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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 0-9756
RIGGS NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-1217953
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1503 Pennsylvania Avenue, N. W., Washington, D. C. 20005
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(Address of principal executive offices) (Zip Code)
(202) 835-6000
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(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
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None None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class Name of each exchange on which registered
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Common Stock, par value OTC, NASDAQ National Market System
$2.50 per share
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 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 amendments to
this Form 10-K. [X]
The aggregate market value of the Corporation's voting stock held by non-
affiliates of the registrant as of February 28, 1994, was $184,286,583.
The number of shares outstanding of the registrant's common stock, as of March
31, 1994, was 30,223,214.
DOCUMENT INCORPORATED BY REFERENCE
Portions of Riggs National Corporation's definitive Proxy Statement to
Stockholders are incorporated by reference, except for Items 402(k) and (l) of
Regulation S-K, in Parts I and III of this Annual Report.
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FORM 10-K INDEX
<TABLE>
<CAPTION>
PART I Page(s) Sequential Page(s)
<S> <C> <C>
Item 1--Business 3 3
Item 2--Properties 6 6
Item 3--Legal Proceedings 6 6
Item 4--Submission of Matters to a Vote of
Security Holders 6 6
PART II
Item 5--Market for Registrant's Common
Equity and Related Stockholder
Matters 7 7
Item 6--Selected Financial Data 7 7
Item 7--Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8 8
Item 8--Financial Statements and
Supplementary Data 33 33
Item 9--Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 69 69
PART III
Item 10--Directors and Executive Officers of
the Registrant (A), 69 69
Item 11--Executive Compensation 71 71
Item 12--Security Ownership of Certain
Beneficial Owners and Management 71 71
Item 13--Certain Relationships and Related
Transactions (A), 71 71
PART IV
Item 14--Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 72 72
</TABLE>
(A) Portions of Riggs National Corporation's definitive Proxy Statement to
Stockholders are incorporated by reference, except for Items 402(k) and
(l) of Regulation S-K, in Parts I and III of this Annual Report.
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PART I
ITEM 1.
BUSINESS
Riggs National Corporation
Riggs National Corporation (the "Corporation") is a multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
and incorporated in the State of Delaware. The Corporation engages in a variety
of banking-related activities, either directly or through subsidiaries. The
Corporation currently has banking subsidiaries in Washington, D.C.; Virginia;
Maryland; Miami, Florida; London, England; Paris, France; and Nassau, Bahamas.
Additionally, the Corporation provides investment advisory services domestically
through a subsidiary registered under the Investment Advisers Act of 1940 and
internationally through a subsidiary in Geneva, Switzerland. Subsidiaries of
the Corporation located in Gibraltar provide trust and corporate services.
The Corporation provides a wide range of financial services to a broad
customer base. These include traditional retail banking, corporate and
commercial banking, and trust and investment advisory services. The
Corporation's trust group provides fiduciary and administrative services,
including financial management and tax planning for individuals, investment and
accounting services for corporate and nonprofit organizations, estate planning
and trust administration, as well as bond trusteeship for state and local
governments and public companies.
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The Riggs National Bank of Washington, D.C.
The Corporation's principal subsidiary is The Riggs National Bank of Washington,
D.C. ("Riggs-Washington"), a national banking association founded in 1836 and
incorporated under the national banking laws of the United States in 1896.
Riggs-Washington had assets of $4.21 billion, deposits of $3.29 billion, and
stockholder's equity of $270 million at December 31, 1993.
Riggs-Washington operates 34 branches and an investment advisory subsidiary
in Washington, D.C., commercial banks in London, England and Paris, France, an
Edge Act subsidiary in Miami, Florida, branch offices in London, England and
Nassau, Bahamas, an investment advisory subsidiary in Geneva, Switzerland, and
a Bahamian bank and trust company. At December 31, 1993, Riggs-Washington and
its subsidiaries had 1,494 full-time equivalent employees.
As a commercial bank, Riggs-Washington provides a wide array of financial
services to customers in the Washington metropolitan area, throughout the United
States and internationally.
Riggs-Washington's Corporate and Commercial Banking Groups provide services to
customers ranging from small regional businesses to major multinational
companies. These services include lines of credit, secured and unsecured term
loans, letters of credit, credit support facilities, foreign currency
transactions and cash management.
Riggs-Washington's Trust and Financial Services Group provides fiduciary and
administrative services, including financial management and tax planning for
individuals, investment and accounting services for corporate and non-profit
organizations, estate planning and trust administration, as well as bond
trusteeship for state and local governments and public companies.
Riggs-Washington provides investment advisory services through Riggs
Investment Management Corporation ("RIMCO"), a wholly owned subsidiary
incorporated under the laws of Delaware and registered under the Investment
Advisers Act of 1940.
Riggs-Washington's Retail Banking Group provides a variety of services
including checking, NOW, savings and money market accounts, loans and personal
lines of credit, certificates of deposit and individual retirement accounts.
Additionally, the Retail Banking Group provides 24-hour banking services through
a network of Riggs's automated teller machines ("ATMs") and through national and
regional ATM networks.
Riggs-Washington's International Banking Group furnishes a variety of
financial services including issuing letters of credit in connection with trade
and other transactions, taking deposits, foreign exchange, private banking and
cash management. Customers include embassies and foreign missions in
Washington, D.C., foreign governments, central banks, and over 200 correspondent
banks around the world. These services are provided through both domestic and
international offices. Riggs-Washington owns majority interests in an
investment advisory firm, Riggs Valmet, S.A., headquartered in Geneva,
Switzerland, and a trust and corporate service company, Riggs Valmet Holdings
Limited, headquartered in Gibraltar. Riggs Valmet, S.A. provides portfolio
management services and Riggs Valmet Holdings Limited forms and administers
trusts and private companies in many jurisdictions for a wide variety of
purposes including estate planning and personal and corporate tax planning.
The Riggs Bank and Trust Company (Bahamas) Limited, in Nassau, provides trust
services for international private banking customers. Riggs-Washington operates
a branch in the U.S. Embassy in London which services the Embassy, its employees
and official visitors. In 1991, Riggs-Washington opened a banking subsidiary
under the laws of France. A full service commercial bank, The Riggs National
Bank (Europe) S.A. ("Riggs-Europe") has one branch located in the U.S. Embassy
in Paris. In addition to serving the Embassy, its employees and official
visitors, the Riggs-Europe office also assists the U.S. Government with
disbursement activities for the Department of Defense and Department of State
for all their facilities in Europe.
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Riggs AP Bank Limited
Riggs AP Bank Limited ("Riggs AP"), a merchant bank located in London, England
is a wholly owned subsidiary of Riggs-Washington. Riggs AP provides traditional
corporate banking services, commercial property financing, investment banking
services and trade finance. At December 31, 1993, Riggs AP had total assets of
$173 million representing 3.6% of the Corporation's total assets and loans of
$93 million or 36.4% of the Corporation's total foreign loans and 3.7% of total
loans.
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The Riggs National Bank of Virginia
The Riggs National Bank of Virginia ("Riggs-Virginia") is a nationally chartered
full-service commercial bank. At December 31, 1993, Riggs-Virginia had assets
of $344 million, deposits of $311 million and stockholder's equity of $31
million. Riggs-Virginia's 17 branches are located in Northern Virginia. At
December 31, 1993, Riggs-Virginia had 102 full-time equivalent employees.
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The Riggs National Bank of Maryland
The Riggs National Bank of Maryland ("Riggs-Maryland") is a nationally chartered
full-service commercial bank. At December 31, 1993, Riggs-Maryland had assets
of $196 million, deposits of $182 million, and stockholder's equity of $13
million. Riggs-Maryland's 11 branches are all located in Montgomery and Prince
Georges counties, Maryland. At December 31, 1993, Riggs-Maryland had 68 full-
time equivalent employees.
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Supervision and Regulation
The Corporation and certain of its subsidiaries are subject to the supervision
of and regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). The Corporation's national banking subsidiaries and
certain of their subsidiaries are subject to the supervision of and regulation
by the Office of the Comptroller of the Currency (the "OCC"). Other federal,
state and foreign laws govern many aspects of the businesses of the Corporation
and its subsidiaries.
Under the BHCA, bank holding companies may not directly or indirectly acquire
the ownership or control of five percent or more of the voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. The BHCA also restricts the types
of businesses and activities in which a bank holding company and its
subsidiaries may engage. Generally, activities are limited to banking and
activities found by the Federal Reserve Board to be so closely related to
banking as to be a proper incident thereto. In addition, the BHCA generally
prohibits the Federal Reserve Board from approving an application from a bank
holding company to acquire a bank or bank holding companies unless such an
acquisition is specifically authorized by statute of the state in which the bank
whose shares to be acquired is located. A majority of states have adopted
statutes permitting out-of-state bank holding companies to acquire in-state
banks and bank holding companies, but usually only if the state in which the
acquiring company is located permits reciprocal acquisitions of its banks and
bank holding companies. The District of Columbia has authorized banks outside a
thirteen-state region to acquire District banks provided they make substantial
financial commitments to the District of Columbia.
Congress is currently considering legislation that would provide for
nationwide interstate banking, subject to certain limitations, including the
ability of states to opt out of coverage. However, the Corporation is unable to
predict whether or not any such legislation will be adopted and, if so, what the
final form of the legislation will be.
The Corporation is required to maintain minimum levels of qualifying capital
under Federal Reserve Board risk-based capital guidelines. For full discussion
of these guidelines, see Pages 22 and 23 and Note 11, Page 51.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), in September 1992, the FDIC issued regulations to implement a risk-
based deposit insurance assessment system under which the assessment rate for an
insured depository institution varies according to the level of risk incurred in
its activities. An institution's risk category is based partly upon whether the
institution is assigned to one of the following "supervisory subgroups":
"healthy"; "supervisory concern"; or "substantial supervisory concern." Based
on its capital category and supervisory subgroup, each insured institution is
assigned an annual FDIC assessment rate, which currently varies between $.23 and
$.31 per $100 of deposits. The new rates were effective for the semi-annual
assessment period beginning January 1, 1993. The Corporation experienced an
increase in its insurance premiums for its three insured banking subsidiaries of
approximately $1.5 million during 1993 as a result of the new assessment
schedule.
FDICIA contains numerous other provisions. Among other things, FDICIA
requires the federal banking agencies to take "prompt corrective action" in
respect of depository institutions that do not meet minimum capital
requirements. FDICIA required each Federal banking agency, including the OCC,
to specify within nine months after the date of enactment of the statute, by
regulation, the levels at which an insured institution would be considered "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." In October 1992, each of
the federal banking agencies including the OCC, issued uniform final regulations
defining such capital levels. Under these regulations, a bank is considered
"well capitalized" if it has (i) a total risk-based capital ratio of 10 percent
or greater, (ii) a Tier 1 risk-based capital ratio of 6 percent or greater,
(iii) a leverage ratio of 5 percent or greater
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and (iv) is not subject to any order or written directive to meet and maintain
a specific capital level. An "adequately capitalized" bank is defined as one
that has (i) a total risk-based capital ratio of 8 percent or greater, (ii) a
Tier 1 risk-based capital ratio of 4 percent or greater and (iii) a leverage
ratio of 4 percent or greater (or 3 percent or greater in the case of a bank
with the highest composite regulatory examination rating). A bank is
considered (A) "undercapitalized" if it has (i) a total risk-based capital
ratio of less than 8 percent, (ii) a Tier 1 risk-based capital ratio of less
than 4 percent or (iii) a leverage ratio of less than 4 percent (or 3 percent
in the case of a bank with the highest composite regulatory examination
rating); (B) "significantly undercapitalized" if the bank has (i) a total risk-
based capital ratio of less than 6 percent, (ii) a Tier 1 risk-based capital
ratio of less than 3 percent or (iii) a leverage ratio of less than 3 percent;
and (C) "critically undercapitalized" if the bank has a ratio of tangible
equity to total assets of equal to or less than 2 percent. Each of the bank
subsidiaries of the Corporation exceeds current minimum regulatory capital
requirements, and qualifies, at a minimum, as "adequately capitalized." The
applicable federal bank regulator for a depository institution may, under
certain circumstances, reclassify a "well capitalized" institution as
"adequately capitalized" or require an "adequately capitalized" or
"undercapitalized" institution to comply with supervisory actions as if it
were in the next lower category. Such a reclassification may be made if the
regulatory agency determines that the institution is in an unsafe or unsound
condition (which could include unsatisfactory examination ratings). A summary
of applicable regulatory capital ratios and the minimums required by the OCC
under its capital guidelines for Riggs-Washington, Riggs-Virginia and Riggs-
Maryland on a historical basis are shown in Note 11, "Reserve Balances, Funds
Restrictions, Regulatory Matters and Capital Requirements."
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
increased regulatory monitoring and growth limitations and are required to
submit capital restoration plans. A depository institution's holding company
must guarantee that capital plan in order for it to be accepted by the
regulators, up to an amount equal to the lesser of 5% of the depository
institution's assets at the time it becomes undercapitalized or the amount
needed to comply with the plan. The federal banking agencies may not accept a
capital plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly or critically undercapitalized institutions and undercapitalized
institutions that do not submit and comply with capital restoration plan
acceptable to the applicable Federal banking agency will be subject to one or
more of the following sanctions: (i) forced sale of shares to raise capital or,
where grounds exist for the appointment of a receiver or conservator, or forced
merger; (ii) restrictions on transactions with affiliates; (iii) limitations on
interest rates paid on deposits; (iv) further restrictions on growth or required
shrinkage; (v) replacement of directors or senior executive officers, subject to
certain grandfather provisions for those elected prior to enactment of FDICIA;
(vi) prohibitions on the receipt of correspondent deposit; (vii) restriction on
capital distributions by the holding companies of such institutions; (viii)
required divestiture of subsidiaries by the institution; or (ix) other
restrictions, as determined by the regulator. In addition, the compensation of
executive officers would be frozen at the level in effect when the institition
failed to meet the capital standards. A forced sale of shares or merger,
restrictions on affiliate transactions and restrictions on rates paid on
deposits would be required to be imposed by the primary federal regulator unless
that regulator determined that they would not further capital improvement.
FDICIA generally requires the appointment of a conservator or receiver within
90 days after a depository institution becomes critically undercapitalized,
unless the FDIC and the institution's primary federal regulator jointly
determine that another course of action would better protect the federal deposit
insurance fund. FDICIA also provides that the board of directors of an insured
depository institution would not be liable to the institution's shareholders or
creditors for consenting in good faith to the appointment of a receiver or
conservator for the institution or to an acquisition or merger of the
institution required by the regulators.
Under the FDIC's final regulations governing the receipt of brokered deposits,
a bank cannot accept brokered deposits unless it is (i) "well capitalized" or
(ii) it is "adequately capitalized" and receives a waiver from the FDIC. In
addition, a bank that is not well capitalized may not offer rates of interest on
deposits that are more than 75 basis points above prevailing rates. Also, "pass
through" deposit insurance is not available for deposits of certain employee
benefit plans in banks that do not meet all minimum capital requirements. As
mentioned above, under the current regulations, each of the bank subsidiaries of
the Corporation exceeds current minimum regulatory capital requirements and
qualifies, at a minimum, as "adequately capitalized." Riggs-Washington does not
solicit brokered deposits and, accordingly, the Corporation does not believe
that the regulations will have an adverse effect on its operations. However,
Riggs-Washington has received a waiver from the FDIC to provide pass-through
deposit insurance to employee benefit plans held in the Trust Department.
Among FDICIA's numerous other provisions are new reporting requirements,
termination of the "too big to fail" doctrine except in special cases,
limitations on the FDIC's ability to pay deposits at foreign branches and
provisions requiring the federal banking agencies to promulgate regulations and
specify standards in numerous areas of bank operations, including interest rate
exposure, asset growth,
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internal controls, credit underwriting, executive officer and director
compensation, real estate construction financing, additional review of capital
standards, interbank liabilities and other operational and managerial
standards as the agencies determine appropriate. These regulations have
increased and may continue to increase the cost of and the regulatory burden
associated with the banking business.
There are legal restrictions on the extent to which the Corporation and its
non-bank subsidiaries may borrow or otherwise obtain credit from Riggs-
Washington, Riggs-Virginia, and Riggs-Maryland. Subject to certain limited
exceptions, a bank subsidiary may not extend credit to the Corporation or to any
other affiliate (as defined) in an amount which exceeds 10% of its capital stock
and surplus and may not extend credit in the aggregate to such affiliates in an
amount which exceeds 20% of its capital stock and surplus. Further, there are
legal requirements as to the type, amount and quality of collateral which must
secure such extensions of credit by each bank subsidiary to the Corporation or
to other affiliates. Finally, extensions of credit and other transactions
between a bank subsidiary and the Corporation or other affiliates must be on
terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to such a bank subsidiary as
those prevailing at the time for comparable transactions with non-affiliated
companies.
Under Federal Reserve Board policy, bank holding companies are expected to act
as a source of financial strength to their subsidiary banks and to commit
resources to support such banks in circumstances where a bank holding company
might not do so absent such policy. In addition, any capital loans by a bank
holding company to any of its subsidiary banks are subordinate in right of
payment to deposits and to certain other indebtedness of such subsidiary bank.
In the event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
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ITEM 2.
PROPERTIES
The Corporation owns properties located in Washington, D.C. which house its
executive offices, twelve of its branches and certain operational units of
Riggs-Washington. The Corporation also owns an office building and a
residential property in London, England, and leases various properties in
Washington, D.C.; London, England; Miami, Florida; Northern Virginia; Maryland;
Paris, France; Geneva and Lugano, Switzerland; and Gibraltar.
ITEM 3.
LEGAL PROCEEDINGS
In the normal course of business, the Corporation is involved in various types
of litigation, including litigation with borrowers who are in default under
their loan agreements. In certain instances, borrowers have asserted or
threatened counterclaims and defenses based on various "lender liability"
theories. In the opinion of management, based on its assesssment and
consultation with outside counsel, litigation which is currently pending against
the Corporation will not have a material impact on the financial condition or
future operations of the Corporation as a whole.
The Corporation is contesting in Tax court the disallowance of Brazilian
Foreign Tax Credits by the Internal Revenue Service. The net tax benefit of
these tax credits have not been recognized for financial reporting purposes,
therefore, there will be no adverse impact on earnings if the Internal Revenue
Service were to prevail.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for vote during the fourth quarter
of 1993.
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PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The common stock of Riggs National Corporation is traded in the Over-the-Counter
Market, NASDAQ National Market System. The NASDAQ symbol for the common stock
is "RIGS."
A history of the Corporation's stock prices and dividends can be found under
Quarterly Stock Information on Page 67 of this Form 10-K.
As of December 31, 1993, there were 4,488 stockholders of record.
Other information required by this item is set forth in Notes 11 and 15 on
Pages 51 and 57, respectively, of this Form 10-K.
ITEM 6.
FINANCIAL REVIEW
<TABLE>
<CAPTION>
Selected Financial Data
(In thousands, except per share amounts) 1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
Interest Income $256,951 $327,540 $474,815 $649,010 $621,200
Interest Expense 122,130 189,604 319,719 476,397 442,099
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Net Interest Income 134,821 137,936 155,096 172,613 179,101
Less: Provision for Loan Losses 69,290 52,067 43,655 106,408 5,588
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Net Interest Income after Provision for Loan Losses 65,531 85,869 111,441 66,205 173,513
Noninterest Income Excluding Securities Gains 88,509 96,200 92,961 78,179 65,144
Securities Gains, Net 24,141 34,213 13,692 1,263 8,285
Provision for Losses on Accelerated Disposition
of Real Estate Assets -- -- 49,800 -- --
Noninterest Expense 266,752 238,403 240,371 236,277 189,910
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Income (Loss) before Taxes and Extraordinary Item (88,571) (22,121) (72,077) (90,630) 57,032
Applicable Income Tax (Benefit) Expense 5,640 (1,069) (6,130) (29,413) 17,609
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Income (Loss) before Extraordinary Item, Net of Taxes (94,211) (21,052) (65,947) (61,217) 39,423
Extraordinary Item - Gain on Purchase of Debt, Net of Taxes -- -- 2,486 4,569 --
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Net Income (Loss) $(94,211) $(21,052) $(63,461) $(56,648) $ 39,423
Earnings (Loss) Per Share:
Income (Loss) before Extraordinary Item, Net of Taxes $ (3.65) $ (.87) $ (4.79) $ (4.44) $ 2.86
Extraordinary Item - Gain on Purchase of Debt, Net of Taxes -- -- .18 .33 --
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Earnings (Loss) Per Share $ (3.65) $ (.87) $ (4.61) $ (4.11) $ 2.86
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Dividends Declared Per Common Share* $ -- $ -- $ .05 $ 1.087 $ 1.25
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</TABLE>
* A cash dividend of $.15 per share applicable to the fourth quarter of 1990
was declared on January 22, 1991, and paid on February 15, 1991.
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ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Earnings Summary
The Corporation achieved a profitable second half of 1993, earning $6.0 million,
compared with a loss of $18.8 million for the same period in 1992. In addition,
nonperforming assets decreased by $98.5 million during this period to their
lowest level in over three years. The financial results also reflect the impact
of a significant cost reduction and revenue enhancing strategy ("BankStart
'93"), which was initiated in the first quarter of 1993, and financial
restructurings of both domestic and London operations during the second quarter
of 1993. In addition, the Corporation's performance during the last half of
1993 was positively affected by economic improvements in the Washington, D.C.,
and London areas, the Corporation's primary markets.
For the year 1993, the Corporation reported a loss of $94.2 million, compared
with a loss of $21.1 million for 1992. The major factors contributing to the
1993 loss were provisions for loan losses of $69.3 million, other real estate
owned expenses of $13.5 million, and restructuring expenses of $34.6 million,
which were only partially offset by securities gains of $24.1 million. The 1992
loss resulted from provisions for loan losses of $52.1 million and other real
estate owned expenses of $15.7 million, and was partially offset by securities
gains of $34.2 million, as well as $5.9 million of nonrecurring interest income
related to a tax receivable.
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Restructuring and Positioning Riggs for the Future
During 1993 the Corporation undertook and accomplished a significant self-
evaluation and redefinition of its goals and market position. These initiatives
included BankStart '93, financial restructurings (both domestically and in the
London operations), hiring a new Chief Executive Officer for The Riggs National
Bank of Washington, D.C. ("Riggs-Washington") and significantly strengthening
the management team, adopting a supercommunity bank focus for the future and
raising $132 million in new equity capital.
BankStart '93. In January 1993, the Corporation initiated BankStart '93, a
comprehensive, corporation-wide project designed to make it more cost efficient
and operationally effective. Each line of business was reexamined in order to
identify opportunities to improve efficiencies and reduce costs. The goal of
the project was to identify revenue enhancements, productivity advances, expense
reductions and product line modifications needed to facilitate the Corporation's
return to consistent profitability. A significant portion of the expense
reduction came from reduced staffing. When the program began, the authorized
number of full-time positions for the Corporation's domestic subsidiaries was
2,060. By December 31, 1993, the authorized number of full-time equivalent
domestic employees had been reduced to approximately 1,700. Subsequent to
BankStart '93, the Corporation identified market opportunities available and
has decided to pursue a "supercommunity bank" strategy (discussed later in this
section). This strategy will result in staff additions, although such
additions, when netted against the remaining BankStart '93 and other reductions,
will leave the staffing complement at approximately the year-end 1993 level.
In the first quarter of 1993, the Corporation took a restructuring charge of
$13.8 million, representing management's estimate of the cost of implementing
BankStart '93. At December 31, 1993, $4.6 million of these expenses remained in
the accrual and are expected to be paid over the remaining implementation
period. BankStart '93 is expected to be substantially implemented by mid-year
1994. This estimate of the implementation costs is evaluated by management on
an ongoing basis and, as adjustments are known, will be revised accordingly.
Financial Restructurings. At the end of the second quarter of 1993, the
Corporation announced a financial restructuring designed to facilitate its
return to profitability. The steps taken included charging off the doubtful
portions of all loans, exiting unprofitable lines of business in the United
Kingdom, reducing its investments in certain foreign subsidiaries and increasing
reserves against problem assets in order to facilitate their disposition. These
actions led to second-quarter provisions for loan losses of $49.2 million,
restructuring charges of $20.8 million, and expenses for other real estate owned
of $16.9 million. Of the $49.2 million in provisions for loan losses, $24.7
million related to commercial real estate in the Washington, D.C., area, and
$24.5 million related to commercial property loans and corporate loans in the
United Kingdom.
As a part of the financial restructuring, the Corporation adopted a plan for
its London operations (the combination of the London branch of Riggs-Washington
and the subsidiary, Riggs AP Bank). This plan addresses the potential risk in
the loan and other real estate owned portfolios in its London operations, and is
designed to facilitate the disposition of certain troubled assets and to exit
unprofitable lines of business. The London operations have been reorganized on
a basis consistent with the Corporation's domestic strategy to segregate ongoing
banking business from the management of problem assets. In June 1993, Riggs AP
Bank transferred all $152.8 million of its nonperforming and classified loans to
Riggs-Washington. These assets were transferred at book
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<PAGE>
value, net of related reserves, and continue to be serviced by Riggs AP Bank.
Ongoing business lines are now centered on financing income-producing commercial
real estate properties in the United Kingdom, as well as financing international
trade transactions, primarily for mid-sized corporations based in the United
Kingdom. The Corporation has substantially completed its withdrawal from
certain business activities in the United Kingdom, including commercial leasing,
corporate finance and trading activity in foreign exchange and money market
instruments.
New Management Team. In June 1993, Paul M. Homan was appointed President and
Chief Executive Officer of Riggs-Washington and Vice Chairman of the
Corporation. Prior to joining the Corporation and Riggs-Washington, Mr. Homan
was President and Chief Executive Officer of First Florida Banks, Inc. of Tampa,
Florida. Prior to his tenure with First Florida, Mr. Homan held executive
positions with several other large financial institutions as well as with the
Office of the Comptroller of the Currency.
In addition to the appointment of Mr. Homan, the Corporation has significantly
strengthened its senior management team since early 1993 with the appointment of
a new Chief Financial Officer, a new head of its General Banking Group and new
heads of its Retail, Corporate and Commercial Lending, Commercial Real Estate
Lending, Loan Review, Audit and Appraisal Services Divisions and its newly
created Risk Management Division. Each of the new division heads has extensive
banking experience.
Supercommunity Bank Strategy. As the largest commercial bank holding company
headquartered in the nation's capital, the Corporation is uniquely positioned in
the center of an affluent market that combines significant public- and private-
sector customers. The Corporation attained this position by steadily growing
and prospering in the Washington, D.C., area for 157 years, and being the only
Washington, D.C.-based bank of size to survive the economic and industry
travails of the late 1980s and early 1990s. This departure of banks leaves the
Corporation competing with a host of community banks and the "super regionals."
In order to differentiate itself from the competition, the Corporation will
offer its customers a breadth of financial products typical of a regional bank
with the personalized service and local decision-making of a community bank.
The Corporation believes that its size will allow it to offer a broader product
line than its smaller competitors, while its personalized service and local
decision-making will give the Corporation a distinct advantage over its larger
regional competitors. Local decision-making and a commitment to the community
will be the key to retaining its existing customers and building new
relationships.
October Equity Sale. On October 21, 1993, as part of the financial
restructuring plan announced by the Corporation at the end of the second quarter
of 1993, the Corporation issued and sold 4,000,000 shares of Series B Preferred
Stock and 5,000,000 shares of Common Stock to certain investors in transactions
exempt from the registration requirements of the Securities Act. The shares of
Series B Preferred Stock and Common Stock were sold for $25 per share and $7.75
per share, respectively. The net proceeds to the Corporation from the October
equity sale (after deducting placement agent fees and related estimated
expenses) were approximately $132 million.
All of the Series B Preferred Stock and 2,924,000 shares of the Common Stock
sold in the October equity sale have been registered for resale by the investors
referred to above pursuant to a shelf registration statement, which is to be
maintained in effect for three years. The Corporation will not receive the
proceeds from any such resales.
---------------------------------------------------
Regulatory Developments
On May 14, 1993, the Corporation entered into a Memorandum of Understanding with
the Federal Reserve Bank of Richmond ("Reserve Bank") and Riggs-Washington
entered into a Written Agreement with the Office of the Comptroller of the
Currency (the "OCC"). The Memorandum of Understanding and the Written Agreement
were the result of regulatory concern over financial and operational weaknesses
and continued losses related primarily to the Corporation's domestic and United
Kingdom commercial real estate exposure.
Under the terms of the Memorandum of Understanding, the Corporation will
notify the Reserve Bank in advance of dividend declarations, the issuance and/or
redemption of long-term debt and use of cash assets in certain circumstances.
The Corporation is also required to submit plans and reports to the Reserve Bank
relating to capital, asset quality, loan loss reserves and operations, including
contingency measures if projected operational results do not occur. In
addition, the Audit Committee of the Corporation's Board of Directors has
reviewed and submitted a report to the Reserve Bank on the adequacy of data
submitted to it and the Board, and the Corporation has appointed a compliance
committee of Directors to monitor performance under the Memorandum of
Understanding.
In accordance with the terms of the Written Agreement, Riggs-Washington has
appointed a committee of its Board of Directors to monitor and coordinate
compliance with the agreement, implement recommendations previously made by an
independent management consultant, and continue to implement the action plan and
work plan previously adopted by Riggs-Washington. Riggs-Washington has met a
number of the requirements of the Written Agreement, including filing amended
call reports; adopting policies and procedures relating to the preparation of
call reports; adopting a capital plan that has been approved by the OCC (that
requires, among other things, a minimum total risk-based capital ratio of
10.00%, a minimum Tier I risk-based capital ratio of 6.00% and a minimum
leverage ratio of 5.00%); submitting for review by the OCC the results of
BankStart '93; and appointing a new president and chief executive officer.
9
<PAGE>
EARNING ASSETS
Money Market Assets
Short-term instruments such as time deposits with other banks, federal funds
sold and resale agreements represent alternatives for the Corporation for the
deployment of excess short-term liquidity. These investments are lower-yielding
and are highly interest-rate sensitive. Funds available for short-term
investments generally are a function of daily movements in the Corporation's
deposit and loan portfolios, combined with the Corporation's overall interest-
rate risk and asset/liability strategy. In 1993, total money market assets
declined by $857.8 million, or 67.9%, as the Corporation shifted to higher-
yielding, longer-term assets, with increases in securities available for sale
and loans during the year. The total average of time deposits with other banks,
federal funds sold and resale agreements fell from $1.12 billion in 1992 to
$862.8 million in 1993.
Securities Available for Sale
Securities available for sale totaled $708.1 million at December 31, 1993,
compared with $159.6 million at year-end 1992. In the first quarter of 1993, in
view of management's intention to use certain securities as part of its
asset/liability strategy and the possibility that securities could be sold in
response to changes in interest rates or for liquidity purposes, $983 million of
securities were classified as held for sale. In the second quarter of 1993,
$696 million in securities held for sale were sold for a pretax gain of $25.9
million. Proceeds from this sale were used to purchase shorter-duration and
variable-rate securities classified as held for sale, in addition to money
market assets.
In May 1993, Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS No. 115) was
issued, effective for fiscal years beginning after December 15, 1993. This
pronouncement requires, among other items, the determination at the acquisition
date of a security whether such security is purchased with the intent and
ability to hold to maturity, whether it is purchased with the intent to trade,
or whether the security is available for sale. Under prior accounting policy,
securities were classified as held for investment if the Corporation had the
ability to hold securities to maturity and the intent to hold such securities
for the foreseeable future, with all other securities classified as held for
sale or trading.
The Corporation adopted SFAS No. 115 on December 31, 1993, which included a
review of the securities portfolio based on management's intent for the
securities at that time. This review resulted in the net transfer of $168.7
million in securities at December 31, 1993, from the available for sale
portfolio to the held-to-maturity portfolio. All unrealized gains and losses
from securities available for sale are excluded from earnings, with unrealized
gains and losses included, net, in stockholders' equity until realized. After
taking into affect the $168.7 million net transfer on December 31, 1993, the new
accounting treatment for the securities available for sale portfolio under SFAS
No. 115 resulted in a $1.28 million net unrealized gain in stockholders' equity.
Securities available for sale pledged to secure deposits and certain
borrowings amounted to $372.8 million at December 31, 1993, and $14.0 million at
December 31, 1992.
Securities Available for Sale
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------
Gross Gross Book/
Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities:
Due within 1 year $ 25,536 $ 337 $ -- $ 25,873
Due after 1 year but within 5 years 119,773 404 139 120,038
Mortgage-Backed Securities:
Due after 1 year but within 5 years 30,441 30 29 30,442
Due after 5 years but within 10 years 482,998 1,362 664 483,696
Due after 10 years 46,199 11 36 46,174
Other Securities:
Due after 1 year but within 5 years 1,216 -- -- 1,216
Due after 5 years but within 10 years 698 -- -- 698
- - -----------------------------------------------------------------------------------------------
Total Securities Available for Sale $706,861 $2,144 $868 $708,137
</TABLE>
Total Securities Available for Sale
10
<PAGE>
Securities Held-to-Maturity
Securities held-to-maturity totaled $660.1 million at December 31, 1993, down
$135.3 million, or 17.0%, from the level at December 31, 1992. The average
balance in securities held-to-maturity was $709.8 million for 1993, compared
with $686.1 million for 1992. At December 31, 1993, securities held-to-maturity
had gross unrealized gains of $729 thousand and gross unrealized losses of $18
thousand. The decrease in this portfolio was due to the transfer in the first
quarter of 1993 of $983 million in investment securities to the held for sale
portfolio -- see "Securities Available for Sale" discussion on prior page. At
December 31, 1993, this portfolio consisted primarily of U.S. Treasury
Securities with 97.6% of the portfolio maturing in one year or less. Other
securities consist primarily of floating-rate notes, preference shares of United
Kingdom companies and Federal Reserve stock. A portion of the securities held-
to-maturity portfolio is pledged to secure certain borrowings and deposits, with
total securities pledged of $271.2 million at December 31, 1993, and $320.0
million at year-end 1992.
