<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
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
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1217953
-----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1503 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20005
------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(202) 835-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
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 shorter periods that the registrant was required to
file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practical date.
COMMON STOCK, $2.50 PAR VALUE 30,258,414 SHARES
----------------------------- ------------------------------
(Title of Class) (Outstanding at August 3, 1995)
<PAGE>
RIGGS NATIONAL CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three and six months ended June 30, 1995 and 1994 3
Consolidated Statements of Condition
June 30, 1995 and 1994, and December 31, 1994 4
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1995 and 1994 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1995 and 1994 6
Financial Ratios and Other Financial Data 7
Notes to the Consolidated Statements 8-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 32
2
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $51,197 $48,412 $100,875 $95,535
Interest and Dividends on Securities Available for Sale 9,617 7,316 18,932 13,777
Interest and Dividends on Securities Held-to-Maturity 8,838 4,478 14,983 10,966
Interest on Money Market Assets:
Time Deposits with Other Banks 4,035 2,049 7,518 4,679
Federal Funds Sold and Reverse Repurchase Agreements 2,788 2,168 6,392 3,364
------ ------ ------- -------
Total Interest on Money Market Assets 6,823 4,217 13,910 8,043
------ ------ ------- -------
Total Interest Income 76,475 64,423 148,700 128,321
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 4,803 4,742 9,707 9,500
Money Market Deposit Accounts 8,092 6,379 16,013 12,669
Time Deposits in Domestic Offices 11,280 5,884 20,535 11,903
Time Deposits in Foreign Offices 4,597 2,629 9,005 5,438
------ ------ ------- -------
Total Interest on Deposits 28,772 19,634 55,260 39,510
------ ------ ------- -------
Interest on Short-Term Borrowings and Long-Term Debt:
Federal Funds Purchased and Repurchase Agreements 3,349 998 5,565 1,592
U.S. Treasury Demand Notes and Other Short-Term Borrowings 1,563 813 2,225 1,441
Long-Term Debt 4,804 4,744 9,611 10,585
------ ------ ------- -------
Total Interest on Short-Term Borrowings and Long-Term Debt 9,716 6,555 17,401 13,618
------ ------ ------- -------
Total Interest Expense 38,488 26,189 72,661 53,128
------ ------ ------- -------
Net Interest Income 37,987 38,234 76,039 75,193
Less: Provision for Loan Losses - 2,100 - 4,200
------ ------ ------- -------
Net Interest Income after Provision for Loan Losses 37,987 36,134 76,039 70,993
NONINTEREST INCOME
Service Charges and Fees 8,733 12,454 17,496 23,221
Trust Income 7,329 7,538 13,971 14,995
Gain on Settlement of Mortgage Insurance Claims - - - 4,739
Other Noninterest Income 2,276 2,502 4,823 4,954
Securities Gains, Net - 68 46 1,424
------ ------ ------- -------
Total Noninterest Income 18,338 22,562 36,336 49,333
NONINTEREST EXPENSE
Salaries and Wages 15,997 16,236 32,154 32,881
Pensions and Other Employee Benefits 3,892 4,953 8,520 9,850
Occupancy, Net 5,934 5,574 11,206 11,589
Data Processing Services 4,026 4,243 8,384 8,666
Furniture and Equipment 2,028 2,334 4,034 4,948
FDIC Insurance 1,994 2,431 3,983 4,863
Advertising and Public Relations 1,407 1,536 2,661 2,927
Other Real Estate Owned (Income) Expense, Net (889) (280) (1,973) 1,006
Restructuring Expense - (2,059) - (2,059)
Other Noninterest Expense 12,481 14,588 25,052 28,472
------ ------ ------- -------
Total Noninterest Expense 46,870 49,556 94,021 103,143
Income before Taxes 9,455 9,140 18,354 17,183
Applicable Income Tax Expense (Benefit) 87 (693) 191 (563)
------ ------ ------- -------
Net Income 9,368 9,833 18,163 17,746
Dividends on Preferred Stock (2,687) (3,046) (5,375) (6,391)
------ ------ ------- -------
Net Income Available for Common Stock $6,681 $6,787 $12,788 $11,355
EARNINGS PER COMMON SHARE $.22 $.23 $.42 $.38
</TABLE>
3
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JUNE 30, JUNE 30, DECEMBER 31,
(UNAUDITED IN JUNE 30, 1995 AND 1994) 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $228,743 $197,840 $206,953
Money Market Assets:
Time Deposits with Other Banks 245,511 162,480 228,224
Federal Funds Sold and Reverse Repurchase Agreements 200,300 282,700 160,000
--------- --------- ---------
Total Money Market Assets 445,811 445,180 388,224
--------- --------- ---------
Securities Available for Sale (at Market Value) 629,188 539,061 598,277
Securities Held-to-Maturity (Market Value: June 30, 1995, $755,968;
June 30, 1994, $417,126; December 31, 1994, $434,993) 756,127 420,962 443,163
Loans 2,571,494 2,650,024 2,549,924
Reserve for Loan Losses 100,145 92,094 97,039
--------- --------- ---------
Net Loans 2,471,349 2,557,930 2,452,885
--------- --------- ---------
Premises and Equipment, Net 152,096 156,159 151,532
Accrued Interest Receivable 34,491 24,192 27,904
Other Real Estate Owned, Net 42,847 49,215 47,763
Other Assets 115,440 122,707 108,964
--------- --------- ---------
Total Assets $4,876,092 $4,513,246 $4,425,665
LIABILITIES
Noninterest-Bearing Demand Deposits $859,168 $934,883 $827,023
Interest-Bearing Deposits:
Savings and NOW Accounts 800,321 895,519 900,209
Money Market Deposit Accounts 917,961 1,097,646 966,348
Time Deposits in Domestic Offices 879,833 602,912 625,432
Time Deposits in Foreign Offices 315,578 207,953 283,782
--------- --------- ---------
Total Interest-Bearing Deposits 2,913,693 2,804,030 2,775,771
--------- --------- ---------
Total Deposits 3,772,861 3,738,913 3,602,794
--------- --------- ---------
Short-Term Borrowings:
Federal Funds Purchased and Repurchase Agreements 195,631 69,930 264,878
U.S. Treasury Demand Notes and Other Short-Term Borrowings 335,750 150,406 28,559
--------- --------- ---------
Total Short-Term Borrowings 531,381 220,336 293,437
--------- --------- ---------
Other Liabilities 48,719 49,241 44,146
Long-Term Debt 217,625 217,625 217,625
--------- --------- ---------
Total Liabilities 4,570,586 4,226,115 4,158,002
STOCKHOLDERS' EQUITY
Preferred Stock-$1.00 Par Value
Shares Authorized - 25,000,000 at June 30, 1995 and 1994, and
December 31, 1994; Liquidation Preference - $25 per share
Cumulative Convertible Series A - 764,537 shares at June 30, 1994 - 765 -
Noncumulative Perpetual Series B - 4,000,000 shares at
June 30, 1995 and 1994, and December 31, 1994 4,000 4,000 4,000
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at June 30, 1995 and 1994, and
December 31, 1994;
Shares Issued - 31,159,212 at June 30, 1995, 31,124,012 at
June 30, 1994 and 31,145,212 at December 31, 1994 77,898 77,810 77,863
Surplus - Preferred Stock 91,192 109,473 91,192
Surplus - Common Stock 156,214 156,004 156,123
Foreign Exchange Translation Adjustments (619) (1,061) (634)
Undivided Profits (Accumulated Deficit) 3,774 (19,610) (9,014)
Unrealized Loss on Securities Available for Sale, Net (3,230) (16,527) (28,144)
Treasury Stock-900,798 shares at June 30, 1995 and 1994, and
December 31, 1994 (23,723) (23,723) (23,723)
--------- --------- ---------
Total Stockholders' Equity 305,506 287,131 267,663
--------- --------- ---------
Total Liabilities and Stockholders' Equity $4,876,092 $4,513,246 $4,425,665
</TABLE>
4
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN UNDIVIDED GAIN (LOSS)
PREFERRED COMMON EXCHANGE PROFITS ON SECURITIES TOTAL
STOCK STOCK TRANSLATION (ACCUM. AVAILABLE TREASURY STOCKHOLDERS'
$1.00 PAR $2.50 PAR SURPLUS ADJUSTMENTS DEFICIT) FOR SALE, NET STOCK EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 $4,765 $77,807 $265,564 $(1,527) $(30,965) $1,276 $(23,723) $293,197
Net Income - - - - 17,746 - - 17,746
Issuance of
Common Stock--
Stock Option Plan - 3 8 - - - - 11
Cash Dividends --
Preferred - - - - (6,391) - - (6,391)
Unrealized Loss on
Securities Available
for Sale, Net - - - - - (17,803) - (17,803)
Foreign Exchange
Translation Adjustments - - - 466 - - - 466
Other - - (95) - - - - (95)
------ ------- -------- -------- --------- --------- --------- --------
Balance,
June 30, 1994 $4,765 $77,810 $265,477 $(1,061) $(19,610) $(16,527) $(23,723) $287,131
Balance,
December 31, 1994 $4,000 $77,863 $247,315 $(634) $(9,014) $(28,144) $(23,723) $267,663
Net Income - - - - 18,163 - - 18,163
Issuance of
Common Stock--
Stock Option Plan - 35 91 - - - - 126
Cash Dividends--
Preferred - - - - (5,375) - - (5,375)
Unrealized Gain on
Securities Available
for Sale, Net - - - - - 24,914 - 24,914
Foreign Exchange
Translation Adjustments - - - 15 - - - 15
------ ------- -------- -------- --------- --------- --------- --------
Balance,
June 30, 1995 $4,000 $77,898 $247,406 $(619) $3,774 $(3,230) $(23,723) $305,506
</TABLE>
5
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
Increase (decrease) in cash and cash equivalents 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $18,163 $17,746
Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:
Provisions for Loan Losses - 4,200
Provisions for Other Real Estate Owned Writedowns (53) 1,935
Depreciation Expense and Amortization of Leasehold Improvements 5,988 6,123
Amortization of Purchase Accounting Adjustments 1,801 1,934
Provision for Deferred Taxes 1,846 -
Restructuring Charges - (2,059)
Gains on Securities Sales (46) (1,424)
Gains on Sales from Other Real Estate Owned (1,725) (1,068)
Increase in Accrued Interest Receivable (6,587) (1,281)
Increase in Other Assets (6,613) (3,581)
Increase in Other Liabilities 2,727 5,147
-------- --------
Total Adjustments (2,662) 9,926
-------- --------
Net Cash Provided By Operating Activities 15,501 27,672
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease In Time Deposits with Other Banks (17,287) 38,466
Proceeds from Maturities of Securities Available for Sale 22,044 66,483
Proceeds from Sales of Securities Available for Sale 46 193,048
Purchase of Securities Available for Sale (29,705) (93,773)
Proceeds from the Maturity of Securities Held-to-Maturity 25,000 1,035,436
Proceeds from Sales of Securities Held-to-Maturity - 4,825
Purchase of Securities Held-to-Maturity (337,964) (814,222)
Net Increase in Loans (19,153) (127,720)
Proceeds from Sales of Other Real Estate Owned 7,149 10,318
Net Increase in Premises and Equipment (6,552) (1,184)
Other, Net 234 (387)
-------- --------
Net Cash (Used In) Provided By Investing Activities (356,188) 311,290
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in:
Demand, NOW, Savings and Money Market Deposit Accounts (116,130) 25,740
Time Deposits 286,197 (60,651)
Federal Funds Purchased and Repurchase Agreements (69,247) (232,400)
U.S. Treasury Demand Notes and Other Short-Term Borrowings 307,191 (1,291)
Net Proceeds From the Issuance of Long-Term Debt - 121,250
Repayment of Long-Term Debt - (120,700)
Net Proceeds From the Issuance of Common Stock 126 11
Dividend Payments - Preferred (5,375) (6,391)
Other, Net - (95)
-------- --------
Net Cash Provided By (Used In) Financing Activities 402,762 (274,527)
-------- --------
Effect of Exchange Rate Changes 15 466
-------- --------
Net Increase in Cash and Cash Equivalents 62,090 64,901
Cash and Cash Equivalents at Beginning of Period 366,953 415,639
-------- --------
Cash and Cash Equivalents at End of Period $429,043 $480,540
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
NONCASH ACTIVITIES:
Loans Transferred to Other Real Estate Owned $385 $7,210
CASH PAID DURING THE YEAR FOR:
Interest Paid (Net of Amount Capitalized) $70,032 $53,129
Income Tax Payments (Refund) 1,848 (5,414)
</TABLE>
6
<PAGE>
RIGGS NATIONAL CORPORATION
