of BIF/SAIF Deposit Premiums
Webster Bank's deposits will be insured by the Federal Deposit
Insurance Corporation ("FDIC") through the Bank Insurance Fund ("BIF"). After
giving effect to the Shawmut Transaction, approximately 71% of Webster Bank's
deposits will then be assessed at BIF premium rates and only 29% of its deposits
will then be assessed at Savings Association Insurance Fund ("SAIF") premium
rates. This compares with approximately 59% BIF and 41% SAIF before the Merger
with Shelton and approximately 63% BIF and 37% SAIF after the Merger prior to
the Shawmut Transaction.
Regulatory Approvals for the Shawmut Transaction
Consummation of the Shawmut Transaction is conditioned upon the receipt
of all required regulatory approvals. An application for approval by the Office
of Thrift Supervision ("OTS") as Webster Bank's primary federal regulator, is
expected to be filed prior to November 15, 1995. Subject to completion of the
Capital Financing, Webster is not aware of any reasons why the approval of the
OTS for the Shawmut Transaction should not be received on a timely basis.
However, this cannot be assured. Webster does not anticipate the need to obtain
any other regulatory approval for the Shawmut Transaction.
In addition to the OTS regulatory approval needed to be obtained by
Webster for the Shawmut Transaction, other regulatory approvals must be received
by Fleet/Shawmut, including various bank regulatory agency approvals for the
Fleet/Shawmut Merger and Fleet/Shawmut Divestiture and no objection from the
9
United States Department of Justice. Webster can provide no assurances as to
receipt of such regulatory approvals by Fleet/Shawmut.
OTS regulatory approval is required to be received by Eagle as to its
acquisition of branches from Fleet/Shawmut under the Eagle Purchase Agreements.
Such acquisition by Eagle is required to be consummated concurrently with the
Shawmut Transaction by Webster. While Webster expects that Eagle will receive
OTS regulatory approval on a timely basis, this cannot be assured.
Conditions to the Shawmut Transaction
The respective obligations of Webster and Shawmut to effect the Shawmut
Transaction are subject to various conditions, including the following: (a) the
prior consummation of the Fleet/Shawmut Merger; (b) the receipt of all required
regulatory approvals (without material conditions) to the Shawmut Transaction
and the expiration of any related regulatory waiting periods; (c) the completion
of the Capital Financing; (d) customary closing conditions, such as continued
accuracy of representations and warranties, delivery of legal opinions,
officers' certificates and transfer and assignment documents at the closing; (e)
the execution and delivery of the Warrant, the Standstill Agreement, the
Contingent Payment Agreement and the Sublease Agreement; and (f) the concurrent
consummation of the acquisition by Eagle under the Eagle Purchase Agreements.
In the event of a Change of Control of Webster (as defined in the
Warrant Agreement) prior to the closing of the Shawmut Transaction, Shawmut at
its option may terminate the Shawmut Agreement.
Conduct of Business Pending the Shawmut Transaction
The Shawmut Agreement contains various restrictions on the operations
of the branches to be sold while the Shawmut Transaction is pending. In general,
the Shawmut Agreement obligates Shawmut (and Webster Bank vis a vis the Webster
Branches) to (a) conduct its business of banking in the usual, regular and
ordinary course, consistent with past practices; (b) to use reasonable efforts
to maintain and preserve intact its relationships with branch employees, and
advantageous business relationships, including branch customers; and (c) to take
no action that would adversely affect or delay the ability of any party to
obtain any regulatory approval. Branch employees may not be transferred to any
facilities other than the branches to be acquired, except upon the request of a
branch employee.
Accounting Treatment
The Shawmut Transaction is intended to be accounted for as a "purchase"
by Webster.
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PRO FORMA COMBINED STATEMENT OF CONDITION
The following Pro Forma Combined Statement of Condition as of June 30,
1995 combines the pro forma combined statement of financial condition of Webster
and Shelton Bancorp Inc., as reflected in the Joint Proxy Statement/Prospectus
with the Shawmut assets acquired and liabilities assumed as if the Merger, the
Shawmut Transaction and the Capital Financing had occurred on June 30, 1995,
after giving effect to the Pro Forma adjustments described in the accompanying
notes.