As discussed in "Securities Available for Sale," the Corporation has specific
policies in place, in compliance with SFAS No. 115, that require the
determination at the acquisition date whether a security should be included in
the securities held-to-maturity portfolio; a security is included if it was
purchased with the intent and the ability to hold the security to maturity and
the Corporation does not anticipate disposing of it for liquidity purposes or
for the recognition of unrealized gains and losses. The Corporation has
policies that require, on an ongoing basis, that a determination be made whether
a security should continue to be in the held-to-maturity portfolio or be
transferred to the securities available for sale portfolio.
The table below details the securities held-to-maturity portfolio at December
31, 1993, 1992 and 1991.
Book Value of Securities Held-to-Maturity
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992* 1991*
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities $629,282 $579,576 $356,706
Obligations of States and Political
Subdivisions 1,999 1,999 1,999
Mortgage-Backed Securities -- 173,782 51,015
Other Securities 28,781 40,036 73,984
- - -------------------------------------------------------------------------------
Total Securities Held-to-Maturity $660,062 $795,393 $483,704
</TABLE>
* Investment Securities for 1992 and 1991 are presented in the Securities
Held-to-Maturity category. See Note 1 - "Summary of Significant Accounting
Policies."
- - --------------------------------------------------------------------------------
Loans
As of December 31, 1993, loans, net of premiums, discounts and unearned fees,
were $2.53 billion, an increase of $347.1 million (15.9%) from the year-end 1992
loan balance. This increase was due to the purchase of $435.9 million in
residential mortgage loans during 1993, which was part of an overall
asset/liability strategy to shift certain shorter-term assets to longer-term
maturities. Substantially all of these loans were recently originated, fixed-
rate residential mortgages with original maturities of 15 or 30 years, have an
average bond equivalent yield of 6.47% and are secured by properties located in
various regions throughout the United States. The purchases combined with local
area originations in 1993 were partially offset by loan curtailments and
payoffs, particularly with respect to residential mortgage loans, as the result
of the high level of mortgage loans refinanced during 1993 and, to a lesser
extent, transfers of loans to other real estate owned.
Domestic commercial and financial loans were $412.0 million at December 31,
1993, an increase of $42.1 million, or 11.4%, when compared with $369.9 million
at December 31, 1992. This increase was attributable to new commercial loan
originations in the fourth quarter of 1993.
Domestic real estate commercial/construction loans were $388.4 million at
December 31, 1993, a decrease of $145.2 million from year-end 1992. This
decrease was the result of loan curtailments and payoffs, transfers to other
real estate owned and limited new lending by the Corporation in this sector.
Domestic real estate commercial/construction loans were 15.4% of total loans and
8.1% of total assets at year-end 1993, compared with 24.4% and 10.5%,
respectively, for year-end 1992. Permanent domestic mortgage loans, which are
primarily to finance owner-occupied commercial buildings, represented one-third
of real estate commercial/construction loans. The remainder of the portfolio
comprised residential
11
<PAGE>
and commercial development properties, including office buildings, warehouses,
shopping centers and hotels. The domestic real estate-commercial/construction
portfolio is secured by properties concentrated in the Washington, D.C.,
metropolitan area.
Residential mortgage loans totaled $1.15 billion at December 31, 1993, an
increase of $620.0 million (117.1%) from the year-earlier level. This increase
is the result of the local area originations and purchases in the open market
during 1993. The purchase and origination activity during 1993 was partially
offset by high levels of principal curtailments and payoffs, the result of
increased mortgage loan refinance activity as consumers took advantage of the
lowest mortgage loan interest rate environment since the late 1960s.
Residential mortgage loans represented 45.6% of the Corporation's loan
portfolio at year-end 1993 and generally provide for a higher credit quality
than other loans. The historically lower charge-off levels over the last five
years attest to the quality of this portfolio ( see the "Reserve for Loan Losses
and Summary of Charge-offs and Recoveries" section).
Home equity loans, which are primarily floating-rate loans secured by first or
second trusts on single-family residential properties, decreased $39.5 million
to $234.1 million at December 31, 1993. This decrease was caused largely by
refinancing resulting from the lower interest-rate environment.
Consumer loans were $82.8 million at year-end 1993, decreasing $24.6 million
from $107.4 million at December 31, 1992, as a result of limited originations of
installment loans and student loans in the domestic markets.
Foreign loans totaled $255.4 million at December 31, 1993, a decrease of
$116.1 million from the year-end 1992 total of $371.5 million. Foreign loans in
the Corporation's London operations were $199.8 million at December 31, 1993,
and constituted 78.2% of the Corporation's total foreign loans. Approximately
59.7% of the decline in the foreign loan portfolio was due to repayments, with
4.0% due to exchange rate fluctuation, 9.3% related to transfers to other real
estate owned and 27.0% due to charge-offs during the year. Riggs AP Bank's
lending activities have been significantly reduced because of the weak economic
conditions in the United Kingdom and the previously discussed financial
restructuring. At December 31, 1993, 72.0% of the Riggs AP Bank's loan
portfolio was secured by commercial-leased properties, with the remainder in
corporate loans.
Year-End Loans
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991 1990 1989
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial and Financial $ 412,006 $ 369,885 $ 532,143 $ 805,319 $ 962,452
Real Estate-Commercial/Construction 388,442 533,685 619,298 808,099 852,376
Residential Mortgage 1,149,363 529,382 725,337 840,403 845,412
Home Equity 234,049 273,586 321,690 341,100 276,220
Consumer 82,819 107,382 158,872 249,124 278,463
- - ----------------------------------------------------------------------------------------------------------------
Total Domestic 2,266,679 1,813,920 2,357,340 3,044,045 3,214,923
Foreign:
Governments and Official Institutions 28,113 29,319 27,377 30,477 46,545
Banks and Other Financial Institutions 14,999 24,734 28,481 65,722 80,438
Commercial and Industrial and
Commercial Property 192,770 291,496 581,499 689,137 500,265
Other 19,514 25,948 23,886 33,228 29,304
- - ----------------------------------------------------------------------------------------------------------------
Total Foreign 255,396 371,497 661,243 818,564 656,552
- - ----------------------------------------------------------------------------------------------------------------
Total Loans 2,522,075 2,185,417 3,018,583 3,862,609 3,871,475
Less: Unearned Discount (Unamortized Premium) and
Net Deferred Fees (6,058) 4,360 12,116 24,228 30,854
- - ----------------------------------------------------------------------------------------------------------------
Total Loans, Net of Unearned Discount
(Unamortized Premium) and Net Deferred Fees 2,528,133 2,181,057 3,006,467 3,838,381 3,840,621
Less: Reserve for Loan Losses 86,513 84,155 103,674 108,887 39,863
- - ----------------------------------------------------------------------------------------------------------------
Total Loans, Net of Reserve for Loan Losses $2,441,620 $2,096,902 $2,902,793 $3,729,494 $3,800,758
</TABLE>
12
<PAGE>
Year-End Maturities and Rate Sensitivity
<TABLE>
<CAPTION>
December 31, 1993
Less Than Over
(In thousands) 1 Year 1-5 Years 5 Years Total
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and Financial $303,809 $ 90,595 $ 17,602 $ 412,006
Real Estate-Commercial/Construction 216,196 112,196 60,050 388,442
Residential Mortgage 15,427 71,370 1,062,566 1,149,363
Foreign 177,437 61,809 16,150 255,396
- - --------------------------------------------------------------------------------
Total $712,869 $335,970 $1,156,368 $2,205,207
With Predetermined Interest Rates $397,026 $204,758 $ 877,908 $1,479,692
With Floating and Adjustable
Interest Rates 315,843 131,212 278,460 725,515
- - --------------------------------------------------------------------------------
Total $712,869 $335,970 $1,156,368 $2,205,207
</TABLE>
-------------------------------------------------------
Real Estate-Commercial/Construction
Geographic Distribution by Type
December 31, 1993
<TABLE>
<CAPTION>
(In thousands)
Geographic Location
District
of United
Project Type Columbia Virginia Maryland Kingdom Other Total
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land $ 20,710 $ 43,806 $ 29,784 $ -- $ -- $ 94,300
Construction:
Single-Family Residential 6,690 22,025 15,129 -- 253 44,097
Office Buildings 33,621 24,858 20,420 -- 5,313 84,212
Multifamily Residential 720 3,733 -- -- -- 4,453
Industrial/Warehouse Loans -- 3,227 7,707 -- -- 10,934
Shopping Centers -- 7,074 4,885 -- -- 11,959
Hotels 4,646 5,792 -- -- -- 10,438
Other 2,547 2,332 251 -- -- 5,130
- - -----------------------------------------------------------------------------------------------------
Total Land and Construction 68,934 112,847 78,176 -- 5,566 265,523
- - -----------------------------------------------------------------------------------------------------
Domestic Commercial Mortgages 40,510 48,945 33,044 146,769 2,976 272,244
- - -----------------------------------------------------------------------------------------------------
Total Real Estate-Commercial/Construction $109,444 $161,792 $111,220 $146,769 $8,542 $537,767
</TABLE>
-------------------------------------------------------
LOANS TO LESSER DEVELOPED COUNTRIES
The Corporation's exposure to lesser developed countries ("LDC") was $16
million at December 31, 1993, down $5 million from the $21 million of LDC
exposure reported at year-end 1992. This exposure includes all short, medium
and long-term outstandings less amounts previously charged-off.
The Corporation provides reserves for LDC exposure based upon its assessment
of the private sector and sovereign risk inherent in the portfolio. Foreign
reserves available to absorb future losses related to the Corporation's LDC
exposures were $364 thousand at December 31, 1993 or approximately 2% of such
exposures. This compares to reserves at December 31, 1992 of $4 million or
approximately 17% of such exposure.
The ratio of reserves to LDC exposure reflects management's conclusion that a
lower overall level of reserves for LDC exposure was adequate based on an
assessment of individual country economic reports, status of debt negotiations,
sovereign refinancing plans, changes in the composition of the portfolio,
transfer risk reserve considerations, and to a lesser extent, secondary market
quotes for third world debt obligations. In the opinion of management, the
reserve for LDC exposure was adequate at December 31, 1993.
13
<PAGE>
CROSS-BORDER OUTSTANDINGS
The Corporation extends credit to borrowers domiciled outside of the United
States. These assets may be impacted by changing economic conditions in their
respective countries. Management routinely reviews these credits and
continuously monitors the international economic climate and assesses the impact
of these changes on its current and proposed foreign-domiciled borrowers.
Cross-border outstandings include loans, acceptances, interest-bearing
deposits with other banks, investments, accrued interest and other monetary
assets, which are denominated in dollars or other non-local currencies. In
addition, cross-border outstandings include legally enforceable guarantees
issued on behalf of non-local third parties and local currency outstandings to
the extent they are not funded by local currency borrowings. Cross-border
outstandings are then reduced by tangible liquid collateral and any legally
enforceable guarantees issued by non-local third parties on behalf of the
respective country.
At December 31, 1993, the Corporation had no cross-border outstandings
exceeding 1% of its total assets to countries experiencing difficulties in
repaying their external debt.
At December 31, 1993, the United Kingdom was the only country with cross-
border outstandings in excess of 1% of the Corporation's total assets which had
loans in either a nonperforming or past due status.
Nonaccrual loans in the United Kingdom totaled $37.7 million at December 31,
1993 as compared to $27.7 million at December 31, 1992. In light of current
economic conditions in the United Kingdom, it is possible that nonperforming
assets in the United Kingdom will be higher at year-end 1994.
There were $4 thousand in past due loans in the United Kingdom at December 31,
1993 and no past due loans at year-end 1992.
At December 31, 1993, the Corporation had identified approximately $8.9
million in potential problem loans in the United Kingdom. These loans, which
are primarily commercial property and corporate loans, were performing at
December 31 and therefore not included as nonaccrual or past due at December 31.
Cross-Border Outstandings which Exceed 1%
of Total Assets
<TABLE>
<CAPTION>
Governments Banks and Commerical
and Official Other Financial and
(In thousands) Institutions Institutions Industrial Other Total
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As of December 31, 1993
United Kingdom $ 765 $ 29,235 $154,660 $ 2,170 $186,830
- - ---------------------------------------------------------------------------------------------------------
As of December 31, 1992
United Kingdom $ 8,925 $129,666 $151,873 $36,888 $327,352
Italy -- 103,711 -- 3,274 106,985
France -- 52,583 -- 69 52,652
- - ---------------------------------------------------------------------------------------------------------
As of December 31, 1991
United Kingdom $10,218 $129,744 $317,103 $25,895 $482,960
Japan -- 97,656 -- -- 97,656
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
Cross-Border Outstandings
in Excess of 1% of Total Assets with
Nonperforming or Past Due Loans
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991
- - -----------------------------------------------------------
<S> <C> <C> <C>
United Kingdom:
Aggregate Outstandings $186,830 $327,352 $482,960
Nonaccrual Loans 37,696 27,715 68,637
Renegotiated Loans 834 -- --
- - -----------------------------------------------------------
Total Nonperforming Loans 38,530 27,715 68,837
- - -----------------------------------------------------------
Past Due Loans $ 4 $ -- $ 555
- - -----------------------------------------------------------
</TABLE>
Cross-Border Outstandings
.75% and 1% of Total Assets
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991
- - -----------------------------------------------------------
<S> <C> <C> <C>
Australia
Countries None Austria Italy
- - -----------------------------------------------------------
Aggregate Outstandings $-- $ 80,445 $ 53,979
</TABLE>
14
<PAGE>
ASSET QUALITY
Nonperforming Asset Summary
Nonperforming assets, which include nonaccrual loans, renegotiated loans, and
other real estate owned (net of reserves), totaled $213.3 million at year-end
1993, a $93.3 million (30.4%) decrease from the year-end 1992 total of $306.6
million. This significant decrease in nonperforming assets during 1993 was
attributable to sales of $140.0 million, net charge-offs/writedowns of $90.5
million, combined with exchange rate fluctuations and other reductions of $3.4
million that were partially offset by net additions in 1993 of $140.6 million.
Nonaccrual, Renegotiated and Past Due Loans
At December 31, 1993, nonaccrual loans, including both domestic and foreign
loans, were $130.2 million, or 5.15% of total loans, compared with $205.4
million, or 9.42% of total loans, at December 31, 1992. Loans (other than
consumer) are placed on nonaccrual status when, in management's opinion, there
is doubt as to the ability to collect either interest or principal, or when
interest or principal is 90 days or more past due and the loan is not well-
secured and in the process of collection. Consumer loans are generally charged
off when they become 120 days past due. The decrease in nonaccrual loans during
1993 was due primarily to a decrease in domestic nonaccrual loans from $152.8
million at year-end 1992 to $85.1 million at year-end 1993. This decrease was
attributable to sales, repayments and other reductions of $77.1 million, charge-
offs/writedowns of $39.8 million and transfers of nonaccrual loans to other real
estate owned of $26.7 million. These decreases more than offset net additions
to nonaccrual loans of $75.9 million during the period.
Nonaccrual foreign loans decreased $7.5 million during 1993, to $45.1 million
at December 31, 1993. Of the $45.1 million of foreign nonaccrual loans at
December 31, 1993, $38.9 million were attributable to nonaccrual real estate-
commercial mortgage loans in the United Kingdom. This decrease was the result
of sales, repayments, transfers to other real estate owned, writedowns/charge-
offs and other reductions of $68.2 million, exceeding net additions of $60.7
million during 1993. With 86.4% of foreign nonaccrual loans residing in the
United Kingdom, the foreign nonaccrual loan portfolio continues to be adversely
affected by the United Kingdom economy.
Renegotiated loans totaled $30.3 million at December 31, 1993, compared with
$11.8 million at year-end 1992. The domestic renegotiated loans ($29.5 million)
generally consisted of commercial real estate loans that were renegotiated to
provide a reduction or deferral of interest or principal as a result of a
deterioration in the financial position of the borrower.
Past due loans consist predominantly of residential real estate and consumer
loans that are well-secured and in the process of collection and, on which the
Corporation is accruing interest. Past due loans increased $1.9 million in
1993, to $3.3 million.
At December 31, 1993, the Corporation had identified approximately $14.3
million in potential problem loans that are currently performing but that
management believes have certain attributes that may lead to nonaccrual or past
due status in the foreseeable future. These loans consisted of $2.7 million in
domestic loans (principally real estate-commercial loans) and $11.6 million of
commercial property and corporate loans originated in the United Kingdom.
INTEREST INCOME ON NONACCRUAL AND
RENEGOTIATED LOANS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991 1990 1989
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income at Original Terms:
Nonaccrual Loans--
Domestic $10,639 $15,155 $19,033 $18,097 $451
Foreign 5,601 3,325 7,741 1,538 208
Renegotiated Loans 1,845 296 -- -- --
- - --------------------------------------------------------------------------------
Total $18,085 $18,776 $26,774 $19,635 $659
Actual Interest Income Recognized:
Nonaccrual Loans--
Domestic Loans $ 1,506 $ 5,345 $ 2,823 $10,755 $245
Foreign Loans 2,128 116 1,139 64 --
Renegotiated Loans 346 94 -- -- --
- - --------------------------------------------------------------------------------
Total $ 3,980 $ 5,555 $ 3,962 $10,819 $245
- - --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Nonperforming Assets and Past Due Loans
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991 1990 1989
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans:/1/
Domestic $ 85,075 $ 152,812 $ 151,114 $ 184,669 $ 35,174
Foreign 45,099 52,613 78,855 21,245 1,191
- - -----------------------------------------------------------------------------------------------------------------------------
Total Nonaccrual Loans 130,174 205,425 229,969 205,914 36,365
Renegotiated Loans:/2/
Domestic 29,465 11,806 -- -- --
Foreign 834 -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------------------
Total Renegotiated Loans 30,299 11,806 -- -- --
Real Estate Assets Subject to
Accelerated Disposition, Net -- -- 89,389 -- --
Other Real Estate Owned, Net:
Domestic 45,049 62,810 7,542 73,029 6,058
Foreign 7,754 26,579 4,211 53 44
- - ------------------------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net 52,803 89,389 11,753 73,082 6,102
- - ------------------------------------------------------------------------------------------------------------------------------
Total Nonperforming Assets, Net $ 213,276 $ 306,620 $ 331,111 $ 278,996 $ 42,467
Past Due Loans:/3/
Domestic $ 3,315 $ 1,369 $ 2,743 $ 46,756 $ 12,258
Foreign 4 55 790 8,733 --
- - ------------------------------------------------------------------------------------------------------------------------------
Total Past Due Loans $ 3,319 $ 1,424 $ 3,533 $ 55,489 $ 12,258
Total Loans, Net of Unearned Discount (Unamortized Premium)
and Net Deferred Fees $2,528,133 $2,181,057 $3,006,467 $3,838,381 $3,840,621
Ratio of Nonaccrual Loans to Total Loans 5.15% 9.42% 7.65% 5.37% .95%
Ratio of Nonperforming Assets to Total Loans
and Other Real Estate Owned, Net 8.26% 13.50% 10.97% 7.13% 1.10%
</TABLE>
/1/ Loans (other than consumer) that are in default in either principal or
interest for 90 days or more that are not well-secured and in the process
of collection.
/2/ Loans for which terms are being renegotiated to provide a reduction of
interest or principal as a result of a deterioration in the financial
position of the borrower in accordance with Statement of Financial
Accounting Standards No. 15.
/3/ Loans contractually past due 90 days or more in principal or interest that
are well-secured and in the process of collection.
-------------------------------------------------
Nonaccrual and Renegotiated Real Estate-Commercial/Construction
Loans - Geographic Distribution by Type
as of December 31, 1993
<TABLE>
<CAPTION>
(In thousands)
District Geographic Location
of United
Project Type Columbia Virginia Maryland Kingdom Other Total
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land $ -- $18,600 $22,660 $ -- $ -- $ 41,260
Construction:
Single-Family Residential 50 3,666 13,281 -- -- 16,997
Office Buildings 7,108 2,310 13,675 -- 5,313 28,406
Multifamily Residential 621 -- -- -- 253 874
Warehouse Loans 319 1,706 796 -- -- 2,821
Shopping Centers -- -- -- -- -- --
Hotels -- 2,158 -- -- -- 2,158
Other 187 -- 180 -- -- 367
Commercial Mortgages -- -- -- 24,411 1,247 25,658
- - --------------------------------------------------------------------------------------------------------------------------
Total Nonaccrual and Renegotiated
Real Estate - Commercial/Construction $8,285 $28,440 $50,592 $24,411 $6,813 $118,541
</TABLE>
16
<PAGE>
Implementation of Interagency Guidance on
Reporting of In-Substance Foreclosures
At December 31, 1993, the Corporation implemented the narrower definition of In-
Substance Foreclosure required by the March 10, 1993, Interagency Policy
Statement on Credit Availability and the June 10, 1993, Interagency Guidance on
Reporting of In-Substance Foreclosures. Under previous financial accounting
guidelines, a nonaccrual loan was transferred from loans to other real estate
owned when foreclosure was probable or the loan was considered in-substance
foreclosed, which by definition in the Securities and Exchange Commission's
Financial Reporting Release No. 28 meant that the borrower had little or no
equity in the property, proceeds for repayment of the loan could be expected to
come only from the operation or sale of the collateral, and the debtor had
either abandoned control of the collateral or it was doubtful that the debtor
would be able to rebuild equity in the collateral or otherwise repay the loan in
the foreseeable future. Loans considered in-substance foreclosed must be
recorded at the lower of cost or fair value.
Under the revised regulatory accounting guidelines, a loan is recognized as an
in-substance foreclosure when the Corporation has possession of the underlying
collateral. This change in treatment impacts only the classification of
accounts in the financial statements and does not result in a change in the
accounting policy related to the determination of the assets' carrying value.
The impact of this change in definition of in-substance foreclosures on certain
categories in the Corporation's financial statements for the indicated periods
is presented in the following table.
The Consolidated Statements of Condition, Income and Cash Flows and the Notes
to Consolidated Financial Statements, as well as the disclosures within this
report, reflect these reclassifications.
Adjustments to Implement New Definition of In-Substance Foreclosures
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991 1990 1989
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Condition
Increase (Decrease) in:
Loans, Net $ 34,964 $ 43,351 $ 13,774 $ 47,125 $ 31,861
Reserve for Loan Losses 1,221 848 -- -- --
Other Real Estate
Owned, Net (33,743) (42,503) (13,774) (47,125) (31,861)
- - ------------------------------------------------------------------------------
Net Effect on Total Assets $ -- $ -- $ -- $ -- $ --
- - ------------------------------------------------------------------------------
Consolidated Statements of
Income
Increase (Decrease) in:
Provision for Loan
Losses $ 8,049 $ 2,278 $ 130 $ 900 $ --
Other Real Estate Owned
Expense, Net (8,049) (2,278) (130) (900) --
- - ------------------------------------------------------------------------------
Net Effect on Pretax Income $ -- $ -- $ -- $ -- $ --
- - ------------------------------------------------------------------------------
Provision for Loan Losses:
As Reported $69,290 $ 49,789 $ 43,525 $105,508 $ 5,588
As Adjusted 69,290 52,067 43,655 106,408 5,588
Other Real Estate Owned
Expense, Net:
As Reported $13,513 $ 17,981 $ 14,370 $ 13,353 $ 1,208
As Adjusted 13,513 15,703 14,240 12,453 1,208
</TABLE>
17
<PAGE>
Provision and Reserve For Loan Losses
The provision for loan losses totaled $69.3 million for 1993, compared with a
provision of $52.1 million for the prior year. Approximately $29.7 million of
the provision for 1993 related to loans originated in the United Kingdom, with
the remainder relating to primarily domestic real estate commercial loans. The
United Kingdom provisions reflect the continued deterioration throughout much of
1993 of economic conditions in the United Kingdom.
The Corporation's banking subsidiaries maintain reserves for loan losses that
are available to absorb potential losses in the current loan portfolio. The
reserve for loan losses is increased by loan loss provisions and recoveries of
previously charged-off loans and is reduced by loan charge-offs. The
Corporation's reserve for loan losses is based on management's assessment of
existing conditions and reflects potential losses determined to be probable and
subject to reasonable estimation. The Corporation determines the appropriate
balance of the reserve for loan losses based upon an analysis of risk factors
affecting the entire loan portfolio and specific reviews of individual loans.
The analysis includes the primary source of repayment on individual loans and
groups of similar loans, the liquidity and financial condition of the borrowers
and guarantors, historical charge-offs/writedowns within loan categories and the
general economic conditions and other factors existing at the determination
date.
On a quarterly basis, the Loan Loss Reserve Committee evaluates the adequacy
of the reserve for loan losses. The Audit Committee of the Board of Directors
reviews management's determination of the adequacy of the reserve for loan
losses. The loan portfolios are continually monitored by management to identify
loans requiring particular attention.
Net charge-offs for 1993 totaled $66.4 million, down slightly from 1992's
$68.4 million. Total net charge-offs for 1993 include domestic commercial real
estate loan net charge-offs of $34.5 million (51.9%) and $26.7 million (40.2%)
from foreign loans. Total domestic commercial real estate and foreign net
charge-off totals compare with $28.4 million (41.5%) and $35.3 million (51.6%),
respectively, for 1992. These totals reflect the continued deterioration of
domestic and foreign commercial real estate portfolios during the past two years
(see the "Nonaccrual, Renegotiated and Past Due Loans" section).
The reserve for loan losses was $86.5 million, or 3.42% of total loans, at
December 31, 1993, compared with $84.2 million, or 3.86% of total loans, at
December 31, 1992. The Corporation's coverage ratio was 53.9% at year-end 1993
and 38.7% at year-end 1992. The coverage ratio is derived by dividing the
reserve for loan losses by the sum of nonaccrual and renegotiated loans.
Several factors should be considered when reviewing the Corporation's coverage
ratio, such as: 54.9% of the Corporation's loan portfolio consisted of
residential mortgage and home equity loans at December 31, 1993. These loans
generally require minimal reserves based upon their favorable historical loss
experience. Further, the Corporation has no credit card loans in its portfolio,
which normally carry high levels of reserves and charge-off activity. Finally,
the coverage ratio does not account for the existence of collateral on
nonaccrual and renegotiated loans, which limits the risk of principal loss on
these assets. At December 31, 1993, 78.3% of the Corporation's nonaccrual and
renegotiated loans were partially or fully secured by real estate, and 56.2%
were contractually current based on their respective loan agreements.
18
<PAGE>
Reserve for Loan Losses and Summary of Charge-Offs and Recoveries
<TABLE>
<CAPTION>
December 31,
(In thousands) 1993 1992 1991 1990 1989
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1 $ 84,155 $ 103,674 $ 108,887 $ 39,863 $ 49,038
Provision for Loan Losses 69,290 52,067 43,655 106,408 5,588
Loans Charged-Off:
Commercial and Financial 4,703 3,192 7,457 11,643 4,040
Real Estate-Commercial/Construction 41,170 31,528 27,576 21,329 3,878
Residential Morgtage 96 215 25 -- --
Home Equity 201 453 450 639 320
Consumer 1,864 2,745 3,864 2,430 1,759
Foreign 31,400 35,575 13,172 3,185 5,294
- - -----------------------------------------------------------------------------------------------------------------
Total Charge-Offs 79,434 73,708 52,544 39,226 15,291
- - -----------------------------------------------------------------------------------------------------------------
Recoveries on Charged-Off Loans:
Commercial and Financial 527 616 1,033 220 168
Real Estate-Commercial/Construction 6,699 3,172 -- -- --
Residential Morgtage 145 15 14 14 --
Home Equity -- -- 26 -- --
Consumer 938 1,231 908 547 417
Foreign 4,712 279 1,678 84 454
- - -----------------------------------------------------------------------------------------------------------------
Total Recoveries on Charged-Off Loans 13,021 5,313 3,659 865 1,039
- - -----------------------------------------------------------------------------------------------------------------
Net Charge-Offs 66,413 68,395 48,885 38,361 14,252
Foreign Exchange Translation Adjustments (519) (3,191) 17 977 (511)
- - -----------------------------------------------------------------------------------------------------------------
Balance, December 31 $ 86,513 $ 84,155 $ 103,674 $ 108,887 $ 39,863
- - -----------------------------------------------------------------------------------------------------------------
Ratio of Net Charge-Offs to Average Loans 3.04% 2.66% 1.43% .94% .38%
Ratio of Reserve for Loan Losses to Total Loans 3.42% 3.86% 3.45% 2.84% 1.04%
--------------------------------------------------------------------------
</TABLE>
Allocation of the Reserve for Loan Losses
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991 1990 1989
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $ 8,836 $ 7,775 $ 6,459 $ 5,219 $ 3,728
Real Estate 29,544 41,699 46,633 71,686 2,814
Consumer 2,905 3,658 2,323 2,783 1,933
Foreign 19,651 25,266 31,434 21,015 20,298
Based on Qualitative Factors 25,577 5,757 16,825 8,184 11,090
- - -----------------------------------------------------------------------------------------------------------------
Balance, December 31 $ 86,513 $ 84,155 $ 103,674 $ 108,887 $ 39,863
</TABLE>
Distribution of Year-End Loans
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991 1990 1989
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial 16.3% 17.0% 17.6% 20.8% 24.9%
Real Estate 61.0 48.6 44.6 42.7 43.9
Consumer 12.6 17.4 15.9 15.3 14.2
Foreign 10.1 17.0 21.9 21.2 17.0
- - -----------------------------------------------------------------------------------------------------------------
Balance, December 31 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
19
<PAGE>
Other Real Estate Owned, Net
Other real estate owned declined to $52.8 million at December 31, 1993, from
$89.4 million at December 31, 1992. The reduction resulted from sales and
repayments of $52.2 million and $18.6 million in charge-offs/writedowns, offset
by net additions of $34.2 million, during the period. Loans are transferred to
other real estate owned when acquired or deemed to be acquired through
foreclosure.
At December 31, 1993, residential and commercial land composed 68.1% of other
real estate owned with office, industrial, retail, and other types of properties
accounting for 31.9%. Approximately 85% of the other real estate owned
properties were located in the Washington, D. C., metropolitan area at year-end
1993, with the remainder located in the United Kingdom.
Loans are transferred to other real estate owned at the lower of cost or fair
value at the date of foreclosure or possession. Other real estate owned is
recorded at the lower of cost or fair value less selling expenses. Any related
charge-offs at acquisition of other real estate owned are charged to the reserve
for loan losses. Subsequent charge-offs and selling expenses are charged to
operations in the period they become known.
Other Real Estate Owned - Geographic Distribution by Type
December 31, 1993
(In thousands)
<TABLE>
<CAPTION>
Geographic Location
District of United
Project Type Columbia Virginia Maryland Kingdom Other Total
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land $ 703 $28,822 $5,031 $ -- $ -- $34,556
Single-Family Residential 307 1,217 1,456 -- 154 3,134
Office Buildings/Retail 390 971 3,403 1,941 -- 6,705
Multifamily Residential 433 -- -- -- -- 433
Warehouse Loans -- 1,953 -- 3,170 -- 5,123
Shopping Centers -- -- -- 2,643 -- 2,643
Other -- 209 -- -- -- 209
- - --------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net $1,833 $33,172 $9,890 $7,754 $154 $52,803
</TABLE>
20
<PAGE>
DEPOSITS
Total deposits at December 31, 1993, were $3.77 billion, as compared with $4.44
billion at year-end 1992, a decrease of $663.8 million, or 15.0%. Foreign
deposits decreased $350.7 million, to $262.7 million, as a result of the
Corporation's decision to phase out the deposit gathering business within its
London operations. Average domestic deposits were $3.74 billion for 1993, down
from $3.91 billion in 1992. The reductions in year-end and average domestic
deposits were due to reductions in demand for certificates of deposit and other
deposit products, the result of the continued lower interest-rate environment.
Average core deposits (total deposits in domestic offices, excluding negotiable
certificates of deposit) were $3.72 billion, down $175.5 million, or 4.5%, from
1992's $3.89 billion.
SHORT-TERM BORROWINGS
Average short-term borrowings, comprising federal funds purchased and repurchase
agreements, U.S. Treasury demand notes and other borrowed funds, totaled $232.6
million during 1993, an increase of $105.1 million from 1992's average balance.
The overall increase in short-term borrowings was attributable to the
Corporation's replacing a portion of the decrease in total deposits during the
year with short-term borrowings. Short-term borrowings are discussed more fully
in Note 9 of "Notes to the Consolidated Financial Statements."