FINANCIAL RATIOS AND OTHER FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PERFORMANCE:
Net Income to Average Assets .81% .88% .80% .78%
Net Income to Average Earning Assets .89% .99% .89% .88%
Net Income to Average Stockholders' Equity 12.77% 13.99% 12.88% 12.43%
Net Income Available to Common Stock
to Average Common Equity 13.46% 16.24% 13.62% 13.18%
Net Interest Income to Average Earning Assets 3.71% 3.92% 3.81% 3.81%
PER COMMON SHARE:
Net Income $ .22 $.23 $ .42 $.38
Book Value (at period end) $6.95 $5.72 $6.95 $5.72
Common Shares Outstanding (at period end) 30,258,414 30,223,214 30,258,414 30,223,214
Average Common Shares Outstanding 30,258,106 30,223,214 30,251,168 30,222,664
ASSET QUALITY:
Nonaccrual Loans as a % of Total Loans .56% 2.82%
Nonaccrual Loans as a % of Average Loans .57% 2.86%
Nonperforming Assets as a % of Total Loans and OREO 2.20% 4.72%
Nonperforming Assets as a % of Total Assets 1.18% 2.82%
Nonaccrual and Renegotiated Loans as a % of Total Loans .57% 2.95%
Net Charge-Offs (Recoveries) as a % of Average Loans (.11)% (.02)%
Reserve for Loan Losses as a % of Total Loans 3.89% 3.48%
Reserve for Loan Losses as a % of Nonaccrual and
Renegotiated Loans 679.96% 117.68%
Period End Stockholders' Equity to Total Assets 6.27% 6.36%
CAPITAL RATIOS AT PERIOD END:
Tier I 11.76% 11.27%
Combined Tier I and Tier II 18.93% 18.18%
Leverage 6.54% 6.59%
</TABLE>
7
<PAGE>
RIGGS NATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, of a normal recurring nature, necessary to present
fairly, in conformity with generally accepted accounting principles applied on a
consistent basis, the Corporation's consolidated financial position at June 30,
1995 and 1994, and December 31, 1994 (audited), and the related changes in
stockholders' equity, the consolidated statements of income and cash flows for
the interim periods presented. These statements should be read in conjunction
with the financial statements and accompanying notes included in the
Corporation's latest annual report. Certain reclassifications have been made to
prior-period amounts to conform with the current year's presentation. The
results of operations for the first half of 1995 are not necessarily indicative
of the results to be expected for the full 1995 year.
NOTE 2. COMMON SHARES
Earnings per common share are calculated using the weighted average number of
shares of common stock outstanding during the period. The weighted average
shares outstanding were 30,258,106 and 30,251,168 for the second quarter of 1995
and the six month period ended June 30, 1995, respectively, with 30,223,214 and
30,222,664 for the same periods in 1994. The weighted average number of shares
of common stock outstanding does not include shares granted under the 1993 Riggs
National Corporation Stock Option Plan (the "1993 Plan") or shares granted under
the 1994 Riggs National Corporation Stock Option Plan (the "1994 Plan"). Under
the 1993 Plan, options to purchase up to 1,250,000 shares of common stock may be
granted to key employees of the Corporation. As of June 30, 1995, options to
purchase 836,200 shares had been granted and remain outstanding in the 1993 Plan
at prices ranging from $9.00 to $10.50 per share and are currently not dilutive.
Under the 1994 Plan, options to purchase up to 1,250,000 shares of common stock
may be granted to key employees of the Corporation. As of June 30, 1995, options
to purchase 215,000 shares have been granted and remain outstanding in the 1994
Plan at prices ranging from $9.06 to $10.00 per share and are currently not
dilutive.
NOTE 3. RESERVE FOR LOAN LOSSES
Changes in the reserve for loan losses are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 94,299 $ 86,711 $ 97,039 $ 86,513
Provision for loan losses -- 2,100 -- 4,200
Loans charged-off:
Domestic 511 3,426 1,107 5,464
Foreign -- 158 4,846 2,663
-------- -------- -------- --------
Total loans charged-off 511 3,584 5,953 8,127
Recoveries on charged-off loans:
Domestic 6,277 4,024 6,832 6,014
Foreign 422 1,974 1,923 2,544
-------- -------- -------- --------
Total recoveries on charged-off loans 6,699 5,998 8,755 8,558
Net recoveries (6,188) (2,414) (2,802) (431)
Foreign exchange translation adjustments (342) 869 304 950
-------- -------- -------- --------
Balance, end of period $ 100,145 $ 92,094 $ 100,145 $ 92,094
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. OTHER REAL ESTATE OWNED
Changes in other real estate owned, net of reserves, are summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $ 47,763 $ 52,803
Additions 385 7,210
Deductions:
Sales and repayments 4,995 9,277
Charge-offs 429 1,908
Other (53) --
--------- --------
Total Deductions 5,371 11,185
Foreign exchange translation adjustments 70 387
--------- --------
Balance, end of period $ 42,847 $ 49,215
</TABLE>
NOTE 5. NEW FINANCIAL ACCOUNTING STANDARDS
In May 1993, SFAS No. 114, "Accounting by Creditors for Impairment of a Loan"
was issued and was amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures" in October 1994.
These pronouncements specify how allowances for credit losses related to
impaired loans, as defined within these Statements, should be determined. Under
SFAS No. 114, the Corporation is required to identify and measure impaired loans
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. SFAS No. 118 provides
additional disclosure guidance of impaired loans and allows for use of existing
methods for recognizing interest income on impaired loans, as determined by
Corporation policy. Both statements are effective for fiscal years beginning
after December 15, 1994. The Corporation implemented SFAS Nos. 114 and 118 on
January 1, 1995. At the time of implementation, the Corporation utilized methods
for the identification and measurement of impaired loans similar to those
prescribed in SFAS Nos. 114 and 118, and thus their adoption did not have a
material effect on the Corporation's financial position.
