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FLEET FINANCIAL GROUP REPORTS RECORD SECOND QUARTER EARNINGS OF $119 MILLION

    PROVIDENCE, R.I., July 21 /PRNewswire/ -- Fleet Financial Group (NYSE: FLT) today reported record net income of $119 million, or 72 cents per fully diluted share, for the quarter ended June 30, up 68 percent from the $71 million, or 45 cents per fully diluted share, earned in the second quarter of 1992.
    For the first six months of 1993, net income was $225 million, or $1.38 per fully diluted share, compared to $121 million, or 76 cents per fully diluted share, for the first half of 1992.
    Terrence Murray, chairman and chief executive officer, described Fleet's record performance as "extremely gratifying.  We continue to be pleased with our earnings momentum and continued reduction of nonperforming assets."
    Murray said Fleet's net interest margin remains strong despite continuing sluggishness of the regional economy which has hampered loan growth.  Murray also noted that the securities portfolio continued to perform well, with unrealized appreciation of approximately $600 million at June 30, 1993.


Overview
    Two significant items occurred during the quarter that were a result of the decreasing interest-rate environment.  Fleet recognized $114 million in gains on the sale of securities, and it incurred a charge of $100 million within Fleet Mortgage Group related to the accelerated amortization of purchased mortgage servicing rights (PMSRs).
    This charge results from a higher consensus prediction for loan prepayments and a refinement to a more conservative basis of evaluating the PMSRs on a disaggregated basis as compared to a total portfolio basis.  It also reflects management's expectations of the effect that a continued high level of prepayments will have on the valuation of PMSRs. The charge consisted of a $40 million writedown of servicing that had become impaired, and a $60 million provision against the risk of future impairment of this asset.
    Murray said, "While there is tremendous value in the $68 billion servicing portfolio of Fleet Mortgage Group, we believe that this provision is prudent in light of the current downward movement of long- term interest rates and resultant high level of refinancing activity. We also believe that this action further enhances our already strong balance sheet."
    Eugene M. McQuade, executive vice president and chief financial officer, noted that the corporation's large fixed income securities portfolio serves as a natural hedge of its servicing portfolio in times of declining interest rates.  McQuade said, "Both portfolios reacted as we expected.  The growth in the value of our securities portfolio more than offset our exposure in the mortgage servicing portfolio."
    Net interest income, on a fully taxable equivalent basis, was $518 million in the second quarter, compared to $490 million in the second quarter of 1992.  The net interest margin for the second quarter was 5.06 percent, vs. 4.82 percent in the second quarter of 1992.  On a year-to-date basis, net interest income for the first six months of 1993 was $1,031 million vs. $961 million for the comparable period in 1992.
    The net interest margin for the first half of 1993 was 5.05 percent, compared to 4.72 percent in the same period of 1992.  The margin ha steadily increased each quarter during the past year as decreases in the cost of liabilities have outpaced decreases in the yield on assets.  In addition to the favorable interest-rate environment, the improved margin has been aided by lower levels of wholesale liabilities and reduced nonperforming assets.
    The second quarter 1993 provision for credit losses was $70 million, which was $59 million less than the prior year's second quarter provision of $129 million.  Expenses related to real estate owned (OREO) were $16 million this quarter vs. $43 million last year.  Total provision and OREO expenses for the first six months of 1993 were $191 million vs. $324 million in the same period of 1992.  Murray added that, "We are pleased with the progress that has been made in reducing asset quality costs, but believe we can continue to make strides in this area."
    As previously noted, the corporation sold $2 billion of mortgage- backed securities during the quarter in order to reduce prepayment risk and shorten the maturity of the portfolio.  The sales resulted in $114 million in securities gains compared to $55 million during the second quarter of 1992.
    Excluding the charge relating to PMSRs, noninterest expense in the second quarter totaled $551 million, compared to the $544 million reported for the second quarter of 1992.  An increase in compensation in the second quarter was due in part to continued high costs at Fleet Mortgage Group in light of record levels of refinance activity, and the effect of acquisitions completed in late 1992, but was offset by a $27 million decrease in OREO expense on a quarter-to-quarter basis.