Average Deposits and Short-Term Borrowings
<TABLE>
<CAPTION>
1993 1992 1991
Average Average Average
(In thousands) Balances Rates Balances Rates Balances Rates
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deposits in Domestic Offices:
Noninterest-Bearing Demand Deposits $ 818,142 $ 834,300 $ 902,513
Savings and NOW Accounts 921,801 2.11% 865,608 3.09% 768,866 4.10%
Money Market Deposits 1,157,883 2.47 1,220,784 3.45 1,277,606 5.10
Other Core Deposits 820,235 3.23 972,841 4.21 1,151,432 6.80
- - ------------------------------------------------------------------------------------------------------------------------
Total Average Core Deposits 3,718,061 3,893,533 4,100,417
Negotiable Certificates of Deposit 25,657 6.61 18,290 9.94 30,727 6.41
- - ------------------------------------------------------------------------------------------------------------------------
Total Average Deposits in Domestic Offices 3,743,718 3,911,823 4,131,144
Deposits in Foreign Offices:*
Noninterest-Bearing Demand Deposits 13,337 11,284 8,907
Interest-Bearing Bank Deposits 131,283 10.54 234,490 13.57 377,240 13.59
Negotiable Certificates of Deposit 17,182 6.42 51,640 9.86 94,208 11.85
Interest-Bearing Non-Bank Deposits 318,446 3.13 434,174 4.99 684,529 7.51
- - ------------------------------------------------------------------------------------------------------------------------
Total Average Deposits in Foreign Offices 480,248 731,588 1,164,884
- - ------------------------------------------------------------------------------------------------------------------------
Total Average Deposits $4,223,966 $4,643,411 $5,296,028
- - ------------------------------------------------------------------------------------------------------------------------
Short-Term Borrowings:
Federal Funds Purchased and Repurchase
Agreements $ 164,899 2.77% $ 87,339 2.86% $ 99,120 5.10%
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 67,731 2.79 40,235 3.18 91,395 5.39
- - ------------------------------------------------------------------------------------------------------------------------
Total Average Short-Term Borrowings $ 232,630 $ 127,574 $ 190,515
</TABLE>
* The majority of interest-bearing deposits in foreign offices are denominated
in amounts of $100 thousand or more.
21
<PAGE>
LONG-TERM DEBT
Long-term debt totaled $213.3 million at December 31, 1993, unchanged from its
balance at December 31, 1992. Long-term debt includes two series of floating-
rate subordinated notes maturing in 1996, which totaled $146.8 million at year-
end 1993. These subordinated notes had an aggregate weighted-average interest
rate of 5.25% at December 31, 1993. Long-term debt also includes subordinated
debentures due in 2009, bearing a fixed rate of interest of 9.65% per annum.
The Corporation's long-term debt is discussed more fully in Note 9 of "Notes to
the Consolidated Financial Statements."
On February 2, 1994, the Corporation issued and sold $125 million of 8.5%
Subordinated Notes, due February 1, 2006. The notes were priced at par and are
not callable for five years. The notes were sold under a shelf registration
statement declared effective on January 13, 1994. The Corporation intends to
use the net proceeds from the offering, approximately $120.7 million, to redeem
equal amounts of the subordinated notes due in 1996. The proceeds were placed
in short-term investments prior to the redemption of the floating-rate notes.
-----------------------------------------
CAPITAL RESOURCES
Under the Federal Reserve Board's risk-based capital guidelines, bank holding
companies are required to meet a minimum ratio of qualifying total capital
(combined Tier I and Tier II) to risk-weighted assets of 8.00%, at least half of
which must be composed of core (Tier I) capital elements. The Corporation's
total and core capital ratios were 16.81% and 10.76%, respectively, at December
31, 1993.
The Federal Reserve Board has established an additional capital adequacy
guideline referred to as the leverage ratio, which measures the ratio of Tier I
capital to average quarterly assets. The most highly rated bank holding
companies that are not contemplating or experiencing significant growth are
required to maintain a minimum leverage ratio of 3.00%. However, most bank
holding companies, including the Corporation, are expected to maintain an
additional cushion of at least 100 to 200 basis points above the 3.00% minimum.
The actual required ratio for individual bank holding companies is based on the
Federal Reserve Board's assessment of a corporation's asset quality, earnings
performance, interest-rate risk and liquidity. The Federal Reserve Board has
not advised the Corporation of a specific minimum leverage ratio requirement.
The Corporation's leverage ratio was 6.03% at December 31, 1993.
The Corporation's policy is to ensure that its bank subsidiaries are
capitalized in accordance with regulatory guidelines. The three national bank
subsidiaries of the Corporation are subject to minimum capital ratios prescribed
by the OCC, which are the same as those for the Federal Reserve Board. Pursuant
to the Written Agreement, Riggs-Washington has committed to the OCC to maintain
a leverage ratio of 5.00%, a Tier I to risk-weighted assets ratio of 6.00% and a
total capital to risk-weighted assets ratio of 10.00%. Riggs-Washington's
ratios were 6.13%, 10.69% and 11.97%, respectively, at December 31, 1993. The
following table summarizes the actual and required capital ratios for the
Corporation and each of its banking subsidiaries.
22
<PAGE>
CAPITAL RATIOS
<TABLE>
<CAPTION>
December 31, Required
1993 1992 Minimums
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Riggs National Corporation
Tier I 10.76% 8.31% 4.00%
Combined Tier I and Tier II 16.81 14.70 8.00
Leverage* 6.03 4.60 3.00
The Riggs National Bank of Washington, D. C.
Tier I 10.69 11.29 6.00
Combined Tier I and Tier II 11.97 12.56 10.00
Leverage* 6.13 6.32 5.00
The Riggs National Bank of Virginia
Tier I 17.05 16.80 4.00
Combined Tier I and Tier II 18.31 18.05 8.00
Leverage* 8.94 8.42 3.00
The Riggs National Bank of Maryland
Tier I 11.46 11.73 4.00
Combined Tier I and Tier II 12.71 12.98 8.00
Leverage* 6.69 6.20 3.00
</TABLE>
* Most bank holding companies and national banks, including the Corporation and
the Corporation's national bank subsidiaries, are expected to maintain an add-
itional cushion of at least 100 to 200 basis points above the 3.00% minimum.
----------------------------------------------------------
INTEREST-RATE RISK MANAGEMENT
The Corporation manages its risk related to movements in interest rates through
the use of simulation and gap analysis. Interest-rate risk arises from the
potential mismatch in the repricing of assets and liabilities within a given
period. Gap analysis presents a period-end analysis of repricing assets as
compared with repricing liabilities, while simulation analysis incorporates the
Corporation's current gap position in addition to future forecasted changes to
the Corporation's portfolios and compositions, as well as anticipated interest-
rate spreads under varying interest-rate scenarios. Gap analysis provides a
general indicator of the potential effect that changing interest rates and
repricing trends may have on the Corporation's net interest income. Thus, the
Corporation utilizes simulation, gap analysis and other techniques to manage the
sensitivity of net interest income to potential changes in interest rates in
order to maximize the Corporation's net interest income while maintaining
acceptable levels of risk.
Gap analysis is performed using contractual maturities, repricing frequency
and management judgment for items with no stated maturity or for items with
expected lives significantly different from their contractual maturity. The two
most significant assumptions made by the Corporation in the gap analysis relate
to securities available for sale and core deposits. Securities available for
sale are considered interest-sensitive due to management's ability to sell them
in response to changes in interest rates and the Corporation's intent to manage
interest-rate risk. Core deposits (savings and NOW accounts) that have no
stated maturity are distributed based on the Corporation's historical experience
and independent studies regarding retention of such deposits.
At December 31, 1993, the Corporation had earning assets subject to repricing
in less than one year in excess of its interest-bearing liabilities subject to
repricing within the same period. This asset-sensitive position was $201.4
million, or 4.21% of total assets, as compared with an asset-sensitive position
of $195.3 million, or 3.80% of assets, at December 31, 1992. Based on the
Corporation's asset-sensitive position at December 31, 1993, downward movements
in interest rates would tend to moderately decrease net interest income, while
upward movements would tend to moderately increase net interest income.
23
<PAGE>
YEAR-END RATE SENSITIVITY
<TABLE>
<CAPTION>
December 31, 1993
Greater
30 Days 31-90 91-180 181-365 1-5 Than Five Total
or Less Days Days Days Years Years Amount
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Time Deposits with Other Banks $ 125,289 $ 22,280 $ 42,398 $ 10,979 $ -- $ -- $ 200,946
Federal Funds Sold and Resale Agreements 200,000 -- 5,000 -- -- -- 205,000
Securities Available for Sale/1/ 708,137 -- -- -- -- -- 708,137
Securities Held-to-Maturity/2/
Taxable 140,997 331,059 161,581 13,772 -- 10,654 658,063
Tax-Exempt -- -- -- -- -- 1,999 1,999
Loans/3/ 885,429 95,747 68,566 117,399 398,056 962,936 2,528,133
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EARNING ASSETS 2,059,852 449,086 277,545 142,150 398,056 975,589 4,302,278
Cash and Due from Banks 210,639
Less: Reserve for Loan Losses 86,513
Premises and Equipment, Net 161,098
Other Assets 192,735
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,059,852 $449,086 $277,545 $142,150 $398,056 $975,589 $4,780,237
Interest-Bearing Deposits:
Savings & NOW Accounts/4/ $ 8,697 $ 17,776 $ 25,900 $ 53,806 $223,732 $625,800 $ 955,711
Money Market Deposits 1,082,048 -- -- -- -- -- 1,082,048
Other Time Deposits 318,340 159,369 171,019 120,380 102,385 23 871,516
Federal Funds Purchased and Repurchase
Agreements 302,330 -- -- -- -- -- 302,330
U.S. Treasury Demand Notes and
Other Borrowed Funds 151,697 -- -- -- -- -- 151,697
Long-Term Debt -- 146,800 -- -- -- 66,525 213,325
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES 1,863,112 323,945 196,919 174,186 326,117 692,348 3,576,627
Demand Deposits 864,549
Other Liabilities 45,864
Stockholders' Equity 293,197
- - ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,863,112 $323,945 $196,919 $174,186 $326,117 $692,348 $4,780,237
Repricing Differential $ 196,740 $125,141 $ 80,626 $(32,036) $ 71,939 $283,241
Effect of Interest Rate Swaps and Futures (186,846) 13,280 14,603 (10,102) 169,065 --
- - ---------------------------------------------------------------------------------------------------------------
Adjusted Repricing Differential 9,894 138,421 95,229 (42,138) 241,004 283,241
- - ---------------------------------------------------------------------------------------------------------------
Cumulative Adjusted Repricing Differential $ 9,894 $148,315 $243,544 $201,406 $442,410 $725,651
</TABLE>
/1/ Securities available for sale are presented in maturity categories that
differ from their respective contractual maturities. Securities available
for sale are considered interest-sensitive due to management's ability to
sell them in response to changes in interest rates and the Corporation's
intent to manage interest rate risk.
/2/ Differences between the presentation of securities held-to-maturity based
upon rate sensitivity and presentation based upon contractual maturity exist
as a result of $3.0 million of floating rate securities of Riggs AP Bank.
/3/ Differences between the presentation of loans based upon rate sensitivity
and presentation based upon contractual maturity exist as a result of
certain floating rate loans.
/4/ Savings and NOW accounts have been adjusted for rate sensitivity purposes
based upon the Corporation's historical experience and an independent study
regarding deposit retention over a representative period covering January
through March 1990. It is assumed that historical deposit longevity patterns
are predictive of existing accounts. Although such accounts are subject to
immediate withdrawal, the Corporation's experience indicates that they
provide a stable source of funds.
24
<PAGE>
NET INTEREST INCOME
Net interest income on a tax-equivalent basis (net interest income plus an
amount equal to the tax savings on tax-exempt interest) totaled $139.5 million
for 1993, down $4.9 million, or 3.4%, from the $144.4 million earned in 1992.
The positive impact on earnings of a $309.1 million decline in average interest-
bearing liabilities during 1993 with the added benefit of a 139-average-basis-
point reduction in the interest rate incurred for the year, was partially offset
by a $299.2 million decrease in average earning assets and a 117-average-basis-
point reduction in the rate earned for 1993. Loans were 50.5% of average
earning assets during 1993, compared with 55.6% for 1992. The net interest
margin (net interest income on a tax-equivalent basis divided by average earning
assets) was 3.23% during 1993, an increase of 10 basis points from the 3.13% net
interest margin for 1992, because of the aforementioned changes in earning
assets and interest-bearing liabilities. Net interest spread (the difference
between the average tax-equivalent rate earned and the average rate incurred on
interest-bearing liabilities) for 1993 was 2.88%, a 22-basis-point improvement
from 1992's spread of 2.66%.
Interest lost on nonaccrual loans totaled $12.6 million for 1993, which had
the effect of reducing the net interest margin by approximately 29 basis points
for 1993. In 1992, interest lost totaled $13.3 million and had the effect of
reducing the net interest margin in that year by approximately 28 basis points.
The Corporation established the goal in 1993 of increasing its loan-to-deposit
ratio above 70% in 1994. The Corporation moved toward this goal in the latter
part of 1993 by purchasing in the open market $435.9 million of residential
mortgages. Subsequent to year-end, the Corporation purchased an additional $90
million of mortgage loans. The Corporation's loan-to-deposit ratio stood at
67.0% at December 31, 1993. The Corporation believes this strategy will have a
significant positive impact on net interest income.
Net Interest Income Changes*
<TABLE>
<CAPTION>
1993 Versus 1992 1992 Versus 1991
Due to Due to Total Due to Due to Total
Rate Volume Change Rate Volume Change
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans (Including Fees) $(31,005) $(31,486) $(62,491) $(29,783) $(78,347) $(108,130)
Securities Available for Sale (8,577) 14,587 6,010 (275) 14,318 14,043
Securities Held-to-Maturity:
U.S. Treasury Securities (278) (18,249) (18,527) (7,431) (2,695) (10,126)
Obligations of States and Political Subdivisions -- -- -- 112 (843) (731)
Mortgage-Backed Securities (892) 19,025 18,133 (1,810) (2,009) (3,819)
Other Securities 1,379 (2,905) (1,526) (856) (2,659) (3,515)
Time Deposits with Other Banks (463) (7,067) (7,530) (20,775) (5,451) (26,226)
Federal Funds Sold and Resale Agreements (2,732) (3,744) (6,476) (12,691) 3,284 (9,407)
- - -------------------------------------------------------------------------------------------------------------------------------
Total Interest Income (42,568) (29,839) (72,407) (73,509) (74,402) (147,911)
Interest Expense:
Savings and NOW Accounts (9,082) 1,615 (7,467) (8,465) 3,634 (4,831)
Money Market Deposit Accounts (11,574) (2,146) (13,720) (20,590) (2,485) (23,075)
Time Deposits in Domestic Offices (8,906) (5,694) (14,600) (25,247) (12,280) (37,527)
Time Deposits in Foreign Offices (16,154) (17,173) (33,327) (16,351) (38,780) (55,131)
Federal Funds Purchased and Repurchase Agreements (82) 2,146 2,064 (2,011) (545) (2,556)
U.S. Treasury Demand Notes and Other Borrowings (173) 782 609 (1,544) (2,107) (3,651)
Long-Term Debt (418) (615) (1,033) (2,329) (1,015) (3,344)
- - -------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense (46,389) (21,085) (67,474) (76,537) (53,578) (130,115)
- - -------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 3,821 $ (8,754) $ (4,933) $ 3,028 $(20,824) $ (17,796)
</TABLE>
* The dollar amount of changes in interest income and interest expense
attributable to changes in rate/volume (change in rate multiplied by change in
volume) has been allocated between rate and volume variances based on the
percentage relationship of such variances to each other. Income and rates are
computed as a tax-equivalent basis using a Federal income tax rate of 34% and
local tax rates as appliable.
25
<PAGE>
THREE-YEAR AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES*
<TABLE>
<CAPTION>
1993 1992 1991
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
(In thousands) Balances Expense Rates Balances Expense Rates Balances Expense Rates
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans:
Commercial-Taxable $ 279,484 $ 18,921 6.77% $ 314,832 $ 22,721 7.22% $ 574,560 $ 45,488 7.92%
Commercial-Tax-Exempt 83,773 7,686 9.17 102,809 11,148 10.84 115,613 13,649 11.81
Real Estate-Commercial/
Construction 454,657 30,544 6.72 590,766 41,581 7.04 718,577 58,737 8.17
Residential Mortgage 692,707 53,353 7.70 619,741 57,076 9.21 771,130 72,988 9.47
Home Equity 261,870 18,079 6.90 301,189 22,602 7.50 337,562 33,963 10.06
Consumer 90,255 10,938 12.12 125,016 15,762 12.61 198,486 22,700 11.44
Foreign 319,070 23,316 7.31 514,688 54,438 10.58 707,516 85,933 12.15
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Loans (Including Fees) 2,181,816 162,837 7.46 2,569,041 225,328 8.77 3,423,444 333,458 9.74
Securities Available for Sale 565,447 21,995 3.89 242,890 15,985 6.58 25,807 1,942 7.53
Securities Held-to-Maturity:
U.S. Treasury Securities 272,272 17,320 6.36 559,502 35,847 6.41 595,930 45,973 7.71
Obligations of States
and Political
Subdivisions 1,999 205 10.26 1,999 205 10.26 10,359 936 9.04
Mortgage-Backed
Securities 397,314 21,858 5.50 54,109 3,725 6.88 78,738 7,544 9.58
Other Securities 38,260 3,821 9.99 70,505 5,347 7.58 104,654 8,862 8.47
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Securities
Held-to-Maturity 709,845 43,204 6.09 686,115 45,124 6.58 789,681 63,315 8.02
Time Deposits with Other
Banks 379,755 18,503 4.87 524,902 26,033 4.96 592,880 52,259 8.81
Federal Funds Sold and
Resale Agreements 483,044 15,044 3.11 596,165 21,520 3.61 533,778 30,927 5.79
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and
Average Rate Earned 4,319,907 261,583 6.06 4,619,113 333,990 7.23 5,365,590 481,901 8.98
Less: Reserve for Loan Losses 85,450 82,498 109,117
Cash and Due from Banks 287,912 296,893 321,018
Premises and Equipment, Net 168,227 183,080 182,325
Other Assets 244,453 259,367 315,395
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Assets $4,935,049 $5,275,955 $6,075,211
Liabilities and
Stockholders' Equity
Interest-Bearing Deposits:
Savings and NOW Accounts $ 926,363 $ 19,578 2.11% $ 871,347 $ 27,045 3.10% $ 775,107 $ 31,876 4.11%
Money Market Deposit
Accounts 1,176,873 29,010 2.47 1,241,790 42,730 3.44 1,292,361 65,805 5.09
Time Deposits in
Domestic Offices 845,892 28,174 3.33 991,130 42,774 4.32 1,198,124 80,301 6.70
Time Deposits in Foreign
Offices 443,359 24,332 5.49 693,560 57,659 8.31 1,134,981 112,790 9.94
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing
Deposits 3,392,487 101,094 2.98 3,797,827 170,208 4.48 4,400,573 290,772 6.61
Short-Term Borrowings:
Federal Funds Purchased
and Repurchase Agreements 164,899 4,566 2.77 87,339 2,502 2.86 99,120 5,058 5.10
U.S. Treasury Demand
Notes and Other Short-
Term Borrowings 67,731 1,887 2.79 40,235 1,278 3.18 91,395 4,929 5.39
Long-Term Debt 213,325 14,583 6.84 222,162 15,616 7.03 235,263 18,960 8.06
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds
and Average Rate Incurred 3,838,442 122,130 3.18 4,147,563 189,604 4.57 4,826,351 319,719 6.62
Demand Deposits 831,479 845,584 895,455
Other Liabilities 45,215 19,210 101,423
Stockholders' Equity 219,913 263,598 251,982
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $4,935,049 $5,275,955 $6,075,211
Net Interest Income and
Spread $ 139,453 2.88% $ 144,386 2.66% $ 162,182 2.36%
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin on
Earning Assets 3.23% 3.13% 3.02%
</TABLE>
* Income and rates are computed on a tax-equivalent basis using a Federal income
tax rate of 34% and local tax rates as applicable. Loan amounts include
nonaccrual and renegotiated loans. Average foreign assets, excluding net pool
funds provided, details of which can be found on page 68 of this report, were
14.6%, 21.5% and 23.4% of average total assets for the periods presented,
respectively. Average foreign liabilities were 18.1%, 23.9% and 29.8% of
average total liabilities for the periods presented, respectively.
26
<PAGE>
NONINTEREST INCOME
Noninterest income for 1993 was $112.7 million, down $17.8 million, or 13.6%,
from 1992. Excluding securities gains of $24.1 million and $34.2 million for
1993 and 1992, respectively, and $5.9 million of nonrecurring interest income
related to a tax receivable recognized in 1992, noninterest income decreased
$1.8 million, or 2.0%. Trust income of $28.9 million was up $1.3 million, or
4.8%, as increases in fees on trust and investment services more than offset
decreases in corporate custodial accounts. Decreases in corporate custodial
accounts should not have a material impact on future trust income as they
provided marginal profitability. Total assets under management by the Financial
Services Group at December 31, 1993, were approximately $4.3 billion, down
slightly from $4.4 billion at year-end 1992. The market value of trust and
custodial assets of the Corporation's Financial Services Group decreased $10.6
billion, or 55.8%, to $8.4 billion at December 31, 1993, due to the
Corporation's exit from the corporate custodial business. Service charges for
1993 of $39.3 million increased $.9 million, or 2.4%, primarily because of an
increase in advisory fee income. Foreign exchange income decreased $2.2 million
or 43.9% in 1993, primarily due to the previously discussed restructuring of
Riggs AP Bank and the exiting of foreign exchange trading-related activities.
Other noninterest income of $8.1 million was down $1.8 million as letter-of-
credit fees decreased $1.1 million during 1993.
Noninterest Income
<TABLE>
<CAPTION>
Change
-------------------
(In thousands) 1993 1992 Amount Percent
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Income $ 28,857 $ 27,530 $ 1,327 4.8%
Service Charges 39,343 38,436 907 2.4
International Noncredit Commissions
and Fees 9,448 9,458 (10) (0.1)
Foreign Exchange Income 2,801 4,993 (2,192) (43.9)
Interest on Federal Tax Receivable -- 5,903 (5,903) n/a
Other Noninterest Income 8,060 9,880 (1,820) (18.4)
- - --------------------------------------------------------------------------------
Noninterest Income Excluding
Securities Gains 88,509 96,200 (7,691) (8.0)
Securities Gains, Net 24,141 34,213 (10,072) (29.4)
- - --------------------------------------------------------------------------------
Total Noninterest Income $112,650 $130,413 $(17,763) (13.6)%
</TABLE>
-----------------------------------------------
NONINTEREST EXPENSE
Noninterest expense for the year ended December 31, 1993, was $266.8 million,
compared with $238.4 million for 1992. Noninterest expense for 1993 included
restructuring expense of $34.6 million, of which $20.8 million related to Riggs
AP Bank. The Riggs AP Bank charge consisted of $1.6 million in severance-
related expenses, $11.5 million from the write-off of a foreign currency
translation account associated with Riggs-Washington's investment in Riggs AP
Bank, and $7.7 million of other restructuring expense. The $20.8 million of
restructuring expense related to Riggs AP Bank included $14.2 million of noncash
expenses, which included the aforementioned $11.5 million write-off of the
foreign currency translation account, the write-off of $2.2 million of fixed
assets and a $.5 million write-off of goodwill. The remaining $6.6 million was
accrued to offset expenses related to severance and excess space and equipment
leases that will be charged against the accrual when paid. Also included in the
$34.6 million in restructuring expense was $13.8 million in expenses related to
the implementation of BankStart '93. The restructuring expenses related to
BankStart '93 consisted of $7.0 million in consulting fees, $4.0 million in
severance-related costs, $1.0 million in occupancy-related costs and $1.8
million in other costs. Implementation of BankStart '93 began in April 1993 and
is expected to continue through mid-1994. During 1993, $9.2 million of the
accrued expenses were paid, with the remainder expected to be paid in 1994. The
estimate of the implementation costs is evaluated by management on an ongoing
basis and, as adjustments become known, may be revised accordingly.
Other real estate owned expense, net of revenues, was $13.5 million, down
13.9% from $15.7 million incurred in 1992. For the first half of 1992,
writedowns and disposition-related losses and expenses from the Corporation's
asset-disposition program totaling $35.2 million were charged to the program-
related reserves rather than other real estate owned expense. Had these amounts
been charged to noninterest expense, other real estate owned expense for 1993
would have decreased $37.4 million from the adjusted 1992 level. This decrease
is attributed to the overall decrease in other real estate owned, which totaled
$89.4 million at December 31, 1992, and decreased $36.6 million (40.9%) during
1993.
27
<PAGE>
Excluding restructuring and other real estate owned expense, noninterest
expense for 1993 was down $4.0 million, or 1.8%, from the total of $222.7
million for 1992. Salaries and related benefits were $88.0 million for 1993, a
decrease of $1.3 million, as a reduction in salaries and wages was offset by an
increase in medical and life insurance premiums, pension expenses and relocation
expenses. Net occupancy expense of $25.8 million was down $2.6 million, or
9.1%, due to decreases in rent expense of $1.2 million, real estate taxes of
$916 thousand and repairs of $815 thousand. Furniture and equipment expense of
$11.2 million decreased $1.6 million, or 12.8%, due to decreases in depreciation
and rental expense of $1.2 million.
FDIC insurance expense of $10.3 million increased $1.5 million in 1993 as an
increase in the assessment rate more than offset a reduction in the deposit base
during the period. Data processing expense of $16.6 million was down $1.1
million for the year, attributable to savings obtained from outsourcing
agreements implemented in 1992 and 1991. Other noninterest expense totaled
$56.9 million, up $2.3 million, or 4.2%, from the $54.5 million for 1992.
Accounting for the increase was $3.6 million of write-offs related to mortgage
indemnity insurance claims on other real estate owned in the United Kingdom.
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Change
------------------
(In thousands) 1993 1992 Amount Percent
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and Wages $ 69,978 $ 74,145 $(4,167) (5.6)%
Pensions and Other Employee Benefits 18,048 15,141 2,907 19.2
- - -------------------------------------------------------------------------------
Total Staff Expense 88,026 89,286 (1,260) (1.4)
- - -------------------------------------------------------------------------------
Occupancy Expense, Net 25,763 28,354 (2,591) (9.1)
Furniture and Equipment Expense 11,153 12,792 (1,639) (12.8)
Other Noninterest Expense:
Advertising and Public Relations 5,971 6,129 (158) (2.6)
Legal Fees 4,024 5,121 (1,097) (21.4)
Other Real Estate Owned Expense,
Net 13,513 15,703 (2,190) (14.0)
FDIC Insurance Expense 10,309 8,789 1,520 17.3
Data Processing Services 16,585 17,684 (1,099) (6.2)
Restructuring Expense 34,554 -- 34,554 n/a
Other Noninterest Expense 56,854 54,545 2,309 4.2
- - -------------------------------------------------------------------------------
Total Noninterest Expense $266,752 $238,403 $28,349 11.9%
</TABLE>
------------------------------------------------
INCOME TAXES
The Corporation's provision for income taxes includes both federal and state
income taxes. The rise in the provision for income taxes to $5.6 million for
1993 from the benefit of $1.1 million for 1992 is primarily attributable to the
Corporation's inability to utilize the tax benefits of the provision for loan
losses and other real estate owned. The provision for income taxes for 1993 is
more than the amount determined by application of the Federal statutory income
tax rate principally because of tax preference items and the Corporation's
inability to carryback the full potential of the net operating losses.
The Corporation adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), required for fiscal years
beginning after December 15, 1992, which requires the Corporation to implement
new accounting and disclosure rules for income taxes. The adoption of SFAS No.
109 did not result in a cumulative adjustment since it was not apparent at
implementation of SFAS No. 109 that future income or the establishment of
certain tax planning strategies would be sufficient to realize deferred tax
assets in future periods in excess of the Corporation's carryback potential.
Further tax discussion and a reconciliation of the effective tax rate to the
1993 federal statutory rate of 34% can be found in Note 14 of "Notes to
Consolidated Financial Statements."
28
<PAGE>
FOURTH QUARTER 1993 VS. FOURTH QUARTER 1992
For the fourth quarter of 1993, the Corporation reported net income of $3.1
million, or $.09 per share, compared with a net loss of $24.1 million, or $.97
per share, for the fourth quarter of 1992. Results for the fourth quarter of
1993 reflected provisions for loan losses of $2.1 million, which were
significantly lower than the $27.3 million recognized in the fourth quarter of
1992. The decrease in provisions for loan losses is indicative of the continued
improvement in asset quality.
Nonperforming assets totaled $213.3 million at December 31, 1993, a decrease
of $60.3 million for the fourth quarter of 1993 and a decrease of $93.3 million
from $306.6 million at December 31, 1992. The 1992 provision included
additional reserves for loans to domestic residential real estate developers and
foreign corporate and property loans. The larger provisions a year earlier
reflected overall declines in collateral values and deteriorating borrower
liquidity, combined with weak economic conditions in the foreign and domestic
commercial/construction markets.
Net interest income on a tax-equivalent basis for the fourth quarter of 1993
was $36.1 million, an increase of $2.6 million, or 7.61%, year to year,
reflecting the positive impact of the October 1993 equity sale, combined with an
approximate $60 million decrease in average nonperforming assets between the
periods. The net interest margin was 3.43% during the fourth quarter of 1993,
up 46 basis points from the fourth quarter of 1992. Interest lost on nonaccrual
loans had the effect of reducing the net interest margin by approximately 16
basis points during the fourth quarter of 1993. The net interest spread was
3.00% for the quarter ended December 31, 1993, up 43 basis points from the same
period in the prior year.
Net recoveries in the fourth quarter of 1993 totaled $1.5 million, an
improvement of $17.5 million when compared with $16.0 million in net charge-offs
for the fourth quarter of 1992. Charge-offs in the fourth quarter of 1993
totaled $9.1 million and were more than offset by $10.6 million in recoveries
during the period. The 1992 charge-offs were primarily related to domestic real
estate loans, principally residential developments, as sluggish residential
sales activity created liquidity problems for some borrowers.
Noninterest income for the fourth quarter of 1993 was $21.2 million, a
decrease of $6.3 million, or 22.7%, when compared with the same period in 1992.
Trust income of $7.2 million was up $409 thousand as an increase in trust and
investment service fees more than offsetting a decline in corporate custodial
account fees. Service charges of $11.5 million were down $638 thousand due to
the decline in the volume of deposit-related services during the period.
Investment advisory fees were down $361 thousand. Partially offsetting these
decreases was an increase in securities gains of $801 thousand. Other
noninterest income of $2.3 million for the fourth quarter of 1993 declined $6.8
million due to the recognition in 1992 of nonrecurring interest income totaling
$5.9 million from an outstanding tax receivable.
Noninterest expense for the fourth quarter of 1993 totaled $51.1 million,
compared with $57.4 million a year earlier, an improvement of $6.2 million, or
10.9%. Salaries and related benefits of $20.7 million were down $2.0 million as
a result of reduced staff levels. Net occupancy expense was down $885 thousand,
to $5.8 million, in the fourth quarter of 1993 because of decreases in property
rent expense, utilities and repairs. Furniture and equipment expense decreased
$695 thousand due to reductions in depreciation, maintenance and repairs, and
equipment rentals. Legal expenses totaled $849 thousand in the fourth quarter
of 1993, down $1.0 million from the prior year's period. Other real estate
owned expense, net of revenues, was $1.3 million, an increase of $1.2 million
when compared with 1992's fourth quarter other real estate owned expense. Other
noninterest expense totaled $12.0 million for the fourth quarter of 1993, a
decrease of $3.0 million, as a result of decreases in consulting fees and
interest cost on hedge transactions.
29
<PAGE>
1992 VS. 1991
The Corporation reported a net loss of $21.1 million, or $.87 per share, for
1992, compared with a net loss of $63.5 million, or $4.61 per share, for 1991.
The 1992 results included provisions for loan losses of $52.1 million, other
real estate owned expenses of $15.7 million, securities gains of $34.2 million
and the recognition of $5.9 million of nonrecurring interest income related to a
tax receivable. The 1991 results included provisions for loan losses of $43.7
million, other real estate owned expenses of $14.2 million, provisions for
accelerated dispositions of $49.8 million, securities gains of $13.7 million and
an extraordinary gain of $2.5 million (net of applicable income tax) related to
the repurchase of subordinated debt at a discount.
During the third quarter of 1991, the Corporation initiated a strategy to
accelerate the disposition of its domestic problem commercial real estate
assets, including both loans and other real estate owned. At the inception, the
Corporation took a charge to earnings of $49.8 million and segregated $191.0
million of program assets. During the program, which ended in June 1992, these
assets were reduced by $146.3 million through sales, the return of a loan to
performing status and writedowns. The remaining $44.3 million of program assets
were transferred to loans and other real estate owned at fair value at the end
of the second quarter of 1992.
Average earning assets during 1992 decreased $746.5 million, or 13.9%, to
$4.62 billion. This decline reflected both weak loan demand due to unfavorable
economic conditions and management's desire to improve asset quality and further
reduce the size of the Corporation to enhance capital ratios. During 1992, the
loan portfolio declined primarily due to loan payments. Average loans were
$2.57 billion during 1992, down $854.4 million, or 25.0%, from the average for
1991.