In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" was issued, requiring that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Such recoverability is
measured based on the estimated future cash flows expected to result from the
use of the asset as well as its eventual disposition. SFAS No. 121 excludes
financial instruments, long-term customer relationships of financial
institutions, mortgage and other servicing rights and deferred tax assets. SFAS
No. 121 is effective for fiscal years beginning after December 15, 1995. The
Corporation does not anticipate any material effect on the Corporation's
financial position from the implementation of SFAS No. 121.
In May 1995, SFAS No. 122, "Accounting for Mortgage Servicing Rights" was
issued. SFAS No. 122 amends Statement of Financial Accounting Standard No. 65,
"Accounting for Certain Mortgage Banking Activities" to require that mortgage
banking enterprises recognize as separate assets rights to service mortgage
loans for others. SFAS 122 also requires that mortgage banking enterprises
assess capitalized mortgage servicing rights based on the fair value of those
rights on a disaggregated basis. SFAS 122 is effective for fiscal years
beginning after December 15, 1995. The Corporation does not anticipate any
material effect on the Corporation's financial position from the implementation
of SFAS No. 122.
9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6. INCOME TAXES
The provision for income taxes is based on income reported for consolidated
financial statement purposes and includes deferred taxes resulting from the
recognition of certain revenues and expenses in different periods for tax
reporting purposes.
Income before income taxes relating to the operations of domestic offices and
foreign offices for the three and six month periods ended June 30, 1995 and
1994, were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic Offices $ 8,642 $ 2,722 $ 16,997 $ 2,958
Foreign Offices 813 6,418 1,357 14,225
-------- -------- -------- --------
Total $ 9,455 $ 9,140 $ 18,354 $ 17,183
</TABLE>
The provision for income taxes for the three and six month periods ended
June 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current Provision (Benefit):
Federal $ (932) $ -- $(1,855) $ --
State 77 70 176 147
Foreign 19 (763) 24 (710)
-------- -------- -------- --------
Total Current Provision (Benefit) (836) (693) (1,655) (563)
Deferred Provision:
Federal 923 -- 1,846 --
State -- -- -- --
Foreign -- -- -- --
-------- -------- -------- --------
Total Deferred Provision 923 -- 1,846 --
Applicable Income Tax Expense (Benefit) $ 87 $ (693) $ 191 $ (563)
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
Outstanding commitments and contingent liabilities that do not appear in the
consolidated financial statements at June 30, 1995, and 1994, are as follows:
<TABLE>
<CAPTION>
CONTRACTUAL OR
NOTIONAL VALUE
JUNE 30,
1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to Extend Credit:
Commercial $247,278 $216,929
Real Estate 214,147 228,940
Consumer 65,674 64,403
-------- --------
Total Commitments to Extend Credit $527,099 $510,272
Letters of Credit:
Commercial $ 58,998 $ 97,838
Standby-Financial 29,389 30,607
Standby-Performance 16,408 34,539
-------- --------
Total Letters of Credit $104,795 $162,984
Financial Instruments with off-balance sheet market risk:
Foreign exchange contracts:
Commitments to purchase $ 32,056 $ 34,486
Commitments to sell 108,492 186,360
Interest rate swap agreements 335,584 261,258
Interest rate option contracts (corridors) 400,000 200,000
</TABLE>
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 enters into derivative transactions to
manage its own risks arising from movements in interest and currency rates.
Off-balance-sheet activities involve varying degrees of credit, interest-rate or
liquidity risk in excess of amounts recognized on the consolidated statements of
condition. The Corporation's management believes that financial derivatives,
such as interest-rate agreements, can be an important element of prudent balance
sheet and interest-rate risk management. The Corporation seeks to minimize its
exposure to loss under these commitments by subjecting them to credit approval
and monitoring procedures.
INTEREST RATE SWAP AGREEMENTS
JUNE 30, 1995
<TABLE>
<CAPTION>
WEIGHTED 1995
AVERAGE RATE ACCRUED ACCRUED UNAMORTIZED YTD NET
NOTIONAL UNREALIZED ------------- INTEREST INTEREST FEES & INTEREST
AMOUNT GAIN(LOSS) RECEIVE PAY RECEIVABLE PAYABLE PREMIUMS INC./(EXP.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay variable,
Maturing July 1998 $200,000 $ (3,626) 5.38% 6.19% $ 1,913 $ 2,234 $ -- $ (863)
Receive variable/pay fixed,
Maturing March 1996 25,000 (133) 6.06% 6.73% 63 70 -- (24)
Receive variable/pay fixed,
Maturing March 1997 25,000 (429) 6.06% 6.97% 63 73 -- (42)
Receive variable/pay fixed
Maturing April 1996 25,000 (118) 6.25% 6.55% 304 314 -- (10)
Receive variable/pay fixed
Maturing April 1997 25,000 (333) 6.25% 6.70% 304 321 -- (17)
For Customers 35,584 81 N/M N/M 511 548 -- (239)
-------- --------- ----- ----- -------- -------- ------ ---------
Total Interest Rate Swap
Agreements $335,584 $ (4,558) $ 3,158 $ 3,560 $ -- $ (1,195)
</TABLE>
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED
At June 30, 1995, the Corporation's financial derivative instruments included a
$200 million (notional principal amount) interest-rate swap agreement, entered
into in July 1993, to hedge money market assets against the possibility of
declining interest rates. The swap agreement entails the receipt of a fixed-rate
of 5.38% while paying a floating rate equal to three-month Libor, reset
quarterly. The rate earned on the actual money market assets is intended to
offset the floating-rate payment and the Corporation is left with the fixed-rate
of 5.38%. All payments are netted on a quarterly basis. The total aggregate net
interest expense from this swap transaction is included in interest income
relating to the money market assets.