Earnings by Group
    The New England Banking Group generated $94 million in second quarter earnings ($61 million before securities gains), compared to $35 million in 1992's second quarter.  Fleet's Connecticut bank turned in the Group's best quarterly performance with earnings of $45 million, while the Massachusetts bank contributed $25 million to second quarter results.  The Connecticut bank's results were enhanced by the recording of $30 million in security gains, as well as a lower provision for credit losses.
    The New York Banking Group earned $61 million in the second quarter ($28 million before securities gains), compared to $28 million in the second quarter of 1992.  Fleet Bank of New York recognized $29 million in security gains during the second quarter of 1993, which, when coupled with an improvement in
credit quality, helped the bank earn $52 million in the second   quarter.  The Long Island bank, which has been affected throughout the last two years by asset quality concerns, continued to reduce its level of nonperforming assets and earned $9 million in the second quarter (which included $5 million in securities gains), compared to a loss of $6 million in the second quarter of 1992.
    The Financial Services Group recorded a loss of $16 million in the second quarter, compared to earnings of $30 million in 1992's second quarter.  Fleet Mortgage lost $29 million for the quarter compared to earnings of $28 million in the second quarter of 1992, as Fleet Mortgage recognized a $49 million (after-tax and minority interest) charge for the previously mentioned accelerated amortization of its PMSRs.  Fleet Finance earned $3 million in the second quarter.


Asset Quality
    Nonperforming assets (NPAs) have been reduced for the sixth consecutive quarter.  At June 30, 1993, nonperforming assets totaled $852 million, a reduction of $92 million from March 31, 1993, and a reduction of $662 million, or 44 percent, from June 30, 1992.  The inflow to NPAs ($186 million) remained level with the prior quarter's additions and down substantially from last year's levels.  Payments totaling $110 million, and sales of OREO property and NPAs of approximately $50 million, assisted in the quarter's $92 million decline in total NPAs.  McQuade noted that this was the first quarter since Fleet's credit problems began (excluding the effect of the fourth quarter bulk sale of problem loans) that the reduction in nonperformers (other than charge-offs) outpaced the inflow.
    The reserve for credit losses remained relatively flat at $1,028 million at June 30, 1993, compared to $1,033 million at March 31, 1993. Net charge-offs for the quarter amounted to $72 million, compared to $98 million in the second quarter of 1992.  Net charge-offs for the first half of 1993 were $151 million compared to $209 million for the same period in 1992.
    The corporation's ratio of nonperforming assets to total assets was 1.90 percent at June 30, 1993, compared to 2.10 percent at March 31, 1993.  Murray added that, "The decrease in the ratio of nonperforming assets to total assets to a level below 2.00 percent is a significant accomplishment.  The last time that this ratio did not exceed 2.00 percent was on Dec. 31, 1989."