Money market assets, which consist of time deposits with other banks and
federal funds sold and resale agreements, ended 1992 at $1.26 billion, up
slightly from the $1.14 billion a year earlier. These assets averaged $1.12
billion and $1.13 billion, respectively, for 1992 and 1991 and reflect the
Corporation's commitment to maintaining adequate liquidity.
At December 31, 1991, the Corporation had total securities held for sale of
$101.2 million, which included only U. S. Treasury securities with a weighted-
average yield of 7.67% and an average maturity of approximately four years at
year-end 1991. This portfolio was established at year-end 1991 in view of the
possible sale of these securities for liquidity purposes. During the first
quarter of 1992, these securities were sold, resulting in a pre-tax gain of $4.2
million, with the proceeds from the sale being reinvested in mortgage-backed
securities.
Investment securities at year-end 1992 totaled $795.4 million, up $311.7
million, or 64.4%, from year-end 1991. The increase was the result of the
reinvestment of a portion of the proceeds from loan curtailments, payoffs, and
the sale of problem assets in 1992. U. S. Treasury securities were $579.6
million at year-end 1992, an increase of $222.9 million during the year. The
weighted-average yield on these securities was 5.93% at year-end 1992, with an
average maturity of approximately two years, compared with a weighted-average
yield of 6.40% and an average maturity of two and one-half years for year-end
1991. Mortgage-backed securities were $173.8 million at year-end 1992, compared
with $51.0 million at year-end 1991. The weighted-average yields were 6.12% and
8.31% at year-end 1992 and 1991, respectively, with average maturities of
approximately seven years and 22 years, respectively. Other investment
securities were $40.0 million at year-end 1992, a decrease of $33.9 million.
This decrease was due to a transfer of $16 million of United Kingdom government
securities to the held for sale category in addition to the sale of $13 million
of other United Kingdom securities.
Total loans at December 31, 1992, were $2.19 billion, down from the $3.02
billion reported at the previous year-end. The decrease in loans was the result
of loan repayments, limited opportunities for quality loan growth, transfer of
loans to other real estate owned, charge-offs, exchange rate fluctuations and
management's desire to reduce the total assets of the Corporation during the
period. During 1992, commercial and financial loans were down $162.3 million
(30.5%), due primarily to loan curtailments. Domestic real estate-
commercial/construction loans were $533.7 million, a decrease of $85.6 million
(13.8%), when compared with year-end 1991, because of transfers to other real
estate owned, charge-offs and curtailments/payoffs. Residential mortgage loans
totaled $529.4 million, a decline of $196.0 million (27.0%), due to the high
volume of prepayment/refinance activity during the declining interest-rate
environment in 1992. Foreign loans decreased $289.7 million for 1992, to $371.5
million at year-end. This significant decrease included repayments (39%),
exchange-rate fluctuations (26%), transfers to other real estate owned (24%) and
charge-offs (11%) during the year. Home equity and consumer loans decreased
$100.0 million from 1991, impacted by the high level of prepayments/refinance
activity discussed above.
Nonperforming assets at December 31, 1992, were $306.6 million, compared with
$331.1 million at December 31, 1991. Nonaccrual loans decreased by $24.5
million and real estate assets subject to accelerated disposition decreased by
$89.4 million, but were partially offset by the increase in renegotiated loans
($11.8 million) and other real estate owned ($77.6 million), as problem
commercial real estate credits continued to work their way through the
nonperforming asset categories. The previously mentioned accelerated
disposition program was completed in the second quarter of 1992 and accounted
for approximately one-half of the increase in other
30
<PAGE>
real estate owned. In addition to the assets discussed above, the Corporation
identified $41.6 million of potential problem credits at December 31, 1992, that
were performing and not reported as either nonperforming or past due.
Provisions for loan losses totaled $52.1 million for 1992, as compared with
provisions of $43.7 million for 1991. Net charge-offs were $68.4 million, or
2.66% of average loans, during 1992 compared with $48.9 million, or 1.43% of
average loans, during 1991. The reserve for loan losses was $84.2 million, or
3.86% of loans, at December 31, 1992, compared with $103.7 million, or 3.45% of
loans at December 31, 1991. The ratio of loan loss reserves to nonaccrual loans
was 41.0% at December 31, 1992, compared with 45.1% a year earlier.
At December 31, 1992, total deposits were $4.44 billion, compared with $4.91
billion at December 31, 1991. Decreases in time deposits of $616 million and
demand deposits of $127 million were partially offset by increases in savings
and NOW accounts of $159 million and money market deposits of $109 million. On
an average basis, total deposits decreased $653 million, to $4.64 billion, from
$5.30 billion. This decrease was due to declines of $648 million in time
deposits, $51 million in money market deposits and $50 million in demand
deposits, partially offset by an increase of $96 million in savings and NOW
accounts. The decreases in time deposits were a result of the Corporation's
plan to shrink the balance sheet in response to pressure on the capital adequacy
ratios. These wholesale funding sources were repaid with the liquid assets of
the Corporation.
Long-term debt of the Corporation was $213.3 million at December 31, 1992,
compared with $232.1 million at December 31, 1991. The decrease of $18.8
million in long-term debt was due to the issuance of 764,537 shares of Series A
7.5% Cumulative Convertible Preferred Stock in exchange for the Sterling
Denominated Fixed-Rate Capital Note due 2004 of Riggs AP Bank.
Stockholders' equity increased to $245 million at December 31, 1992, from $205
million at December 31, 1991. This increase was due to the issuance of $19
million of Series A 7.5% Cumulative Convertible Preferred Stock as discussed
above and $49 million of common stock (in a rights offering), partially offset
by the $21 million loss for the year and foreign exchange translation losses of
$6 million.
Net interest income on a tax-equivalent basis totaled $144.4 million during
1992, down $17.8 million, or 11.0%, from the $162.2 million earned in 1991, as
the positive impact of an improved net interest spread was more than offset by
the effect of a $746 million decrease in average earning assets and, to a lesser
extent, the reduced benefit of noninterest-bearing funds in a declining rate
environment. The net interest margin was 3.13% during 1992, up from 3.02% in
1991. Net interest spread for 1992 was 2.66%, an increase of 30 basis points,
year to year. Net interest income continued to be affected by the level of
nonperforming assets. Interest lost on nonaccrual loans totaled $13.3 million
for 1992, compared with $32.0 million for 1991. The 1992 net interest margin
and net interest spread were both negatively impacted by nonaccrual loans by
approximately 36 basis points.
Noninterest income during 1992 increased $23.8 million, or 22.3%, to $130.4
million. The 1992 results included securities gains of $34.2 million and
interest on a tax receivable of $5.9 million, while the 1991 results included
securities gains of $13.7 million. Excluding these items, noninterest income
for 1992 was down $2.7 million, or 2.9%. This decrease was due primarily to
lower foreign exchange income from lower volumes and a narrower spread and
lower service charges on deposits. Partially offsetting these negative factors
were increased international fee-based services and increased miscellaneous
fees.
Noninterest expense for 1992 was $238.4 million, $51.8 million, or 17.8%,
below the 1991 level, primarily due to the $49.8 million 1991 charge related to
the establishment of the reserve for accelerated disposition of certain of the
Corporation's domestic problem commercial real estate assets. Total staff
expenses were $3.5 million less in 1992 than 1991 because of a decrease in full-
time-equivalent staff, from 2,187 to 2,147, partially offset by increases in
benefits expenses.
Occupancy expense for 1992 totaled $28.4 million, down $1.8 million (6.0%)
because of a decrease in property rentals, repairs and services. Furniture and
equipment expense of $12.8 million for 1992 decreased $1.5 million (10.5%) as a
result of the sale of equipment combined with the transfer of certain equipment
and lease agreements to IBM under an outsourcing agreement for certain computer
operations. Data processing expense increased $.3 million due to increased
expenses related to the same IBM outsourcing agreement. The net decreases
summarized above were partially offset during 1992 by an increase in other
noninterest expense of $3.8 million (7.5%), the result of increases in interest
cost of hedges, consulting fees and losses on disposal of equipment.
The income tax benefit for 1992 was $1.1 million, compared with a benefit of
$6.1 million for 1991. The decrease in the benefit during 1992 is the result of
several factors, the most significant being the overall decline in net operating
losses during 1992. The effective tax rate was 4.8% in 1992, compared with 6.5%
in 1991. The benefits for 1992 and 1991 are less than the amount determined by
application of the Federal statutory income tax rate, due principally to tax
preference items and the Corporation's inability to carryback the full potential
of the net operating losses.
31
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended
(In thousands, except per share December 31, Change
amounts) 1993 1992 Amount
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income $61,916 $ 69,190 $ (7,274)
Interest Expense 26,746 37,073 (10,327)
- - -------------------------------------------------------------------------------
Net Interest Income 35,170 32,117 3,053
Less: Provision for Loan Losses 2,125 27,255 (25,130)
- - -------------------------------------------------------------------------------
Net Interest Income after Provision for Loan
Losses 33,045 4,862 28,183
Noninterest Income 21,239 27,492 (6,253)
Noninterest Expense 51,121 57,355 (6,234)
- - -------------------------------------------------------------------------------
Income (Loss) before Income Taxes 3,163 (25,001) 28,164
Applicable Income Tax (Benefit) Expense 82 (940) 1,022
- - -------------------------------------------------------------------------------
Net Income (Loss) $ 3,081 $(24,061) $ 27,142
Earnings (Loss) Per Share $.09 $(.97)
</TABLE>
NET INTEREST INCOME CHANGES*
<TABLE>
<CAPTION>
Three Months Ended
December 31, Due to
1993 1992 Change Rate Volume
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income:
Loans (Including Fees) $43,282 $ 43,996 $ (714) $ (3,281) $ 2,567
Securities
Available-for-Sale 7,087 1,117 5,970 86 5,884
Securities
Held-to-Maturity:
U.S. Treasury
Securities 2,503 9,178 (6,675) 3,010 (9,685)
Obligations of States
and Political
Subdivisions 51 51 -- -- --
Mortgage-Backed
Securities 4,309 2,107 2,202 (610) 2,812
Other Securities 1,113 1,037 76 608 (532)
Time Deposits with Other
Banks 3,049 6,737 (3,688) 327 (4,015)
Federal Funds Sold and
Resale Agreements 1,452 6,398 (4,946) (270) (4,676)
- - -------------------------------------------------------------------------------
Total Interest Income 62,846 70,621 (7,775) (130) (7,645)
Interest Expense:
Savings and NOW Accounts 4,821 5,971 (1,150) (1,214) 64
Money Market Deposit
Accounts 6,665 9,227 (2,562) (1,326) (1,236)
Time Deposits in Domestic
Offices 5,915 8,269 (2,354) (2,346) (8)
Time Deposits in Foreign
Offices 4,205 9,425 (5,220) 1,437 (6,657)
Federal Funds Purchased
and Repurchase Agreements 1,141 369 772 88 684
U.S. Treasury Demand
Notes and Other
Short-Term Borrowings 337 281 56 (14) 70
Long-Term Debt 3,662 3,531 131 127 4
- - -------------------------------------------------------------------------------
Total Interest Expense 26,746 37,073 (10,327) (3,248) (7,079)
- - -------------------------------------------------------------------------------
Net Interest Income $36,100 $ 33,548 $ 2,552 $ 3,118 $ (566)
</TABLE>
* The dollar amount of changes in interest income and interest expense
attributable to changes in rate/volume (change in rate multiplied by change in
volume) has been allocated between rate and volume variances based on the
percentage relationship of such variances to each other. Income and rates are
computed on a tax-equivalent basis using a Federal tax rate of 34% for 1993
and 1992 and local tax rates.
32
<PAGE>
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
Page(s) Sequential Page(s)
<S> <C> <C>
(a) The following consolidated financial statements and related
documents are set forth in this Annual Report on Form 10-K as
follows:
Riggs National Corporation and Subsidiaries:
Consolidated Statements of Income 34 34
Consolidated Statements of Condition 35 35
Consolidated Statements of Changes in Stockholders' Equity 36 36
Consolidated Statements of Changes in Cash Flows 37 37
Notes to Consolidated Financial Statements 38-64 38-64
Report of Independent Public Accountants 65 65
(b) The following supplementary data is set forth in this Annual
Report on Form 10-K as follows:
Quarterly Financial Information 66 66
Consolidated Financial Ratios and Other Information 66 66
Quarterly Stock Information 67 67
</TABLE>
33
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands, except per share amounts) 1993 1992 1991
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Interest and Fees on Loans:
Taxable $155,152 $214,180 $319,794
Tax-Exempt 4,916 7,144 8,811
- - -------------------------------------------------------------------------------
Total Interest and Fees on Loans 160,068 221,324 328,605
Interest on Securities Available for Sale 21,995 15,985 1,942
Interest and Dividends on Securities
Held-to-Maturity:
Taxable 41,211 42,548 60,488
Tax-Exempt 130 130 594
- - -------------------------------------------------------------------------------
Total Interest and Dividends on Securities
Held-to-Maturity 41,341 42,678 61,082
Interest on Money Market Assets:
Time Deposits with Other Banks 18,503 26,033 52,259
Federal Funds Sold and Resale Agreements 15,044 21,520 30,927
- - -------------------------------------------------------------------------------
Total Interest on Money Market Assets 33,547 47,553 83,186
- - -------------------------------------------------------------------------------
Total Interest Income 256,951 327,540 474,815
Interest Expense
Interest on Deposits:
Savings and NOW Accounts 19,578 27,045 31,876
Money Market Deposit Accounts 29,010 42,730 65,805
Time Deposits in Domestic Offices 28,174 42,774 80,301
Time Deposits in Foreign Offices 24,332 57,659 112,790
- - -------------------------------------------------------------------------------
Total Interest on Deposits 101,094 170,208 290,772
Interest on Short-Term Borrowings and
Long-Term Debt:
Federal Funds Purchased and Repurchase
Agreements 4,566 2,502 5,058
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 1,887 1,278 4,929
Long-Term Debt 14,583 15,616 18,960
- - -------------------------------------------------------------------------------
Total Interest on Short-Term Borrowings and
Long-Term Debt 21,036 19,396 28,947
- - -------------------------------------------------------------------------------
Total Interest Expense 122,130 189,604 319,719
- - -------------------------------------------------------------------------------
Net Interest Income 134,821 137,936 155,096
Less: Provision for Loan Losses 69,290 52,067 43,655
- - -------------------------------------------------------------------------------
Net Interest Income after Provision for Loan
Losses 65,531 85,869 111,441
Noninterest Income
Trust Income 28,857 27,530 27,295
Service Charges and Fees 48,791 47,894 48,531
Other Noninterest Income 10,861 20,776 17,135
Securities Gains, Net 24,141 34,213 13,692
- - -------------------------------------------------------------------------------
Total Noninterest Income 112,650 130,413 106,653
Noninterest Expense
Salaries and Wages 69,978 74,145 78,444
Pensions and Other Employee Benefits 18,048 15,141 14,389
Occupancy Expense, Net 25,763 28,354 30,152
Furniture and Equipment Expense 11,153 12,792 14,296
Provision for Losses on Accelerated
Disposition of Real Estate Assets -- -- 49,800
Other Noninterest Expense 141,810 107,971 103,090
- - -------------------------------------------------------------------------------
Total Noninterest Expense 266,752 238,403 290,171
- - -------------------------------------------------------------------------------
Income (Loss) before Taxes and Extraordinary
Item (88,571) (22,121) (72,077)
Applicable Income Tax (Benefit) Expense 5,640 (1,069) (6,130)
- - -------------------------------------------------------------------------------
Income (Loss) before Extraordinary Item, Net
of Taxes (94,211) (21,052) (65,947)
Extraordinary Item -- Gain on Purchase of
Debt, Net of Applicable Income Taxes -- -- 2,486
- - -------------------------------------------------------------------------------
Net Income (Loss) $(94,211) $(21,052) $(63,461)
Earnings (Loss) Per Share:
Income (Loss) before Extraordinary Item, Net
of Taxes $ (3.65) $ (.87) $ (4.79)
Extraordinary Item -- Gain on Purchase of
Debt, Net of Applicable Income Taxes -- -- .18
- - -------------------------------------------------------------------------------
Earnings (Loss) Per Share $ (3.65) $ (.87) $ (4.61)
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
Consolidated Statements of Condition
<TABLE>
<CAPTION>
December 31,
(In thousands, except per share amounts) 1993 1992
- - -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due from Banks $ 210,639 $ 315,241
Money Market Assets:
Time Deposits with Other Banks 200,946 648,452
Federal Funds Sold and Resale Agreements 205,000 615,263
- - -------------------------------------------------------------------------------
Total Money Market Assets 405,946 1,263,715
Securities Available for Sale (Market Value: 1993,
$708,137; 1992, $160,720) 708,137 159,592
Securities Held-to-Maturity (Market Value: 1993,
$660,773; 1992, $804,273) 660,062 795,393
Loans 2,522,075 2,185,417
Less: Unearned Discount (Unamortized Premium) and
Net Deferred Fees (6,058) 4,360
- - -------------------------------------------------------------------------------
Loans, Net of Unearned Discount (Unamortized
Premium) and Net Deferred Fees 2,528,133 2,181,057
Reserve for Loan Losses 86,513 84,155
- - -------------------------------------------------------------------------------
Loans, Net of Reserve for Loan Losses 2,441,620 2,096,902
Premises and Equipment, Net 161,098 174,394
Accrued Interest Receivable 22,911 26,733
Customers' Acceptance Liability 300 8,650
Other Real Estate Owned, Net 52,803 89,389
Other Assets 116,721 147,513
- - -------------------------------------------------------------------------------
Total Assets $4,780,237 $5,077,522
Liabilities
Deposits:
Noninterest-Bearing Demand Deposits $ 864,549 $ 883,916
Interest-Bearing Deposits:
Savings and NOW Accounts 955,711 977,745
Money Market Deposit Accounts 1,082,048 1,236,341
Time Deposits in Domestic Offices 643,736 757,115
Time Deposits in Foreign Offices 227,780 582,481
- - -------------------------------------------------------------------------------
Total Interest-Bearing Deposits 2,909,275 3,553,682
- - -------------------------------------------------------------------------------
Total Deposits 3,773,824 4,437,598
Short-Term Borrowings:
Federal Funds Purchased and Repurchase Agreements 302,330 52,421
U.S. Treasury Demand Notes and Other Short-Term
Borrowings 151,697 88,079
- - -------------------------------------------------------------------------------
Total Short-Term Borrowings 454,027 140,500
Acceptances Outstanding 300 8,650
Other Liabilities 45,564 32,029
Long-Term Debt 213,325 213,325
- - -------------------------------------------------------------------------------
Total Liabilities 4,487,040 4,832,102
Stockholders' Equity
Preferred Stock - $1.00 Par Value
Shares Authorized - 25,000,000 at December 31, 1993,
and 1992; Liquidation Preference - $25 per share
Cumulative Convertible Series A - 764,537 shares at
December 31, 1993, and 1992 765 765
Noncumulative Perpetual Series B - 4,000,000 shares
at December 31, 1993 4,000 --
Common Stock - $2.50 Par Value
Shares Authorized - 50,000,000 at December 31, 1993,
and 1992
Shares Issued - 31,122,812 at December 31, 1993, and
26,122,812 at December 31, 1992 77,807 65,307
Surplus:
Preferred Stock 109,541 18,232
Common Stock 156,023 131,572
Foreign Exchange Translation Adjustments (1,527) (11,413)
Undivided Profits (Accumulated Deficit) (30,965) 64,680
Unrealized Net Gain on Securities Available for Sale 1,276 --
Treasury Stock - 900,798 shares at December 31,
1993, and 1992 (23,723) (23,723)
- - -------------------------------------------------------------------------------
Total Stockholders' Equity 293,197 245,420
- - -------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $4,780,237 $5,077,522
</TABLE>
The accompanying notes are an integral part of these statements.
35
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
For the years ended December 31, 1993, 1992 and 1991
Unrealized
Foreign Undivided Net Gain
Preferred Common Exchange Profits on Securities Total
Stock Stock Translation (Accumulated Available Treasury Stockholders'
(In thousands) $1.00 Par $2.50 Par Surplus Adjustments Deficit) For Sale Stock Equity
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 $ -- $36,695 $111,119 $ 1,299 $152,307 $ -- $(23,723) $277,697
Net Income (Loss) (63,461) (63,461)
Foreign Exchange Translation
Adjustments (6,501) (6,501)
Cash Dividends Declared:
Common Stock,
$.05 Per Share* (2,756) (2,756)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 -- 36,695 111,119 (5,202) 86,090 (23,723) 204,979
Issuance of Series A Preferred
Stock - 764,537 shares 765 18,232 18,997
Issuance of Common
Stock - 11,445,000 shares 28,612 20,453 49,065
Net Income (Loss) (21,052) (21,052)
Foreign Exchange Translation
Adjustments (6,211) (6,211)
Cash Dividends Declared:
Series A Preferred Stock,
$.46875 Per Share (358) (358)
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 765 65,307 149,804 (11,413) 64,680 -- (23,723) 245,420
Issuance of Series B Preferred
Stock - 4,000,000 shares 4,000 91,309 95,309
Issuance of Common
Stock - 5,000,000 shares 12,500 24,451 36,951
Net Income (Loss) (94,211) (94,211)
Unrealized Net Gain on
Securities Available for Sale 1,276 1,276
Foreign Exchange Translation
Adjustments 9,886 9,886
Cash Dividends Declared:
Series A Preferred Stock,
$1.875 Per Share (1,434) (1,434)
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $4,765 $77,807 $265,564 $ (1,527) $(30,965) $1,276 $(23,723) $293,197
</TABLE>
* A cash dividend of $.15 per share applicable to the fourth quarter of 1990
was declared on January 22, 1991, and paid on February 15, 1991.
The accompanying notes are an integral part of these statements.
36
<PAGE>
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (94,211) $ (21,052) $ (63,461)
Adjustments to Reconcile Net Income
(Loss) to Cash
Provided by (Used in) Operating
Activities:
Provisions for Loan Losses 69,290 52,067 43,655
Provisions for OREO Writedowns and
Losses on Accelerated
Disposition of Real Estate Assets 11,330 11,923 49,800
Depreciation Expense and Amortization
of Leasehold Improvements 12,937 14,010 14,261
Amortization of Purchase Accounting
Adjustments 5,673 4,373 4,287
Provision for Deferred Taxes 5,598 4,558 10,634
Restructuring Charges 34,554 -- --
(Gains) Losses on Securities Sales (26,975) (34,213) (13,692)
(Gains) Losses on Sales from OREO (2,702) (396) 696
(Increase) Decrease in Accrued Interest
Receivable 3,822 9,456 20,760
(Increase) Decrease in Other Assets 19,521 (21,171) 18,282
Increase (Decrease) in Other Liabilities (21,019) (36,732) (22,768)
- - -------------------------------------------------------------------------------
Total Adjustments 112,029 3,875 125,915
- - -------------------------------------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities 17,818 (17,177) 62,454
- - -------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Net (Increase) Decrease in Time
Deposits with Other Banks 447,506 (174,424) 514,878
Proceeds from Sale of Securities
Available for Sale 736,310 1,092,085 --
Purchase of Securities Available for
Sale (879,125) (1,073,668) (101,314)
Proceeds from Securities
Held-to-Maturity Sales -- 26,925 815,111
Proceeds from the Maturity of
Securities Held-to-Maturity 768,607 237,598 633,205
Purchase of Securities Held-to-Maturity (1,010,754) (618,899) (957,353)
Net (Increase) Decrease in Loans (417,461) 722,292 655,577
Proceeds from Sale of Loans -- -- 11,050
Proceeds from Sale of OREO and Real
Estate Assets Subject to Accelerated
Disposition 31,930 52,053 37,206
Net (Increase) Decrease in Premises and
Equipment 359 2,012 (17,976)
Other, Net (520) (19,983) 87
- - -------------------------------------------------------------------------------
Net Cash Provided by (Used in)
Investing Activities (323,148) 245,991 1,590,471
- - -------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Demand,
Savings, NOW and Money Market Deposit
Accounts (195,694) 141,713 (360,105)
Net Increase (Decrease) in Time Deposits (468,080) (616,487) (838,117)
Net Increase (Decrease) in Federal
Funds Purchased and Repurchase Agreements 249,909 (22,283) (39,990)
Net Increase (Decrease) in U.S.
Treasury Demand Notes and Other
Short-Term Borrowings 63,618 36,898 (89,660)
Proceeds from the Issuance of Preferred
and Common Stock 132,260 49,065 --
Repayments and Purchases of Long-Term
Debt -- -- (13,200)
Dividend Payments (1,434) (358) (2,756)
- - -------------------------------------------------------------------------------
Net Cash Provided by (Used in)
Financing Activities (219,421) (411,452) (1,343,828)
- - -------------------------------------------------------------------------------
Effect of Exchange Rate Changes 9,886 (6,211) (6,501)
- - -------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents (514,865) (188,849) 302,596
Cash and Cash Equivalents at Beginning
of Year 930,504 1,119,353 816,757
- - -------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 415,639 $ 930,504 $ 1,119,353
Supplemental Schedule of Noncash
Investing and Financing Activities:
Loans Transferred to OREO $ 34,248 $ 132,468 $ 57,430
Loans to Finance the Sale of OREO 30,276 25,585 15,771
Loans Exchanged for Mortgage-Backed
Securities -- -- 26,304
Loans Transferred to Real Estate Assets
Subject to Accelerated Disposition, Net -- 13,670 85,307
OREO Transferred to Real Estate Assets
Subject to Accelerated Disposition, Net -- 5,418 92,554
Preferred Stock Issued in Exchange for
Long-Term Debt -- 18,997 --
Supplemental Disclosures:
Interest Paid (net of amount
capitalized) $ 125,540 $ 197,738 $ 339,108
Income Tax Payments (Refund) (4,269) (7,202) (6,788)
</TABLE>
The accompanying notes are an integral part of these statements.
37
<PAGE>
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share amounts and as indicated)
Note 1. Summary of Significant Accounting Policies
- - --------------------------------------------------------------------------------
The following summary of significant accounting policies of Riggs National
Corporation ("the Corporation"), including its principal subsidiaries, The Riggs
National Bank of Washington, D.C. ("Riggs-Washington") and Riggs AP Bank Limited
("Riggs AP") and other subsidiaries, The Riggs National Bank of Virginia
("Riggs-Virginia"), and The Riggs National Bank of Maryland ("Riggs-Maryland"),
is presented to assist the reader in understanding the financial, statistical
and other data presented in this report. References to Riggs-Washington include
The Riggs National Bank of Washington, D.C., and its subsidiaries, including
Riggs-AP.
General Accounting Policies
The accounting and reporting policies of the Corporation are in accordance with
generally accepted accounting principles and conform to general practice within
the banking industry.
For purposes of reporting cash flows, cash equivalents include cash on hand,
amounts due from banks and federal funds sold and resale agreements. Generally,
federal funds are purchased and sold for one-day periods.
Certain reclassifications have been made to the 1991 and 1992 balances to
conform with the 1993 classifications.
Consolidation Policy
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries, after elimination of all intercompany transactions.
Securities Held-to-Maturity and Securities Available for Sale
Effective December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). This pronouncement is effective for fiscal
years beginning after December 15, 1993 (with early adoption encouraged), and
may not be applied retroactively to prior years' financial statements. SFAS No.
115 requires, among other items, the determination at the acquisition date of a
security whether such security is purchased with the intent and ability to hold
to maturity, whether it is purchased with the intent to trade, or whether the
security is available for sale. Under prior accounting policy, securities were
classified as held for investment if the Corporation had the ability to hold
securities to maturity and the intent to hold such securities for the
foreseeable future, with all other securities classified as held for sale.
Under SFAS No. 115, securities available for sale are carried at fair value,
with unrealized gains and losses, net of tax, included as a separate component
of stockholders' equity. This is contrary to prior accounting policy, in which
the Corporation carried these securities at the lower of cost or market with any
adjustments included in earnings. Management has established policies which
require the periodic review of the securities portfolio. This review includes
the Corporation's current asset/liability strategy and the possibility that the
Corporation could sell securities in response to changes in interest rates or
for liquidity purposes, to determine if certain securities held-to-maturity
should be transferred to the available for sale portfolio. (See Note 2,
"Securities.") Securities Held for Sale in 1992 and prior years are presented
in the Securities Available for Sale category and Investment Securities are
presented in the Securities Held-to-Maturity category in the Corporation's
financial statements and in the accompanying notes.
Loans
Loans are carried at the principal amount outstanding net of unearned discounts,
unamortized premiums and deferred fees and costs. Interest on loans and
amortization of unearned discounts/premiums and deferred fees and costs are
computed by methods which generally result in level rates of return on principal
amounts outstanding. Loan origination fees and certain direct loan origination
costs are deferred and the net amount is amortized as an adjustment of the
related loan's yield. The Corporation generally amortizes these amounts in a
manner that approximates a level yield over the estimated life of the loans.
The Corporation discontinues the accrual of interest on loans based on
delinquency status, an evaluation of the related collateral and the financial
strength of the borrower. Generally, loans are placed on nonaccrual status when
the loans are in default in either principal or interest for 90 days or more and
the loans are not well-secured and in the process of collection. Income
recognition on consumer loans is discontinued and the loans are charged off
after a delinquency period of 120 days. At that point, any accrued interest
which has not actually been collected is reversed.
At December 31, 1993, the Corporation implemented a narrower definition of
In-Substance Foreclosure as required by regulatory agencies. This definition
is also consistent with Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan." This definition is
discussed in detail below, and loan related disclosures have been adjusted to
reflect this new definition.
Implementation of Interagency Guidance on Reporting of In-Substance Foreclosures
At December 31, 1993, the Corporation implemented the narrower definition of
In-Substance Foreclosure required by the March 10, 1993 Interagency Policy
Statement on Credit Availability and the June 10, 1993 Interagency Guidance on
Reporting of In-Substance Foreclosures. Under previous financial accounting
guidelines, a nonaccrual loan was transferred from loans to other real estate
owned when foreclosure was probable or the loan was considered in-substance
foreclosed, which by definition in the Securities and Exchange Commission's
Financial Reporting Release No. 28 meant that the borrower had little or no
equity in the property, proceeds for repayment of the loan could be expected
to come only from the operation or sale of the collateral, and the debtor had
either
38
<PAGE>
abandoned control of the collateral or it was doubtful that the debtor would be
able to rebuild equity in the collateral or otherwise repay the loan in the
foreseeable future. Loans considered in-substance foreclosed must be recorded
at the lower of cost or fair value.
Under the revised regulatory accounting guidelines, a loan is recognized as an
in-substance foreclosure when the Corporation has possession of an asset prior
to obtaining legal title. This definition is consistent with the Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan," which will be required for fiscal years beginning after December 15,
1994. This change in treatment impacts only the classification of accounts in
the financial statements and does not result in a change in the accounting
policy related to the determination of the assets' carrying value. The impact
of this change in definition of in-substance foreclosures on certain categories
in the Corporation's financial statements is presented in the following table.
The Consolidated Statements of Condition, Income and Cash Flows and the Notes to
Consolidated Financial Statements reflect these reclassifications.
Adjustments to Implement New Definition
of In-Substance Foreclosures
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
- - --------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Statements of Condition
Increase (Decrease) in:
Loans, Net $ 34,964 $ 43,351 $ 13,774
Reserve for Loan Losses 1,221 848 --
Other Real Estate Owned, Net (33,743) (42,503) (13,774)
- - --------------------------------------------------------------------
Net Effect on Total Assets $ -- $ -- $ --
Consolidated Statements of Income
Increase (Decrease) in:
Provision for Loan Losses $ 8,049 $ 2,278 $ 130
Other Real Estate Owned
Expense, Net (8,049) (2,278) (130)
- - --------------------------------------------------------------------
Net Effect on Pretax Income $ -- $ -- $ --
Provision for Loan Losses
As Reported $ 69,290 $ 49,789 $ 43,525
As Adjusted 69,290 52,067 43,655
Other Real Estate Owned
Expense, Net
As Reported $ 13,513 $ 17,981 $ 14,370
As Adjusted 13,513 15,703 14,240
</TABLE>
Other Real Estate Owned
Other real estate owned is property acquired or deemed to have been acquired
through foreclosure. See the "Implementation of Interagency Guidance on
Reporting of In-Substance Foreclosures" section, discussed in detail above.
Other real estate owned is recorded at the lower of fair value less estimated
costs to sell, or cost. Initial writedowns of other real estate owned are
charged to the reserve for loan losses. Revenues and expenses incurred in
connection with ownership of the properties, and subsequent writedowns and gains
and losses upon sale are included, net, in other real estate owned expense.
Real Estate Assets Subject to Accelerated Disposition
Real estate assets subject to accelerated disposition include specific
foreclosed and in-substance foreclosed properties and nonperforming loans
secured by commercial real estate. In 1991, the Corporation adopted a strategy
to accelerate the disposition of these assets by pricing the properties at a
discount to fair value. As a result, the Corporation established a reserve to
cover potential losses due to the pricing strategy as well as estimated costs
associated with the disposition efforts, including legal expenses and selling
costs. At June 30, 1992, the program was discontinued.
Premises and Equipment
Premises, leasehold improvements and furniture and equipment are stated at cost
less accumulated depreciation and amortization. Depreciation and amortization
on premises, leasehold improvements, and furniture and equipment are computed
using the straight-line method. Ranges of useful lives for computing
depreciation and amortization are as follows:
<TABLE>
<CAPTION>
Years
- - ---------------------------------------
<S> <C>
Premises 25 to 35
Leasehold Improvements 5 to 20
Furniture and Equipment 5 to 15
</TABLE>
Major improvements and alterations to premises and leaseholds are capitalized.
