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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________________to
______________________
Commission file number: 1-6522
BANK OF BOSTON CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2471221
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Federal Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(6l7) 434-2200
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Common Stock, par value $2.25 per share
Preferred Stock Purchase Rights
Adjustable Rate Cumulative Preferred Stock, Series A
(liquidation preference $50 per share)
Adjustable Rate Cumulative Preferred Stock, Series B
(liquidation preference $50 per share)
Adjustable Rate Cumulative Preferred Stock, Series C
(liquidation preference $100 per share)
Depositary Shares, each representing one-tenth of a share of
8.60% Cumulative Preferred Stock, Series E
(liquidation preference $25 per Depositary Share)
Depositary Shares, each representing one-tenth of a share of 7
7/8% Cumulative Preferred Stock, Series F
(liquidation preference $25 per Depositary Share)
Name of each exchange on which registered:
------------------------------------------
Each class is registered on the Boston Stock Exchange and on
the New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
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None
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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 such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes[X] No[ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (#229.405 of this
chapter) is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.[ ]
Aggregate market value of Number of shares of
shares of common stock common stock
held by non-affiliates of outstanding as of
Registrant as of February 25, 1994 February 25, 1994
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$2,482,823,070 106,357,915
Documents Incorporated by Reference:
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1. Pertinent extracts from Registrant's 1993 Annual Report
to Stockholders (Parts I, II and IV).
2. Pertinent extracts from Registrant's Proxy Statement in
connection with the Registrant's 1994 Annual Meeting
of Stockholders (Part III).
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INDEX
Name of Item Page
- ------------ ----
PART I
Item 1. Business 1
Item 2. Properties 19
Item 3. Legal Proceedings 20
Item 3A. Executive Officers of the Corporation 23
Item 4. Submission of Matters to a Vote of
Security Holders 26
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 27
Item 6. Selected Financial Data 27
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 27
Item 8. Financial Statements and Supplementary
Data 27
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 28
PART III
Item 10. Directors and Executive Officers
of the Registrant 29
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain
Beneficial Owners and Management 29
Item 13. Certain Relationships and Related
Transactions 29
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 30
SIGNATURES
Signatures II-1
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PART I
Item 1. Business.
THE CORPORATION
Bank of Boston Corporation (the "Corporation") is a
registered bank holding company, organized in 1970 under
Massachusetts law with both national and international
operations. Through its subsidiaries, the Corporation is
engaged in providing a wide variety of financial services to
individuals, corporate and institutional customers,
governments and other financial institutions. These
services include individual and community banking, consumer
finance, mortgage origination and servicing, domestic
corporate and investment banking, leasing, international
banking, commercial real estate lending, private banking,
trust, correspondent banking, and securities and payments
processing. The Corporation's principal subsidiary is The
First National Bank of Boston ("FNBB"), a national banking
association with its headquarters in Massachusetts. Other
major banking subsidiaries of the Corporation are Casco
Northern Bank, N.A. ("Casco") in Maine, Bank of Boston
Connecticut ("BKB Connecticut"), Rhode Island Hospital Trust
National Bank ("Hospital Trust"), Bank of Vermont, and in
Massachusetts, South Shore Bank, Mechanics Bank and
Multibank West. As of December 31, 1993, approximately 78%
of the Corporation's total loan volume consisted of domestic
loans and leases, with the balance overseas. The
Corporation's banking subsidiaries maintain approximately
320 branches in Massachusetts, Rhode Island, Connecticut,
Maine and Vermont. The Corporation, through its
subsidiaries, has a presence in approximately 33 states of
the United States and in approximately 23 foreign countries.
As of December 31, 1993, the Corporation's subsidiaries
employed in the aggregate approximately 18,600 full-time
equivalent employees in their domestic and foreign
operations.
The executive office of the Corporation and the head
office of FNBB are located at 100 Federal Street, Boston,
Massachusetts 02110 (Telephone (617) 434-2200).
BUSINESS OF THE CORPORATION
The Corporation's business is generally focused
in the areas of retail banking, corporate banking and
international banking. In October of 1993, the Corporation
announced certain organizational and management changes,
including the creation of a new Chairman's Office and the
establishment of a twenty-nine member Corporate Working
Committee. The Chairman's Office consists of Chairman
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and Chief Executive Officer Ira Stepanian, President and
Chief Operating Officer Charles K. Gifford, Vice Chairman,
Chief Financial Officer and Treasurer William J. Shea, and
Vice Chairman Edward A. O'Neal. The Corporation's
businesses were previously organized into five major groups
and a number of other major centralized functions. This
group structure was replaced by fifteen core business and
ten corporate-wide support areas, each led by an executive
with authority to operate and manage his or her respective
area. These twenty-five executives and the members of the
Chairman's Office comprise the Corporate Working
Committee. These core business and corporate wide support
areas work closely with one another and each is linked to
one of the members of the Chairman's Office. For
discussions of the Corporation's business activities,
including its lending activities, its cross-border
outstandings, and the management of its foreign currency
exposure, see "Management's Financial Review," "Cross-Border
Outstandings," and "Off-Balance-Sheet Financial Markets
Instruments" on pages 32 through 51, 86 and 87, and 47 and
48, respectively, of the Corporation's 1993 Annual Report to
Stockholders, which pages are included in Exhibit 13 hereto
and which discussions are incorporated herein by reference.
Activities in which the Corporation and its subsidiaries
are presently engaged or which they may undertake in the
future are subject to certain statutory and regulatory
restrictions. Banks and bank holding companies are
extensively regulated under both federal and state law.
There are various legal limitations upon the extent to which
banking subsidiaries of the Corporation can finance or
otherwise supply funds to the Corporation or certain of its
affiliates. See "Supervision and Regulation."
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The following table presents selected financial
information concerning the business of the Corporation on a
geographic basis.
(in millions)
United States International
Operations Operations Consolidated
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For the Year Ended
December 31, 1993(1)
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Net Interest Revenue $ 1,087.8 $ 431.0 $ 1,518.8
Net Income $ 220.3 $ 78.7 $ 299.0
Total Average Assets $ 29,718 $ 8,649 $ 38,367
For the Year Ended
December 31, 1992(1)
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Net Interest Revenue $ 1,033.8 $ 272.0 $ 1,305.8
Net Income $ 226.3 $ 52.6 $ 278.9
Total Average Assets $ 29,995 $ 6,860 $ 36,855
For the Year Ended
December 31, 1991(1)
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Net Interest Revenue $ 951.2 $ 163.6 $ 1,114.8
Net Income (Loss) $ (162.1) $ 49.0 $ (113.1)
Total Average Assets $ 32,803 $ 5,112 $ 37,915
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<FN>
(1) This data is presented generally in a manner whereby
assets and income are segregated by geographic location
based upon the domicile of the customer or borrower. This
information should be read in conjunction with "Geographic
Segment Information" which appears on pages 84 and 85 and
with information included under the caption "Cross-border
Outstandings" which appears on pages 86 and 87 of the
Corporation's 1993 Annual Report to Stockholders, which
pages are included in Exhibit 13 hereto and which
information is hereby incorporated by reference.
COMPETITION AND INDUSTRY CONSOLIDATION
The Corporation's subsidiaries compete with other major
financial institutions, including commercial banks,
investment banks, mutual savings banks, savings and loan
associations, credit unions, consumer finance companies,
money market funds and other non-banking institutions, such
as insurance companies, major retailers, brokerage firms,
and investment companies in New England, throughout the
United States, and internationally. One of the principal
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methods of competing effectively in the financial services
industry is to improve customer service through the quality
and range of services available, easing access to facilities
and pricing. See "Supervision and Regulation" with respect
to the impact of legislation upon the Corporation and its
subsidiaries.
One outgrowth of the competitive environment discussed
above has been a significant number of consolidations in the
banking industry both on a national and regional level. The
Corporation engages on an ongoing basis in reviewing and
discussing possible acquisitions of financial institutions,
as well as banking and other assets in order to expand its
business incident to the implementation of its business
strategy. The Corporation intends to continue to explore
acquisition opportunities as they arise in order to take
advantage of the continuing consolidation in the banking
industry.