Balance Sheet
    Total assets at June 30, 1993 were $44.8 billion, while total loans and leases were $26.1 billion at the same date, compared with $44.9 billion of total assets and $26.1 billion of loans and leases at March 31, 1993.  Modest increases in the commercial and industrial and the consumer loan portfolios were offset by continued contraction of commercial real estate loans.
    During the second quarter, the corporation repurchased approximately 50 percent, $104 million, of its Series III and IV preferred stock.  The repurchase will save the corporation approximately $10 million in dividends annually.  Stockholders' equity amounted to $3.4 billion at June 30, 1993, a decrease of $39 million from the previous quarter, but a $549 million increase from June 30, 1992.  The decrease in stockholders' equity from the first quarter to the second quarter was due to the previously mentioned preferred stock repurchase.
    Fleet's senior debt ratings were upgraded during the first half of 1993 by Moody's Investors Service from Baa2 to A3, and by Standard &
Poor's Corp. from BBB+ to A-.   Murray noted that, "The upgrades are a reflection of Fleet's strong balance sheet, positive earnings trend and significant improvement in credit quality."
    Fleet Financial Group is a diversified financial services company listed on the New York Stock Exchange with approximately 1,200 offices nationwide.  Its lines of business include commercial and consumer banking, mortgage banking, consumer finance, asset-based lending, investment management, and student loan processing.
                     FLEET FINANCIAL GROUP
                      Financial Highlights
                               Three Months Ended     Six Months Ended
                               6/30/93     6/30/92   6/30/93    6/30/92
    For the Period ($ in
     millions):
    Net income                  $119         $71      $225       $121
    Net interest income (a)      518         490     1,031        961
    Provisions for credit
     losses                       70         129       155        241
    Per Common share:
    Fully diluted earnings  72 cents    45 cents     $1.38   76 cents
    Market value
     (period-end)             33.750      29.625    33.75
    Cash dividends declared     0.25        0.20     0.475       0.40
    Book value (period-end)    21.50       18.69     21.50      18.69
    For the Period ($ in
     millions):
    Assets                   $44,841     $44,624   $44,841    $44,624
    Deposits                  31,648      33,488    31,648     33,488
    Total stockholders'
     equity                    3,441       2,610     3,441      2,610
    Asset Quality ($ in
     millions):
    Nonperforming assets        $852      $1,515      $852     $1,515
    Nonperforming assets as
     a pct. of loans,
     leases, ISF and OREO   3.24 pct    5.58 pct  3.24 pct   5.58 pct
    Nonperforming loans to
     period-end loans           2.43        3.76      2.43       3.76
    Reserve for credit
     losses to period-end
     loans and leases           3.94        3.99      3.94       3.99
    Reserve for Credit
     Losses (millions
    Beginning reserve for
     credit losses            $1,033      $1,021    $1,029     $1,021
    Provision for credit
     losses                       70         129       155        241
    Gross charge-offs             95         121       196        244
    Recoveries                    23          23        44         34
    Acquisitions, other           (3)         10        (4)        10
    Ending reserve for
     credit losses             1,028       1,062     1,028      1,062
    Operating and Capital
     Ratios:
    Return on average
     common equity         15.51 pct   11.30 pct 15.38 pct   9.64 pct
    Return on average
     assets                     1.05        0.63      1.00       0.54
    Net interest margin         5.06        4.82      5.05       4.72
    Efficiency ratio (b)       67.28       67.81     66.65      69.76
    Efficiency ratio
     excluding OREO (b)        65.37       62.50     64.43      64.33
    Total equity/assets
     (period-end)               7.67        5.85      7.67       5.85
    Tier 1 risk-based
     capital ratio
     (estimated)               11.40       10.22     11.40      10.22
    Total risk-based
     captial ratio
     (estimated)               16.50       15.30     16.50      15.30
    (a) Fully taxable equivalent
    (b) The June 30, 1993 efficiency ratios exclude $100 million of non- interest income and expense due to the effect of securities gains and accelerated amortization of PMSR.
                       Fleet Financial Group
                   Consolidated Income Statement
                      (Dollars in thousands)
                             Three months ended     Six Months Ended
                            6/30/93     6/30/92   6/30/93     6/30/92
    Interest income (FTE)  $810,394    $872,140  $1,632,823  $1,748,953
    Interest expense        292,239     382,632     601,595     787,507
    Net interest income
     (FTE)                  518,155     489,508   1,031,228     961,446
    Total provision for
     credit losses           69,941     129,437     154,871     240,643
    Net interest income
     after provision for
     credit losses          448,214     360,071     876,357     720,803
    Noninterest Income:
     Mortgage banking (a)   101,992      87,923     206,413     172,244
     Securities held for
      sale gains            113,660      54,672     132,698      64,964
     Service charges on
      deposits               42,834      39,247      85,910      77,424
     Investment services
      revenue                42,732      40,499      85,167      81,501
     Student loan servicing
      fees                   14,106      16,501      25,363      33,606
     Service charges, fees
      and commissions        13,526      11,354      22,866      22,143
     Merchant discount fees   8,049       5,195      13,795      10,509
     Securities trading
      gains, net              5,299       5,395      10,229      10,142
     Banking commissions      4,901       5,238       9,940      10,945
     Brokerage fees and
      commissions             4,736       4,357       9,887      10,009
     Insurance                3,880       4,389       9,215       9,058
     Foreign exchange/
      interest rate products    512       2,865         713      (1,134)
     Other                   45,048      35,135      98,810      74,260
     Total noninterest
      income                401,275     312,770     711,006     575,671
    Noninterest Expense:
     Employee compensation
      and benefits          255,693     234,131     510,927     468,838
     Occupancy               43,362      39,673      86,908      83,808
     Equipment               32,488      29,260      64,152      59,983
     FDIC assessment         20,591      19,584      41,207      39,175
     Other professional
      fees                   10,657       8,332      26,173      18,440
     Marketing               12,808      13,099      25,570      25,960
     Printing and mailing    10,603       9,205      21,512      20,080
     Telephone                9,818       8,838      19,328      18,589
     Charge card              9,998       5,246      18,746      10,204
     Office supplies          8,951       8,342      16,897      16,613
     Legal                    6,169       7,829      15,526      15,100
     Travel and
      entertainment           7,380       6,342      14,470      12,115
     Other                   63,977      74,311     113,459     126,925
     Subtotal noninterest
      expense               492,495     464,192     974,875     915,830
     Acquired servicing
      rights amortization   128,818      26,189     156,349      51,163
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