Leasehold improvements are amortized over the shorter of the terms of the
respective leases or the estimated useful lives of the improvements.
Other Assets
Included in other assets are intangible assets, such as goodwill, which is the
excess of cost over net assets of acquired entities, and core-deposit
intangibles. Goodwill is amortized on the straight-line method over 25 years.
The Corporation had unamortized goodwill of $7.3 million at December 31, 1993,
and amortization expense of $565 thousand; $716 thousand, and $668 thousand for
1993, 1992, and 1991, respectively. Core-deposit intangibles represent the net
present value of the future income streams related to deposits acquired through
mergers or acquisitions and are amortized on an accelerated basis over 10 years.
The unamortized core-deposit intangibles recorded on the Corporation's books at
December 31, 1993, were $21.4 million, and amortization expense of $3.5 million,
$3.7 million, and $3.6 million was recorded for 1993, 1992, and 1991,
respectively.
Income Taxes
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
mandates the asset and liability method of accounting for deferred income taxes.
The Corporation had previously accounted for deferred taxes under
39
<PAGE>
the deferral method required by Accounting Principles Board ("APB") Opinion No.
11.
Earnings Per Share
Earnings per share is calculated by dividing net earnings after deduction of
preferred stock dividends by the weighted-average number of shares of common
stock and common stock equivalents outstanding during each period. Stock
options are considered common stock equivalents, unless determined to be anti-
dilutive. Earnings per share also reflects provisions for dividend requirements
on all outstanding shares of preferred stock. The weighted-average shares
outstanding were 26,208,315 for 1993, 24,534,063 for 1992 and 13,777,014 for
1991.
Fully diluted earnings per share was not presented because outstanding
preferred shares, when converted to Common Stock, as well as the assumed
exercise of outstanding stock options, were anti-dilutive.
Foreign Currency Translation
The functional currency amounts of assets and liabilities of foreign entities
are translated into U.S. dollars at year-end exchange rates. Income and expense
items are translated using appropriately weighted-average exchange rates for the
period. Functional currency to U.S. dollars translation gains and losses, net
of related hedge transactions, are credited or charged directly to the
stockholders' equity account, "Foreign Exchange Translation Adjustments."
Foreign Exchange Income
Foreign currency trading and exchange positions, including spot and forward
exchange contracts, are valued monthly and the resulting profits and losses are
recorded in foreign exchange trading income. The amounts of net foreign
exchange trading gains included in the accompanying consolidated statements of
income under other noninterest income were $2.8 million for 1993, $5.0 million
for 1992 and $8.2 million for 1991.
Interest-Rate Futures and Forward Contracts
Gains and losses on futures and forward contracts and interest-rate agreements
used to hedge certain interest-sensitive assets and liabilities are deferred and
are either recognized as income at the time of disposition of the assets or
liabilities being hedged, or are amortized over the life of the hedged
transaction as an adjustment to yield. Gains and losses on futures and forward
contracts with trading account activities are recognized currently in trading
income.
Interest-Rate Swap Agreements
Interest-rate swaps are entered into as hedges against fluctuations in the
interest rate of specifically identified assets or liabilities. There is no
effect on total assets or liabilities of the Corporation. Net receivables or
payables under agreements designated as hedges are recorded as adjustments to
interest income or interest expense related to the hedge asset or liability.
Related fees are deferred and amortized over the life of the swap agreements.
New Financial Accounting Standards
On January 1, 1993, the Corporation adopted SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 established financial accounting and reporting standards
for the effects of income taxes that result from the Corporation's activities
during the current and preceding years. It requires an asset and liability
approach in accounting for income taxes versus the deferred method previously
used under Accounting Principles Board Opinion No. 11 ("APB No. 11"). Under
SFAS No. 109, deferred income taxes are recorded using enacted tax laws and
rates for the years in which the taxes are expected to be paid. In addition,
SFAS No. 109 provides for the recognition of deferred tax assets based on tax
loss and tax credit carryforwards, to the extent that realization of such assets
is more likely than not. Under APB No. 11, deferred tax assets were generally
recognized only to the extent such assets were reasonably assured of
realization, primarily through tax loss and tax credit carryback potential.
Income tax provisions for 1992 were determined under APB No. 11 and have not
been restated to reflect adoption of SFAS No. 109. The effect of the adoption
of SFAS No. 109 was not material. (See Note 14, "Income Taxes.")
In May 1993, SFAS No. 114, "Accounting by Creditors for Impairment of a Loan"
was issued which specifies how allowances for credit losses related to impaired
loans, as defined in the Statement, should be determined. Upon implementation
of the Statement, the Corporation will be required to identify and measure
impaired loans in its loan portfolio. For the most part measurement will be
based on the present value of expected future cash flows discounted at the
loan's effective interest rate or, for collateral-dependent loans, on the fair
value of the collateral. If the valuation of the impaired loan is less than the
recorded investment in the loan, the Corporation will recognize an impairment by
creating a valuation allowance with a corresponding charge to provision for loan
losses or by adjusting an existing valuation allowance for the impaired loan
with the corresponding amount reflected in earnings. This Statement is
effective for financial statements for fiscal years beginning after December 15,
1994. The Corporation is evaluating the impact that the adoption of this
Statement will have on future financial statements.
At December 31, 1993, the Corporation implemented a narrower definition of
In-Substance Foreclosure as required by regulatory agencies. This definition
is consistent with SFAS No. 114; see "Implementation of Interagency Guidance
on Reporting of In-Substance Foreclosures," detailed above.
Effective December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS No. 115). This
pronouncement is effective for fiscal years beginning after December 15, 1993.
In addition, SFAS No. 115 may not be applied retroactively to prior years'
financial statements. (See "Securities Held-to-Maturity and Securities
Available for Sale" above.)
40
<PAGE>
NOTE 2. SECURITIES
- - --------------------------------------------------------------------------------
Effective December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). This pronouncement is discussed in detail
in Note 1, "Summary of Significant Accounting Policies." Implementation of SFAS
No. 115 included a review of the securities portfolio based on management's
intent for those securities at that time, which resulted in the net transfer of
$168.7 million in securities available for sale to the held-to-maturity
portfolio. SFAS No. 115 requires that all unrealized gains and losses from the
securities available for sale portfolio be included, net, in stockholders'
equity until realized. This treatment is contrary to previous accounting
policy, which require such securities to be carried at the lower of cost or
market with any unrealized gains and losses included in earnings. After giving
effect to the $168.7 million net transfer on December 31, 1993, the new
accounting treatment for securities available for sale resulted in a $1.28
million net unrealized gain in stockholders' equity and an immaterial adjustment
to earnings.
Securities Available for Sale
A comparison of book and market value for securities available for sale at year-
end follows:
<TABLE>
<CAPTION>
1993 1992
Book Market Book Market
Value Value Value Value
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $145,911 $145,911 $143,263 $143,263
Mortgage-Backed Securities 560,312 560,312 -- --
Other Securities 1,914 1,914 16,329 17,457
- - -----------------------------------------------------------------------------
Total Securities Available for Sale $708,137 $708,137 $159,592 $160,720
</TABLE>
Proceeds from the sale of securities available for sale totaled $736 million
during 1993, as compared with $1.10 billion during 1992. During 1993, gross
gains from the sale of securities available for sale totaled $27.0 million, with
no gross losses during the year. The weighted-average yield to maturity of
these securities was 4.43% at year-end 1993. The average maturity on these
securities was 6 years and 5 months.
The "Other Securities" category consists of $1.9 million of foreign debt
securities.
Securities available for sale pledged to secure deposits and other borrowings
amounted to $372.8 million at December 31, 1993, and $14.0 million at December
31, 1992.
Securities Held-to-Maturity
A comparison of book and market value for the securities held-to-maturity
category at year-end follows:
<TABLE>
<CAPTION>
1993 1992
Gross Gross Gross Gross
Book Unrealized Unrealized Market Book Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $629,282 $502 $-- $629,784 $579,576 $11,743 $ 13 $591,306
Obligations of States & Political Subdivisions 1,999 80 -- 2,079 1,999 26 -- 2,025
Mortgage-Backed Securities -- -- -- -- 173,782 -- 4,599 169,183
Other Securities 28,781 147 18 28,910 40,036 1,893 170 41,759
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Securities Held-to-Maturity $660,062 $729 $18 $660,773 $795,393 $13,662 $4,782 $804,273
</TABLE>
41
<PAGE>
There were no sales of securities held-to-maturity during 1993, compared with
$33 million in 1992. Gross gains and losses on the sale of these securities
were $108 thousand and $595 thousand, respectively, in 1992.
The maturity distribution of securities held-to-maturity at year-end follows:
<TABLE>
<CAPTION>
December 31, 1993
--------------------------------------------------
Obligations
of States
U.S. Treasury and Political Other
Securities Subdivisions Securities Total
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Within 1 year
Book $629,282 $ -- $15,151 $644,433
Market 629,784 -- 15,163 644,947
Yield* 3.43% -- 4.33% --
After 1 but within 5 years
Book -- -- 2,976 2,976
Market -- -- 2,983 2,983
Yield* -- -- 3.98% --
After 5 but within 10 years
Book -- -- 1,745 1,745
Market -- -- 1,855 1,855
Yield* -- -- 4.09% --
After 10 years
Book -- 1,999 8,909 10,908
Market -- 2,079 8,909 10,988
Yield* -- 6.50% 6.00% --
- - --------------------------------------------------------------------------------
Total Securities Held-to-Maturity
Book $629,282 $1,999 $28,781 $660,062
Market 629,784 2,079 28,910 660,773
Yield* 3.43% 6.50% 4.79% --
</TABLE>
* Weighted-average yield to maturity at December 31, 1993. Obligations of
states and political subdivisions are not reported on a tax-equivalent basis.
The "Other Securities" category consists primarily of floating-rate notes, and
preference shares of United Kingdom companies. Also included under this
category are investments for which there is no readily available market value
quotation, such as Federal Reserve Bank stock. These securities, which amounted
to $8.9 million at December 31, 1993, and $12.3 million at December 31, 1992,
have their year-end book values included as an approximation of their market
values in the table above.
U.S. Treasury securities and mortgage-backed securities pledged to secure
deposits and other borrowings amounted to $271.2 million on December 31, 1993,
and $320.0 million on December 31, 1992.
42
<PAGE>
NOTE 3. LOANS
- - --------------------------------------------------------------------------------
The following schedule reflects loans by type at year-end:
<TABLE>
<CAPTION>
Loan Type 1993 1992
- - -------------------------------------------------------------------------
<S> <C> <C>
Commercial and Financial $ 412,006 $ 369,885
Real Estate-Commercial/Construction 388,442 533,685
Residential Mortgage 1,149,363 529,382
Home Equity 234,049 273,586
Consumer 82,819 107,382
Foreign 255,396 371,497
- - -------------------------------------------------------------------------
Loans 2,522,075 2,185,417
Less: Unearned Discount (Unamortized Premium)
and Net Deferred Fees (6,058) 4,360
- - -------------------------------------------------------------------------
Total Loans, Net $2,528,133 $2,181,057
</TABLE>
A summary of nonperforming and renegotiated loans, loans contractually past
due 90 days or more and potential problem loans at year-end follows:
<TABLE>
<CAPTION>
1993 1992
- - ----------------------------------------------
<S> <C> <C>
Nonaccrual Loans $130,174 $205,425
Renegotiated Loans 30,299 11,806
Past Due Loans 3,319 1,424
Potential Problem Loans 14,279 41,555
</TABLE>
At December 31, 1993, the Corporation implemented a narrower definition of
In-Substance Foreclosure as required by regulatory agencies, see Note 1,
"Summary of Significant Accounting Policies."
NOTE 4. RESERVE FOR LOAN LOSSES
- - --------------------------------------------------------------------------------
An analysis of the changes in the reserve for loan losses follows:
<TABLE>
<CAPTION>
1993 1992 1991
- - -------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $84,155 $103,674 $108,887
Provision for Loan Losses 69,290 52,067 43,655
Loans Charged-Off 79,434 73,708 52,544
Less: Recoveries on
Charged-Off Loans 13,021 5,313 3,659
- - -------------------------------------------------------------
Net Charge-Offs 66,413 68,395 48,885
Foreign Exchange
Translation Adjustments (519) (3,191) 17
- - -------------------------------------------------------------
Balance, December 31* $86,513 $ 84,155 $103,674
</TABLE>
* At December 31, 1993, the Corporation implemented a narrower definition of
In-Substance Foreclosure as required by regulatory agencies, see Note 1,
"Summary of Significant Accounting Policies."
The level of the reserve for loan losses as of December 31, 1993, is based on
management's estimates of the amount required to reflect the collection risks in
the loan portfolio based on circumstances and conditions known at the time.
Current economic conditions in the United States and the United Kingdom, along
with the state of the local commercial real estate market, will continue to
affect the Corporation's loan portfolio. This may result in additional
provisions and writedowns related to problem loans. The performance of these
assets will depend on future economic conditions of these markets and the impact
of such conditions on the Corporation's borrowers. However, in the opinion of
management, the reserve for loan losses was adequate at December 31, 1993.
43
<PAGE>
NOTE 5. OTHER REAL ESTATE OWNED
- - --------------------------------------------------------------------------------
Other real estate owned at December 31, 1993, and 1992 is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
- - -------------------------------------------------------------
<S> <C> <C>
Foreclosed Property - Domestic $46,565 $68,280
Foreclosed Property - Foreign 9,954 27,746
- - -------------------------------------------------------------
56,519 96,026
Less: Reserve for Other Real Estate Owned 3,716 6,637
- - -------------------------------------------------------------
Total Other Real Estate Owned, Net $52,803 $89,389
</TABLE>
At December 31, 1993, the Corporation implemented a narrower definition of In-
Substance Foreclosure as required by regulatory agencies. See Note 1, "Summary
of Significant Accounting Policies."
Total net other real estate owned expense and provision for losses on
accelerated disposition of real estate assets totaled $13.5 million and $15.7
million for the years ended December 31, 1993 and 1992, respectively.
Provisions for other real estate owned and accelerated disposition losses
totaled $11.3 million and $11.9 million for the same periods. The remaining
other real estate owned expense was comprised of operating and selling expenses,
combined with losses on sale of other real estate owned, partially offset by
operating revenues and gains on sale of other real estate owned.
Real Estate Assets Subject to Accelerated Disposition and Other Real Estate
Owned
During the third quarter of 1991, the Corporation initiated a strategy to
accelerate the disposition of domestic problem commercial real estate assets.
At its inception, the program included approximately $191.0 million of assets,
consisting of properties securing problem commercial real estate loans,
properties to which the Corporation already had title and in-substance
foreclosed properties. From inception of the program through June 30, 1992, the
Corporation reduced program assets $146.3 million, or 76.6%, through sales, the
return of a loan to performing status and writedowns. At the end of the second
quarter of 1992, the Corporation discontinued the asset disposition program and
transferred the remaining $44.3 million of assets to loans receivable and other
real estate owned at fair value.
Reserve for Other Real Estate Owned
An analysis of the changes in the reserves for other real estate owned,
including the reserve for losses on real estate assets subject to accelerated
disposition, follows:
<TABLE>
<CAPTION>
1993 1992
- - -------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $ 6,637 $49,176
Additions:
Provision for OREO losses 11,330 11,923
Other 2,330 1,718
- - -------------------------------------------------------------
Total Additions 13,660 13,641
Deductions:
Loss on sales and selling expenses 735 33,868
Charge-offs 14,516 19,294
Other 1,221 1,996
- - -------------------------------------------------------------
Total Deductions 16,472 55,158
Foreign Exchange Translation Adjustments (109) (1,022)
- - -------------------------------------------------------------
Balance, December 31 $ 3,716 $ 6,637
</TABLE>
44
<PAGE>
NOTE 6. TRANSACTION WITH RELATED PARTIES
- - --------------------------------------------------------------------------------
The Corporation and its banking subsidiaries have had and expect to have
transactions in the ordinary course of business with many of the Corporation's
directors, executive officers, their associates and family members.
During 1993, Allbritton Communications Company ("ACC"), a company indirectly
wholly owned by Mr. Allbritton (Chairman of the Board and CEO of the
Corporation), paid Riggs-Washington $259 thousand to lease space in two office
buildings owned by Riggs-Washington. In early 1992, ACC exercised its option to
extend one of the leases through 1996. The second lease expired in December
1993 and is being renewed pursuant to a three-year renewal option. ACC also
reimbursed Riggs-Washington $1 thousand for use of its dining room during 1993.
Perpetual Corporation, also indirectly owned by Mr. Allbritton, reimbursed
Riggs-Washington $2 thousand for use of its fitness facility during 1993.
Riggs-Washington, through advertising agencies, purchases advertising time
from various Washington metropolitan area television stations, including
WJLA-TV, an affiliate of a major network, and NewsChannel 8, a cable television
program service. WJLA-TV is a division of ACC and NewsChannel 8 is a division
of ALLNEWSCO, Inc., both of which are indirectly wholly owned by Mr. Allbritton.
During 1993, Riggs-Washington through advertising agencies, purchased $266
thousand in advertising time from WJLA-TV and $19 thousand in advertising time
from NewsChannel 8. The amounts that Riggs-Washington, through advertising
agencies, paid to WJLA-TV and NewsChannel 8 represent an immaterial portion of
its gross revenues for 1993.
Riggs-Washington has in the past sold participations in commercial real estate
loans to University State Bank ("University"), a Texas bank that is indirectly
wholly owned by Mr. Allbritton. The participations sold to University were in
loans bearing floating rates of interest. The purchase price of each of the
participations was equal to the outstanding principal amount of the portion of
the loan purchased. Riggs-Washington receives a servicing fee of 0.25% on each
of the loans in which participations were sold to University and, in some
transactions, shared a portion of the loan fees with University. No loan
participations were sold to University during 1993. On December 31, 1993, there
were $17 million in loan participations outstanding to University. As of that
date, University's total assets were $217.1 million and its total loans
outstanding were $96.5 million.
The table below reflects information concerning loans by banking subsidiaries
of the Corporation to directors and executive officers of the Corporation, their
associates and family members, and directors of Riggs-Washington and Riggs AP,
their associates and family members. In addition to the amounts set forth in
the table, the Corporation's banking subsidiaries had $7.7 million of letters of
credit outstanding at December 31, 1993. There were no loans included in the
table below that were nonaccrual, past due, restructured or potential problems
at December 31, 1993.
In the opinion of management, these credit transactions did not, at the time
they were entered into, involve more than the normal risk of collectibility or
present other unfavorable features.
<TABLE>
<CAPTION>
December 31, Amounts December 31,
1992 Additions Collected 1993
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans to Directors, Executive Officers
and family members $17,761 $ 856 $ 610 $18,007
Loans guaranteed by Directors 34 -- 34 --
Loans to companies of which Directors
were principal stockholders or
directors 29,295 51,472 40,748 40,019
- - ------------------------------------------------------------------------------
Total Loans $47,090 $52,328 $41,392 $58,026
Percent of Loans, Net 2.16% 2.30%
</TABLE>
45
<PAGE>
NOTE 7. PREMISES AND EQUIPMENT
- - --------------------------------------------------------------------------------
Investments in premises and equipment at year-end were as follows:
<TABLE>
<CAPTION>
1993 1992
- - ------------------------------------------------------
<S> <C> <C>
Premises and Land $ 138,171 $137,155
Furniture and Equipment 65,080 67,355
Leasehold Improvements 59,718 62,580
Accumulated Depreciation
and Amortization (101,873) (92,904)
- - ----------------------------------------------------
Subtotal 161,096 174,186
Capital Leases 9 256
Accumulated Amortization (7) (48)
- - ----------------------------------------------------
Total Premises and Equipment $ 161,098 $174,394
</TABLE>
Depreciation and amortization expense amounted to $12.9 million in 1993, $14.0
million in 1992 and $14.3 million in 1991.
The Corporation is committed to the following future minimum lease payments
under non-cancelable operating lease agreements covering equipment and premises.
These commitments expire intermittently through 2009 in varying amounts. The
total minimum lease payments under these commitments at December 31, 1993, were
as follows:
<TABLE>
<CAPTION>
Operating
Leases
- - -----------------------------------------
<S> <C>
1994 $14,950
1995 14,212
1996 10,607
1997 6,133
1998 5,449
1999 and after 18,049
- - -----------------------------------------
Total Minimum Lease Payments $69,400
</TABLE>
Total minimum operating lease payments included in the preceding table have
not been reduced by future minimum payments from sublease rental agreements that
expire intermittently through 1999. Minimum sublease rental income for 1994
totals approximately $3.4 million. Rental expense for all operating leases
(cancelable and non-cancelable) consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
- - --------------------------------------------------------
<S> <C> <C> <C>
Minimum Rentals $15,961 $17,686 $18,663
Rental Income (2,847) (3,914) (3,945)
- - ------------------------------------------------------
Net Rental Expense for
Operating Leases $13,114 $13,772 $14,718
</TABLE>
46
<PAGE>
NOTE 8. TIME DEPOSITS, $100 THOUSAND OR MORE
- - --------------------------------------------------------------------------------
The following table reflects the year-end balances and maturities for the
Corporation's time deposits in domestic offices of $100 thousand or more:
<TABLE>
<CAPTION>
1993 1992
- - ---------------------------------------------------
<S> <C> <C>
Certificates of Deposit:
Due within three months $ 94,665 $100,483
Three to six months 39,313 44,569
Six to twelve months 23,276 22,502
Over twelve months 13,045 10,637
- - -------------------------------------------------
Total $170,299 $178,191
</TABLE>
Average time deposits of $100 thousand or more in domestic offices were $317
million in 1993, 5.9% below the $337 million for 1992.
Interest expense related to time deposits of $100 thousand or more in domestic
offices amounted to $5.5 million in 1993, $10.3 million in 1992 and $21.9
million in 1991.
The majority of time deposits in foreign offices were in denominations of $100
thousand or more.
Note 9. Borrowings
- - --------------------------------------------------------------------------------
Short-Term Borrowings
Short-term borrowings outstanding at year-end and other related information
follow:
<TABLE>
<CAPTION>
Federal Funds Purchased U.S. Treasury Demand Notes
and Repurchase Agreements and Other Short-Term Borrowings
1993 1992 1991 1993 1992 1991
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31 $302,330 $ 52,241 $ 74,704 $151,697 $ 88,079 $ 51,181
Average amount outstanding* 164,899 87,339 99,120 67,731 40,235 91,395
Average rate paid* 2.77% 2.86% 5.10% 2.79% 3.18% 5.39%
Maximum amount outstanding at any
month end 302,330 252,821 190,556 151,697 100,733 254,725
</TABLE>
* Average amounts are based on daily balances. Average rates are computed on
actual interest expense divided by average amounts outstanding.
Federal funds purchased consist of borrowings from other financial institutions
that have maturities ranging from one to 180 days. Repurchase agreements are
transactions with customers and brokers secured by either securities or resale
agreements, which generally mature within 30 days. U.S. Treasury demand notes
consist of treasury tax and loan account funds transferred to interest-bearing
demand notes with no fixed maturity subject to call by the Federal Reserve.
Other short-term borrowings are borrowings from other financial institutions.
Long-Term Debt
Long-term debt outstanding at year-end and other related information follow:
<TABLE>
<CAPTION>
Balance Outstanding
Interest Rate December 31,
December 31, 1993 1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Parent Corporation:
Floating-Rate Subordinated Notes due 1996 5.25%* $ 51,500 $ 51,500
Floating-Rate Subordinated Capital Notes
due 1996 5.25* 95,300 95,300
Subordinated Debentures due 2009 9.65 66,525 66,525
- - --------------------------------------------------------------------------------
Total Long-Term Debt $213,325 $213,325
</TABLE>
* Minimum rate in effect according to indentures.
47
<PAGE>
Floating-Rate Subordinated Notes Due 1996
The Floating-Rate Subordinated Notes due 1996 (the "Subordinated Notes") were
issued in the Euromarket on September 18, 1984, carry interest at rates
determined quarterly by a formula based upon the London Interbank Offered Rate
("LIBOR") and are subject to a minimum rate of 5.25%.
During 1991, the Corporation purchased, on the open market and at a discount,
$8.5 million of the Subordinated Notes, resulting in pretax gains of $2.5
million.
Floating-Rate Subordinated Capital Notes Due 1996
The Floating-Rate Subordinated Capital Notes due 1996 (the "Subordinated Capital
Notes") were originally issued in the Euromarket on December 18, 1985, carry
interest at rates determined quarterly by a formula based upon LIBOR and are
subject to a minimum rate of 5.25%. Under the indenture related to the
Subordinated Capital Notes, the Corporation was required to issue common stock
or perpetual preferred stock totaling $95.3 million before the maturity date of
the notes. This requirement was fulfilled during 1993.
During 1991, the Corporation purchased, on the open market and at a discount,
$4.7 million of the Subordinated Capital Notes, resulting in pretax gains of
$1.7 million.
Fixed-Rate Subordinated Debentures Due 2009
On June 6, 1989, the Corporation issued $100 million of 9.65% Subordinated
Debentures due June 15, 2009. The debentures may not be redeemed prior to
maturity and are unsecured subordinated obligations of the Corporation. In
April 1990, the Corporation purchased, on the open market and at a discount,
$33.5 million of the Subordinated Debentures, resulting in pretax gains of $7.7
million.
Offering of Fixed-Rate Subordinated Notes Due 2006
Subsequent to year-end, the Corporation sold $125 million of 8.5% Subordinated
Notes, due 2006. The notes were priced at par and are not callable for five
years. A shelf registration statement relating to the Fixed-Rate Subordinated
Notes was declared effective on January 13, 1994. The Corporation intends to
use the net proceeds from the offering, approximately $120.7 million, to
redeem equal amounts of the Subordinated Notes and Subordinated Capital Notes
due in 1996, which are discussed above.
NOTE 10. COMMITMENTS AND CONTINGENCIES
- - --------------------------------------------------------------------------------
Off-Balance-Sheet Risk
In the normal course of business, the Corporation enters into various
transactions that, in accordance with generally accepted accounting principles,
are not included on the consolidated statements of condition. These
transactions are referred to as "off-balance-sheet commitments" and differ from
the Corporation's balance sheet activities in that they do not give rise to
funded assets or liabilities. The Corporation offers such products to enable
its customers to meet their financing objectives, as well as to manage their
interest and currency rate risk. Offering these products provides the
Corporation with fee income. The Corporation also enters into these activities
to manage its own risks arising from movements in interest and currency rates
and as a part of its trading activities. These transactions involve varying
degrees of credit, interest-rate or liquidity risk in excess of amounts
recognized on the consolidated statements of condition. The Corporation seeks
to minimize its exposure to loss under these commitments by subjecting them to
credit approval and monitoring procedures, as well as by entering into
offsetting or matching positions to hedge interest-rate and currency-rate risk.
Outstanding commitments and contingent liabilities that do not appear in the
consolidated financial statements at December 31, 1993, are as follows:
<TABLE>
<S> <C>
Commitments to Extend Credit:
Commercial $277,466
Real Estate
Commercial/Construction 38,360
Mortgage 137,080
Home Equity 194,774
- - ----------------------------------------------
Total Real Estate 370,214
- - ----------------------------------------------
Consumer 66,181
- - ----------------------------------------------
Total Commitments to Extend Credit $713,861
Letters of Credit:
Commercial $ 56,860
Standby - Financial 35,159
Standby - Performance 49,032
- - ----------------------------------------------
Total Letters of Credit $141,051
Foreign Currency Contracts:
Commitments to Purchase $ 33,935
Commitments to Sell 204,428
Interest-Rate Agreements -
Notional Principal Amount:
Interest-Rate Swaps 273,552
</TABLE>
48
<PAGE>
Commitments to Extend Credit
The Corporation enters into contractual commitments to extend credit, normally
with fixed expiration dates or termination clauses, at specified rates and for
specific purposes. Customers use credit commitments to ensure that funds will
be available for working capital purposes, for capital expenditures and to
ensure access on funds at specified terms and conditions. Substantially all of
the Corporation's commitments to extend credit are contingent upon customers'
meeting and satisfying other conditions at the time of loan funding. The
contractual amount of commitments to extend credit for which the Corporation has
received a commitment fee, or which were otherwise legally binding, was $714
million at December 31, 1993; approximately 73% of these commitments were
scheduled to expire within one year. Since many of the commitments are expected
to expire without being drawn upon, the total contractual amounts do not
necessarily represent future funding requirements.
Letters of Credit and Foreign Guarantees
There are two major types of letters of credit: commercial and standby letters
of credit. A commercial letter of credit is normally a short-term instrument
used to finance a commercial contract for the shipment of goods from seller to
buyer. This type of letter of credit ensures prompt payment to the seller in
accordance with its terms. Although the commercial letter of credit is
contingent upon the satisfaction of specified conditions, it represents a
current exposure if the customer defaults on the underlying transaction.
Commercial letters of credit issued by the Corporation totaled $57 million at
December 31, 1993.
A standby letter of credit can be either financial or performance based.
Financial standby letters of credit obligate the Corporation to disburse funds
to a third party if the Corporation's customer fails to repay an outstanding
loan or debt instrument under the terms of the agreement with the beneficiary.
Performance standby letters of credit obligate the Corporation to disburse funds
if the customer fails to perform some contractual or non-financial obligation
under the terms of the agreement with the beneficiary. The Corporation's
policies generally require that all standby letter of credit arrangements
contain security and debt covenants similar to those contained in loan
agreements. At December 31, 1993, financial standby letters of credit and
performance standby letters of credit totaled $35 million and $49 million,
respectively.
Capital Markets
Capital markets products include commitments to purchase and sell foreign
exchange, futures, forward and option contracts, and interest-rate agreements.
The Corporation utilizes these products to manage its exposure to movements in
interest and currency rates, and to generate revenue by assisting customers in
managing their own exposure to such rate movements. There are several types of
risk associated with these products: credit or performance risk, currency-rate
risk, and interest-rate risk. Performance risk relates to the ability of a
counterparty to meet its obligations under the contract. Performance risk is
limited to the cost of replacing the contract at current rates -- not the
security, foreign currency to be exchanged, or the notional principal, which is
the amount upon which interest rates are applied to determine the payment
streams under interest-rate agreements.
Currency-rate risk and interest-rate risk arise from changes in the market
value of positions stemming from movements in currency and interest rates. The
Corporation limits its exposure to market value changes by entering into
offsetting or matching positions. The Corporation establishes and monitors
limits of exposure on unmatched positions.
Commitments to purchase and sell foreign exchange facilitate the management of
currency-rate risk by ensuring that at some future date a customer will have a
specific currency at a specified rate. The Corporation enters into these
contracts to serve its customers, to hedge its own risk positions associated
with its asset and liability management, and as part of its trading activities.
In addition to entering into offsetting or matching positions to offset foreign
currency-rate risk, the Corporation has established limits on the aggregate
amount of open positions, forward trading gaps and total volume of contracts
outstanding, as well as counterparty and country limits. At December 31, 1993,
commitments to purchase and sell foreign exchange were $34 million and $204
million, respectively. The difference between these positions is effectively
hedged through the Corporation's Sterling equity investment in Riggs AP.
Interest-rate agreements, which include interest-rate swaps, forward-rate
agreements, and other interest-rate products, obligate two parties to exchange,
or contingently exchange, interest payment flows calculated with reference to
one or more interest-rate indices. Interest-rate agreements enable the
Corporation to manage the interest-rate sensitivities of underlying assets or
liabilities. There were no forward-rate agreements outstanding at December 31,
1993. Interest-rate swaps obligate two parties to exchange periodic payments
based upon the difference between two designated or formula rates of interest
applied to the same notional principal amount. Similar to other off-balance-
sheet products, the notional amounts should not be taken as a measure of
exposure because the replacement cost of the contract generally is much smaller
than the face value or notional amount of the contract. The Corporation's
notional principal of interest-rate swaps at December 31, 1993, totaled $274
million.
Concentration of Credit Risk
The Corporation regularly assesses the quality of its commercial credit
exposures and assigns risk ratings to substantially all extensions of credit in
its commercial, real estate and international portfolios. The Corporation seeks
to identify as early as possible problems that may result from economic
downturns or deteriorating conditions in certain markets or with respect to
specific credits. Lending officers have the primary responsibility for
monitoring credit quality, identifying problem
49
<PAGE>
credits and recommending changes in risk ratings. When signs of credit
deterioration are detected, credit or other specialists may become involved to
minimize the Corporation's exposure to future credit losses. The Loan Review
Department provides an independent assessment of credit ratings, credit quality
and the credit management process. This is achieved through regular reviews of
loan documentation, collateral, risk ratings and problem loan classifications.
Credit risk is reduced by maintaining a loan portfolio that is diverse in
terms of type of loan, industry concentration, geographic distribution, and
borrower concentration, thus minimizing the adverse impact of any single event
or set of occurrences.
Geographically, the Corporation's loans are concentrated in the Baltimore-
Washington, D.C.-Richmond corridor and the United Kingdom. All categories of
loans in the domestic portfolio are predominantly to borrowers located in the
Washington metropolitan area. Loans originated by the Corporation's United
Kingdom subsidiary represent 77% of foreign loans, and are predominantly to
borrowers located in the United Kingdom.