The Pro Forma Combined Statement of Condition should be read in
conjunction with the separate historical consolidated financial statements and
notes of Webster and of Shelton incorporated by reference or appearing in the
Joint Proxy Statement/Prospectus and the Pro Forma Combined Statements of
Webster and Shelton appearing in the Joint Proxy Statement/Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" herein. The Pro Forma Combined
Statement of Condition is not necessarily indicative of the consolidated
financial position that would have been achieved had the Merger, the Capital
Financing and the Shawmut Transaction been consummated on the date indicated.
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PRO FORMA COMBINED STATEMENT OF CONDITION
AT JUNE 30, 1995 (Unaudited)
Pro Forma Fleet Assets Purchase Pro Forma
Combined Acquired And Accounting Combined
Webster/ Liabilities And Other Webster/
Shelton Assumed Adjustments Shelton/Shawmut
----------- ------------ ------------ ------------
(In Thousands)
ASSETS
Cash and Due from Depository Institutions.......... $ 33,960 $ 304,074 $ (307,000)(b) $ 31,034
Interest-bearing Deposits.......................... 42,672 -- -- 42,672
Securities......................................... 168,583 -- -- 168,583
Mortgage-backed Securities......................... 837,367 -- (147,000)(c) 690,367
Loans Receivable, Net.............................. 1,873,375 682,777(a) (12,000)(d) 2,544,152
Accrued Interest Receivable........................ 19,534 5,000 -- 24,534
Premises and Equipment, Net........................ 36,135 8,149 4,000 (e) 48,284
Segregated Assets, Net............................. 124,319 -- -- 124,319
Other Real Estate Acquired Through Foreclosure
and In-Substance Foreclosure, Net................ 21,719 -- -- 21,719
Core Deposit Intangible............................ 5,095 -- 45,000 (f) 50,095
Prepaid Expenses and Other Assets.................. 27,649 -- -- 27,649
----------- ----------- ----------- -----------
TOTAL ASSETS.................................... $ 3,190,408 $ 1,000,000 $ (417,000) $ 3,773,408
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits........................................... $ 2,465,291 $ 1,000,000(a) $ (277,000)(b) $ 3,188,291
Federal Home Loan Bank Advances.................... 411,505 -- (170,000)(c) 241,505
Other Borrowings................................... 43,130 -- -- 43,130
Advanced Payments by Borrowers for Taxes
and Insurance.................................... 16,273 -- -- 16,273
Accrued Expenses and Other Liabilities............. 86,659 -- 3,000 (g) 89,659
----------- ----------- ----------- -----------
Total Liabilities............................... 3,022,858 1,000,000 (444,000) 3,578,858
SHAREHOLDERS' EQUITY............................... 167,550 -- 27,000 (h) 194,550
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY......................................... $ 3,190,408 $ 1,000,000 $ (417,000) $ 3,773,408
=========== =========== =========== ===========
The Pro Forma Combined Statement of Condition does not include results of
operations subsequent to June 30, 1995, which are expected to increase
shareholders' equity.
The Pro Forma Combined Statement of Condition has not been adjusted to reflect
any of the improvements in operating efficiencies that Webster anticipates may
occur in the future due to the Merger with Shelton or the Shawmut Transaction.
See footnotes on following page.
SELECTED SIGNIFICANT STATISTICAL DATA - PRO FORMA COMBINED
AT JUNE 30, 1995 (Unaudited)
Pro Forma
Pro Forma Combined Combined Webster/
Webster/Shelton Shelton/Shawmut
--------------- -----------------
Book value per common share................................. $22.33 $22.63
Tangible book value per common share........................ 21.57 16.24 (i)
Common shares outstanding (000's)........................... 6,734 7,839
Shareholders' equity to total assets........................ 5.25% 5.16%
Nonaccrual loans and OREO to total assets................... 1.87% 1.58%
Allowance for loan losses to nonaccrual loans............... 118.22% 131.82%
Allowance for loan and OREO losses to nonaccrual loans and OREO 74.82% 83.21%
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Notes to Pro Forma Combined Financial Statements
(a) The weighted average interest rates at June 30, 1995 for the loans
acquired and deposits assumed in the Shawmut Transaction were 7.91% and
2.72%, respectively.