In July 1993, the Corporation completed its acquisitions
of Society for Savings Bancorp, Inc., a $2.4 billion
registered bank holding company based in Hartford,
Connecticut ("Bancorp") and Multibank Financial Corp., a
$2.4 billion registered bank holding company based in
Dedham, Massachusetts ("Multibank"). In addition, in
September 1993, the Corporation announced that it had
reached a definitive agreement to acquire BankWorcester
Corporation ("BankWorcester") for $34.00 for each share of
BankWorcester common stock outstanding, subject to an upward
adjustment if the transaction is not consummated on or
before June 30, 1994. It is expected that the total
purchase price will be approximately $247 million.
BankWorcester, the holding company for Worcester County
Institution for Savings, had approximately $1.5 billion of
assets, approximately $1.3 billion of deposits and 28
branches at December 31, 1993. The transaction has been
approved by the boards of directors of both companies and by
BankWorcester's stockholders. In March 1994, the
Corporation announced that it had reached a definitive
agreement to acquire Pioneer Financial, A Co-operative Bank
("Pioneer Bank") for $118 million in cash. Pioneer Bank,
which is based in Middlesex County, Massachusetts had
approximately $773 million in assets, $720 million in
deposits and 20 branches at December 31, 1993. The Pioneer
Bank transaction has been approved by the boards of
directors of both companies. Both pending transactions are
subject to the approval of the Office of the Comptroller of
the Currency (the "OCC") and the Board of Bank Incorporation
of the Commonwealth of Massachusetts (the "Massachusetts
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BBI"), and applications for approval for the BankWorcester
acquisition have been submitted to the OCC and the
Massachusetts BBI. Neither transaction may be consummated
until the 30th day after OCC approval is received, during
which time the United States Department of Justice may
challenge the transactions on antitrust grounds. The
Corporation's objective is to consummate the BankWorcester
transaction by mid-year 1994 and the Pioneer Bank
transaction in the fall of 1994 although no assurances can
be given that the requisite regulatory approvals will be
granted or, if granted, that such approvals will be received
within these time frames.
SUPERVISION AND REGULATION
The business in which the Corporation and its subsidiaries
are engaged is subject to extensive supervision, regulation
and examination by various bank regulatory authorities and
other agencies of federal and state governments. The
Corporation and its subsidiaries are engaged on a regular
basis in discussions with such regulators and agencies on a
variety of matters which arise in connection with this
regulatory and supervisory process. The supervisory or
regulatory activities may, but need not, be directly related
to the financial services provided by the Corporation and
its subsidiaries. The supervision, regulation and
examination to which the Corporation and its subsidiaries
are subject are often intended by the regulators primarily
for the protection of depositors or are aimed at carrying
out broad public policy goals rather than for the protection
of security holders.
Several of the more significant regulatory provisions
applicable to banks and bank holding companies to which the
Corporation and its subsidiaries are subject are noted below
along with certain current regulatory matters concerning the
Corporation and its banking subsidiaries. To the extent
that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by
reference to the particular statutory provisions. Any
change in applicable law or regulation may have a material
effect on the business and prospects of the Corporation.
The Corporation
The Corporation, as a bank holding company under the Bank
Holding Company Act of 1956, as amended, (the "BHCA"), is
registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") and is
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regulated under the provisions of the BHCA. Under the BHCA,
the Corporation is prohibited, with certain exceptions, from
acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any company which is not a
bank and from engaging in any business other than that of
banking, managing or controlling banks or furnishing
services to, or acquiring premises for, its affiliated
banks. The Corporation may, however, engage in, and own
voting shares of companies engaging in, certain activities
determined by the Federal Reserve Board, by order or by
regulation, to be so closely related to banking or to
managing or controlling banks "as to be a proper incident
thereto." The location of such "non-bank" subsidiaries of
the Corporation is not restricted geographically under the
BHCA. The Corporation is required by the BHCA to file with
the Federal Reserve Board periodic reports and such
additional reports as the Federal Reserve Board may require.
The Federal Reserve Bank of Boston (the "Federal Reserve")
performs examinations of the Corporation and certain of its
subsidiaries.
The BHCA requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before it may
acquire substantially all of the assets of any bank, or
ownership or control of any voting shares of any bank, if,
after such acquisition, it would own or control, directly or
indirectly, more than 5% of the voting shares of such bank.
Since the Corporation is also a bank holding company under
the laws of Massachusetts, the Commissioner of Banks for the
Commonwealth of Massachusetts (the "Massachusetts
Commissioner") has authority to require certain reports from
the Corporation from time to time and to examine the
Corporation and each of its subsidiaries other than national
banking associations. Prior approval of the Massachusetts
BBI also may be required before the Corporation may acquire
any additional commercial banks located in Massachusetts.
Acquisitions by the Corporation of non-Massachusetts banks
or bank holding companies may be subject to the prior
approval by both the Massachusetts and the applicable state
or federal banking regulators. Massachusetts has an
interstate bank acquisition law which permits banking
organizations outside Massachusetts to acquire Massachusetts
banking organizations if the state law of the acquirer
permits acquisitions of banking organizations in that state
by Massachusetts-based banking organizations.
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In addition, Massachusetts has a business combinations law
which provides that if any acquirer buys 5% or more of a
target company's stock without the prior approval of the
target company's board of directors, it generally may not
(i) complete the acquisition through a merger, (ii) pledge
or sell any assets of the target company, or (iii) engage in
other self-dealing transactions with the target company for
a period of three years. The prior board approval
requirement does not apply if the acquirer buys at least 90%
of the target company's outstanding stock in the transaction
in which it crosses the 5% threshold or if the acquirer,
after crossing the threshold, obtains the approval of the
target company's board and two-thirds of the target
company's stock held by persons other than the acquirer.
This legislation automatically applies to Massachusetts
corporations, including the Corporation, which did not elect
to "opt out" of the statute.
Massachusetts law also provides for classified boards of
directors for most public companies incorporated in
Massachusetts, unless the company elected to "opt out" of
the law. As a result of this law, the Corporation's Board
of Directors is divided into three classes of Directors and
the three-year terms of the classes are staggered.
Other Massachusetts legislation exists which is intended
to provide limited anti-takeover protection to certain
Massachusetts corporations by preventing an acquirer of
certain percentages of such corporation's stock from
obtaining voting rights in such stock unless the
corporation's other stockholders authorize such voting
rights. The legislation automatically applies to certain
Massachusetts corporations which have not elected to "opt
out" of the statute. The Corporation, by vote of its Board
of Directors, has "opted out" of the statute's coverage.
In June 1990, the Board of Directors of the Corporation
adopted a stockholder rights plan providing for a dividend
of one preferred stock purchase right for each outstanding
share of common stock of the Corporation (the "Rights").
Under certain circumstances, the Rights would enable
stockholders to purchase common stock of the Corporation or
of an acquiring Corporation at a substantial discount. The
dividend was distributed on July 12, 1990 to stockholders of
record on that date. Holders of shares of the Corporation's
common stock issued subsequent to that date receive the
Rights with their shares. The Rights trade automatically
with shares of the Corporation's common stock and become
exercisable only under certain circumstances.
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The purpose of the Rights is to encourage potential
acquirers to negotiate with the Corporation's Board of
Directors prior to attempting a takeover and to provide the
Board with leverage in negotiating on behalf of all
stockholders the terms of any proposed takeover. The Rights
may have certain anti-takeover effects. The Rights should
not interfere, however, with any merger or other business
combination approved by the Board of Directors. For a
further discussion of the Corporation's stockholder rights
plan see the description of the Rights set forth in the
Corporation's registration statement on Form 8-A relating to
the Rights (including the Rights Agreement, dated as of June
28, 1990, between the Corporation and FNBB, as Rights Agent,
which is attached as an exhibit to the Form 8-A), which is
incorporated herein by reference.