In March 1995, the Corporation entered into two $25 million (notional principal
balance) interest-rate swap agreements to alter the interest sensitivity of a
portion of the Corporation's real estate mortgage loan portfolio. Both swap
agreements entail the receipt of a floating rate equal to 3-month Libor, reset
quarterly, and payments ranging from 6.73% to 6.97%, maturing in March of 1996
and 1997. Also, in April 1995, the Corporation entered into two additional $25
million (notional principal balance) interest-rate swap agreements to alter the
interest sensitivity of a portion of the Corporation's real estate mortgage loan
portfolio. The April 1995 swap agreements entail the receipt of a floating rate
equal to 3-month Libor, reset quarterly, and payments ranging from 6.55% to
6.70%, maturing in April 1996 and 1997. Payments for the March and April 1995
swap agreements are netted on a quarterly basis. The total net interest
income/expense from these swap agreements are included in interest income
relating to the real estate mortgage loan portfolio.
INTEREST RATE OPTION CONTRACTS (CORRIDORS)
JUNE 30, 1995
<TABLE>
<CAPTION>
WEIGHTED 1995
AVERAGE RATE ACCRUED ACCRUED UNAMORTIZED YTD NET
NOTIONAL UNREALIZED --------------- INTEREST INTEREST FEES & INTEREST
AMOUNT GAIN(LOSS) RECEIVE PAY RECEIVABLE PAYABLE PREMIUMS INC./(EXP.)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive variable/pay fixed,
Maturing April 1996 $100,000 $ (103) 6.19% 5.60% $ 1,117 $ 995 $ 338 $ 104
Receive variable/pay fixed,
Maturing April 1997 100,000 (299) 6.19% 5.69% 1,117 1,011 904 28
Receive variable/pay fixed,
Maturing August 1996 200,000 (422) 6.19% 6.00% 2,063 2,000 742 (124)
-------- --------- ----- ----- -------- -------- -------- ---------
Total Interest Rate Option
Contracts $400,000 $ (824) $ 4,297 $ 4,006 $ 1,984 $ 8
</TABLE>
Based on the possibility of further short-term rate increases by the Federal
Reserve, in April 1994, the Corporation purchased two $100 million (notional
principal balance) corridors to reduce its interest-rate risk exposure relating
to the $200 million swap agreement to hedge money market assets. A premium was
paid for these agreements, with the cost amortized over the respective lives.
Under the original terms, the corridor limits for three-month Libor were set
from 5.00% to 6.00%. However, in early November 1994, the rates were adjusted
based upon market conditions. Under the terms of the adjustments, the
Corporation would receive payments from the counterparty if three-month Libor
exceeded a level of approximately 5.60%, however, if Libor rose above 7.00%,
then the Corporation would begin paying to the counterparty Libor in excess of
7.00%. The net result was that the floating-rate paid on the swap would be
capped at 5.60% unless Libor rose above 7.00%. If rates exceeded 7.00%, the
Corporation would effectively reduce the actual floating-rate to be paid by
1.40% as a result of the corridor (7.00%-5.60% = 1.40%). All rates are reset
quarterly to coincide with the interest-rate swap reset dates. The total
aggregate net interest income/expense for these corridor agreements are included
in interest income relating to money market assets. These corridor agreements
mature in April 1996 and 1997.
In August 1994, the Corporation entered into another corridor transaction in the
amount of $200 million (notional principal balance). This corridor, executed to
hedge the costs of certain short-term borrowings against rising interest rates,
included a termination agreement. A premium was also paid for this corridor,
with the cost amortized over the two-year life. Under the agreement, the
Corporation receives payments, calculated quarterly on the notional principal
amount, by the amount that three-month Libor exceeds 6.00%. Such payments will
cease, if three-month Libor would equal or exceed 8.00% on a reset date. All
payments are netted on a quarterly basis. The total aggregate net interest
income/expense for this corridor agreement is included in interest expense
relating to short-term borrowings. This "terminating corridor" agreement matures
in August 1996.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 8. RECENT DEVELOPMENTS
The purchase and construction of the new operations center located in Riverdale,
Maryland has been approved by local governmental authorities. The land contract
settled on June 29, 1995 and grading and clearing of the site has begun. The
Corporation does not anticipate any substantial delays and expects the
operations center to be completed in May 1996. The Corporation estimates that
the relocation of personnel from leased locations to this new facility will have
a positive impact on its results of operations for the fourth quarter of 1996
and thereafter. The Corporation does not anticipate any material impact to its
financial condition or results of operations in the current fiscal year from its
plans for building this new facility.
NOTE 9. REGULATORY MATTERS
On May 14, 1993, the Corporation entered into a Memorandum of Understanding with
the Federal Reserve Bank of Richmond ("Federal Reserve"). The Memorandum of
Understanding was 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 must notify the
Federal 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 Federal
Reserve Bank relating to capital, asset quality, loan loss reserves and
operations, including contingency measures if projected operational results do
not occur. As of June 30, 1995, the Corporation was in compliance with the
provisions and requirements of the Memorandum of Understanding.
13
<PAGE>
RIGGS NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
The Corporation reported consolidated net income of $9.4 million ($.22 per
common share) for the second quarter of 1995 compared with net income of $9.8
million ($.23 per common share) for the same quarter a year earlier. The second
quarter performance for 1995 is the Corporation's eighth consecutive profitable
quarter. Net interest income before the provision for loan losses (adjusted for
tax savings on tax-exempt interest) remained stable, decreasing only $103
thousand, or less than 1%, despite a 21 basis point decline in the net interest
margin between the periods. The decline in the margin was due to overall
increases in costs of funds, primarily in time deposits. The stability in the
net interest income is the result of reduced nonperforming asset levels and net
increases in earning assets.
Also affecting the second quarter 1995 results was a decline of $4.2 million
(18.7%) in noninterest income, partially offset by reductions in noninterest
expense of $2.7 million (5.4%). A significant portion of the decrease in
noninterest income was attributable to reductions in service charges and fees
totaling $3.7 million. The loss of noninterest income due to the sale of three
foreign subsidiaries in the third quarter of 1994 accounted for $2.7 million of
this decrease. Offsetting the decline in noninterest income was a $4.7 million
decrease in noninterest expense (adjusted for restructuring expense) from the
second quarter 1995 compared with the same period in 1994; however, $2.5 million
of this decrease was attributed to the absence of expense from the foreign
subsidiaries sold in 1994. The remaining decline was due to an increase in other
real estate owned net gains of $609 thousand combined with other efficiency
improvements between the periods.