(b) As part of the Shawmut Transaction, Webster will swap two of its
Fairfield County branch banking offices (the "Branch Swap"), the effect
of which is expected to reduce cash and deposits by approximately $177
million. The weighted average interest rate at June 30, 1995 of the
deposits being swapped is 4.78%. Included below is a summary of the
projected effect on cash of the Branch Swap, the effect of adjustments
to cash for estimated run-off of assumed deposits of $100 million and
the acquired loan repayments and prepayments of principal balances of
$15 million. Such deposit run-off is based on actual activity from July
1, 1995 to September 30, 1995 and projections up to the date of the
Shawmut Transaction closing. The amounts reflected as loan repayments
and prepayments of principal are primarily estimates of such activity
from July 1, 1995 to the date of the Shawmut Transaction closing. The
remaining $45 million projected reduction in cash represents the
estimated net impact of the Shawmut Transaction, Capital Financing and
other adjustments as described in footnote (b) below.
(In thousands)
Branch Swap....................................... $ (177,000)
Projected deposit run-off......................... (100,000)
------------
Total cash adjustments related to deposits...... (277,000)
------------
Projected loan prepayments........................ 15,000
Net cash reduction................................ (45,000)
------------
Total adjustments to Cash....................... $ (307,000)
============
(c) Webster expects to sell approximately $147 million of available for
sale mortgage-backed securities with a weighted average interest rate
at June 30, 1995 of approximately 7.20% and use excess cash to payoff
approximately $170 million of outstanding Federal Home Loan Bank
advances with a weighted average interest rate at June 30, 1995 of
approximately 6.20%. Such transactions will assist Webster Bank to
continue as a "well-capitalized" bank for regulatory capital ratio
purposes after giving effect to the Shawmut Transaction. Also, see
Capital Financing, as described in footnote (h) below.
(d) Purchase accounting and other adjustments related to the acquired loan
portfolio reflect additional loan loss reserves, projected repayments
and prepayments of principal balances offset by mark to market premium
adjustments.
(e) The stated book value of premises and equipment acquired estimated at
$8.1 million approximates market value. Webster expects to purchase
approximately $4 million of additional data processing and other
equipment.
(f) Represents a tax deductible core deposit intangible estimated at
approximately $45 million based on $900 million of deposit liabilities
assumed (after the projected deposit run-off).
(g) Includes estimated transaction costs of approximately $3 million
(principally financial advisory and other professional fees and
computer conversion costs).
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(h) In the Capital Financing, Webster expects to raise approximately $27
million in net shareholders' equity in an underwritten public offering
of additional shares of Webster Stock. On this basis and using a market
price of $26.25 per share of Webster Stock (the closing price of
Webster Stock on the Nasdaq National Market on September 29, 1995,
which was the last business day immediately preceding the announcement
of the Shawmut Transaction), Webster would issue approximately 1.1
million shares of Webster Stock in the Capital Financing. There can be
no assurance that the Capital Financing will be consummated or as to
the price per share of the additional shares of Webster Stock to be
issued.
(In thousands)
Estimated common equity raised...................... $ 29,000
Estimated expenses (including underwriting discount)
related to the sale of common equity............... (2,000)
------------
Estimated net proceeds from the sale of
common equity.................................... $ 27,000
============
(i) On a Webster/Shelton/Shawmut pro forma combined basis, the tangible
book value per share is computed by subtracting the tax deductible core
deposit intangible estimated at approximately $50 million from common
shareholders' equity estimated at approximately $177 million, divided
by the common shares outstanding estimated at approximately 7.8 million
shares.
PRO FORMA COMBINED SUMMARY
After giving effect to both the Merger with Shelton and the Shawmut
Transaction, Webster at June 30, 1995 would have pro forma combined total assets
of approximately $3.8 billion. Webster Bank would then be the second largest
independent bank in Connecticut and the largest Connecticut based bank in the
Hartford Banking Market, basd on total deposit market share. Webster's pro forma
combined loans receivable would increase as of that date from approximately $1.9
billion, after giving effect to the Merger with Shelton, to approximately $2.5
billion after also giving effect to the Shawmut Transaction. The pro forma
weighted average interest rate of Webster's total earning assets of 7.48% at
June 30, 1995 after giving effect to the Merger with Shelton would increase to
approximately 7.60% after also giving effect to the Shawmut Transaction. Total
deposits at June 30, 1995 on a pro forma combined basis would increase from
approximately $2.5 billion after giving effect to the Merger with Shelton to
approximately $3.2 billion after also giving effect to the Shawmut Transaction.