The Banking Subsidiaries
General
The Corporation's banking subsidiaries that are national
banks are subject to the supervision of, and are regularly
examined by, the OCC. The Corporation's state-chartered
banking subsidiaries are subject to the supervision of, and
are regularly examined by, the Federal Deposit Insurance
Corporation (the "FDIC") as well as by their respective
state regulators. The Corporation's domestic subsidiary
banks' deposits are insured by the FDIC to the extent
allowed by law and, accordingly, the banks are subject to
the regulations of the FDIC. As members of the Federal
Reserve System, the nationally chartered banks are also
subject to regulation by the Federal Reserve Board. Bank of
Vermont and Hospital Trust, as members of the Federal Home
Loan Bank of Boston, are also subject to the regulations of
the Federal Housing Finance Board.
FIRREA
Under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), an FDIC insured
institution can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default. The term
"default" is defined to mean the appointment of a
conservator or receiver for such institution and "in danger
of default" is defined generally as the existence of certain
conditions indicating that a "default" is likely to occur in
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the absence of regulatory assistance. In addition, FIRREA
broadened the enforcement powers of the federal banking
agencies, including the power to impose fines and penalties
over all financial institutions. Further, under FIRREA the
failure to meet capital guidelines could subject a financial
institution to a variety of regulatory actions, including
the termination of deposit insurance by the FDIC.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), also provides for expanded regulation of
financial institutions. Under FDICIA, banks are placed in
one of five capital categories, for which the federal
banking agencies have established specific capital ratio
levels. Pursuant to the agencies' regulations, an
institution is considered "well capitalized" if it has a
total risk-based capital ratio of at least 10%, a tier 1
risk-based capital ratio of at least 6% and a leverage
capital ratio of at least 5%. In addition, regardless of a
bank's capital level, a bank is not considered "well
capitalized" if it is subject to a cease and desist order,
formal agreement, capital directive, or prompt corrective
action directive that requires it to achieve or maintain a
higher level of capital. An institution is considered
"adequately capitalized" if it has a total risk-based
capital ratio of at least 8%, a tier 1 risk-based capital
ratio of at least 4% and a leverage capital ratio of at
least 4%. Institutions with capital levels below those
necessary to qualify as "adequately capitalized" are deemed
to be either "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized,"
depending on their specific capital levels.
FDICIA, through its prompt corrective action ("PCA")
system, imposes significant operational and management
restrictions on banks that are not considered at least
"adequately capitalized". At December 31, 1993, FNBB
satisfied the requirements of the "well capitalized"
category and the Corporation's other banking subsidiaries
satisfied the requirements of the "adequately capitalized"
or "well capitalized" categories. The capital categories of
the Corporation's banking subsidiaries are determined solely
for purposes of applying FDICIA's PCA provisions, and such
capital categories may not constitute an accurate
representation of the overall financial condition or
prospects of any of the Corporation's banking subsidiaries.
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Under FDICIA's PCA system, a bank in the
"undercapitalized" category must submit a capital
restoration plan guaranteed by its parent company. The
liability of the parent company under any such guarantee is
limited to the lesser of 5% of the bank's assets at the time
it became undercapitalized, or the amount needed to comply
with the plan. A bank in the "undercapitalized" category
also is subject to limitations in numerous areas including,
but not limited to: asset growth; acquisitions; branching;
new business lines; acceptance of brokered deposits; and
borrowings from the Federal Reserve. Progressively more
burdensome restrictions are applied to banks in the
"undercapitalized" category that fail to submit or implement
a capital plan and to banks that are in the "significantly
undercapitalized" or "critically undercapitalized"
categories. In addition, a bank's primary federal banking
agency is authorized to downgrade the bank's capital
category to the next lower category upon a determination
that the bank is in an unsafe or unsound condition or is
engaged in an unsafe or unsound practice. An unsafe or
unsound practice can include receipt by the institution of a
rating on its most recent examination of three or worse (on
a scale of 1 (best) to 5 (worst)), with respect to its asset
quality, management, earnings or liquidity.
The FDIC's deposit insurance assessments have moved under
FDICIA from a flat-rate system to a risk-based system. The
risk-based system places a bank in one of nine risk
categories, principally on the basis of its capital level
and an evaluation of the bank's risk to the Bank Insurance
Fund, and bases premiums on the probability of loss to the
FDIC with respect to each individual bank. During 1993, the
FDIC's risk-based system provided that the highest and
lowest premiums assessable per $100 of insured deposits were
$.31 and $.23, respectively, with a greater difference
between the rates possible in 1994 or 1995.
FDICIA and the regulations issued thereunder also have (i)
limited the use of brokered deposits to well capitalized
banks, and adequately capitalized banks that have received
waivers from the FDIC; (ii) established restrictions on the
permissible investments and activities of FDIC-insured state
chartered banks and their subsidiaries; (iii) implemented
uniform real estate lending rules; (iv) prescribed standards
to limit the risks posed by credit exposure between banks;
(v) revised risk-based capital rules to include components
for measuring the risk posed by interest rate changes; (vi)
amended various consumer banking laws; (vii) increased
restrictions on loans to a bank's insiders; (viii)
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established standards in a number of areas to assure bank
safety and soundness; and (ix) implemented additional
requirements for institutions that have $500 million or more in
total assets with respect to annual independent audits,
audit committees, and management reports related to
financial statements, internal controls and compliance with
designated laws and regulations.
The Corporation continues to analyze the effect of, and
address its ongoing compliance with, the various regulations
issued under FDICIA. It is anticipated that FDICIA, and the
regulations enacted thereunder, will continue to result in
more limitations on banking activities generally, and
increased costs for the Corporation and the banking industry
because of higher FDIC assessments and higher costs of
compliance, documentation and record keeping.
Other Regulatory Restrictions
The Corporation's domestic subsidiary banks and the
subsidiaries of such banks are subject to a large number of
other regulatory restrictions, including certain
restrictions upon: (i) any extensions of credit by such
banks to, from or for the benefit of the Corporation and the
Corporation's non-banking affiliates (collectively with the
Corporation, the "Affiliates"), (ii) the purchase of assets
or services from or the sale of assets or the provision of
services to Affiliates, (iii) the issuance of a guarantee,
acceptance or letter of credit on behalf of or for the
benefit of Affiliates, (iv) the purchase of securities of
which an Affiliate is a principal underwriter during the
existence of the underwriting and (v) investments in stock
or other securities issued by Affiliates or acceptance
thereof as collateral for an extension of credit. The
Corporation and all its subsidiaries, including FNBB, are
also subject to certain restrictions with respect to
engaging in the issue, flotation, underwriting, public sale
or distribution of certain types of securities. In
addition, under both the BHCA and regulations which have
been issued by the Federal Reserve Board, the Corporation
and its subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of
credit, lease or sale of any property or the furnishing of
any service. In operations in other countries, the
Corporation and FNBB are also subject to restrictions
imposed by the laws and banking authorities of such
countries.
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The Corporation's banking subsidiaries are also required
to maintain cash reserves against deposits and are subject
to restrictions, among others, upon (i) the nature and
amount of loans which they may make to a borrower; (ii) the
nature and amount of securities in which they may invest;
(iii) the portion of their respective assets which may be
invested in bank premises; (iv) the geographic location of
their branches; and (v) the nature and extent to which they
can borrow money.
Dividends
The payment of dividends by the Corporation is determined
by the Board of Directors based on the Corporation's
liquidity, asset quality profile, capital adequacy, and
recent earnings history (excluding significant non-recurring
transactions) as well as economic conditions and other
factors, including applicable government regulations and
policies and the amount of dividends payable to the
Corporation by its subsidiary banks.
In 1993, the aggregate dividends declared by the
Corporation on its common stock and preferred stock were
approximately $73 million. For each quarter of 1993, a
dividend of $.10 per share was declared and paid on the
Corporation's common stock. In the first quarter of 1994,
the Corporation declared a dividend on its common stock of
$.22 per share. The declaration and payment of dividends on
the Corporation's common stock was previously subject to the
prior approval of the Federal Reserve and the Division of
Banking Supervision and Regulation of the Federal Reserve
Board pursuant to an agreement between the Corporation and
the Federal Reserve entered into in 1991. In October 1993,
the Federal Reserve terminated the agreement.