At December 31, 1993, approximately $538 million or 21% of the Corporation's
loan portfolio consisted of loans secured by real estate (excluding single-
family residential loans), approximately 70% and 30% of which were secured by
properties located in the Washington, D. C. area and in the United Kingdom,
respectively. In addition, the Corporation had $52.8 million in other real
estate owned at December 31, 1993.
These commercial and real estate markets have been experiencing problems,
including declining occupancy and rental rates and property values, which have
resulted in increases in the delinquency and default rates on the Corporation's
commercial real estate loan portfolio and as such have caused significant
losses. Additional provisions and writedowns will depend on future economic
conditions in the United States and United Kingdom, as well as changes in the
local real estate market and the impact of these events on the Corporation's
borrowers. Domestic real estate-commercial loans represent the only industry in
which the Corporation has a concentration of credit risk in excess of 10% of
year-end loans. These loans totaled $388.4 million and represented 15.4% of the
total loan portfolio at December 31, 1993. Approximately half of the
Corporation's real estate-commercial portfolio is for the development of
residential properties. The remainder of the portfolio is for the development
of commercial properties, including office buildings, warehouses, shopping
centers and hotels.
Approximately 54.9% of the Corporation's loan portfolio is secured by the
primary residence of the borrower. At December 31, 1993, residential mortgage
loans were $1.15 billion and home equity loans were $234.0 million.
Other Commitments
During the first quarter of 1991, the Corporation entered into a ten-year
outsourcing agreement with Integrated Systems Solutions Corp. ("ISSC"), a
subsidiary of IBM, pursuant to which ISSC is managing the operations directly
associated with computer and telecommunications functions of the Corporation.
Payments for the remaining seven years of the contract are approximately $116
million. The base payment for 1993 was $14.8 million. Total expense under this
contract for 1993 was $13.9 million, compared with total expenses of $14.1
million and $13.5 million for 1992 and 1991, respectively.
Litigation
In the normal course of business, the Corporation is involved in various types
of litigation, including litigation with borrowers who are in default under
their loan agreements. In certain instances, borrowers have asserted or
threatened counterclaims and defenses based on various "lender liability"
theories. In the opinion of management, based on its assessment and
consultation with outside counsel, litigation that is currently pending against
the Corporation will not have a material impact on the financial condition or
future operations of the Corporation, as a whole.
50
<PAGE>
NOTE 11. RESERVE BALANCES, FUNDS RESTRICTIONS, REGULATORY MATTERS AND CAPITAL
REQUIREMENTS
- - --------------------------------------------------------------------------------
Reserve Balances
Riggs-Washington, Riggs-Virginia and Riggs-Maryland must maintain reserves
against deposits and Eurocurrency liabilities in accordance with Regulation D of
the Federal Reserve Act. The total average reserve balances amounted to $102.2
million in 1993 and $82.8 million in 1992.
Funds Restrictions
The Federal Reserve Act ("The Act") imposes restrictions upon the amount of
loans or advances that banks, such as Riggs-Washington, Riggs-Virginia and
Riggs-Maryland, may extend to the Corporation and its non-bank subsidiaries
("affiliates"). Loans by any bank to any one affiliate are limited to 10% of
the bank's capital stock and surplus. Further, aggregate loans by any one bank
to all of its affiliates may not exceed 20% of its capital stock and surplus.
In addition, the Act requires that borrowings by affiliates be secured by
designated amounts of collateral.
The National Bank Act limits dividends payable by national banks without
approval of the Comptroller of the Currency to net profits (as defined) retained
in the current and preceding two calendar years. Riggs-Washington had combined
net losses (as defined) of approximately $91 million, for 1993 and 1992. Thus,
Riggs-Washington's ability to pay dividends to the Corporation in 1994 will
depend on whether its earnings exceed such losses. Riggs-Virginia and Riggs-
Maryland had combined net income (as defined) of approximately $6 million and
$600 thousand, for 1993 and 1992, respectively. The payment of dividends by the
Corporation's national bank subsidiaries may also be affected by other factors,
such as requirements for the maintenance of adequate capital. In addition, the
Comptroller of the Currency is authorized to determine, under certain
circumstances relating to the financial condition of a national bank, whether
the payment of dividends would be an unsafe or unsound banking practice and to
prohibit payment thereof.
During 1991, Riggs-Virginia did not pay a dividend to the Corporation.
During 1992 and 1993, Riggs-Virginia made dividend payments to the Corporation
totaling $836 thousand and $1.2 million, respectively. Riggs-Washington and
Riggs-Maryland made no dividend payments to the Corporation in 1993, 1992 or
1991.
Regulatory Matters
On May 14, 1993, the Corporation entered into a Memorandum of Understanding with
the Federal Reserve Bank of Richmond ("Reserve Bank") and Riggs-Washington
entered into a Written Agreement with the Office of the Comptroller of the
Currency (the "OCC"). The Memorandum of Understanding and the Written Agreement
were the result of regulatory concern over financial and operational weaknesses
and continued losses related primarily to the Corporation's domestic and United
Kingdom commercial real estate exposure.
Under the terms of the Memorandum of Understanding, the Corporation will
notify the Reserve Bank in advance of dividend declarations, the issuance and/or
redemption of long-term debt and use of cash assets in certain circumstances.
The Corporation is also required to submit plans and reports to the Reserve Bank
relating to capital, asset quality, loan loss reserves and operations, including
contingency measures if projected operational results do not occur. In
addition, the Audit Committee of the Corporation's Board of Directors will
review and submit a report to the Reserve Bank on the adequacy of data submitted
to it and the Board, and the Corporation has appointed a compliance committee of
Directors to monitor performance under the Memorandum of Understanding.
In accordance with the terms of the Written Agreement, Riggs-Washington has
appointed a committee of its Board of Directors to monitor and coordinate
compliance with the agreement, implement recommendations previously made by an
independent management consultant, and continue to implement the action plan and
work plan previously adopted by Riggs-Washington. Riggs-Washington has met a
number of the requirements of the agreement, including filing amended call
reports; adopting policies and procedures relating to the preparation of call
reports; adopting a capital plan that has been approved by the OCC (that
requires, among other things, a minimum total risk-based capital ratio of
10.00%, a minimum Tier I risk-based capital ratio of 6.00% and a minimum
leverage ratio of 5.00%); submitting for review by the OCC the results of
BankStart '93; and appointing a new president and chief executive officer.
Capital Requirements
Under the Federal Reserve Board's risk-based capital guidelines, bank holding
companies are required to meet a minimum ratio of qualifying total (combined
Tier I and Tier II) capital to risk-weighted assets of 8.00%, at least half of
which must be composed of core (Tier I) capital elements. The Corporation's
total and core capital ratios were 16.81% and 10.76%, respectively, at December
31, 1993, as compared with 14.70% and 8.31% at December 31, 1992.
The Federal Reserve Board has established an additional capital adequacy
guideline referred to as the leverage ratio, which measures Tier I capital to
quarterly average assets. The most highly rated bank holding companies are
required to maintain a minimum leverage ratio of 3.00%. However, most bank
holding companies, including the Corporation, are expected to maintain an
additional cushion of at least 100 to 200 basis points above the 3.00% minimum.
The actual required ratio for individual bank holding companies is based on the
Federal Reserve Board's assessment of the company's asset quality, earnings
performance, interest-rate risk and liquidity. The Federal Reserve Board has
not advised the Corporation of a specific leverage ratio requirement. The
Corporation's leverage ratio was 6.03% at December 31, 1993.
51
<PAGE>
As a result of enactment of the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), the Federal Reserve Board and the other
federal bank regulatory agencies have placed a greater emphasis on capital
ratios of banking organizations. FDICIA expressly conditions the ability of a
banking organization to engage in certain activities on the maintenance of
capital levels equal to or in excess of minimum guidelines and imposes
restrictions on banking organizations that fail to meet minimum guidelines. In
addition, the Federal Reserve Board has shown an increased emphasis on the
leverage ratio as a regulatory tool.
The Corporation's policy is to ensure that its operating subsidiaries are
capitalized within the appropriate regulatory guidelines. During 1993, the
Corporation contributed $38 million to Riggs-Washington to ensure its
capitalization would be in excess of the regulatory guidelines. The Corporation
has no current plans to make any substantial capital contributions to its
subsidiary banks. The three national bank subsidiaries of the Corporation are
subject to minimum capital ratios prescribed by the Office of the Comptroller of
the Currency that are the same as those of the Federal Reserve Board.
In the event that the Corporation is unable to meet the projections in its
capital plan, or any of its banking subsidiaries falls below the minimum capital
requirements, additional regulatory action may be taken. With respect to the
banking subsidiaries, the OCC can take action under the "prompt corrective
action" provision of FDICIA. The classification from strongest to weakest
include "well capitalized," "adequately capitalized," "under capitalized,"
"significantly undercapitalized" and "critically undercapitalized." Such
actions can vary depending on the severity of the capital position, and may
include the refiling of a capital plan, restrictions on growth, and other
actions the regulators may deem to be appropriate in order to achieve compliance
with capital requirements. Each of the bank subsidiaries of the Corporation
exceeds current minimum regulatory capital requirements, and qualifies, at a
minimum, as "adequately capitalized" under the FDICIA regulations. In
addition, under Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to their subsidiary banks and
to commit resources to support such banks. The Corporation's ability to provide
financial strength to its subsidiaries will depend on, among other things, its
liquidity position and Federal Reserve approval.
At December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This pronouncement
requires, among other items, the reporting of unrealized gains and losses in
securities available for sale in stockholders' equity, contrary to previous
accounting policy, which reported such unrealized gains and losses in earnings.
At December 31, 1993, the Corporation reported net unrealized gains of $1.28
million in stockholders' equity. The year-end net unrealized gains were
excluded from Tier I and Tier II capital for regulatory reporting purposes per
current regulatory agency guidance. The regulatory agencies are reviewing the
current reporting guidelines in relationship to SFAS No. 115, and may amend the
applicable regulatory capital rules to include SFAS No. 115-related adjustments
in equity. Thus, the capital ratios disclosed at December 31, 1993, do not
include the $1.28 million in net unrealized gains from the implementation of
SFAS No. 115.
The following table reflects the actual and required minimum ratios for the
Corporation and its national banking subsidiaries:
<TABLE>
<CAPTION>
Capital Ratios
December 31, Required
1993 1992 Minimums
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Riggs National Corporation
Tier I 10.76% 8.31% 4.00%
Combined Tier I and Tier II 16.81 14.70 8.00
Leverage* 6.03 4.60 3.00
The Riggs National Bank of Washington, D.C.
Tier I 10.69 11.29 6.00
Combined Tier I and Tier II 11.97 12.56 10.00
Leverage* 6.13 6.32 5.00
The Riggs National Bank of Virginia
Tier I 17.05 16.80 4.00
Combined Tier I and Tier II 18.31 18.05 8.00
Leverage* 8.94 8.42 3.00
The Riggs National Bank of Maryland
Tier I 11.46 11.73 4.00
Combined Tier I and Tier II 12.71 12.98 8.00
Leverage* 6.69 6.20 3.00
</TABLE>
* Most bank holding companies and national banks, including the Corporation and
the Corporation's national bank subsidiaries, are expected to maintain an
additional cushion of at least 100 to 200 basis points above the 3.00%
minimum.
52
<PAGE>
NOTE 12. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- - --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:
Cash and Money Market Assets
For short-term investments that reprice or mature in 90 days or less, the
carrying amount is a reasonable estimate of fair value.
Securities Held-to-Maturity and Securities Available for Sale
For U.S. Treasury securities, municipal securities and mortgage-backed
securities, fair values are based on quoted market prices or dealer quotes. For
"Other Securities," fair value equals quoted market prices, if available. If a
quoted market price is not readily available, as is the case for $8.9 million of
Federal Reserve Bank stock at December 31, 1993, management believes that the
assets carrying value approximates fair value.
Loans
The fair value of loans is estimated by discounting the expected future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. For short-
term loans, defined as those maturing or repricing in 90 days or less,
management believes the carrying amount is a reasonable estimate of fair value.
Criticized loans are predominantly collateral-dependent; therefore, their
carrying value net of related reserves is a reasonable estimate of fair value.
Deposit Liabilities
The fair value of demand deposit, savings and NOW accounts, and money market
deposit accounts is the amount payable on demand at the reporting date. The
fair value of investment and negotiable certificates of deposit, and foreign
time deposits with a repricing or maturity date extending beyond 90 days is
estimated using a discounted cash flow at the rates currently offered for
deposits of similar remaining maturities. The value attributable to the
Corporation's core deposits representing the relatively low-cost funding
afforded by core depositor relationships has not been considered in the
calculation of fair value of deposit liabilities.
Short-Term Borrowings
For those short-term liabilities defined as those repricing or maturing in 90
days or less, the carrying amount is a reasonable estimate of fair value.
Long-Term Debt
For the Corporation's long-term debt, fair values are based on dealer quotes.
Commitments to Extend Credit, and Standby and Commercial Letters of Credit
The fair value of loan commitments and letters of credit, both standby and
commercial, is assumed to equal the carrying value, which is immaterial.
Extensions of credit under these commitments, if exercised, would result in
loans priced at market terms.
Foreign Exchange Contracts
The fair value of foreign exchange contracts represents the net asset or
liability already recorded by the Corporation, since these contracts are
revalued on a daily basis.
Interest-Rate Agreements
The fair value of interest-rate agreements is equal to the replacement value of
the agreement. The replacement value is defined as the amount the Corporation
would receive or pay to terminate the agreement at the reporting date, taking
into account the current market rate of interest and the current
creditworthiness of the swap counterparties.
The estimated fair values of the Corporation's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
--------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due
from banks $ 210,639 $ 210,639 $ 315,241 $ 315,241
Money market assets 405,946 405,946 1,263,715 1,263,715
Securities available
for sale 708,137 708,137 159,592 160,720
Securities held-to-
maturity 660,062 660,773 795,393 804,273
Loans 2,528,133 2,454,962 2,181,057 2,144,610
Reserve for
loan losses 86,513 -- 84,155 --
- - -------------------------------------------------------------------------------
Loans, net 2,441,620 2,454,962 2,096,902 2,144,610
Financial liabilities:
Deposits 3,773,824 3,776,108 4,437,598 4,441,650
Short-term borrowings 454,027 454,027 140,500 140,500
Long-term debt 213,325 232,409 213,325 195,709
Off-Balance-Sheet
commitments - asset
(liability):
Foreign exchange
contracts 232 232 8,181 8,181
Interest-rate agreements
Interest-rate swaps 113 (1,676) 235 (5,118)
Forward-rate agreements (91) (91) -- (62)
</TABLE>
Changes in interest rates, assumptions or estimation methodologies may have a
material effect on these estimated fair values. As a result, the Corporation's
ability to actually realize these derived values cannot be assured. Management
is concerned that reasonable comparability between financial institutions may
not be likely because of the wide range of
53
<PAGE>
permitted valuation techniques and numerous estimates that must be made,
given the absence of active secondary markets for many of the financial
instruments. This lack of uniform valuation methodologies introduces a greater
degree of subjectivity to these estimated fair values. In addition, the
estimated fair values exclude non-financial assets, such as premises and
equipment, and certain intangibles, such as core deposit premiums and customer
relationships. Thus, the aggregate fair values presented do not represent the
underlying value of the Corporation.
NOTE 13. NONINTEREST INCOME AND EXPENSE
- - --------------------------------------------------------------------------------
Noninterest Income
Noninterest income in the consolidated statement of income includes the
following components:
<TABLE>
<CAPTION>
Noninterest Income 1993 1992 1991
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Trust Income $ 28,857 $ 27,530 $ 27,295
Service Charges 39,343 38,436 40,859
International Noncredit Commissions and Fees 9,448 9,458 7,672
Foreign Exchange Income 2,801 4,993 8,194
Interest on Tax Receivable -- 5,903 --
Other Noninterest Income 8,060 9,880 8,941
Securities Gains, Net 24,141 34,213 13,692
- - -----------------------------------------------------------------------------
Total Noninterest Income $112,650 $130,413 $106,653
</TABLE>
Noninterest Expense
Noninterest expense in the consolidated statements of income includes the
following components:
<TABLE>
<CAPTION>
Noninterest Expense 1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and Wages $ 69,978 $ 74,145 $ 78,444
Pension and Other Employee Benefits 18,048 15,141 14,389
Occupancy Expense, Net 25,763 28,354 30,152
Furniture and Equipment Expense 11,153 12,792 14,296
Provision for Losses on Accelerated Disposition
of Real Estate Assets -- -- 49,800
Other Noninterest Expense:
Advertising and Public Relations 5,971 6,129 5,922
Legal Fees 4,024 5,121 5,749
Other Real Estate Owned Expense, Net 13,513 15,703 14,240
FDIC Insurance Expense 10,309 8,789 9,056
Data Processing Services 16,585 17,684 17,387
Restructuring Expense 34,554 -- --
Other Noninterest Expense 56,854 54,545 50,736
- - --------------------------------------------------------------------------------
Total Noninterest Expense $266,752 $238,403 $290,171
</TABLE>
Noninterest expense for 1993 included restructuring expense of $34.6 million,
of which $20.8 million related to Riggs AP. The Riggs AP charge consists of
severance of $1.6 million, the writeoff of the foreign currency translation
account associated with Riggs-Washington's investment in Riggs AP of $11.5
million and $7.7 million of other restructuring expenses. The $13.8 million of
restructuring expense related to BankStart '93 consisted of $7.0 million in
consulting fees, $4.0 million in severance related costs, $1.0 million of
occupancy-related costs and $1.8 million of other costs. These costs represent
management's best estimate of the total costs of the restructurings and were
accrued during 1993. These estimates are evaluated by management on an ongoing
basis and, as adjustments become known, will be revised accordingly.
54
<PAGE>
NOTE 14. INCOME TAXES
- - --------------------------------------------------------------------------------
In February 1992, SFAS No. 109, "Accounting for Income Taxes" was issued. SFAS
No. 109 establishes financial accounting and reporting standards for the effects
of income taxes that result from the Corporation's activities during the current
and preceding years. It requires an asset and liability approach in accounting
for income taxes versus the deferred method previously used under Accounting
Principles Board No. 11 ("APB No. 11").
Under SFAS No. 109, deferred income taxes are recorded using enacted tax laws
and rates for the years in which taxes are expected to be paid. In addition,
SFAS No. 109 provides for the recognition of deferred tax assets based on tax
loss and tax credit carryforwards, to the extent that realization of such assets
is more likely than not. Under APB No. 11 deferred tax assets were generally
recognized only to the extent realization of such assets was assured beyond a
reasonable doubt, which was generally demonstrated by the Corporation's ability
to carry back tax losses or tax credits to recover taxes previously paid. The
Corporation's net realizable deferred tax asset at December 31, 1992, under APB
No. 11 was $10.1 million.
The Corporation adopted SFAS No. 109 on January 1, 1993, and the effect of
adoption was not material. Income tax provisions for 1992 and 1991 were
determined under APB No. 11 and have not been restated to reflect adoption of
SFAS No. 109.
Income (loss) before income taxes relating to the operations of domestic
offices (on shore) and foreign offices (off shore) was as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Domestic Offices $(28,980) $ 3,920 $(51,162)
Foreign Offices (59,591) (26,041) (16,706)
- - ---------------------------------------------------------------
(88,571) (22,121) (67,868)
Less: Extraordinary Item,
Gain on Purchase of Debt -- -- 4,209
- - ---------------------------------------------------------------
Total $(88,571) $(22,121) $(72,077)
</TABLE>
The current and deferred portions of the income tax provision (benefit),
were as follows:
<TABLE>
<CAPTION>
1993 1992* 1991*
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Current Provision (Benefit):
Federal $ (24) $(5,645) $ (7,682)
State 254 257 (726)
Foreign (188) (239) (6,633)
- - ----------------------------------------------------------------------
Total Current Provision (Benefit) 42 (5,627) (15,041)
Deferred Provision (Benefit):
Federal 5,309 4,453 7,014
State -- -- 673
Foreign 289 105 2,947
- - ---------------------------------------------------------------------
Total Deferred Provision (Benefit) 5,598 4,558 10,634
- - ---------------------------------------------------------------------
Provision for Income Tax
Expense (Benefit) 5,640 (1,069) (4,407)
Less: Tax Expense on
Extraordinary Item -- -- 1,723
- - ---------------------------------------------------------------------
Applicable Income Tax Expense (Benefit) $5,640 $(1,069) $ (6,130)
</TABLE>
* Restated to reflect reclassification of current and deferred taxes based upon
actual timing differences determined upon filing of tax returns.
Reconciliation of Statutory Tax Rates to Effective Tax Rates:
<TABLE>
<CAPTION>
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax computed at Federal statutory rate of 34%
for 1993, 1992 and 1991 $(30,114) $(7,522) $(23,076)
Add (Deduct):
State tax, net of Federal tax benefit 168 170 (35)
Tax-exempt security interest (44) (44) (201)
Tax-exempt loan interest (1,688) (2,445) (2,996)
Tax-exempt interest disallowance 45 76 135
Amortization of fair value adjustments 100 100 100
Stock dividend deduction (33) (19) (43)
Tax benefit on transfer of foreign assets not
recognized 3,119 -- --
Tax benefit on foreign exchange translation
adjustment not recognized 5,591 --
Tax benefit of net operating loss not recognized 27,504 7,979 20,686
Other, net 992 636 1,023
- - --------------------------------------------------------------------------------
Provision for Income Tax Expense (Benefit) $ 5,640 $(1,069) $ (4,407)
- - --------------------------------------------------------------------------------
Effective Tax Rate (6.4)% 4.8% 6.5%
</TABLE>
55
<PAGE>
The components of income tax liabilities (assets) that result from temporary
differences in the recognition of revenue and expenses for income tax and
financial reporting purposes at December 31, 1993, follow:
Sources of Temporary Differences Resulting in Deferred Tax Liabilities (Assets):
<TABLE>
<CAPTION>
1993
- - -------------------------------------------------
<S> <C>
Excess tax over book depreciation $ 1,056
Pension plan and post-retirement 1,032
- - -------------------------------------------------
Total Deferred Tax Liabilities 2,088
Accrual to cash basis conversion (366)
Provision for losses (34,445)
Other real estate owned (14,314)
Deferred loan fees (459)
Alternative minimum tax carryover (5,072)
Other tax credit carryovers (886)
Net operating loss carryover (22,479)
Other, net (3,296)
- - -------------------------------------------------
Total Deferred Tax Assets (81,317)
Valuation Allowance 74,694
- - -------------------------------------------------
Net Deferred Tax Liability (Asset) $(4,535)
</TABLE>
At December 31,1992, and 1993, the Corporation maintained a valuation
allowance of approximately $42.2 million and $74.7 million, respectively, to
reduce the net deferred tax asset to $10.1 million and $4.5 million,
respectively.
The net change in the valuation allowance for deferred tax assets during 1993
was an increase of $32.5 million. The change related to an additional $14.9
million of loss carryforwards generated in 1993, $12.0 million of additional
unbenefited regular deferred assets, and a $5.6 million reduction in existing
deferred tax assets resulting from changes in financial forecasts and a tax
refund from a loss carryback.
The deferred tax assets include, among other items, investment tax credit
carryforwards for Federal income tax purposes of $0.8 million that are available
to reduce future Federal income tax through 2004, $0.1 million in foreign tax
credit carryforwards that are available to reduce future income tax through
1997, and alternative minimum tax credit carryforwards of $5.1 million that are
available to reduce future Federal regular income taxes over an indefinite
period. In addition, the deferred tax assets include the benefit of tax loss
carryforwards for $22.5 million, detailed as follows:
<TABLE>
<CAPTION>
Expire Expire Expire
in 1998 in 2007 in 2008 Unlimited Total
- - ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal Taxes $4,544 $ -- $3,392 $ -- $ 7,936
State Taxes -- 918 3,500 -- 4,418
Foreign Taxes -- -- -- 10,125 10,125
- - ---------------------------------------------------------------
Total $4,544 $918 $6,892 $10,125 $22,479
</TABLE>
56
<PAGE>
NOTE 15. COMMON AND PREFERRED STOCK
- - --------------------------------------------------------------------------------
The Corporation is authorized to issue 50 million shares of Common Stock, par
value $2.50 (the "Common Stock"). At December 31, 1993, the Corporation had
30,222,014 shares issued and outstanding.
On October 21, 1993, the Corporation issued and sold 5,000,000 shares of
Common Stock, at a price of $7.75 per share, in transactions exempt from the
registration requirements of the Securities Act of 1933. The net proceeds from
the sale of the Common Stock totaled approximately $37.0 million and will be
used for general purposes, which may include the payment of debt service, the
payment of dividends on preferred stock, investments in or extensions of credit
to its subsidiaries, and for other working capital purposes.
Pursuant to a rights offering that commenced on December 12, 1991, and expired
on January 23, 1992, the Corporation sold 11,445,000 shares of Common Stock,
representing all of the shares offered, at a subscription price of $4.375 per
share. Net proceeds from the offering were $49.1 million.
The Corporation is authorized to issue 25 million shares of Preferred Stock,
the conditions of which will be set at the time of issuance. As of December 31,
1993, 4,764,537 shares of Preferred Stock were issued and outstanding.
On October 21, 1993, the Corporation issued 4,000,000 shares of 10.75%
Noncumulative Perpetual Preferred Stock, Series B ("Series B Preferred"), in
transactions exempt from the registration requirements of the Securities Act of
1933. The Series B Preferred shares have a liquidation preference of $25 per
share, no preemptive rights, no public market and are non-voting (subject to
certain limited exceptions). The Series B Preferred is not redeemable prior to
October 1, 1998, at which time, at the Corporation's option, it may redeem in
whole or in part the Series B Preferred at prices ranging from $27.25 in October
1998 to $25.00 in October 2008 and thereafter, plus accrued but unpaid
dividends. There is no mandatory redemption or sinking fund obligation
associated with the Series B Preferred. Dividends are payable on February 1,
May 1, August 1 and November 1 of each year and are noncumulative. The Board of
Directors of the Corporation declared a dividend of $0.746528 per share, payable
on February 1, 1994, to shareholders of record on January 17, 1994, which covers
the initial dividend period commencing October 21, 1993, and ending January 31,
1994. The proceeds from the Series B Preferred, net of expenses, was $95.3
million.
During the second quarter of 1992, the Corporation issued 764,537 shares of
7.5% Cumulative Convertible Preferred Stock, Series A ("Series A Preferred"), to
Norwich Union Insurance Group, a major insurance company headquartered in
Norwich, England. The Series A Preferred was issued in exchange for debt of
Riggs AP Bank Ltd., the Corporation's indirectly owned United Kingdom banking
subsidiary. The Series A Preferred have no preemptive rights and are non-
voting, subject to certain limited exceptions. The Series A Preferred shares
have a liquidation preference of $25 per share and are convertible at the
holder's option into 2,002,141 shares of common stock, at $9.5465 per share.
The Series A Preferred Shares are redeemable, in whole or in part, at the
Corporation's option, beginning July 1, 1996, at $26.125 per share and declining
to $25.00 per share after July 1, 2002, plus any accrued but unpaid dividends.
There is no mandatory redemption or sinking fund obligation associated with the
Series A Preferred. Dividends are payable on February 1, May 1, August 1, and
November 1 of each year and are cumulative. There is currently no public market
for the Series A Preferred. All dividends related to the Series A Preferred
have been paid.
57
<PAGE>
NOTE 16. BENEFIT PLANS
- - --------------------------------------------------------------------------------
PENSION PLANS
Riggs National Corporation
Under the Corporation's noncontributory defined benefit pension plan, benefits
are normally based on years of service and the average of the highest base
annual salary for a consecutive five-year period prior to retirement.
Reconciliation of Funded Status and Prepaid Pension Cost
<TABLE>
<CAPTION>
1993 1992 1991
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit
obligation:
Vested benefits $(61,010) $(50,017) $(44,016)
Nonvested benefits (3,415) (2,666) (2,659)
- - ---------------------------------------------------------------
Total $(64,425) $(52,683) $(46,675)
- - ---------------------------------------------------------------
Actuarial present value
of projected benefit
obligation, for service
rendered to date $(77,243) $(62,878) $(59,754)
Plan assets at fair value --
primarily unit funds 66,780 64,624 63,527
- - ---------------------------------------------------------------
Plan assets in excess
of projected benefit
obligation $(10,463) $ 1,746 $ 3,773
Unrecognized net loss
from past experience
different from that
assumed and effects of
changes in assumptions 19,757 9,040 6,681
Unrecognized balance
of initial net asset (2,920) (3,651) (4,382)
Unrecognized prior
service cost (1,278) (1,602) 9
- - ---------------------------------------------------------------
Prepaid pension cost $ 5,096 $ 5,533 $ 6,081
</TABLE>
The Corporation's funding policy is to contribute an amount at least equal to
the minimum required contribution under the Employee Retirement Income Security
Act.
The assets of the Corporation's pension plan consist of an Immediate
Participation Guarantee contract with a life insurance company and funds held in
trust by the Corporation. The monies held in trust are invested primarily in
fixed-income and equity pooled funds.
Net Periodic Pension Cost
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 1,773 $ 1,828 $ 1,589
Interest cost on projected
benefit obligation 5,427 5,149 4,887
Actual return on plan assets (7,840) (5,039) (9,957)
Net amortization and deferral 1,285 (1,323) 3,800
- - -----------------------------------------------------------
Net periodic pension cost $ 645 $ 615 $ 319
- - -----------------------------------------------------------
Assumptions used in
accounting for the plan were: 1993 1992 1991
- - -----------------------------------------------------------
Weighted-average discount rate 7.50% 8.75% 9.0%
Rates of increase in
compensation levels 5.0% 5.0% 6.0%
Expected long-term
rate of return on plan assets 10.0% 10.0% 10.0%
- - -----------------------------------------------------------
</TABLE>
Riggs AP Bank
The Riggs AP pension plan provides monthly pension payments upon normal
retirement at age 60 or upon later retirement to substantially all employees.
Reduced pensions are available for early retirement or disability. The plan has
a final-pay benefit formula that takes into account years of service.
58
<PAGE>
Reconciliation of Funded Status and Prepaid Pension Cost
<TABLE>
<CAPTION>
1993 1992 1991
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested benefits $(10,767) $ (9,868) $(11,117)
Nonvested benefits -- (5) (4)
- - ------------------------------------------------------------------
Total $(10,767) $ (9,873) $(11,121)
- - ------------------------------------------------------------------
Actuarial present value
of projected benefit
obligation, for service
rendered to date $(12,105) $(10,637) $(12,751)
Plan assets at fair value --
primarily unit funds 14,876 13,028 14,719
- - ------------------------------------------------------------------
Plan assets in excess of
projected benefit obligation $ 2,771 $ 2,391 $ 1,968
Unrecognized net loss (gain)
from past experience
different from that assumed
and effects of changes in
assumptions (2,638) (1,938) (971)
Unrecognized balance of
initial net asset (1,499) (1,742) (2,411)
- - ------------------------------------------------------------------
Accrued pension cost $ (1,366) $ (1,289) $ (1,414)
</TABLE>
Riggs AP's annual pension costs are determined based on the Projected Unit
Credit Cost Method with specific amortization schedules for the various
categories of plan liabilities. Actuarial assumptions are selected based on
guidelines established by the Financial Accounting Standards Board.
Net Periodic Pension Cost
<TABLE>
<CAPTION>
1993 1992 1991
- - -----------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 489 $ 625 $ 879
Interest cost on projected
benefit obligation 917 1,009 902
Actual return on plan assets (1,021) (1,158) (1,054)
Net amortization and deferral (208) (237) (236)
- - -----------------------------------------------------------
Net periodic pension cost $ 177 $ 239 $ 491
- - -----------------------------------------------------------
<CAPTION>
Assumptions used in
accounting for the plan were: 1993 1992 1991
- - -----------------------------------------------------------
<S> <C> <C> <C>
Weighted-average discount rate 8.0% 9.0% 9.0%
Rates of increase in
compensation levels 7.0% 7.0% 7.0%
Expected long-term
rate of return on plan assets 9.0% 9.0% 9.0%
- - -----------------------------------------------------------
</TABLE>
Supplemental Executive Retirement Plan. Effective January 1, 1993, the
Corporation adopted a Supplemental Executive Retirement plan to provide
supplemental retirement income and preretirement death benefits to certain key
employees of the Corporation and its subsidiaries at the level of senior vice
president and above. The Compensation Committee of the Board of Directors has
the authority to determine the amount of benefits to be paid upon the
participant's retirement, termination of employment or death and the vesting
schedule under which such benefits will be paid. Under parameters adopted by
the Compensation Committee, the amount of benefits is based on the participant's
corporate title, functional responsibility and service as a member of the Board
of Directors. Upon the later of a participant's termination of employment or
attainment of age 62, the participant will receive the vested portion of the
supplemental retirement benefit, payable for life of the participant, but for no
more than 15 years. In the case of the death of a participant while employed,
the participant's beneficiary will receive the supplemental benefit for 15
years.
---------------------------------------------
POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Corporation and its subsidiaries
provide certain health care and life insurance benefits for retired employees.