There was no provision for loan losses in the first half of 1995, the result of
improvement in asset quality as nonperforming assets were reduced over 55% from
$127.5 million at the end of the second quarter of 1994 to $57.6 million at the
end of the second quarter of 1995. The June 30, 1995 level also represents an
$18.1 million decrease, or 24% from year end 1994. The Corporation's overall
asset quality continues to improve as a result of collection and
asset-management efforts as well as improved economic conditions domestically
and in the United Kingdom.
Consolidated net income for the first half of 1995 was $18.2 million ($.42 per
common share) compared with $17.7 million ($.38 per common share) for the same
period a year earlier. The current results for the first half of 1995 were
impacted by the same trends as described for the current quarter results,
although 1994's six-month results also include securities gains of $1.4 million
and a $4.7 million gain on the settlement of mortgage insurance claims.
Assets totaled $4.88 billion at June 30, 1995, up $450.4 million from year-end
1994 and $362.8 million from June 30, 1994. The increase in total assets from
June 30, 1994 is attributable primarily to net purchases in the securities
portfolio (see "Securities"). Deposits at June 30, 1995 totaled $3.77 billion,
an increase of $170.1 million from year-end 1994 and $33.9 million from June 30,
1994. The increase over the last twelve months is primarily due to increases in
domestic time deposits combined with several new initiatives in the deposit area
(see "Deposits"). Total liabilities increased $412.6 million during 1995 and
increased $344.5 million from the year-earlier level. The increase from the
year-earlier balances was due to the aforementioned increase in deposits
combined with a $311.0 million increase in short-term borrowings (see
"Short-Term Borrowings and Long-Term Debt").
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
SECURITIES
Schedules detailing securities available for sale and held-to-maturity follow:
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
AMORTIZED MARKET/ AMORTIZED MARKET/
AVAILABLE FOR SALE COST BOOK VALUE COST BOOK VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands)
U.S. Treasury Securities $164,001 $163,887 $45,482 $44,864
Government Agencies Securities 26,605 26,257 -- --
Obligations of States & Political Subdivisions 8,800 8,330 -- --
Mortgage-Backed Securities 415,137 411,175 496,342 480,433
Other Securities 19,539 19,539 13,764 13,764
-------- -------- -------- --------
Total $634,082 $629,188 $555,588 $539,061
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
BOOK MARKET BOOK MARKET
HELD-TO-MATURITY VALUE VALUE VALUE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands)
U.S. Treasury Securities $319,568 $319,406 $292,362 $291,522
Government Agencies Securities 436,559 436,562 125,000 122,004
Other Securities -- -- 3,600 3,600
-------- -------- -------- --------
Total $756,127 $755,968 $420,962 $417,126
</TABLE>
Total securities held-to-maturity and available for sale increased $343.9
million (33.0%) during the first half of 1995, and increased $425.3 million
(44.3%) since June 30, 1994. The increase in securities from year-end 1994 and
from the prior year was mainly due to net purchases during the first six months
of 1995 totaling $367.7 million. These purchases were funded primarily from
increases in short-term borrowings. The Corporation anticipated lower rates for
the second half of 1995 and thus elected to purchase securities in the second
quarter of 1995 in an amount equal to securities scheduled to mature in the
second half of 1995, resulting in an improved yield for the portfolio. The
weighted-average maturities and yields for securities held-to-maturity, adjusted
for anticipated prepayments, was approximately 1.3 years and 5.94% at June 30,
1995. The weighted-average maturities and yields for securities available for
sale, adjusted for anticipated prepayments, was approximately 2.8 years and
6.13% at June 30, 1995.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
SECURITIES, CONTINUED
The maturity distribution of securities at June 30, 1995, follows:
<TABLE>
<CAPTION>
OBLIGATIONS
GOVERNMENT OF STATES
U.S. TREASURY AGENCIES AND POLITICAL OTHER
(IN THOUSANDS) SECURITIES SECURITIES SUBDIVISIONS SECURITIES TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
Within 1 year
Amortized Cost $148,949 -- $ 8,800 $ 7,014 $164,763
Book/Market 149,114 -- 8,330 7,014 164,458
Yield* 5.93% -- 6.08% 5.65% 5.93%
After 1 but within 5 years
Amortized Cost 15,052 26,605 -- 222,946 264,603
Book/Market 14,773 26,257 -- 221,488 262,518
Yield* 4.05% 6.02% -- 5.98% 5.88%
After 5 but within 10 years
Amortized Cost -- -- -- 175,952 175,952
Book/Market -- -- -- 173,589 173,589
Yield* -- -- -- 4.61% 4.61%
After 10 years
Amortized Cost -- -- -- 28,764 28,764
Book/Market -- -- -- 28,623 28,623
Yield* -- -- -- 3.70% 3.70%
--------- --------- --------- --------- ---------
Total Securities Available for Sale
Amortized Cost $164,001 $ 26,605 $ 8,800 $434,676 $634,082
Book/Market 163,887 26,257 8,330 430,714 629,188
Yield* 5.76% 6.02% 6.08% 5.27% 5.44%
SECURITIES HELD-TO-MATURITY
Within 1 year
Book $319,568 $110,316 $ -- $ -- $429,884
Market 319,406 110,337 -- -- 429,743
Yield* 5.38% 6.21% -- -- 5.59%
After 1 but within 5 years
Book -- 326,243 -- -- 326,243
Market -- 326,225 -- -- 326,225
Yield* -- 6.56% -- -- 6.56%
--------- --------- --------- --------- ---------
Total Securities Held-to-Maturity
Book $319,568 $436,559 $ -- $ -- $756,127
Market 319,406 436,562 -- -- 755,968
Yield* 5.38% 6.47% -- -- 6.01%
</TABLE>
[FN]
* Weighted average yield to maturity at June 30, 1995. The securities within
the category of "Securities Available for Sale - Obligations of State and
Political Subdivisions" are taxable securities and are on a nonaccrual
basis at June 30, 1995. All contractual payments to date have
been received.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
LOANS
The following table reflects loans by type for the periods indicated:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
LOAN TYPE (IN THOUSANDS) 1995 1994 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and Financial $ 459,220 $ 455,296 $ 400,660
Real Estate - Commercial/Construction 332,933 354,504 323,835
Residential Mortgage 1,316,530 1,323,928 1,317,169
Home Equity 230,368 221,116 220,910
Consumer 74,730 75,834 75,887
Foreign 152,332 212,709 204,558
------------ ------------- ------------
Loans 2,566,113 2,643,387 2,543,019
Less: Unearned Discount (Unamortized
Premium) and Net Deferred Fees (5,381) (6,637) (6,905)
------------ ------------- ------------
Total Loans, Net $ 2,571,494 $ 2,650,024 $ 2,549,924
</TABLE>
At June 30, 1995, total loans outstanding (net of premiums/discounts) were $2.57
billion, compared with $2.55 billion at December 31, 1994, and $2.65 billion at
June 30, 1994. The increase in loans from December 31, 1994 was mostly
attributable to net increases in commercial and financial and home equity loans,
the result of several local area loan origination initiatives begun in the first
quarter of 1995. These increases were partially offset by decreases in foreign
loans during the first half of 1995. The decrease in loans from June 30, 1994
was mainly due to net decreases in real estate-commercial/construction and
foreign loans, the result of limited new lending in these sectors during the
period.