The pro forma weighted average interest rate of Webster's total interest bearing
liabilities of 4.49% at June 30, 1995 after giving effect to the Merger with
Shelton would decrease to approximately 4.00% after also giving effect to the
Shawmut Transaction. The pro forma weighted average interest rate spread of
2.99% at June 30, 1995 after giving effect to the Merger with Shelton would
increase to approximately 3.60% after also giving effect to the Shawmut
Transaction. The assets being acquired and the liabilities being assumed in the
Shawmut Transaction will be the amounts outstanding at the date of consummation
of the Shawmut Transaction, which is expected to occur in the first quarter of
1996. The amounts and weighted average rates will change from the June 30, 1995
amounts and weighted average rates shown above due to interest-rate repricing,
principal repayments and prepayments and other changes in balances of the assets
being acquired and the liabilities being assumed. References herein to the
Shawmut Transaction include the pro forma adjustments shown in the preceding
footnotes.
14
ANNEX A
Investment Banking Group
World Financial Center
North Tower
New York, New York 10281-1325
212/449-1000
[LOGO] Merrill Lynch
October 1, 1995
Board of Directors
Webster Financial Corporation
First Federal Plaza
Waterbury, CT 06702
Members of the Board:
Webster Financial Corporation ("Webster"), acting through its
wholly-owned subsidiary, First Federal Bank ("First Federal"), has entered into
a purchase and assumption agreement dated October 1, 1995 (the "Agreement") with
Shawmut Bank Connecticut, National Association ("Shawmut") pursuant to which
First Federal will acquire certain assets and assume certain liabilities (the
"Acquisition Transaction") of Shawmut (the "Hartford Commercial Bank Divestiture
Package") in consideration of payment of the purchase price determined pursuant
to Article III of the Agreement (the "Consideration"). We understand that the
Acquisition Transaction is occurring in the context of Fleet Financial Group's
("Fleet") divestiture of certain assets and certain liabilities of Shawmut in
conjunction with Fleet's pending acquisition of Shawmut.
You have asked us whether, in our opinion, the proposed
Consideration to be paid or delivered in the manner contemplated in the
Agreement is fair to Webster from a financial point of view.
In arriving at the opinion set forth below, we have, among
other things:
(1) Reviewed Webster's Annual Reports, Forms 10-K and
related financial information for the three fiscal
years ended December 31, 1994 and Webster's Quarterly
Reports on Form
10-Q and the related unaudited financial information
for the quarterly periods ending March 31, 1995 and
June 30, 1995;
(2) Reviewed certain information furnished to us by
Webster, including financial and other forecasts and
assumptions, relating to the business, earnings,
assets and prospects of Webster;
(3) Reviewed certain information provided to us by Fleet
relating to the assets and liabilities of the
Hartford Commercial Bank Divestiture Package;
(4) Conducted discussions with members of senior
management of Webster concerning the financial
condition, businesses, assets and prospects of
Webster and such senior management's views as to the
financial forecasts and pro forma analysis of
Webster;
(5) Compared the proposed deposit premium to be paid in
the Acquisition Transaction with deposit premiums in
certain transactions which we deemed to be relevant;
(6) Reviewed the pro forma balance sheets and estimated
income statements for Webster as prepared by the
management of Webster and analyzed, based upon
information provided by Webster's senior management,
the pro forma impact of the Acquisition Transaction
on the earnings and tangible book value per share,
consolidated capitalization and certain balance sheet
and profitability ratios of Webster, including the
impact of an assumed capital financing plan as more
completely described in the agreement (the "Equity
Offering");
(7) Compared the results of operations of Webster with
that of certain publicly traded companies which we
deemed to be relevant;
(8) Reviewed certain information and reports and
conducted discussions with certain members of senior
management of Webster concerning this information and
reports related to Webster's review of Fleet;
(9) Reviewed the Agreement dated October 1, 1995; and
(10) Reviewed such other financial studies and analyses
and performed such other investigations and took into
account such other matters as we deemed necessary to
the rendering of this opinion.