Substantially all active employees may become eligible for benefits if they
reach normal retirement age or if they retire earlier with at least ten years'
service. Similar benefits for active employees are provided through an
insurance company and several health maintenance organizations. The Corporation
recognizes the cost of providing those benefits by expensing the annual
insurance premiums, which were $6.6 million in 1993, $6.4 million in 1992 and
$5.6 million in 1991.
In December 1990, the Financial Accounting Standards Board issued SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
The Statement requires a significant change in the Corporation's historical
practice of accounting for postretirement benefits on a pay-as-you-go (cash)
basis by requiring accrual of the expected cost of benefits during the years
that the employee renders the necessary service. The Statement is generally
effective for fiscal years beginning after December 15, 1992, except that its
application to plans outside the United States (such as Riggs AP Bank Ltd.'s
plan) was delayed to fiscal years beginning after December 15, 1994. The
Corporation implemented SFAS No. 106 on January 1, 1993, resulting in an
accumulated transition obligation of $13.0 million, which the Corporation
elected to recognize on a delayed basis over a 20-year period. The Corporation
experienced an increase of approximately $1.5 million in 1993 for postretirement
health and life insurance expenses due to the implementation of SFAS No. 106,
which included $652 thousand relating to the amortization of the transition
obligation.
59
<PAGE>
Three benefit plans are provided by the Corporation to retired employees:
Medical and Hospitalization Insurance, Dental Insurance and Life Insurance.
Medical and Hospitalization Insurance. Retirees are eligible for postretirement
benefits if they have been employed by the Corporation for at least 10 years at
the time of their retirement. Participants pay a portion of their premium.
Participants are in two general categories of benefits. Retirees over the age
of 65 participate in a "coordination of benefits"- style plan in which Medicare
is their primary insurer and the plan pays the remainder of medical and
hospitalization insurance up to prescribed coverage limits. Retirees under 65
are in one of two plans. They may continue to participate in HMO's if they
participated in the HMO as an active employee. The majority of retirees
participate in a "point-of-service" plan that offers participants health care
through a network of affiliated providers at pre-negotiated prices to the plan
and low HMO-style co-payments to the participants. The plan also allows
participants to use a non-network-affiliated provider, but the participants must
pay a deductible and receive only a partial reimbursement of their expenses.
Dental Insurance. Retirees become eligible for dental insurance on the same
schedule as medical and hospitalization. Participants pay a portion of their
premium. There are two plan options from which participants may choose. The
first option is an indemnity plan that offers partial reimbursement up to an
annual limit. The second plan offers services through a network of affiliated
providers; the participant is liable only for a small co-payment when using a
network-affiliated provider.
Life Insurance. Retirees receive a life insurance benefit equal to one-half of
their last annual salary with the Corporation.
The net periodic cost for postretirement health and life insurance benefits
during 1993 included the following:
<TABLE>
<CAPTION>
Amount
- - -------------------------------------------------------------------------------
<S> <C>
Service Cost $ 596
Interest Cost 1,128
Other 652
- - -------------------------------------------------------------------------------
Total $ 2,376
</TABLE>
The funding status of the postretirement plans and the amounts recognized in the
Corporation's Statements of Financial Condition at December 31, 1993, follow:
<TABLE>
<CAPTION>
Amount
- - --------------------------------------------------------------------------------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 10,865
Fully eligible active plan participants 1,867
Other active plan participants 2,343
- - --------------------------------------------------------------------------------
Total 15,075
Unrecognized transition obligation (12,377)
Unrecognized net loss (1,298)
- - --------------------------------------------------------------------------------
Accrued postretirement benefit cost $ 1,400
</TABLE>
The assumed health care cost trend rate ranged from 8% to 12% for 1993,
gradually decreasing to 6% by the year 2003 and remaining constant thereafter.
A discount rate of 7.5% was used to determine the accumulated postretirement
benefit obligation. Increasing the assumed health care cost trend rate by one
percentage point would increase the accumulated postretirement benefit
obligation at December 31, 1993, by $1.0 million, and increase the net periodic
postretirement benefit cost for 1993 by $100 thousand.
----------------------------------------------------------------------------
1993 STOCK OPTION PLAN
On March 10, 1993, the Board of Directors of the Corporation adopted the "1993
Stock Option Plan" (the "Plan"), which was approved at the May 14, 1993, Annual
Meeting of Shareholders. The Plan provides for the issuance of options to
purchase shares of Common Stock of the Corporation. Key employees of the
Corporation and certain subsidiaries may be granted either incentive or
nonqualified stock options. Generally, the exercise price cannot be less than
the fair market value of the Common Stock at the date of the grant. The
aggregate number of shares of Common Stock reserved for issuance upon exercise
of options granted under the Plan is 1,250,000. Unless previously terminated by
the Board of Directors, the Plan will terminate on March 10, 2003. A summary of
the stock option activity for 1993 follows:
<TABLE>
<CAPTION>
Stock Average Price
Options Per Share
- - -------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1992 -- $ --
Granted 742,000 8.53
Exercised -- --
Terminated -- --
- - --------------------------------------------------------
Outstanding at December 31, 1993 742,000 $8.53
</TABLE>
60
<PAGE>
NOTE 17. FOREIGN ACTIVITIES
- - --------------------------------------------------------------------------------
Foreign activities are those conducted with customers domiciled outside the
United States, regardless of the location of the banking office. Foreign
business activity is substantially integrated within the Corporation. As a
result, it is not possible to definitively classify the business of most
operating activities as entirely domestic or foreign. The Foreign Consolidated
Statements of Condition shown below reflect the portion of the Corporation's
consolidated statements of condition derived from transactions with customers
who are domiciled outside the United States.
<TABLE>
<CAPTION>
Foreign Consolidated Statements of
Condition December 31,
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Deposits with Banks in Foreign Countries:
Interest Bearing $144,446 $ 538,822 $ 435,884
Other 6,775 7,024 8,630
- - --------------------------------------------------------------------------------
Total Deposits with Banks in Foreign
Countries 151,221 545,846 444,514
Securities Available for Sale 1,915 -- --
Securities Held-to-Maturity 13,659 41,896 57,592
- - --------------------------------------------------------------------------------
Loans to Foreign Customers:
Governments and Official Institutions 28,113 29,319 27,377
Banks and Financial Institutions 14,999 24,734 28,481
Commercial and Industrial and Commercial
Property 192,576 290,517 578,760
Other 19,530 25,999 23,886
- - --------------------------------------------------------------------------------
Total Loans, Net of Unearned Discount 255,218 370,569 658,504
Less: Reserve for Loan Losses 27,785 25,481 31,434
- - --------------------------------------------------------------------------------
Loans, Net 227,433 345,088 627,070
Pool Funds Provided, Net/1/ 202,960 45,028 282,710
Other Assets 65,467 98,839 127,983
- - --------------------------------------------------------------------------------
Total Assets $662,655 $1,076,697 $1,539,869
Liabilities
Foreign Deposits:
Banks in Foreign Countries $ 50,507 $ 165,660 $ 338,654
Governments and Official Institutions 142,769 150,249 223,529
Other 410,900 678,425 768,181
- - --------------------------------------------------------------------------------
Total Deposits/2/ 604,176 994,334 1,330,364
Short-Term Borrowings 373 31 850
Long-Term Debt -- -- 18,802
Other Liabilities 58,106 82,332 189,853
- - --------------------------------------------------------------------------------
Total Liabilities $662,655 $1,076,697 $1,539,869
Supplemental Data on Foreign Deposits
Demand $138,241 $ 127,813 $ 133,521
Savings, NOW and Money Market 252,785 334,773 301,755
Time/3/ 213,150 531,748 895,088
- - --------------------------------------------------------------------------------
Total Foreign Deposits $604,176 $ 994,334 $1,330,364
</TABLE>
/1/ Pool Funds Provided. Net are amounts contributed by foreign activities to
fund domestic activities.
/2/ Total foreign deposits in domestic offices totaled $395.4 million, $480.0
million and $520.4 million at December 31, 1993, 1992 and 1991,
respectively.
/3/ The majority of time deposits are in amounts of $100 thousand or more.
61
<PAGE>
The table to the right reflects changes in the reserve for loan losses on
loans to customers domiciled outside the United States. Although this reserve
is allocated to foreign operations, it is available to the entire loan
portfolio. Allocations of the provision for loan losses are based upon actual
charge-off experience and additional amounts deemed necessary in relation to
risks inherent in the foreign loan portfolio.
The table below reflects foreign assets by geographical location for the last
three years and selected categories of the Consolidated Statements of Income.
Loans made to, or deposits placed with, a branch of a foreign bank located
outside the foreign bank's home country are considered as loans to, or deposits
with, the foreign bank. To measure profitability of foreign activity, the
Corporation has established a funds pricing system for units that are users or
providers of funds. Noninterest income and expense allocations are based on
earning assets and interest-bearing liabilities identified with each
geographical area.
Foreign Reserve for Loan Losses
<TABLE>
<CAPTION>
1993 1992 1991
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $25,481 $31,434 $21,015
Provisions for Loan Losses 29,511 32,534 21,896
Loans Charged-Off 31,400 35,575 13,172
Less: Recoveries on
Charged-Off Loans 4,712 279 1,678
- - ------------------------------------------------------------------
Net Charge-Offs 26,688 35,296 11,494
Foreign Exchange
Translation Adjustments (519) (3,191) 17
- - ------------------------------------------------------------------
Balance, December 31 $27,785 $25,481 $31,434
</TABLE>
Geographical Performance
<TABLE>
<CAPTION>
Income (Loss) Net
Total Assets Total Total before Income
December 31, Revenue Expenses Income Taxes (Loss)
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Middle East and Africa 1993 $ 51,703 $ 10,575 $ 11,536 $ (961) $ (1,023)
1992 32,719 12,162 13,400 (1,238) (1,174)
1991 41,803 15,675 13,689 1,986 1,666
- - ----------------------------------------------------------------------------------------------------
Europe 1993 296,693 33,538 92,604 (59,066) (62,829)
1992 671,297 66,826 96,981 (30,155) (28,609)
1991 1,070,712 125,821 143,628 (17,807) (14,936)
- - ----------------------------------------------------------------------------------------------------
Asia/Pacific 1993 11,755 4,681 2,823 1,858 1,976
1992 10,234 4,750 6,064 (1,314) (1,246)
1991 11,278 12,768 13,193 (425) (357)
- - ---------------------------------------------------------------------------------------------------
South and Central America 1993 22,200 10,278 6,028 4,250 4,521
1992 42,904 12,957 9,517 3,440 3,263
1991 32,697 21,099 16,127 4,972 4,170
- - ---------------------------------------------------------------------------------------------------
Carribean 1993 73,456 1,774 1,745 29 31
1992 244,522 3,639 3,968 (329) (312)
1991 96,749 6,030 4,580 1,450 1,216
- - ---------------------------------------------------------------------------------------------------
Other 1993 3,888 2,065 1,520 545 579
1992 29,993 1,609 1,478 131 124
1991 3,920 1,580 2,032 (452) (379)
- - ---------------------------------------------------------------------------------------------------
Total Foreign* 1993 $ 459,695 $ 62,911 $116,256 $(53,345) $ (56,745)
1992 1,031,669 101,943 131,408 (29,465) (27,954)
1991 1,257,159 182,973 193,249 (10,276) (8,620)
- - ---------------------------------------------------------------------------------------------------
Percentage of Foreign 1993 10% 17% 25% n/a% n/a%
To Consolidated 1992 20 22 27 n/a n/a
1991 23 31 30 n/a n/a
</TABLE>
* Total foreign assets at December 31, 1993, 1992 and 1991, exclude net pool
funds contributed by foreign activities to fund domestic activities.
62
<PAGE>
NOTE 18. PARENT CORPORATION FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Dividends from Subsidiaries $ 1,594 $ 1,003 $ 141
Interest on Loans -- 15 275
Interest on Time Deposit Placements 173 1,156 2,211
Interest on Resale Agreements 1,755 1,520 5,901
Interest and Dividends on Securities
Held-to-Maturity 809 533 2,304
Other Operating Income 2,502 3,720 2,635
- - --------------------------------------------------------------------------------
Total Revenues 6,833 7,947 13,467
Operating Expenses
Interest Expense 15,009 14,603 20,462
Other Operating Expenses 3,995 12,922 3,873
- - --------------------------------------------------------------------------------
Total Operating Expenses 19,004 27,525 24,335
Income (Loss) before Taxes and Extraordinary
Item (12,171) (19,578) (10,868)
Applicable Income Tax (Benefit) Expense* (1,780) (2,999) (3,976)
- - --------------------------------------------------------------------------------
Income (Loss) before Undistributed Earnings
(Losses) of Subsidiaries (10,391) (16,579) (6,892)
Undistributed Earnings (Losses) of
Subsidiaries (83,820) (4,473) (59,055)
- - --------------------------------------------------------------------------------
Income (Loss) before Extraordinary Item, Net
of Tax (94,211) (21,052) (65,947)
Extraordinary Item - Gain on Purchase of
Debt, Net of Tax -- -- 2,486
- - --------------------------------------------------------------------------------
Net Income (Loss) $(94,211) $(21,052) $(63,461)
</TABLE>
* Applicable income taxes are provided for based on parent corporation income
only and do not reflect the tax expense or benefit of the subsidiaries'
operations.
Statements of Condition
<TABLE>
<CAPTION>
December 31,
1993 1992
- - --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and Due from Banks $ 1,548 $ 1,879
Time Deposit Placements -- 20,000
Intercompany Resale Agreements 157,960 --
Resale Agreements -- 56,500
Securities Held-to-Maturity 134,783 --
Premises and Equipment, Net 10,258 10,834
Investment in Subsidiaries 323,266 358,409
Other Assets 14,992 12,585
- - --------------------------------------------------------------------------------
Total Assets $642,807 $460,207
Liabilities
Intercompany Repurchase Agreements $134,660 $ --
Other Liabilities 1,625 1,462
Long-Term Debt 213,325 213,325
- - --------------------------------------------------------------------------------
Total Liabilities 349,610 214,787
Stockholders' Equity
Preferred Stock - $1.00 Par Value
Shares Authorized - 25,000,000 at December 31, 1993, and
1992; Liquidation Preference - $25 per share
Cumulative Convertible Series A - 764,537 shares at
December 31, 1993, and 1992 765 765
Noncumulative Perpetual Series B - 4,000,000 shares at
December 31, 1993 4,000 --
Common Stock - $2.50 Par Value
Shares Authorized - 50,000,000 at December 31, 1993, and
1992
Shares Issued - 31,122,812 at December 31, 1993, and
26,122,812 at December 31, 1992 77,807 65,307
Surplus:
Preferred Stock 109,541 18,232
Common Stock 156,023 131,572
Foreign Exchange Translation Adjustments (1,527) (11,413)
Undivided Profits (Accumulated Deficit) (30,965) 64,680
Unrealized Net Gain on Securities Available for Sale 1,276 --
Treasury Stock - 900,798 shares at December 31, 1993,
and 1992 (23,723) (23,723)
- - --------------------------------------------------------------------------------
Total Stockholders' Equity 293,197 245,420
- - --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $642,807 $460,207
</TABLE>
63
<PAGE>
Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (94,211) $(21,052) $ (63,461)
Adjustments to Reconcile Net Income (Loss) to
Net Cash
Provided by (Used in) Operating Activities:
Provisions for Loan Losses, OREO,
Depreciation, Purchase Accounting
and Deferred Taxes 1,537 9,667 1,727
Decrease (Increase) in Other Assets (2,407) (3,734) (2,688)
Increase (Decrease) in Other Liabilities 163 1,007 (25,351)
Undistributed (Earnings) Losses of
Subsidiaries 83,820 4,473 59,055
- - --------------------------------------------------------------------------------
Total Adjustments 83,113 11,413 32,743
- - --------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating
Activities (11,098) (9,639) (30,718)
- - --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Securities Held-to-Maturity -- 500 22,000
Purchase of Securities Held-to-Maturity (134,783) -- --
Net Decrease (Increase) in Capital Notes of
Banking Subsidiaries -- 11,598 48,000
Net Decrease (Increase) in Loans -- 3,000 (3,000)
Net Decrease (Increase) in Premises, Net (1) 82 (1,453)
Net Decrease (Increase) in Investment in
Subsidiaries (50,040) (2,188) (98,249)
Other, Net 1,679 1,137 --
- - --------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing
Activities (183,145) 14,129 (32,702)
- - --------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term
Borrowings 134,660 -- (123,749)
Repayments and Purchase of Long-Term Debt -- -- (13,200)
Proceeds from the Issuance of Preferred and
Common Stock 132,260 49,065 --
Dividend Payments (1,434) (358) (2,756)
- - --------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing
Activities 265,486 48,707 (139,705)
- - --------------------------------------------------------------------------------
Effect of Exchange Rate Changes 9,886 (6,211) (6,501)
- - --------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash
Equivalents 81,129 46,986 (209,626)
Cash and Cash Equivalents at Beginning of Year 78,379 31,393 241,019
- - --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 159,508 $ 78,379 $ 31,393
Supplemental Schedule of Noncash Investing
and Financing Activites:
Preferred Stock Issued in Exchange for
Long-Term Debt $ -- $ 18,997 $ --
Supplemental Disclosures:
Interest Paid $ 14,469 $ 14,647 $ 20,568
Income Tax Payments (Refund) -- (7,061) (12,135)
</TABLE>
64
<PAGE>
Report of Independent Public Accountants
To Riggs National Corporation:
We have audited the accompanying consolidated statements of condition of
RIGGS NATIONAL CORPORATION (a Delaware corporation) and its subsidiaries as of
December 31, 1993, and 1992, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1993. These financial statements are the
responsibility of Riggs National Corporation's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
did not audit the financial statements of Riggs AP Bank Limited (an indirect,
wholly owned subsidiary), which statements reflect total assets of 10.3% and
17.4%, and total interest income of 20.7% and 24.5% of the related consolidated
totals for 1992 and 1991, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Riggs AP Bank Limited, is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Riggs National Corporation and its
subsidiaries as of December 31, 1993, and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen & Co.
Washington, D.C.,
January 31, 1994
65
<PAGE>
Supplemental Financial Data
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1993
(Unaudited) for the Years Ended
December 31, 1993, 1992 and 1991 First Second Third Fourth
(In Thousands, Except Per Share Amounts) Quarter Quarter Quarter Quarter
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income $ 67,784 $ 65,290 $61,961 $61,916
Interest Expense 33,829 32,044 29,511 26,746
- - --------------------------------------------------------------------------------
Net Interest Income 33,955 33,246 32,450 35,170
Less: Provision for Loan Losses 14,200 49,193 3,772 2,125
- - --------------------------------------------------------------------------------
Net Interest Income (Loss) after
Provision for Loan Losses 19,755 (15,947) 28,678 33,045
Noninterest Income 22,250 47,274 21,887 21,239
Provision for Losses on Accelerated
Disposition of Real Estate Assets -- -- -- --
Noninterest Expense 69,461 98,660 47,510 51,121
- - --------------------------------------------------------------------------------
Income (Loss) before Taxes and
Extraordinary Item (27,456) (67,333) 3,055 3,163
Applicable Income Tax (Benefit) Expense 165 5,300 93 82
- - --------------------------------------------------------------------------------
Income (Loss) before Extraordinary
Item, Net of Taxes (27,621) (72,633) 2,962 3,081
Extraordinary Item - Gain on Purchase
of Debt, Net of Taxes -- -- -- --
- - --------------------------------------------------------------------------------
Net Income (Loss) $(27,621) $(72,633) $ 2,962 $ 3,081
- - --------------------------------------------------------------------------------
Earnings (Loss) Per Share:
Income (Loss) before Extraordinary
Item, Net of Taxes $ (1.11) $ (2.89) $ 0.10 $ 0.09
Extraordinary Item - Gain on Purchase
of Debt, Net of Taxes -- -- -- --
- - --------------------------------------------------------------------------------
Earnings (Loss) Per Share $ (1.11) $ (2.89) $ 0.10 $ 0.09
</TABLE>
CONSOLIDATED FINANCIAL RATIOS AND OTHER INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income to Average:
Earning Assets (2.18)% (.46)% (1.18)% (.89)% .67%
Total Assets (1.91) (.40) (1.04) (.80) .60
Stockholders' Equity (42.84) (7.99) (25.19) (16.63) 11.90
- - --------------------------------------------------------------------------------------------------------
Average
Loans to Deposits 51.65% 55.33% 64.64% 71.38% 71.34%
Stockholders' Equity to Loans 10.08 10.26 7.36 8.35 8.88
Stockholders' Equity to Deposits 5.21 5.68 4.76 5.96 6.33
Stockholders' Equity to Assets 4.46 5.00 4.15 4.82 5.03
- - --------------------------------------------------------------------------------------------------------
At December 31:
Reserve for Loan Losses to Net Loans 3.42% 3.86% 3.45% 2.84% 1.04%
Common Stockholders 4,488 4,481 4,389 4,365 4,421
Employees 1,667 2,147 2,187 2,426 2,397
Banking Offices 75 76 75 76 65
- - --------------------------------------------------------------------------------------------------------
Per Share Data:
Dividend Payout Ratio n/a n/a n/a n/a 43.68%
Average Common Shares Outstanding 26,208,315 24,534,063 13,777,014 13,777,014 13,777,014
Book Value per Common Share $5.92 $8.98 $14.88 $20.16 $24.85
- - --------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
1992 1991
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$90,155 $89,017 $79,178 $ 69,190 $141,040 $118,752 $112,755 $102,268
54,464 52,646 45,421 37,073 98,080 81,081 74,758 65,800
- - -----------------------------------------------------------------------------------------------------------
35,691 36,371 33,757 32,117 42,960 37,671 37,997 36,468
6,375 11,657 6,780 27,255 11,271 9,375 17,970 5,039
- - -----------------------------------------------------------------------------------------------------------
29,316 24,714 26,977 4,862 31,689 28,296 20,027 31,429
27,073 30,668 45,180 27,492 27,984 22,494 31,119 25,056
-- -- -- -- -- -- 49,800 --
56,603 57,585 66,860 57,355 59,593 62,982 61,627 56,169
- - -----------------------------------------------------------------------------------------------------------
(214) (2,203) 5,297 (25,001) 80 (12,192) (60,281) 316
(19) (190) 80 (940) (886) (4,414) 958 (1,788)
- - -----------------------------------------------------------------------------------------------------------
(195) (2,013) 5,217 (24,061) 966 (7,778) (61,239) 2,104
-- -- -- -- 1,164 1,322 -- --
- - -----------------------------------------------------------------------------------------------------------
$ (195) $(2,013) $ 5,217 $(24,061) $ 2,130 $ (6,456) $(61,239) $ 2,104
- - -----------------------------------------------------------------------------------------------------------
$ (.01) $ (.08) $ .21 $ (.97) $ .07 $ (.57) $ (4.44) $ .15
-- -- -- -- .08 .10 -- --
- - -----------------------------------------------------------------------------------------------------------
$ (.01) $ (.08) $ .21 $ (.97) $ .15 $ (.47) $ (4.44) $ .15
</TABLE>
QUARTERLY STOCK INFORMATION *
<TABLE>
<CAPTION>
Price Range Dividends
High Low Declared
- - --------------------------------------------------------------------
<S> <C> <C> <C>
1993 Fourth Quarter $ 9.375 $ 7.875 $ --
Third Quarter 9.50 6.25 --
Second Quarter 10.625 7.125 --
First Quarter 11.625 7.75 --
- - --------------------------------------------------------------------
1992 Fourth Quarter $10.125 $ 7.00 $ --
Third Quarter 8.25 6.375 --
Second Quarter 8.625 6.375 --
First Quarter 9.25 4.25 --
- - --------------------------------------------------------------------
1991 Fourth Quarter $ 6.75 $ 3.75 $ --
Third Quarter 8.75 5.875 --
Second Quarter 12.25 7.75 --
First Quarter 13.00 6.63 .05
- - --------------------------------------------------------------------
</TABLE>
* The high and low information listed above represents high and low sales
prices as reported on the NASDAQ National Market System.
67
<PAGE>
THREE-YEAR FOREIGN AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
1993 1992 1991
Average Average Average
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
(In thousands) Balances Expense Rates Balances Expense Rates Balances Expense Rates
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans, Net of Unearned Discounts $319,070 $23,316 7.31% $ 514,688 $54,422 10.57% $ 707,516 $ 85,877 12.14%
Securities 22,600 2,942 13.02 52,361 4,127 7.88 80,822 7,051 8.72
Time Deposits with Other Banks 315,490 14,035 4.45 443,054 23,392 5.28 499,227 46,254 9.27
Pool Funds Provided, Net* 190,348 6,281 3.30 169,161 6,437 3.81 435,226 25,287 5.81
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and
Average Rate Earned 847,508 46,574 5.50 1,179,264 88,378 7.49 1,722,791 164,469 9.55
Less: Reserve for Loan Losses 28,834 19,816 23,584
Cash and Due from Banks 26,714 29,417 40,259
Premises and Equipment, Net 19,038 24,596 13,410
Other Assets 44,309 89,864 104,488
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $908,735 $1,303,325 $1,857,364
Liabilities and Stockholders' Equity
Interest-Bearing Deposits:
Savings, NOW and Money Market $315,119 $ 7,268 2.31% $ 352,167 $11,498 3.27% $ 318,831 $ 15,188 4.76%
Other Time 376,399 22,929 6.09 664,496 57,111 8.59 1,176,185 115,685 9.84
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 691,518 30,197 4.37 1,016,663 68,609 6.75 1,495,016 130,873 8.75
Short-Term Borrowings 389 19 4.84 498 22 4.40 1,431 6 .39
Long-Term Debt -- -- -- 8,837 1,013 11.46 17,773 1,942 10.93
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds
and Average Rate Incurred 691,907 30,216 4.37 1,025,998 69,644 6.79 1,514,220 132,821 8.77
Demand Deposits 143,521 131,858 125,938
Other Liabilities and
Stockholders' Equity 73,307 145,469 217,206
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $908,735 $1,303,325 $1,857,364
Net Interest Income and Spread $16,358 1.13% $18,734 .70% $ 31,648 .78%
Net Interest Margin on Earning Assets 1.93% 1.59% 1.84%
</TABLE>
* Pool Funds Provided, Net are amounts contributed by foreign activities to
fund domestic activities.
Foreign Net Interest Income Changes*
<TABLE>
<CAPTION>
1993 Versus 1992 1992 Versus 1991
Due to Due to Total Due to Due to Total
Rate Volume Change Rate Volume Change
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans (Including Fees) $(13,934) $(17,172) $(31,106) $ (9,634) $(21,821) $(31,455)
Securities 1,873 (3,058) (1,185) (628) (2,296) (2,924)
Time Deposits with Other Banks (3,304) (6,053) (9,357) (18,010) (4,852) (22,862)
Pool Funds Supplied, Net (915) 759 (156) (6,901) (11,949) (18,850)
- - ----------------------------------------------------------------------------------------------------------------------
Total Interest Income (16,280) (25,524) (41,804) (35,173) (40,918) (76,091)
Interest Expense:
Savings, NOW and Money Market Accounts (3,114) (1,116) (4,230) (5,154) 1,464 (3,690)
Other Time Deposits (13,729) (20,453) (34,182) (13,238) (45,336) (58,574)
Short-Term Borrowings 2 (5) (3) 22 (6) 16
Long-Term Debt (506) (507) (1,013) 90 (1,019) (929)
- - ----------------------------------------------------------------------------------------------------------------------
Total Interest Expense (17,347) (22,081) (39,428) (18,280) (44,897) (63,177)
- - ----------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 1,067 $ (3,443) $ (2,376) $(16,893) $ 3,979 $(12,914)
</TABLE>
* The dollar amount of changes in interest income and interest expense
attributable to changes in rate/volume (change in rate multiplied by change
in volume) has been allocated between rate and volume variances based on the
percentage relationship of such variances to each other.
68
<PAGE>
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item pertaining to directors of the Corporation
is included in the Corporation's proxy statement for its 1994 Annual Meeting of
Stockholders. The information required by this Item pertaining to executive
officers of the Corporation is as follows:
<TABLE>
<CAPTION>
EXECUTIVE POSITION AGE
OFFICER*
<S> <C> <C>
Joe L. Allbritton Chairman of the Board and Chief Executive 69
Officer of the Corporation and Chairman of
the Board of Riggs-Washington
Paul M. Homan Vice Chairman of the Board of the Corporation 53
and President and Chief Executive Officer of
Riggs-Washington
Timothy C. Coughlin President of the Corporation 51
John L. Davis Chief Financial Officer of the Corporation 52
and Riggs-Washington
David Lesser General Counsel of the Corporation and 38
Executive Vice President and General Counsel
of Riggs-Washington
Alexander C. Baker Secretary of the Corporation and Senior Vice 48
President, Trust Officer and Secretary of
Riggs-Washington
Randall R. Reeves Senior Executive Vice President and Chief 46
Credit Officer and Head of Special Assets
Group of Riggs-Washington
Joseph W. Barr Executive Vice President of Riggs-Washington 44
-- Head of Retail Banking
Fred L. Bollerer Executive Vice President of Riggs-Washington 51
-- Head of General Banking Group
Paul Cushman, III Executive Vice President of Riggs-Washington 33
-- Head of International Banking Group
George W. Grosz Executive Vice President of Riggs-Washington 56
-- Head of Financial Services Group
Gloria A. Lembo Executive Vice President of Riggs-Washington 44
-- Head of Technology Services Group
S. Dean Lesiak Executive Vice President of Riggs-Washington 41
-- Head of Risk Management
</TABLE>
* Executive officers of Riggs National Corporation, including certain executive
officers of Riggs-Washington, as of March 9, 1994.
69
<PAGE>
Experience of Management
Joe L. Allbritton has been Chairman of the Board and Chief Executive Officer
of the Corporation since 1981. He has served as Chairman of the Board of Riggs-
Washington since 1983 and was the Chief Executive Officer of Riggs-Washington
from 1982 to June 1993. Mr. Allbritton was the beneficial owner of
approximately 33% of the Common Stock of the Corporation as of March 31, 1994.
He also serves as Chairman of the Board of, and is the owner of, Perpetual
Corporation, Westfield News Advertiser, Inc. and University Bancshares.
Paul M. Homan was appointed President and Chief Executive Officer of Riggs-
Washington and Vice Chairman of the Corporation in June 1993. Mr. Homan served
as president and chief execuive officer of First Florida Banks, Inc. of Tampa
from August 1991 through December 1992 before returning to serve as principal of
Homan & Associates, a bank consulting firm which he founded in 1987. Mr. Homan
served as senior adviser to the Comptroller of the Currency in 1990 and 1991, as
executive vice president of Continental Bank Corporation from 1985 to 1987 and
as chairman and chief executive officer of Nevada National Bank from 1983 to
1985. Mr. Homan also worked at the OCC from 1966 to 1983, rising to the
position of senior deputy controller for bank supervision, the OCC's top career
position.
Timothy C. Coughlin has served as President of the Corporation since 1992. He
served as President and Chief Operating Officer of the Riggs-Washington from
1983 to 1992. He has been a Director of the Corporation since 1988 and a
Director of Riggs-Washington since 1983.
John L. Davis joined the Corporation in June 1993 and is Chief Financial
Officer of the Corporation and Senior Vice President and Chief Financial Officer
of Riggs-Washington. Mr. Davis served as Senior Vice President and Controller of
First Florida Bank, N.A. from 1990 to 1992 and as Senior Vice President and
Chief Financial Officer of First Union National Bank of Georgia from 1987 to
1990.
David Lesser has served as General Counsel of the Corporation and Executive
Vice President and General Counsel of Riggs-Washington since 1987.
Alexander C. Baker has served as Secretary of the Corporation and as Secretary
of Riggs-Washington since 1992 and as Senior Vice President and Trust Officer of
Riggs-Washington since 1987.
Randall R. Reeves has served as Senior Executive Vice President and Chief
Credit Officer of Riggs-Washington since 1991. Mr. Reeves was President and
Chief Executive Officer of University Bancshares, Inc. from 1985 to 1992.
Joseph W. Barr joined Riggs-Washington as Executive Vice President in charge
of Retail Banking in June 1993. He served as Executive Vice President in
charge of Retail Banking at First American Metro Corp. from 1992 to June 1993
and as Executive Vice President in charge of Community Banking at Perpetual
Savings Bank, F.S.B. from 1989 to 1992.
Fred L. Bollerer joined Riggs-Washington as Executive Vice President in charge
of the General Banking Group in October 1993. During 1988 and 1989, Mr.
Bollerer was the President and Chief Operating Officer of First American, N.A.
of Washington, D.C. From 1989 to 1993, Mr. Bollerer was the Chairman and Chief
Executive Officer of First American Metro Corp.
Paul Cushman, III has served as Executive Vice President of Riggs-Washington
in charge of the International Banking Group since 1992. He was Senior Vice
President of Riggs-Washington from 1989 to 1992 and Vice President of Riggs-
Washington from 1987 to 1989.
George W. Grosz has served as Executive Vice President of Riggs-Washington in
charge of Financial Services Group, which includes the Trust and Investment
Department and the Private Banking Division, since 1987. He was a Director of
Riggs-Washington from 1989 to 1993.
Gloria A. Lembo has served as Executive Vice President in charge of Technology
Services Group of Riggs-Washington since August 1993. She has been a Senior
Vice President since 1988 with various responsibilities for Deposit Operations,
Corporate Operations, Commercial Real Estate Operations and Loan Operations.