REAL ESTATE-COMMERCIAL/CONSTRUCTION LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
PROJECT TYPE (IN THOUSANDS) COLUMBIA VIRGINIA MARYLAND KINGDOM OTHER TOTAL
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land Acquisition and
Construction Development $ 30,152 $ 17,401 $ 15,319 $ -- $ -- $ 62,872
Multifamily Residential 26,334 12,388 8,727 -- 298 47,747
Commercial:
Office Buildings 47,142 40,990 23,678 -- 2,350 114,160
Shopping Centers 11,104 21,866 18,790 -- -- 51,760
Hotels 4,571 5,497 -- -- -- 10,068
Industrial/Warehouse Loans -- 10,682 7,959 -- -- 18,641
Churches 6,227 1,667 6,457 -- -- 14,351
Other 5,667 5,778 1,818 -- 71 13,334
-------- -------- -------- -------- -------- --------
Total Commercial 74,711 86,480 58,702 -- 2,421 222,314
Foreign -- -- -- 93,216 -- 93,216
-------- -------- -------- -------- -------- --------
Total Real Estate-Commercial/
Construction Loans $131,197 $116,269 $ 82,748 $ 93,216 $ 2,719 $426,149
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
LOANS, CONTINUED
The Corporation extends credit to borrowers domiciled outside of the United
States through several of its banking subsidiaries. Cross-border outstandings
include loans, acceptances, interest-bearing deposits with other banks,
investments, accrued interest and other monetary assets. These assets may be
impacted by changing economic conditions in their respective countries. 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.
The table below details those countries in which the Corporation had total
outstandings in excess of 1% of its total assets. At June 30, 1995, the
Corporation had no cross-border outstandings exceeding 1% of its total assets to
countries experiencing difficulties in repaying their external debt. The
Corporation did not have any cross-border outstandings between .75% and 1% at
June 30, 1995 or December 31, 1994, however, at June 30, 1994 the Corporation
had $39.6 million (.88%) outstanding to Italy.
CROSS-BORDER OUTSTANDINGS THAT EXCEED 1% OF TOTAL ASSETS
<TABLE>
<CAPTION>
90 DAYS
% OF OR MORE POTENTIAL
(IN MILLIONS) AMOUNT ASSETS NONACCRUAL RENEGOTIATED PAST DUE PROBLEM
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JUNE 30, 1995
United Kingdom $159.9 3.3% $ 7.2 $0.2 $-- $ 5.9
DECEMBER 31, 1994
United Kingdom 149.4 3.4 10.6 0.3 -- 4.3
France 61.1 1.4 -- -- -- --
JUNE 30, 1994
United Kingdom 178.5 4.0 22.5 0.4 -- 11.0
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY
Nonperforming assets, which include nonaccrual loans, renegotiated loans and
other real estate owned (net of reserves), totaled $57.6 million at June 30,
1995, an $18.1 million (23.9%) decrease from the year-end 1994 total of $75.7
million and a $69.9 million (54.8%) decrease from the June 30, 1994 total. The
composition of nonperforming assets and past due loans is detailed below:
NONPERFORMING ASSETS AND PAST-DUE LOANS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1995 1994 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Nonaccrual Loans: (1)
Domestic $ 7,187 $ 47,098 $ 11,518
Foreign 7,232 27,688 15,865
-------- -------- --------
Total Nonaccrual Loans 14,419 74,786 27,383
-------- -------- --------
Renegotiated Loans: (2)
Domestic 157 3,064 288
Foreign 152 409 267
-------- -------- --------
Total Renegotiated Loans 309 3,473 555
-------- -------- --------
Other Real Estate Owned, Net:
Domestic 40,816 42,856 44,068
Foreign 2,031 6,359 3,695
-------- -------- --------
Total Other Real Estate Owned, Net 42,847 49,215 47,763
-------- -------- --------
Total Nonperforming Assets $ 57,575 $127,474 $ 75,701
PAST-DUE LOANS: (3)
Domestic $ 2,463 $ 2,327 $ 6,091
Foreign -- -- 30
-------- -------- --------
Total Past-Due Loans $ 2,463 $ 2,327 $ 6,121
</TABLE>
[FN]
(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 have been 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 Standard No. 15. Renegotiated loans do not include $13.4
million in loans renegotiated at market terms that have performed in
accordance with their respective renegotiated terms. These performing,
market rate loans are no longer included in nonperforming asset totals.
(3) - Loans contractually past due 90 days or more in principal or interest
that are well-secured and in the process of collection.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY, CONTINUED
At June 30, 1995, nonaccrual loans, including both domestic and foreign loans,
were $14.4 million, or .56% of total loans, compared with $27.4 million, or 1.1%
of total loans, at year-end 1994 and $74.8 million, or 2.8% of total loans, at
June 30, 1994. The decrease in nonaccrual loans during the first half of 1995
was due to paydowns and payoffs of $12.4 million, in addition to loans returning
to accrual status of $2.6 million, charge-offs of $5.2 million and transfers to
other real estate owned of $385 thousand. These reductions were partially offset
by additions of $7.4 million and foreign exchange translation adjustments of
$203 thousand. Of the $12.4 million in paydowns and payoffs during the first six
months of 1995, $5.0 million (40.1%) related to foreign nonaccrual loans and
$7.4 million (59.9%) related to domestic nonaccrual loans. Renegotiated loans
decreased $246 thousand during the first half of 1995, with paydowns and payoffs
totaling $132 thousand, combined with transfers back to accrual status of $114
thousand. Nonaccrual and renegotiated real estate-commercial/construction loans,
both foreign and domestic, totaled $3.7 million at June 30, 1995, or 25.3% of
the total nonaccrual and renegotiated loans at June 30, 1995.