The Corporation is a legal entity separate and distinct
from its subsidiary banks and its other non-bank
subsidiaries. The Corporation's revenues (on a parent
company only basis) result primarily from interest and
dividends paid to the Corporation by its subsidiaries. The
right of the Corporation, and consequently the right of
creditors and stockholders of the Corporation, to
participate in any distribution of the assets or earnings of
any subsidiary through the payment of such dividends or
otherwise is necessarily subject to the prior claims of
creditors of the subsidiary (including depositors, in the
case of banking subsidiaries), except to the extent that
claims of the Corporation in its capacity as a creditor may
be recognized.
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It is the policy of the OCC and the Federal Reserve Board
that banks and bank holding companies, respectively, should
pay dividends only out of current earnings and only if after
paying such dividends the bank or bank holding company would
remain adequately capitalized. Federal banking regulators
also have authority to prohibit banks and bank holding
companies from paying dividends if they deem such payment to
be an unsafe or unsound practice. In addition, it is the
position of the Federal Reserve Board that a bank holding
company is expected to act as a source of financial strength
to its subsidiary banks.
Various federal and state laws, regulations and policies
limit the ability of the Corporation's banking subsidiaries
to pay dividends to the Corporation. Federal banking law
requires the approval of the OCC if the aggregate total of
the dividends declared by any of the Corporation's national
banking subsidiaries in any calendar year will exceed the
bank's net profits, as defined by applicable regulation, for
that year combined with retained net profits for the
preceding two years. Also, state law requires the approval
of state bank regulatory authorities if the dividends
declared by state banks exceed certain prescribed limits.
In 1993, approximately $7 million of dividends were declared
by one of the Corporation's banking subsidiaries. The
payment of any future dividends by the Corporation's banking
subsidiaries will be determined based on a number of
factors, including the subsidiary's liquidity, asset quality
profile, capital adequacy and recent earnings history. In
addition, as discussed below, two of the Corporation's
banking subsidiaries, BKB Connecticut and South Shore Bank,
are subject to regulatory agreements which require prior
regulatory approval and prior notice, respectively, for the
payment of dividends. See the related discussions set
forth below in "Capital," "Legislation" and "Regulatory
Agreements."
Capital
Information concerning the Corporation and its banking
subsidiaries with respect to capital is set forth in the
discussion of "Capital Management" contained in the
Corporation's 1993 Annual Report to Stockholders on pages 49
and 50, which pages are included in Exhibit 13 hereto and
which discussion is incorporated herein by reference. See
also "Legislation" and "Regulatory Agreements" discussed
below and "Dividends" discussed above.
13
17
Legislation
In addition to extensive existing government
regulation, federal and state statutes and regulations can
change in unpredictable ways, often with significant effects
on the way in which financial institutions may conduct
business. Legislation which has been enacted in recent
years has substantially increased the level of competition
among commercial banks, thrift institutions and non-banking
institutions, including insurance companies, brokerage
firms, mutual funds, investment banks and major retailers.
Similarly, the enactment of banking legislation such as
FIRREA and FDICIA has affected the banking industry by,
among other things, broadening the powers of the federal
banking agencies in a number of areas. Other legislation,
which is considered from time to time, such as interstate
branching, could, if enacted, significantly affect the
business of the Corporation. See also "Supervision and
Regulation -- the Corporation" discussed above.
Regulatory Matters
During 1993, certain regulatory agreements between the
Corporation or its banking subsidiaries and their respective
banking agencies were terminated by the agencies as a result
of improvements in the areas addressed in those agreements.
Information on the terminated and remaining agreements is
set forth below.
As previously reported, in 1989, FNBB entered into an
agreement with the OCC to address certain areas, and the
Corporation entered into a similar memorandum of
understanding with the Federal Reserve. In 1991 the
Corporation entered into a written agreement with the
Federal Reserve that was essentially a formalization of the
then existing memorandum of understanding. In February 1993
and October 1993, respectively, the OCC and the Federal
Reserve terminated the agreements as a result of the
progress made by FNBB and the Corporation in the areas
addressed by the agreements.
As previously reported, in 1991 Casco and Hospital Trust
entered into agreements with the OCC that were substantially
similar to the OCC's agreement with FNBB. In February 1993,
the OCC terminated the agreements with Casco and Hospital
Trust as a result of the progress made by Casco and Hospital
Trust in the areas addressed in their respective
agreements.
As previously reported, Bank of Vermont and its
regulators, the FDIC and the Commissioner of Banking,
Insurance and Securities of the State of Vermont (the
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18
"Vermont Commissioner"), entered into a memorandum of
understanding in 1992. In October 1993, the FDIC and the
Vermont Commissioner terminated the memorandum as a result
of Bank of Vermont's compliance with its provisions.
As previously reported, in 1992 Bancorp and Multibank
entered into written agreements with the Federal Reserve.
In September 1993, the Federal Reserve terminated the
agreements with Bancorp and Multibank as a result of the
progress made by Bancorp and Multibank in the areas
addressed in their respective agreements.
As previously reported, in connection with the acquisition
of Bancorp, BKB Connecticut was merged with and into
Bancorp's subsidiary bank, Society for Savings ("Society"),
and Society changed its name to "BKB Connecticut" following
the merger. The resulting bank remains subject to a
stipulation and agreement entered into by BKB Connecticut
with the Connecticut Banking Commissioner in 1991 pursuant
to which BKB Connecticut is required, among other things, to
reduce the level of its classified assets, to maintain
appropriate reserves, and to maintain its tier 1 leverage
capital ratio in excess of minimum regulatory requirements.
As of December 31, 1993, BKB Connecticut's tier 1 leverage
capital ratio was above the minimum required under its
agreement. The agreement requires the prior written consent
of the Connecticut Banking Commissioner and the Regional
Director of the FDIC for the payment of dividends by BKB
Connecticut. The agreement, as amended, also requires BKB
Connecticut to submit semiannual progress reports to the
regulators of actions taken under the agreement. BKB
Connecticut has implemented or is implementing improvements
in the various areas addressed in its agreement.
As previously reported, Mechanics Bank entered into a
memorandum of understanding with the FDIC and the
Massachusetts Commissioner in 1991. In January 1994, the
FDIC and the Massachusetts Commissioner terminated the
agreement with Mechanics Bank as a result of the progress
made by Mechanics Bank in the areas addressed in the
agreement.
As previously reported, South Shore Bank entered into a
memorandum of understanding with the FDIC and the
Massachusetts Commissioner in 1992, which incorporated the
terms of an earlier memorandum of understanding entered into
in 1991. The memorandum of understanding addresses certain
areas, including management, asset quality, reserves,
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19
profitability, capital ratios, and dividends. South Shore
Bank is also subject to the ongoing conditions of the FDIC's
approval order relating to the merger of two other banks
into South Shore Bank. The conditions of the approval order
require, among other things, a plan to reduce classified
asset levels and that South Shore Bank have, as of December
31, 1993, a minimum tier 1 leverage capital ratio of at
least 6.0%. As of December 31, 1993, South Shore Bank was
in compliance with the capital ratio aspects of, and had
adopted or was implementing improvements in the various
areas addressed in, the agreement and approval order.
As previously reported, as part of the 1991 merger of two
of Multibank's banking subsidiaries, the FDIC issued an
approval order which requires that the resulting bank,
Multibank West, comply with certain conditions. The
approval order addresses, among other things, uniform
policies and procedures, risk ratings, asset quality,
reserves and funds management, and requires that Multibank
West maintain an equity-to-assets ratio of at least 5%.
Multibank West, which is required to file periodic progress
reports with the FDIC, has complied with all of the aspects of
the approval order.