S. Dean Lesiak joined the Corporation in July 1993 as Executive Vice President
of Riggs-Washington in charge of Risk Management. He served as Chief Compliance
Officer of First Florida Banks, Inc. from 1992 to 1993 and also as Senior Vice
President--Senior Credit Policy Officer of First Florida Banks, Inc. from 1988
to 1991. Mr. Lesiak also served as a National Bank Examiner at the OCC for over
ten years.
70
<PAGE>
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is included in Riggs National
Corporation's definitive Proxy Statement to Stockholders, which is incorporated
by reference, except for Items 402 (k) and (l) of Regulation S-K.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in Riggs National
Corporation's definitive Proxy Statement to Stockholders, which is incorporated
by reference, except for Items 402 (k) and (l) of Regulation S-K.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in Note 6 to the Financial
Statements of this Form 10-K and in Riggs National Corporation's definitive
Proxy Statement to Stockholders, which is incorporated by reference, except for
Items 402 (k) and (l) of Regulation S-K.
71
<PAGE>
PART IV
ITEM 14.
EXHIBITS, FINANICAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
14(a) Page(s) Sequential Page(s)
<S> <C> <C>
The following are submitted under Item 8:
Consolidated Statements of Income--Years Ended
December 31, 1993, 1992 and 1991. 34 34
Consolidated Statements of Condition--At
December 31, 1993 and 1992. 35 35
Consolidated Statements of Changes in
Stockholders' Equity--Years Ended
December 31, 1993, 1992 and 1991. 36 36
Consolidated Statements of Cash Flows--Years
Ended December 31, 1993 1992 and 1991. 37 37
Notes to Consolidated Financial Statements as
of December 31, 1993, 1992 and 1991. 38-64 38-64
Report of Independent Public Accountants 65 65
</TABLE>
14(b) Reports on Form 8-K
On October 27, 1993, the Corporation filed a Form 8-K related to the sale of
Series B Preferred and Common Stock completed on October 21, 1993.
On December 21, 1993, the Corporation filed a Form 8-K related to the
effective date of a previously filed shelf registration statement covering the
sale of Series B Preferred and Common Stock.
14(c) Exhibits
The exhibits listed on the Index to Exhibits on Pages 74 through 75 hereof are
incorporated by reference or filed herewith in response to this item.
72
<PAGE>
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.
RIGGS NATIONAL CORPORATION
/s/ JOE L. ALLBRITTON
- - -------------------------------
Joe L. Allbritton, Chairman of the
Board and Chief Executive Officer
March 31, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ PAUL M. HOMAN Vice Chairman of the Board
- - -------------------------------
Paul M. Homan
/s/ TIMOTHY C. COUGHLIN President
- - -------------------------------
Timothy C. Coughlin
/s/ JOHN L. DAVIS Chief Financial Officer
- - ------------------------------- (Principal Financial
John L. Davis and Accounting Officer)
/s/ BARBARA B. ALLBRITTON* Director
- - -------------------------------
(Barbara B. Allbritton)
Director
- - -------------------------------
(Norman R. Augustine)
/s/ CALVIN CAFRITZ* Director
- - -------------------------------
(Calvin Cafritz)
/s/ CHARLES A. CAMALIER, III* Director
- - -------------------------------
(Charles A. Camalier, III)
/s/ RONALD E. CUNEO* Director
- - -------------------------------
(Ronald E. Cuneo)
/s/ FLOYD E. DAVIS, III* Director
- - -------------------------------
(Floyd E. Davis, III)
/s/ JACQUELINE C. DUCHANGE* Director
- - -------------------------------
(Jacqueline C. Duchange)
/s/ MICHELA A. ENGLISH* Director
- - -------------------------------
(Michela A. English)
/s/ DR. JAMES E. FITZGERALD* Director
- - -------------------------------
(Dr. James E. Fitzgerald)
Director
- - -------------------------------
(David J. Gladstone)
/s/ LAWRENCE I. HEBERT* Director
- - -------------------------------
(Lawrence I. Hebert)
/s/ MICHAEL J. JACKSON* Director
- - -------------------------------
(Michael J. Jackson)
/s/ LEO J. O'DONOVAN, S.J.* Director
- - -------------------------------
(Leo J. O'Donovan, S.J.)
/s/ STEPHEN B. PFEIFFER* Director
- - -------------------------------
(Stephen B. Pfeiffer)
Director
- - -------------------------------
(John A. Sargent)
/s/ JAMES R. SCHLESINGER* Director
- - -------------------------------
(James R. Schlesinger)
/s/ ROBERT L. SLOAN* Director
- - -------------------------------
(Robert L. Sloan)
/s/ JAMES W. SYMINGTON* Director
- - -------------------------------
(James W. Symington)
Director
- - -------------------------------
(Jack Valenti)
/s/ EDDIE N. WILLIAMS* Director
- - -------------------------------
(Eddie N. Williams)
*By: /s/ ALEXANDER C. BAKER
- - -------------------------------
Alexander C. Baker, Attorney-in-fact
MARCH 31,1994
73
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description Pages Sequential Page No.
- - ------- --------------------------------------------------------------------------------- ------------ -------------------
<C> <S> <C> <C>
(2.1) Agreement and Plan of Reorganization by and between Riggs National
Corporation and Guaranty Bank and Trust Company dated June 11, 1986 and related
Stock Purchase Agreement (Incorporated by reference to the Registrant's
Form 10-Q for the quarter ended June 30, 1986, SEC File No. 0-9756.)
(2.2) Agreement and Plan of Reorganization by and between Riggs National
Corporation and First Fidelity Bank, dated June 17, 1987 and related Stock
Purchase Agreement (Incorporated by reference to Exhibit 2.1 and Appendix B of
Registration Statement on Form S-4, Registration No. 33-16473, filed September
4, 1987, SEC File No. 0-9756.)
(2.3) Purchase and Assumption Agreement among Federal Deposit Insurance
Corporation, Receiver of the National Bank of Washington, Federal Deposit
Insurance Corporation and The Riggs National Bank of Washington, D.C. dated as
of August 10, 1990. Indemnity Agreement between Federal Deposit Insurance
Corporation and The Riggs National Bank of Washington, D. C. dated as of August
10, 1990. (Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended June 30, 1990, SEC File No. 0-9756.)
(3.1) Certificate of Incorporation as Amended (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended September 30, 1989, SEC File
No. 0-9756.)
(3.2) By-laws of the Registrant with amendments through February 12, 1992. Exhibit 3.2
1-22 77-102
(4.1) Indenture dated September 15, 1984 with respect to $60 million Floating
Rate Subordinated Notes due 1996 (Incorporated by reference to the Registrant's
Form 10-Q for the quarter ended September 30, 1984, SEC File No. 0-9756.)
(4.2) Indenture dated December 18, 1985 with respect to $100 million Floating
Rate Subordinated Capital Notes due 1996 (Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year 1985, SEC File No. 0-9756.)
(4.3) Indenture dated June 1, 1989 with respect to $100 million 9.65%
Subordinated Debentures due 2009 (Incorporated by reference to the Registrant's
Form 8-K dated June 20, 1989, SEC File No. 0-9756.)
(10.1) Agreement dated April 22, 1981 between 1120 Vermont Avenue Associates
and The Riggs National Bank of Washington, D.C. (Incorporated by reference to
the Registrant's Annual Report on Form 10-K for the year 1981, SEC File No.
0-9756.)
(10.2) Corrected Version of Riggs National Corporation 1984 Stock Appreciation
Rights Plan as Amended February 15, 1989 and previously filed with the
Registrant's Annual Report on Form 10-K for the year 1988, SEC File No. 0-9756.
(Incorporated by reference to the Registrant's Annual report on Form 10-K for
the year 1989, SEC File No. 0-9756.)
(10.3) Split Dollar Life Insurance Plan Agreements. (Incorporated by reference
to the Registrant's Annual Report on Form 10-K for the year 1989, SEC File No.
0-9756.)
(10.5) Supplemental Executive Retirement Plan as amended September 15, 1993.
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended
September 30, 1993, SEC File No. 0-9756.)
</TABLE>
Portions of Riggs National Corporation's definitive Proxy Statement to
Stockholders, except for Items 402(k) and (l) of Regulations S-K are
incorporated by reference in Parts I and III of this Annual Report.
74
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Pages Sequential Page No.
- - ------- --------------------------------------------------------------------------------- ------------ -------------------
<C> <S> <C> <C>
(10.6) Management Employment Arrangement dated June 9, 1993. (Incorporated by
reference to the Registrant's Form 10-Q for the quarter ended June 30, 1993, SEC
File No. 0-9756.)
(10.7) 1993 Stock Option Plan. (Incorporated by reference to the Registrant's
Form 10-Q for the quarter ended June 30, 1993, SEC File No. 0-9756.)
(18) Letter from Arthur Andersen & Co. regarding change in accounting principle
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended
March 31, 1990, SEC File No. 0-9756.)
(22) Subsidiaries of the Registrant: The Corporation's only significant
subsidiaries, as defined in Regulation S-X, are The Riggs National Bank of
Washington, D.C., organized under the national banking laws of the United States
and Riggs AP Bank Limited, organized under the laws of the United Kingdom.
(23) Proxy Statement dated October 6, 1989 and incorporated by reference
(Commission File No. 0-9756.)
(25) Power of Attorney Exhibit 25
1-3 104-106
(28) Report of Ernst and Young Exhibit 28
1 108
Exhibits omitted are not required or not applicable.
</TABLE>
75
<PAGE>
Riggs National Corporation
Exhibit 3.2
Form 10-K for the Year
Ended December 31, 1993
<PAGE>
RIGGS NATIONAL CORPORATION
BY-LAWS
As Adopted January 7, 1981
With Amendments through February 12, 1992
<PAGE>
BY-LAWS OF
RIGGS NATIONAL CORPORATION
As Adopted January 7, 1981
(With Amendments through February 12, 1992)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article I--OFFICES
Section 1.1 Registered Office.................. 1
Section 1.2 Other Offices...................... 1
Article II--THE STOCKHOLDERS
Section 2.1 Place of Meetings.................. 2
Section 2.2 Annual Meeting..................... 2
Section 2.3 Special Meetings................... 2
Section 2.4 Notice of Meetings................. 2
Section 2.5 Voting Lists....................... 3
Section 2.6 Quorum............................. 3
Section 2.7 Manner of Acting................... 3
Section 2.8 Voting............................. 4
Section 2.9 Inspectors of Election............. 4
Article III--THE DIRECTORS
Section 3.1 General Powers..................... 5
Section 3.2 Number, Tenure and Qualifications.. 5
Section 3.3 Resignation, Filling Vacancies..... 6
Section 3.4 Place of Meetings.................. 6
Section 3.5 Annual Meeting..................... 6
Section 3.6 Notice of Meetings................. 6
Section 3.7 Quorum............................. 7
Section 3.8 Action Without a Meeting........... 7
Section 3.9 Conference Call Meetings........... 7
Section 3.10 Compensation of Directors.......... 7
Section 3.11 Removal of Directors............... 8
Section 3.12 Committees of the Board............ 8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article IV--THE EXECUTIVE COMMITTEE
Section 4.1 Appointment, Tenure and Quorum..... 9
Section 4.2 Powers of the Executive Committee.. 9
Section 4.3 Place and Time of Meetings......... 9
Section 4.4 Minutes of Proceedings............. 10
Article V--THE OFFICERS
Section 5.1 Number and Qualifications.......... 11
Section 5.2 Term of Office..................... 11
Section 5.3 Compensation....................... 11
Section 5.4 The Chairman of the Board.......... 12
Section 5.5 The Senior Chairman and Vice
Chairmen......................... 12
Section 5.6 The President...................... 12
Section 5.7 Executive Vice-Presidents.......... 12
Section 5.8 Vice-Presidents.................... 12
Section 5.9 The Treasurer...................... 13
Section 5.10 Assistant Treasurer................ 13
Section 5.11 The Secretary...................... 13
Section 5.12 Assistant Secretary................ 14
Section 5.13 The Comptroller.................... 14
Section 5.14 Assistant Comptroller.............. 14
Article VI--NOTICES
Section 6.1 Manner of Giving................... 15
Section 6.2 Waiver of Notice................... 15
Article VII--CERTIFICATES OF STOCK
Section 7.1 Stock Certificates................. 16
Section 7.2 Facsimile Signatures............... 16
Section 7.3 Designations, Preferences,
Participating and Optional
Rights........................... 16
Section 7.4 Lost Certificates.................. 17
Section 7.5 Transfer of Stock.................. 17
Section 7.6 Registered Stockholders............ 17
Article VIII--FIXING RECORD DATE
Section 8.1 Record Date........................ 18
Article IX--INSPECTION OF BOOKS AND RECORDS
Section 9.1 Right and Conditions of Inspection. 19
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article X--CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 10.1 Contracts.......................... 20
Section 10.2 Loans.............................. 20
Section 10.3 Checks, Drafts, etc................ 20
Section 10.4 Deposits........................... 20
Section 10.5 Voting Stock and Other
Corporations..................... 20
Article XI--FISCAL YEAR
Section 11.1 Fiscal Year........................ 21
Article XII--SEAL
Section 12.1 Seal............................... 21
Article XIII--AMENDMENTS
Section 13.1 Amendments......................... 21
Article XIV--ADVANCEMENT OF EXPENSES
Section 14.1 Advancement of Expenses............ 22
</TABLE>
iii
<PAGE>
RIGGS NATIONAL CORPORATION
* * * * *
B Y - L A W S
Adopted January 7, 1981
(With Amendments through February 12, 1992)
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered office of the Corporation
-----------------
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2 Other Offices. The Corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
1
<PAGE>
ARTICLE II
THE STOCKHOLDERS
Section 2.1 Place of Meetings. All meetings of the stockholders of the
-----------------
Corporation for the election of directors or for any other purpose shall be held
in the City of Washington, District of Columbia, at such place as may be fixed
from time to time by the Board of Directors, or at such other place either
within or without the State of Delaware as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting.
Section 2.2 Annual Meeting. The Annual Meeting of the stockholders shall
--------------
be held on the second Wednesday in April of each year at 10:30 a.m., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, for the election of directors
and for the transaction of such other business as may properly come before the
meeting.
Section 2.3 Special Meetings. Special meetings of the stockholders, may
----------------
be called at any time by the Board of Directors, or the Chairman of the Board,
and shall be called upon the request in writing of the holders of at least one-
fifth of the shares of capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 2.4 Notice of Meetings. Written or printed notice stating the
------------------
place, date and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given to each
stockholder of record entitled to vote at such meeting not less than ten or more
than sixty days before the date of the meeting.
2
<PAGE>
Section 2.5 Voting Lists. The officer who has charge of the stock ledger
------------
of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 2.6 Quorum. At all meetings of the stockholders the holders of a
------
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.7 Manner of Acting. When a quorum is present at any meeting,
----------------
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question properly brought
before such meeting, unless the question is one upon which by express provision
of the statutes or of the Certificate of
3
<PAGE>
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
Section 2.8 Voting. Unless otherwise provided in the Certificate of
------
Incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote for each share of the capital stock having voting power
held by such stockholder. All elections of directors shall be by written
ballot, unless otherwise provided in the Certifricate of Incorporation.
Cumulative voting for the election of directors shall not be permitted. Each
stockholder entitled to vote may authorize another person or persons to act for
him by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period.
Section 2.9 Inspectors of Election. The Board of Directors shall appoint
----------------------
three or more inspectors of election, and three or more alternates, to serve at
any meeting of the stockholders at which a vote is to be taken, the inspectors
of election shall examine proxies, pass upon their regularity, receive the votes
and act as tellers, and perform any other duties which the chairman may require
of them at said meeting.
4
<PAGE>
ARTICLE III
THE DIRECTORS
Section 3.1 General Powers. The business of the Corporation shall be
--------------
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 3.2 Number, Tenure and Qualifications. The number of directors
---------------------------------
which shall constitute the whole Board shall be not less than five nor more than
twenty-five. The initial Board shall consist of the six directors named in the
Certificate of Incorporation who shall serve until the first Annual Meeting of
the stockholders, unless earlier replaced. Thereafter, within the limits above
specified, the number of directors shall be fixed from time to time by
resolution of the Board of Directors. The directors shall be elected at the
Annual Meeting of the stockholders, except as provided in Section 3.3 of this
Article, and each director elected shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. No reduction
in the number of directors shall have the effect of shortening the term of any
incumbent director, but any director affected thereby shall continue to hold
office until the next annual election. Each director shall, during the full
term of his directorship, own a minimum of $1,000 par value of stock of the
Corporation. No person shall be eligible to become a director after he has
attained age sixty-five; and, no person, who at the time he was first elected to
be a director was a principal officer or official of the organization with which
he is affiliated on a full-time basis, will be eligible to be re-elected after
he ceases to be a principal officer or official of such organization; provided,
however, that any person who was first elected or appointed to the Board at or
prior to the April 15, 1987 meeting of stockholders shall be eligible
5
<PAGE>
to become a director until he has attained the age of seventy-two; and provided
further, that the Chairman of the Board, at his discretion, may waive the
foregoing age or organization requirements. Notwithstanding the foregoing,
there shall be no age or organization requirements for the director serving as
Chairman of the Board.
Section 3.3 Resignation, Filling Vacancies. Any director may resign at
------------------------------
any time upon written notice to the Corporation. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute.
Section 3.4 Place of Meetings. The Board of Directors of the Corporation
-----------------
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 3.5 Annual Meeting. The first meeting of each newly elected
--------------
Board of Directors shall be held immediately following the Annual Meeting of the
stockholders, for the purpose of electing officers and transaction of other
business and no notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present; or it may meet at such place and time as shall be fixed by the consent
in writing of all of the directors.
Section 3.6 Notice of Meetings. Regular meetings of the Board of
------------------
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board. Special meetings of the Board may
be called by the Chairman of the Board, or by the President on two days' notice
to each director, either personally or by mail or by telegram; special meetings
shall be called by the Chairman of the Board or the Secretary in like manner and
on like notice on the written request of three directors.
6
<PAGE>
Section 3.7 Quorum. At all meetings of the Board a majority of the
------
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 3.8 Action Without a Meeting. Any action required or permitted
------------------------
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 3.9 Conference Call Meetings. Members of the Board of Directors,
------------------------
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 3.10 Compensation of Directors. The Board of Directores shall
-------------------------
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated retainer or both as director. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
7
<PAGE>
Section 3.11 Removal of Directors. Unless otherwise restricted by the
--------------------
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 3.12 Committees of the Board. The Board of Directors may, by
-----------------------
resolution passed by a majority of the whole board, designate an Executive
Commmittee and one or more other committees and prescribe their powers and
authority. Each committee shall consist of one or more directors of the
Corporation as fixed by resolution of the Board. The Board may des-ignate one
or more alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee.
8
<PAGE>
ARTICLE IV
THE EXECUTIVE COMMITTEE
Section 4.1 Appointment, Tenure and Quorum. The Board of Directors shall
------------------------------
appoint the Chairman of the Executive Committee who shall preside at all
meetings of the Committee. The Chairman of the Board of Directors shall, with
the advice, consent and approval of the Board, appoint the other members of the
Executive Committee. The Chairman of the Board, the Senior Chairman, if any,
the Vice Chairmen, if any, and the President shall be ex-officio members of
the Executive Committee. The members of the Executive Committee shall serve at
the pleasure of the Board of Directors. A majority of the members of the
Executive Committee shall constitute a quorum for the transaction of business.
Section 4.2 Powers of the Executive Committee. During the intervals
---------------------------------
between meetings of the Board of Directors, the Executive Committee shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation; except that the
Executive Committee shall not have the power or authority to amend the
Certificate of Incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease, or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amend the By-Laws of the Corporation, or declare a dividend, or authorize the
issuance of stock, or take any other corporate action which under the General
Corporation Law of Delaware is specifically required to be taken by the Board of
Directors.
Section 4.3 Place and Time of Meetings. Meetings of the Executive
--------------------------
Committee may be held at the office of the Corporation, or elsewhere, and at
such time as they may appoint, but the Executive Committee shall at all times be
subject to the call of the Chairman of the Board
9
<PAGE>
or any two or more members of the committee.
Section 4.4 Minutes of Proceedings. The Executive Committee shall keep
----------------------
regular minutes of its proceedings and shall report the same to the Board of
Directors when requested.
10
<PAGE>
ARTICLE V
THE OFFICERS
Section 5.1 Number and Qualifications. The officers of the Corporation
-------------------------
shall consist of a Chairman of the Board, a President, one or more Executive
Vice-Presidents, one or more other Vice-Presidents, a Treasurer, a Secretary
and a Comptroller. The Corporation may also have a Senior Chairman of the
Board, one or more Vice Chairmen of the Board, and one or more Assistant
Treasurers, Assistant Secretaries and Assistant Comptrollers as determined by
the Board of Directors. None of the officers except the Chairman of the Board,
the Senior Chairman, if any, the Vice Chairmen, if any, and the President need
be directors of the Corporation. Any number of offices may be held by the same
person including that of Chairman of the Board and President.
Section 5.2 Term of Office. The officers of the Corporation shall be
--------------
elected annually at the first meeting of the Board of Directors after each
Annual Meeting of the stockholders and shall hold office until their respective
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time, with or without cause, by the
affirmative vote of a majority of the Board. Such removal shall be without
prejudice to the contract rights, if any, of the officer so removed. Any
vacancy occurring among the officers shall be filled by the Board of Directors,
but the person so elected to fill the vacancy shall hold office only until the
first meeting of the Board of Directors after the next Annual Meeting of the
stockholders.
Section 5.3 Compensation. The compensation of the Chairman of the Board,
------------
the Senior Chairman, if any, the Vice Chairmen, if any, and the President shall
be fixed by the Board of Directors. The Board of Directors may delegate to the
Chairman of the Board, or the President the authority to fix the compensation of
the other officers and agents of the Corporation.
11
<PAGE>
Section 5.4 The Chairman of the Board. The Chairman of the Board shall
-------------------------
be the Chief Executive Officer of the Corporation. He shall preside at all
meetings of the stockholders and of the Board of Directors, and shall have,
subject to the supervision and direction of the Board of Directors and the
Executive Committee, general charge of the business, property and affairs of the
Corporation and may exercise the powers vested in him by the Board of Directors,
by law or these By-Laws, or which usually attach or pertain to such office.
Section 5.5. The Senior Chairman and Vice Chairmen. The Senior Chairman
-------------------------------------
and Vice Chairmen shall perform such duties as the Board of Directors, the
Executive Committee or the Chairman of the Board may prescribe. In the absence
or inability of the Chairman of the Board to act, the Senior Chairman or the
Vice Chairman designated by the Board shall preside at meetings of the
stockholders and of the Board of Directors.
Section 5.6 The President. The President shall be the Chief
-------------
Administrative Officer of the Corporation. He shall have, under the direction
of the Chairman of the Board, general supervision and care of the affairs of the
Corporation and, in general perform all acts incident to the office of President
as prescribed by law, by these By-Laws, or by the Board of Directors. In the
absence or inability of the Chairman of the Board, the Senior Chairman, or a
Vice Chairman to act, he shall preside at the meetings of the stockholders and
of the Board of Directors.
Section 5.7 Executive Vice-Presidents. An Executive Vice-President shall
-------------------------
perform such duties as the Board of Directors, the Executive Committee, the
Chairman of the Board, or the President may prescribe, and in the absence or
disability of the President, the Executive Vice-President, or if there be more
than one Executive Vice-President, the Executive Vice-President designated by
the Board, shall perform the duties and exercise the powers of the President.
Section 5.8 Vice-Presidents. A Vice-President shall perform such duties
---------------
as shall be assigned to him by the Board of Directors, the Executive Committee,
the Chairman of the Board, the President or by an Executive Vice-President.
12
<PAGE>
Section 5.9 The Treasurer. The Treasurer shall have the custody of the
-------------
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Board of Directors or the Executive Committee at regular meetings, or
whenever they may request it, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 5.10 Assistant Treasurer. An Assistant Treasurer shall perform
-------------------
such duties as may be assigned to him by the Board of Directors, the Executive
Committee, the Chairman of the Board, the President or the Treasurer. In the
absence or disability of the Treasurer, his duties may be performed by any
Assistant Treasurer.
Section 5.11 The Secretary. The Secretary shall attend all meetings of
-------------
the Board of Directors and of the stockholders, and shall record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any standing committees when required. He shall give or
cause to be given notice of all meetings of the stockholders and of the Board of
Directors, and shall keep the seal of the Corporation in safe custody. He shall
perform such other duties as may be prescribed by the Board of Directors, or the
Executive Committee, or the Chairman of the Board under whose supervision he
shall be.
13
<PAGE>
Section 5.12 Assistant Secretary. An Assistant Secretary shall perform
-------------------
such duties as may be assigned to him by the Board of Directors, the Executive
Committee, the Chairman of the Board, the President or the Secretary. In the
absence or disability of the Secretary, his duties may be performed by any
Assistant Secretary.
Section 5.13 The Comptroller. The Comptroller shall be the chief
---------------
accounting officer of the Corporation, and shall have general supervision and
control of all accounting matters, including the books of account of the
Corporation. He shall also perform such other duties and services as may from
time to time be prescribed by the Board of Directors, the Executive Committee,
the Chairman of the Board, the President, or an Executive Vice-President.
Section 5.14 Assistant Comptroller. An Assistant Comptroller shall
---------------------
perform such duties as may be assigned to him by the Board of Directors, the
Executive Committee, the Chairman of the Board, the President or the
Comptroller. In the absence or disability of the Comptroller, his duties may be
performed by any Assistant Comptroller.
14
<PAGE>
ARTICLE VI
NOTICES
Section 6.1 Manner of Giving. Whenever notice is required to be given to
----------------
any director or stockholder under the provisions of the General Corporation Law
of Delaware or under the Certificate of Incorporation or under these By-Laws, it
shall not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 6.2 Waiver of Notice. Whenever any notice is required to be
----------------
given under the General Corporation Law of Delaware or under the Certificate of
Incorporation or under these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
15
<PAGE>
ARTICLE VII
CERTIFICATES OF STOCK
Section 7.1 Stock Certificates. Every holder of stock in the Corporation
------------------
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board of Directors, or the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
Section 7.2 Facsimile Signatures. Any of or all the signatures on the
--------------------
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 7.3 Designations, Preferences, Participating and Optional Rights.
------------------------------------------------------------
If the Corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
16
<PAGE>
Section 7.4 Lost Certificates. The Board of Directors may direct a new
-----------------
certificate of stock to be issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. The Board of
Directors may, in its discretion and as a condition precedent to the issuance of
a new certificate, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 7.5 Transfer of Stock. The shares of stock shall be transferable
-----------------
on the books of the Corporation by the registered owner or owners thereof or by
attorney, lawfully constituted in writing, and upon surrender of the certificate
therefor duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Corporation or its transfer agent shall
issue a new certificate to the person or persons entitled thereto.
Section 7.6 Registered Stockholders. The Corporation shall be entitled
-----------------------
to treat the registered holder of any share or shares of its stock as the actual
owner thereof and as such the person possessing the exclusive right to receive
dividends and to vote such stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
17
<PAGE>
ARTICLE VIII
FIXING RECORD DATE
Section 8.1 Record Date. The Board of Directors may fix, in advance, a
-----------
date, not more than sixty nor less than ten days before the date of any
stockholders meeting nor more than sixty days prior to any dividend payment date
or other date for the distribution or allotment of any rights, as a record date
for the determination of the stockholders entitled to notice of and to vote at
such meeting, or entitled to receive such dividends or rights, as the case may
be; and only stockholders of record on such date shall be entitled to notice of
and to vote at such meeting or to receive such dividends or rights. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
18
<PAGE>
ARTICLE IX
INSPECTION OF BOOKS AND RECORDS
Section 9.1 Right and Conditions of Inspection. Any stockholder of
----------------------------------
record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours
for business to inspect for any proper purpose the Corporation's stock ledger, a
list of its shareholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean a purpose reasonably related to
such person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the Corporation at its
registered office in the State of Delaware or at its principal place of
business.
19
<PAGE>
ARTICLE X
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 10.1 Contracts. The Board of Directors may authorize any officer
---------
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 10.2 Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 10.3 Checks, Drafts, etc. All checks, drafts or other orders for
--------------------
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in the manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 10.4 Deposits. All funds of the Corporation shall be deposited
--------
in such banks, trust companies or other depositaries as the Board of Directors
may select.
Section 10.5 Voting Stock and Other Corporations. The Chairman of the
-----------------------------------
Board, the President or any Executive Vice-President may execute proxies on
behalf of the Corporation for the purpose of voting any shares of stock of any
other corporation owned by the Corporation.
20
<PAGE>
ARTICLE XI
FISCAL YEAR
Section 11.1 Fiscal Year. The fiscal year of the Corporation shall begin
-----------
on the first day of January in each year and end on the last day of December in
each year.
ARTICLE XII
SEAL
Section 12.1 Seal. The corporate seal shall have inscribed thereon the
----
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE XIII
AMENDMENTS
Section 13.1 Amendments. These By-Laws may be altered, amended or
----------
repealed or new by-laws may be adopted by the Board of Directors at any regular
or special meeting of the Board provided notice of such alteration, amendment,
repeal or adoption of new by-laws be contained in the notice of such meeting.
Nothing herein shall be construed so as to divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
21
<PAGE>
ARTICLE XIV
ADVANCEMENT OF EXPENSES
Section 14.1 Advancement of Expenses. In connection with the provisions
-----------------------
of Article ELEVENTH of the Corporation's Certificate of Incorporation, the
Corporation shall pay or reimburse expenses incurred by any person entitled to
indemnification under such Article in defending any pending or threatened
action, suit or proceeding, whether civil, criminal, administrative or
investigative, with respect to which such person is a party or is threatened to
be made a party. Such payment or reimbursement shall be made promptly upon
receipt by the Corporation of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Corporation.
22
<PAGE>
Riggs National Corporation
Exhibit 25
Form 10-K for the Year
Ended December 31, 1993
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that each person whose signature appears
below constitutes and appoints Alexander C. Baker his true and lawful
attorney-in-fact and with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign the Form 10-K for the
Riggs National Corporation for the fiscal year ending December 31, 1993, and
to file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing required and necessary to be done in and about the
premises, or fully to all intent and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
Signature Capacity Date
- - --------- -------- ----
<S> <C> <C>
/s/ Barbara B. Allbritton Director 2-9-94
- - ----------------------------------- ----------
Barbara B. Allbritton
Director
- - ----------------------------------- ----------
Norman R. Augustine
/s/ Calvin Cafritz Director 2-9-94
- - ----------------------------------- ----------
Calvin Cafritz
/s/ Charles A. Camalier, III Director 2-9-94
- - ----------------------------------- ----------
Charles A. Camalier, III
/s/ Ronald E. Cuneo Director 2-9-94
- - ----------------------------------- ----------
Ronald E. Cuneo
/s/ Floyd E. Davis, III Director 2-9-94
- - ----------------------------------- ----------
Floyd E. Davis, III
</TABLE>
<PAGE>
Page 2 of 3
POWER OF ATTORNEY
Signature Capacity Date
- - --------- -------- ----
/s/ Jacqueline C. Duchange Director 2-9-94
- - --------------------------------- ----------
Jacqueline C. Duchange
/s/ Michela A. English Director 2-9-94
- - --------------------------------- ----------
Michela A. English
/s/ James E. Fitzgerald Director
- - --------------------------------- ----------
James E. Fitzgerald
Director
- - --------------------------------- ----------
David J. Gladstone
/s/ Lawrence I. Hebert Director
- - --------------------------------- ----------
Lawrence I. Hebert
/s/ Michael J. Jackson Director
- - --------------------------------- ----------
Michael J. Jackson
/s/ Leo J. O'Donovan Director
- - --------------------------------- ----------
Leo J. O'Donovan
/s/ Steven B. Pfeiffer Director
- - --------------------------------- ----------
Steven B. Pfeiffer
<PAGE>
Page 3 of 3
POWER OF ATTORNEY
Signature Capacity Date
- - --------- -------- ----
Director
- - --------------------------------- ----------
John A. Sargent
/s/ James R. Schlesinger Director
- - --------------------------------- ----------
James R. Schlesinger
/s/ Robert L. Sloan Director
- - --------------------------------- ----------
Robert L. Sloan
/s/ James W. Symington Director
- - --------------------------------- ----------
James W. Symington
Director
- - --------------------------------- ----------
Jack Valenti
/s/ Eddie N. Williams Director
- - --------------------------------- ----------
Eddie N. Williams
<PAGE>
Riggs National Corporation
Exhibit 28
Form 10-K for the Year
Ended December 31, 1993
<PAGE>
[LOGO OF ERNST & YOUNG APPEARS HERE]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) and related Prospectus of Riggs National Corporation pertaining to
the Riggs National Corporation 1993 Employees' Savings Plan of our report with
respect to the financial statements of Riggs AP Bank Limited (not separately
included therein) dated March 2, 1993 except for Note 19 Subsequent Events:
Regulatory and Other Developments Relating to Riggs National Corporation as to
which the date is October 25, 1993, included as Exhibit 28 to the Annual
Report (Form 10-K) of Riggs National Corporation for the year ended December
31, 1993, filed with the Securities and Exchange Commission.
ERNST & YOUNG
Chartered Accountants
London, England
March 30, 1994