In preparing our opinion, we have assumed and relied on the
accuracy and completeness of all of the financial and other information supplied
or otherwise made available to us by Webster and Fleet, and we have not
independently verified such information or undertaken an independent evaluation
or appraisal of the assets or liabilities of Webster or Fleet or any of their
respective subsidiaries, nor have we been furnished any such independent
evaluation or appraisal. We have also assumed and relied upon the senior
management of Webster as to the reasonableness and achievability of the
financial and operating forecasts (and the assumptions and bases therefor)
provided to, and discussed with, us. In that regard, we have assumed with your
consent that such forecasts, including without limitation, financial forecasts
resulting from the Acquisition Transaction and projections regarding future
economic conditions and results of operations reflect the best currently
available estimates and judgments of Webster's senior management as to the
future financial performance of Webster or the Hartford Connecticut Commercial
Bank Divestiture Package, as the case may be, and that such projections and
forecasts will be realized in the amounts and the time periods currently
estimated by the senior management of Webster. We are not experts in the
evaluation of allowances for loan losses, and we have not assumed any
responsibility for making an independent evaluation of the adequacy of the
allowance for loan losses of the Hartford Commercial Bank Divestiture Package
nor have we reviewed any individual credit files, and we have assumed that the
aggregate allowances for loan losses are adequate to cover such losses. In
addition, we are not experts in the evaluation of the loans and other assets to
be acquired and the liabilities to be assumed in connection with the Acquisition
Transaction as provided for in the Agreement and have assumed, with your
permission, that all such assets and liabilities have the market valuations
ascribed to them in the financial records supplied by the senior management of
Webster, and we have not assumed any responsibility for undertaking an
independent inquiry as to the accuracy of such valuations. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
Our opinion is being rendered without regard to (i) the
necessity for, or level of, any restrictions, obligations or undertakings which
may be imposed or required by or upon Webster or First Federal in the course of
obtaining regulatory approval for the Acquisition Transaction, including any
restrictions imposed under applicable law on the ability of First Federal to pay
dividends to Webster following consummation of the Acquisition Transaction and
related transactions, and (ii) any financial or other effects of the conversion
of Bristol Savings Bank, the renaming of Bristol Savings Bank as Webster Bank
and the merger of First Federal with and into Webster Bank as contemplated in
the Agreement. Our opinion is also based on the assumption that Webster will be
able to complete the Equity Offering and take all of the other actions
contemplated to be taken by it in the Agreement, and this opinion is not
addressed to the fairness of any of the foregoing.
We have been retained by the Board of Directors of Webster as
an independent contractor to act as financial advisor to Webster with respect to
the Acquisition Transaction and will receive a fee for our services. We have, in
the past, provided financial advisory and financing services to Webster and
Fleet and certain of their respective affiliates and have received customary
fees for the rendering of such services. In addition, in the ordinary course of
business, we may actively trade debt and/or equity securities of Webster and
Fleet and/or their respective affiliates for our own account and the accounts of
our customers, and we therefore may from time to time hold a long or short
position in such securities.
Our opinion is directed to the Board of Directors of Webster,
and, while we understand that no stockholder meeting is necessary for approval
of the Acquisition Transaction, our opinion does not constitute nor should it be
construed as constituting a recommendation to any stockholder of Webster as to
how such stockholder should vote at any stockholder meeting of Webster that may
be held in connection with the Acquisition Transaction.
This opinion is directed only to the proposed Consideration
and is solely for the confidential use the Board of Directors of Webster and may
not be reproduced, summarized, described or referred to or given to any person
without our prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, it is understood that this opinion can
be summarized and reproduced (in such form as Merrill Lynch shall approve) in
connection with the description of the Acquisition Transaction in the joint
proxy statement/prospectus relating to shareholder approval for the issuance of
additional shares of Webster common stock in its pending acquisition of Shelton
Bancorp, Inc.
On the basis of, and subject to the foregoing, we are of the
opinion that the proposed Consideration to be paid in the Acquisition
Transaction is fair to Webster from a financial point of view.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By
-----------------------------------
Director
Investment Banking Group
Item 7. Financial Statements and Exhibits.
c. Exhibits
*2. Purchase and Assumption Agreement between First Federal
Bank, a federal savings bank and Shawmut Bank Connecticut,
National Association, dated as of October 1, 1995.
* Previously filed
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 hereunto duly authorized.
WEBSTER FINANCIAL CORPORATION
---------------------------------
(Registrant)
/s/ John V. Brennan
----------------------------------
John V. Brennan
Executive Vice President,
Chief Financial Officer and Treasurer
Date: October 18, 1995