The Corporation is currently in the process of seeking
regulatory approval to merge Mechanics Bank, South Shore
Bank and Multibank West into FNBB. While it is anticipated
that the mergers will be consummated by mid-year 1994, there
can be no assurances that the requisite regulatory approvals
will be granted or, if granted, that such approvals will be
received within this time frame.
As previously reported, in January 1994, the Securities
and Exchange Commission (the "Commission") commenced an
administrative proceeding against the Corporation. The
administrative proceeding relates to the Commission's claim
that the Corporation's second quarter 1989 Form 10-Q did not
disclose known trends or uncertainties with respect to the
Corporation's credit portfolio and specifically its domestic
commercial real estate portfolio. The Corporation reported
a significant loss in the third quarter of 1989 as a result
of adding to its reserve for credit losses, primarily due to
deterioration in the credit quality of its domestic
commercial real estate portfolio. Management believes that
the disclosures made in its second quarter 1989 Form 10-Q
were appropriate and intends to defend the action
vigorously. Although management cannot predict the outcome
of this proceeding, an unfavorable outcome will not result
in any monetary penalties to the Corporation.
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20
GOVERNMENTAL POLICIES AND ECONOMIC CONDITIONS
The earnings and business of the Corporation and its
subsidiaries are affected by a number of external
influences. The economic and political conditions in which
the Corporation and its subsidiaries operate can vary
greatly. Such conditions include volatile foreign exchange
markets and, in certain countries, high rates of inflation
and foreign exchange liquidity problems. In 1993, the
economies of New England and the United States reflected
modest improvement and for most of 1993, the Corporation
experienced improved domestic loan demand. The economic
downturn in New England, however, predated the national
recession and since the state of the regional economy
reflects structural as well as cyclical forces, New
England's economic recovery may be slower and more uneven
than for the country as a whole.
The Corporation's earnings and business are also affected
by the policies of various government and regulatory
authorities in New England and throughout the United States,
as well as foreign governments and international agencies,
including, in the United States, the Federal Reserve Board.
Important functions of the Federal Reserve Board, in
addition to those enumerated under "Supervision and
Regulation," are to regulate the supply of money and of bank
credit, to deal with general economic conditions within the
United States and to be responsive to international economic
conditions. From time to time, the Federal Reserve Board
and the central banks of foreign countries have taken
specific steps to effect changes in the value of the United
States dollar in foreign currency markets as well as to
control domestic inflation and to control the country's
money supply. The instruments of monetary policy employed
by the Federal Reserve Board for these purposes (including
interest rates and the level of cash reserves banks are
required to maintain against deposits) influence in various
ways the interest rates paid on interest bearing liabilities
and the interest received on earning assets, as well as the
overall level of bank loans, investments and deposits.
Inflation has generally had a minimal impact on the
Corporation because substantially all of its assets and
liabilities are of a monetary nature and a large portion of
its operations are based in the United States, where
inflation has been low. As discussed in "Management's
Financial Review," a currency position maintained by the
Corporation in Brazil, a country with a hyperinflationary
economy, has had an effect on the levels of net interest
17
21
revenue, noninterest income and net interest margin, while
modestly benefiting total revenue. Prospective domestic and
international economic and political conditions and the
policies of the Federal Reserve Board, as well as other
domestic and international regulatory authorities, may
effect the future business and earnings of the Corporation.
This section should be read in conjunction with
"Management's Financial Review" contained in the
Corporation's 1993 Annual Report to Stockholders on pages 32
through 51, which pages are included in Exhibit 13 hereto
and which discussion is incorporated herein by reference.
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22
CONSOLIDATED STATISTICAL INFORMATION
The "Consolidated Statistical Information" is incorporated
herein by reference from the following pages of the
Corporation's 1993 Annual Report to Stockholders, which
pages are included in Exhibit 13 hereto. This information
should be read in conjunction with the financial statements
incorporated by reference in Item 8 of this Report.
Page of 1993 Annual
Report to Stockholders
Average Balances and Interest Rates:
Consolidated 79
United States Operations 80
International Operations 81
Change in Net Interest Revenue-Volume and
Rate Analysis:
1993 compared with 1992 82
1992 compared with 1991 83
Geographic Segment Information 84
Cross-border Outstandings 86 and 87
Loans and Lease Financing 88
Nonaccrual Loans and Leases 89
Reserve for Credit Losses:
Allocation of Reserve for Credit Losses 90
Analysis of Reserve for Credit Losses 91
Securities 92
Deposits 92
Short-term Borrowings 93
Consolidated Selected Financial Data-Selected
Ratios 31
Item 2. Properties.
The head offices of the Corporation and FNBB are
located in a 37-story building at 100 Federal Street,
Boston, Massachusetts. In 1993, FNBB leased approximately
70% of the building's approximately 1.3 million square feet.
FNBB's securities and payments processing center is located
in Canton, Massachusetts, where FNBB leases approximately
85% of the Canton office building's approximately 275,000
square feet. FNBB's data processing and record keeping
operations are located at Columbia Park in Boston. The
Columbia Park facility, comprising approximately 405,000
square feet, and the land on which it is situated are owned
by FNBB. In addition, FNBB leases Multibank's former
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operations facility in Dedham, Massachusetts, which
comprises approximately 158,000 square feet. The
headquarters for FNBB's operations in Argentina and Brazil
are located in a 10-story building in Buenos Aires and a
20-story building in Sao Paulo, respectively. The Buenos
Aires and Sao Paulo facilities, comprising approximately
256,000 and 187,000 square feet, respectively, are owned by FNBB.
Hospital Trust owns a 30-story building and a building
adjacent thereto at One Hospital Trust Plaza, Providence,
Rhode Island. Hospital Trust occupies approximately 40% of
the complex's approximately 546,000 square feet. In
addition, Hospital Trust maintains an operations center in
East Providence, Rhode Island that also serves as the
primary backup for FNBB's Columbia Park facility. The East
Providence operations center, which consists of approximately
141,000 square feet, is owned by Hospital Trust.
BKB Connecticut has recently moved its headquarters to
Hartford, Connecticut where it has offices at 31 Pratt Street
and 100 Pearl Street. BKB Connecticut owns and occupies
approximately 50,000 square feet at the Pratt Street
location, which was the former Bancorp headquarters. BKB
Connecticut owns an undivided one-half interest in the Pearl Street
location and currently occupies approximately 54,000 square feet.
BKB Connecticut also maintains regional offices in Connecticut, the
largest of which is in Waterbury and comprises approximately
157,000 square feet of owned space in three interconnected buildings.
Casco's headquarters are located at One and Two
Monument Square in Portland, Maine. Casco leases approximately
135,000 square feet of the complex and currently occupies
approximately 76,000 square feet of that space. Bank of Vermont's
headquarters in Burlington, Vermont consist of approximately 77,000
square feet of owned space in four interconnected buildings.
None of these properties is subject to any material
encumbrance. The Corporation's subsidiaries also own or
lease numerous other premises used in domestic and foreign
operations.
Item 3. Legal Proceedings.
The Corporation and its subsidiaries in 1993 were or
currently are parties to a number of legal proceedings that
have arisen in connection with the normal course of business
20
24
activities of the Corporation, FNBB and the Corporation's
other subsidiaries, including the following matters:
Arnold/Society for Savings Bancorp, Inc. As previously
reported, in March, 1993, a complaint was filed in Delaware
Chancery Court against the Corporation, Bancorp and
Bancorp's directors who voted in favor of the Corporation's
acquisition of Bancorp. The action was brought by a Bancorp
stockholder, individually and as a class action on behalf of
all Bancorp stockholders of record on the date the
acquisition was announced, and sought an injunction with
respect to the proposed acquisition and damages in an
unspecified amount. In May 1993, the Chancery Court denied
the plaintiff's motion for a preliminary injunction and in
July 1993, the Corporation acquired Bancorp. In December
1993, the Chancery Court granted summary judgment in favor
of the Corporation, Bancorp and Bancorp's former directors.
The plaintiff has appealed that decision to the Delaware Supreme
Court, where the matter is currently pending.
Bancorp Class Action. As previously reported, a class
action complaint was filed in U.S. District Court for the
District of Connecticut against Bancorp, two of its then
senior officers and one former officer. The complaint, as
subsequently amended, alleges that Bancorp's financial
reports for fiscal years 1988, 1989, and the first half of
1990 contained material misstatements or omissions
concerning its real estate loan portfolio and other matters,
in violation of Connecticut common law and of Sections 10(b)
and 20 of the Securities Exchange Act of 1934. The action
was brought by a Bancorp shareholder, individually and as a
class action on behalf of purchasers of Bancorp's stock from
January 19, 1989 through November 30, 1990 and seeks damages
in an unspecified amount. Bancorp and the defendant
officers have denied the allegations of the amended
complaint and intend to defend the action vigorously.
Lender Liability Litigation. The Corporation's
subsidiaries, in the normal course of their business in
collecting outstanding obligations, are named as defendants
in complaints or counterclaims filed in various
jurisdictions by borrowers or others who allege that lending
practices by such subsidiaries have damaged the borrowers or
others. Such claims, commonly referred to as lender
liability claims, frequently request not only relief from
repayment of the debt obligation, but also recovery of
actual, consequential, and punitive damages, some in very
large dollar amounts. During 1991, one such claim resulted
in a judgment being entered against Hospital Trust for
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approximately $4.0 million, plus interest. The judgment
against Hospital Trust remains on appeal.
Stranway/Elmendorf Case. As previously reported, in June
1985 a complaint was filed against FNBB in the U.S. District
Court for the District of New Hampshire by private
plaintiffs on behalf of the United States in a qui tam
action under 3l U.S.C. # 3729, known as the False Claims
Act. The complaint alleges that FNBB failed to disclose, or
made false statements, to the Farmer's Home Administration
("FmHA") in connection with securing and inducing payment on
guarantees from the FmHA on loans by FNBB and certain
investors to Stranway Corporation and its subsidiary
Elmendorf Board Corporation. Damages are alleged in the
amount of $50,000,000, plus interest, costs and attorneys
fees. The United States, which must decide at the outset
whether to take over civil prosecution of a False Claims Act
suit initiated by a private plaintiff, has declined to enter
an appearance in and take over the action. The action was
transferred to the District of Massachusetts. In 1986, FNBB
filed a motion to dismiss the suit for lack of subject
matter jurisdiction and the motion was denied by the
District Court in 1988. Discovery has been essentially
completed in the case. FNBB denies the allegations in the
complaint and intends to continue to defend the action
vigorously.
Management, after reviewing all actions and proceedings
pending against the Corporation and its subsidiaries,
considers that the aggregate loss, if any, resulting from
the final outcome of these proceedings will not be
material.
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26
Item 3A. Executive Officers of the Corporation.
Information with respect to the executive officers of the
Corporation, as of March 1, 1994, is set forth below.
Executive Officers are generally elected annually by the
Board of Directors and hold office until the following year
and until their successors are chosen and qualified, unless
they sooner resign, retire, die or are removed. Except
where otherwise noted, the positions listed for the officers
are for both the Corporation and FNBB.
Date
Assumed
Executive
Officer
Name and Age Current Position Position
- --------------- ---------------- --------
Ira Stepanian Chairman of the Board 1981
57 of Directors and
Chief Executive Officer
Charles K. Gifford President and Chief Operating 1987
51 Officer
Edward A. O'Neal Vice Chairman 1992
49
William J. Shea Vice Chairman, Chief Financial January 1993
46 Officer & Treasurer of the
Corporation and Vice Chairman
and Chief Financial Officer of
FNBB
Constantin R. Boden Group Executive, 1990
57 Latin America, Asia
International Private Banking
Helen G. Drinan Executive Director, April 1993
46 Human Resources
Paul F. Hogan Executive Director, April 1993
49 Credit & Loan Review
Ira A. Jackson Executive Director, 1987
45 External Affairs
Robert T. Jefferson Comptroller March 1993
46
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Date
Assumed
Executive
Officer
Name and Age Current Position Position
- --------------- ---------------- --------
Peter J. Manning Executive Director, 1990
55 Mergers & Acquisitions,
Audit & Risk Review
Gary A. Spiess General Counsel and Clerk 1987
53 of the Corporation
and General Counsel,
Secretary & Cashier of FNBB
Eliot N. Vestner, Jr. Executive Counsel, 1987
58 Regulatory Affairs
Bradford H. Warner Group Executive, Treasury 1989
42
Guilliaem Aertsen IV Group Executive, October 1993
46 Real Estate (FNBB)
Melville E. Blake III Executive Director, October 1993
39 Strategic Planning (FNBB)
Robert L. Champion, Jr. Executive Director, October 1993
49 Corporate Administrative
Services (FNBB)
Barbara F. Clark Group Executive, October 1993
47 Media & Communications
(FNBB)
Edward P. Collins Group Executive, October 1993
46 US Lending, Leasing & Asset
Based Lending (FNBB)
Robert E. Gallery Group Executive, October 1993
42 NE Large Corporate Banking
& NE Corporate Banking,
CT, RI (FNBB)
Susan P. Haney Group Executive, October 1993
46 The Private Bank (FNBB)
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Date
Assumed
Executive
Officer
Name and Age Current Position Position
- --------------- ---------------- --------
Thomas J. Hollister Group Executive, October 1993
39 Retail & Small Business
(FNBB)
David W. Kruger Group Executive, October 1993
51 Global Products (FNBB)
Michael R. Lezenski Executive Director, October 1993
46 Technology Services &
Banking Operations (FNBB)
Mark A. MacLennan Group Executive, October 1993
40 Multinational, Europe &
Financial Institutions
(FNBB)
David E. McKown Group Executive, October 1993
56 Entrepreneurial Lending,
Mezzanine & Corporate
Finance (FNBB)
William H. Ott Group Executive, October 1993
41 Consumer Finance (FNBB)
Joe K. Pickett Group Executive, October 1993
48 Mortgage Banking (FNBB)
Richard A. Remis Group Executive, October 1993
39 NE Corporate Banking-MA,
ME, NH & VT (FNBB)
Susannah M. Swihart Group Executive, October 1993
38 Specialized Finance (FNBB)
All of the foregoing individuals have been
officers of the Corporation or one of its subsidiaries for
the past five years except for Ms. Haney and Messrs. Blake,
Champion, Gallery, O'Neal, Ott and Shea. Prior to joining
the Corporation in 1990, Ms. Haney was Senior Vice
President/Manager of Portfolio Accounting for The Boston
Company since 1988 and Mr. Champion was Senior Vice
President and Department Head, General Services for
Continental Bank from 1976. Mr. Gallery came to the
Corporation in 1991 from The First National Bank of Chicago
where he was Division Manager, Midwest since 1989. Prior to
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joining the Corporation in 1992, Mr. O'Neal was employed by
Chemical Banking Corporation as Senior Executive Vice
President, Operating Services and Nationwide Consumer in
1992, Vice Chairman and Director from 1990 to 1991 and Group
Executive Consumer Banking Group from 1987 to 1990. Mr.
Blake also joined the Corporation in 1992 and prior to that
time was Vice President of the MAC Group/Gemini Consulting
since 1988. Mr. Ott also came to the Corporation in 1992
from Constellation Bancorp where he served as Executive Vice
President, Community Banking Division, and prior to that
time was an Associate at TAC Associates from 1991 to 1992,
Senior Vice President, Community Banking Division of Fleet
Bank from 1990 to 1991 and Vice President of Bank of America
from 1975 to 1990. Mr. Shea joined the Corporation in 1993
from Coopers & Lybrand, where he had served as a partner
since 1983 and as Vice Chairman since 1991.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
26
30
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The information required by this Item is presented on
pages 30, 31 and 95 of the Corporation's 1993 Annual Report
to Stockholders, which pages are included in Exhibit 13
hereto, and such information is hereby incorporated by
reference.
Item 6. Selected Financial Data.
The "Consolidated Selected Financial Data" of the
Corporation for the six years ended December 31, 1993
appears on pages 30 and 31 of the Corporation's 1993 Annual
Report to Stockholders, which pages are included in Exhibit
13 hereto, and such information is hereby incorporated by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information in response to this Item is included in
"Management's Financial Review" on pages 32 through 51 of
the Corporation's 1993 Annual Report to Stockholders, which
pages are included in Exhibit 13 hereto, and such
information is hereby incorporated by reference.
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31
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data required
by this Item are included on the pages of the Corporation's
1993 Annual Report to Stockholders indicated below, which
pages are included in Exhibit 13 hereto, and such statements
and data are hereby incorporated by reference.
Page of 1993 Annual
Report to Stockholders
Report of Independent Accountants 53
Bank of Boston Corporation and Subsidiaries:
Consolidated Balance Sheet as of December 31, 1993
and 1992 54
Consolidated Statement of Income for the years
ended December 31, 1993, 1992 and 1991 55
Consolidated Statement of Changes in Stockholders'
Equity for
the years ended December 31, 1993, 1992 and 1991 56 and 57
Consolidated Statement of Cash Flows for the years
ended December 31, 1993, 1992 and 1991 58
Notes to Financial Statements 59 through 78
Summary of Quarterly Consolidated Financial Information
and Common Stock Data 95
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the
Registrant.
Information concerning the Executive Officers of the
Corporation which responds to this Item is contained in the
response to Item 3A contained in Part I of this Report and
is hereby incorporated by reference herein. The information
that responds to this Item with respect to Directors, is
contained under the heading "Election of Directors" in the
Corporation's definitive proxy statement for its 1994 Annual
Meeting of Stockholders, which is required to be filed
pursuant to Regulation 14A of the Exchange Act and which
will be filed with the Commission not later than 120 days
after the end of the Corporation's fiscal year (the "Proxy
Statement"). Information with respect to compliance by the
Corporation's directors and executive officers with Section
16(a) of the Exchange Act is contained under the heading
"Compliance with Section 16(a) of the Exchange Act" in the
Proxy Statement. Pursuant to General Instruction G(3) to
Form 10-K, the foregoing information from the Proxy
Statement is hereby incorporated by reference.
Item 11. Executive Compensation.
The information required in response to this Item is
contained under the heading "Compensation of Executive
Officers" in the Proxy Statement. Pursuant to General
Instruction G(3) to Form 10-K, the foregoing information
from the Proxy Statement, with the exception of the sections
entitled "Compensation Committee Report on Executive
Compensation" and "Five-Year Stockholder Return Comparison,"
is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
The information required in response to this Item is
contained under the heading "Beneficial Ownership of
Securities" in the Proxy Statement. Pursuant to General
Instruction G(3) to Form 10-K, the foregoing information
from the Proxy Statement is hereby incorporated by
reference.
Item 13. Certain Relationships and Related Transactions.
The information required in response to this Item is
contained under the heading "Indirect Interest of Directors
and Executive Officers in Certain Transactions" in the Proxy
Statement. Pursuant to General Instruction G(3) to Form
10-K, the foregoing information from the Proxy Statement is
hereby incorporated by reference.
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33
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a)(1) The financial statements required in response to
this Item are listed in response to Item 8 of this
Report and are incorporated herein by reference.
(a)(2) Financial Statement Schedules.
Schedules have been omitted because the information is
either not required, not applicable, or is included in
the financial statements or notes thereto.
(a)(3) Exhibits
3(a) - Restated Articles of Organization of the
Corporation, as amended through November 24,
1993.
3(b) - By-Laws of the Corporation, as amended through
October 28, 1993.
4(a) - Indenture dated as of January 15, 1986 defining
rights of holders of the Corporation's 7 3/4%
Convertible Subordinated Debentures Due 2011,
incorporated herein by reference to Exhibit 4(b)
to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1985 (File No.
1-6522).
4(b) - Fiscal and Paying Agency Agreement dated as of
February 10, 1986 defining rights of holders of
the Corporation's Subordinated Floating Rate
Notes Due 2001, incorporated herein by reference
to Exhibit 4(d) to the Corporation's Annual
Report on Form 10-K for the year ended December
31, 1985 (File No. 1-6522).
4(c) - Fiscal and Paying Agency Agreement dated as of
August 26, 1986 defining rights of holders of
the Corporation's Floating Rate Subordinated
Equity Commitment Notes Due 1998 incorporated
herein by reference to Exhibit 4(e) to the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1986 (File No. 1-6522).
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34
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K (cont'd).
(a)(3) Exhibits (cont'd)
4(d) - Indenture dated as of June 15, 1987 defining the
rights of holders of the Corporation's 9 1/2%
Subordinated Equity Contract Notes due 1997,
incorporated herein by reference to Exhibit 4(g)
to the Corporation's Annual Report on Form 10-K
for the year ended December 31, l987 (File No.
1-6522).
4(e) - Indenture dated as of July 15, 1988 and form of
note defining rights of the holders of the
Corporation's 10.30% Subordinated Notes due
September 1, 2000, incorporated herein by
reference to Exhibit 4(i) to the Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1988 (File No. 1-6522).
4(f) - Fiscal and Paying Agency Agreement dated as of
September 12, 1985 defining rights of holders of
the Corporation's Floating Rate Notes Due 2000,
incorporated herein by reference to Exhibit 4(c)
to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1985 (File No.
1-6522).
4(g) - Subordinated Indenture dated as of June 15,
1992, as amended by the First Supplemental
Indenture dated as of June 24, 1993, and forms
of notes defining rights of the holders of the
Corporation's 6 7/8% Subordinated Notes due
2003, the 6 5/8% Subordinated Notes due 2005,
and the 6 5/8% Subordinated Notes due 2004,
incorporated herein by reference to Exhibit 4(d)
to the Corporation's Registration Statement on
Form S-3 (Registration Number 33-48418), to
Exhibits 4(e) and 4(f) to the Corporation's Current
Report on Form 8-K dated June 24, 1993, to Exhibit
4 to the Corporation's Current Report on Form 8-K
dated November 15, 1993 and to Exhibit 4 to the
Corporation's Current Report on Form 8-K dated
January 5, 1994 (File No. 1-6522).
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35
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K (cont'd).
(a)(3) Exhibits (cont'd)
4(h) - Rights Agreement, dated as of June 28, 1990,
between the Corporation and FNBB, as Rights
Agent, and the description of the Rights,
incorporated herein by reference to the
Corporation's registration statement on Form 8-A
relating to the Rights and to Exhibit 1 of such
registration statement (File No. 1-6522).
4(i) - Deposit Agreement, dated August 13, 1992 between
the Corporation and FNBB, as Depositary,
relating to the Corporation's Depositary Shares,
each representing a one-tenth interest in the
Corporation's 8.60% Cumulative Preferred Stock,
Series E, incorporated herein by reference to
Exhibit 4(b) to the Corporation's Current Report
on Form 8-K dated August 13, 1992 (File No.
1-6522).
4(j) - Deposit Agreement, dated as of June 30, 1993
between the Corporation and FNBB, as Depositary,
relating to the Corporation's Depositary Shares,
each representing a one-tenth interest in the
Corporation's 7 7/8% Cumulative Preferred Stock,
Series F, incorporated herein by reference to
Exhibit 4(b) to the Corporation's Current Report
on Form 8-K dated June 24, 1993 (File No.
1-6522).
10(a) Bank of Boston Corporation 1982 Stock Option
Plan as amended through August 24, 1989,
incorporated herein by reference to Exhibit
10(a) to the Corporation's Annual Report on Form
10-K for the year ended December 31, 1989 (File
No. 1-6522).*
____________________________________________________________
* Indicates that document is a management contract or
compensatory plan or arrangement that is required to be
filed as an exhibit to this Report pursuant to Item 14(c) of
Form 10-K.
32
36
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K (cont'd).
(a)(3) Exhibits (cont'd)
10(b) Bank of Boston Corporation 1986 Stock Option
Plan as amended through August 24, 1989,
incorporated herein by reference to Exhibit
10(b) to the Corporation's Annual Report on Form
10-K for the year ended December 31, 1989 (File
No. 1-6522).*
10(c) Bank of Boston Corporation and its Subsidiaries
Performance Recognition Opportunity Plan, as
amended effective January 27, 1994.*
10(d) Bank of Boston Corporation Executive
Non-Qualified Deferred Compensation Plan, as
amended through March 12, 1991, incorporated
herein by reference to Exhibit 10(d) to the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992 (File No.
1-6522).*
10(e) The First National Bank of Boston Bonus
Supplemental Employee Retirement Plan, as
amended through September 13, 1990, incorporated
herein by reference to Exhibit 10(e) to the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1990 (File No.
1-6522).*
10(f) Description of the Corporation's Supplemental
Life Insurance Plan, incorporated herein by
reference to Exhibit 10(h) to the Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1988 (File No. 1-6522).*
10(g) The First National Bank of Boston Excess Benefit
Supplemental Employee Retirement Plan, effective
as of January 1, 1989, incorporated herein by
reference to Exhibit 10(g) to the Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1989 (File No. 1-6522).*
____________________________________________________________
* Indicates that document is a management contract or
compensatory plan or arrangement that is required to be
filed as an exhibit to this Report pursuant to Item 14(c) of
Form 10-K.
33
37
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K (cont'd).
(a)(3) Exhibits (cont'd)
10(h) Bank of Boston Corporation 1991 Long-Term Stock
Incentive Plan, as amended through January 27,
1994.*
10(i) Employment Agreement dated July 7, 1992 between
The First National Bank of Boston and Edward A.
O'Neal, incorporated herein by reference to
Exhibit 10(k) to the Corporation's Annual Report
on Form 10-K for the year ended December 31,
1992 (File No. 1-6522).*
10(j) Employment Agreement dated December 4, 1992
between The First National Bank of Boston and
William J. Shea, incorporated herein by
reference to Exhibit 10(l) to the Corporation's
Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-6522).*
10(k) Bank of Boston Corporation Relocation Policy, as
amended through October, 1990, incorporated
herein by reference to Exhibit 10(j) to the
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1990 (File No.
1-6522).*
10(l) - Description of the Corporation's
Supplemental Long-Term Disability Plan effective
as of February 10, 1994.*
10(m) Bank of Boston Corporation's Director Stock
Award Plan effective as of May 1, 1993.*
10(n) Lease dated as of September 1, 1991 between The
First National Bank of Boston and The Equitable
Federal Street Realty Company Limited
Partnership, incorporated herein by reference to
Exhibit 10(l) to the Corporation's Annual Report
on Form 10-K for the year ended December 31,
1991 (File No. 1-6522).
_____________________________________________________________
* Indicates that document is a management contract or
compensatory plan or arrangement that is required to be
filed as an exhibit to this Report pursuant to Item 14(c) of
Form 10-K.
34
38
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K (cont'd).
(a)(3) Exhibits (cont'd)
11 - Computation of earnings per common share.
12(a) Computation of the Corporation's Consolidated
Ratio of Earnings to Fixed Charges (excluding
interest on deposits).
12(b) Computation of the Corporation's Consolidated
Ratio of Earnings to Fixed Charges (including
interest on deposits).
12(c) Computation of the Corporation's Consolidated
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements (excluding
interest on deposits).
12(d) Computation of the Corporation's Consolidated
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements (including
interest on deposits).
13 - Pages 30 through 51, 53 through 93 and 95 of the
Corporation's 1993 Annual Report to
Stockholders.
21 - List of subsidiaries of Bank of Boston
Corporation.
23 - Consent of Independent Accountants.
24 - Power of attorney of certain officers and
directors (included on pages II-1 through
II-2).
35
39
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K (cont'd).
(a)(3) Exhibits (cont'd)
99 - Notice of Annual Meeting and Proxy Statement for
the Annual Meeting of the Corporation's
Stockholders to be held April 28, 1994.
(Pursuant to General Instruction G(3) to Form
10-K, the information required to be filed by
Part III hereof is incorporated by reference
from the Corporation's definitive proxy
statement which is required to be filed pursuant
to Regulation 14A and which will be filed with
the Commission not later than 120 days after the
end of the Corporation's fiscal year.)
(b) During the fourth quarter of 1993, the Corporation
filed three Current Reports on Form 8-K. The current
reports, dated October 28, 1993, November 2, 1993 and
November 15, 1993, contained information pursuant to
Items 5 and 7 of Form 8-K. The Corporation also filed
one Current Report on Form 8-K, dated January 5, 1994,
which contained information pursuant to Items 5 and 7 of
Form 8-K.
36
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Boston, and Commonwealth of Massachusetts, on the 4th day of
March, 1994.
BANK OF BOSTON CORPORATION
By /s/ IRA STEPANIAN
-------------------------------
(Ira Stepanian)
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following
persons in the capacities and on the dates listed below. By
so signing, each of the undersigned, in his or her capacity
as a director or officer, or both, as the case may be, of
the Corporation, does hereby appoint Ira Stepanian, Charles
K. Gifford, William J. Shea, Bradford H. Warner, Robert T.
Jefferson and Gary A. Spiess, and each of them severally, or
if more than one acts, a majority of them, his or her true
and lawful attorneys or attorney to execute in his or her
name, place and stead, in his or her capacity as a director
or officer or both, as the case may be, of the Corporation,
any and all amendments to said report and all instruments
necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission. Each
of said attorneys shall have full power and authority to do
and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever
requisite or necessary to be done in the premises as fully
and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving
the acts of said attorneys and each of them.
Signature Title Date
--------- ----- ----
Chairman of the Board of Directors,
Chief Executive Officer and Director
/s/ IRA STEPANIAN (Chief Executive Officer) March 4, 1994
- -----------------------------
(Ira Stepanian)
/s/ CHARLES K. GIFFORD President and Chief Operating March 4, 1994
- ----------------------------- Officer and Director
(Charles K. Gifford)
/s/ WILLIAM J. SHEA Vice Chairman, March 4, 1994
- ----------------------------- Chief Financial Officer and Treasurer
(William J. Shea) (Chief Financial Officer)
/s/ ROBERT T. JEFFERSON Comptroller March 4, 1994
- ----------------------------- (Chief Accounting Officer)
(Robert T. Jefferson)
II-1
41
Signature Title Date
--------- ----- ----
/s/ WAYNE A. BUDD Director March 4, 1994
- -----------------------------
(Wayne A. Budd)
/s/ JOHN J. CAREY Director March 4, 1994
- -----------------------------
(John J. Carey)
/s/ WILLIAM F. CONNELL Director March 4, 1994
- -----------------------------
(William F. Connell)
/s/ GARY L. COUNTRYMAN Director March 4, 1994
- -----------------------------
(Gary L. Countryman)
/s/ ALICE F. EMERSON Director March 4, 1994
- -----------------------------
(Alice F. Emerson)
/s/ DONALD F. MCHENRY Director March 4, 1994
- -----------------------------
(Donald F. McHenry)
/s/ J. DONALD MONAN Director March 4, 1994
- -----------------------------
(J. Donald Monan)
/s/ PAUL C. O'BRIEN Director March 4, 1994
- -----------------------------
(Paul C. O'Brien)
/s/ JOHN W. ROWE Director March 4, 1994
- -----------------------------
(John W. Rowe)
Director , 1994
- -----------------------------
(Richard A. Smith)
/s/ WILLIAM C. VAN FAASEN Director March 4, 1994
- -----------------------------
(William C. Van Faasen)
/s/ THOMAS B. WHEELER Director March 4, 1994
- -----------------------------
(Thomas B. Wheeler)
/s/ ALFRED M. ZEIEN Director March 4, 1994
- -----------------------------
(Alfred M. Zeien)
/s/ CHARLES A. ZRAKET Director March 4, 1994
- -----------------------------
(Charles A. Zraket)
II-2