Other real estate owned, net of reserves, decreased to $42.8 million at June 30,
1995, from $47.8 million at December 31, 1994 and $49.2 million at June 30,
1994. The decrease during the first half of 1995 is the result of paydowns and
sales of $5.0 million and net charge-offs of $376 thousand offset by foreign
exchange translation adjustments of $70 thousand and transfers from nonaccrual
loans of $385 thousand. At June 30, 1995, residential and commercial land
composed 75% of other real estate owned with office, industrial, retail and
other categories accounting for the remainder of the portfolio.
OTHER REAL ESTATE OWNED - (1)
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
PROJECT TYPE (IN THOUSANDS) COLUMBIA VIRGINIA MARYLAND KINGDOM OTHER TOTAL
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land $ 500 $ 22,787 $ 8,809 $ -- $ -- $ 32,096
Single-Family Residential 283 229 25 -- -- 537
Office Buildings/Retail -- 537 4,572 989 2,561 8,659
Multifamily Residential -- 156 -- -- -- 156
Warehouse Loans 357 -- -- 1,042 -- 1,399
-------- -------- -------- -------- -------- --------
Total Other Real Estate Owned, Net $ 1,140 $ 23,709 $ 13,406 $ 2,031 $ 2,561 $ 42,847
</TABLE>
[FN]
(1) - Balances are net of valuation reserves totaling $1.7 million.
Past due loans consist predominantly of residential real estate and consumer
loans that are well-secured and in the process of collection and that are
accruing interest. Past due loans decreased $3.7 million during the first half
of 1995 to $2.5 million, while increasing $136 thousand from June 30, 1994.
At June 30, 1995, the Corporation had identified approximately $14.2 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 $8.3 million of domestic
loans, primarily commercial and financial, and $5.9 million of commercial
property and corporate loans originated in the United Kingdom.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY, CONTINUED
In addition, the Corporation had $8.3 million in other potential problem assets
at June 30, 1995. This amount consisted of $10.0 million, par value, of Orange
County, California, variable-rate one-year notes due in July and August 1995
(the "Notes"), which were purchased from the Corporation's proprietary RIMCO
Monument Money Market Fund. These securities are classified in the securities
available for sale portfolio at June 30, 1995. Due to Orange County's bankruptcy
declaration on December 6, 1994, the Notes are on a nonaccrual basis and are
carried at their estimated fair value. Interest on the Notes is current, but due
to the uncertainty of the outcome of the bankruptcy proceedings, there is no
assurance that future payments will be received. On July 7, 1995 the Corporation
accepted Orange County's offer to extend the maturity date of $5 million par
value of the Notes, under their original terms and conditions, to June 30,
1996. The Corporation is monitoring the situation closely and the impact
of this extension, which occurred subsequent to the current period-end, is
not expected to be material. The remaining $5 million par value of the Notes
were not part of the bankruptcy proceeding and are expected to mature without an
extension in the third quarter of 1995.
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 based on management's assessment of existing
conditions and reflects potential losses determined to be probable and subject
to reasonable estimation. The reserve for loan losses was $100.1 million, or
3.89% of total loans (net of premiums/discounts) at June 30, 1995, compared with
$97.0 million, or 3.81% of total loans at December 31, 1994, and $92.1 million,
or 3.48% of total loans, at June 30, 1994. The increase in the reserve for loan
losses as a percentage of total loans from June 30, 1994 to June 30, 1995, was
due to the increase in the reserve balance as well as a decrease in total loans
between the periods. The Corporation's coverage ratio was 680% at June 30,
1995, 347% at year-end 1994 and 118% at June 30, 1994. The increase in the
coverage ratio during the periods was primarily the result of decreases
in total nonperforming assets during the periods.
DEPOSITS
Deposits, which are offered through several banking subsidiaries of the
Corporation, are the primary and most stable source of funds for the
Corporation. Deposits totaled $3.77 billion at June 30, 1995, increasing $170.1
million (4.7%) from the year-end 1994's deposit total and $33.9 million (.9%)
from the June 30, 1994 deposit total. The increase from the year earlier balance
was due to increases in domestic time ($276.9 million) and foreign time deposits
($107.6 million), partially offset by declines in savings and NOW accounts and
money market deposits ($274.9 million). The increase in domestic time deposits
was mainly due to a $125.9 million increase in the balance of time deposits with
the U.S. Treasury at June 30, 1995. The remainder of the increase was due to
several deposit initiatives begun in the latter half of 1994, primarily
targeting demand deposit and time deposit products.
During 1994, the Corporation conducted a detailed analysis of its retail banking
system, determining the best use of its locations, branch facilities, product
lines and personnel. The Corporation has already sold or consolidated four
retail branches as part of this analysis. The Corporation currently does not
anticipate significant branch sales or consolidations, but the Corporation is
actively seeking enhancements to existing branches to attract new customers,
improve service quality and the overall profitability of its branches, and is
also searching for opportunities to establish new retail banking branches in
strategic locations.
DEPOSITS
<TABLE>
<CAPTION>
CHANGE
JUNE 30, ---------------------
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand Deposits $ 859,168 $ 934,883 $ (75,715) (8.1)%
Interest-Bearing Deposits:
Savings and NOW Accounts 800,321 895,519 (95,198) (10.6)
Money Market Deposit Accounts 917,961 1,097,646 (179,685) (16.4)
Time Deposits in Domestic Offices 879,833 602,912 276,921 45.9
Time Deposits in Foreign Offices 315,578 207,953 107,625 51.8
---------- ---------- ---------- ------
Total Interest-Bearing Deposits 2,913,693 2,804,030 109,663 3.9
---------- ---------- ---------- ------
Total Deposits $3,772,861 $3,738,913 $ 33,948 0.9%
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings increased $237.9 million (81.1%) during the first half of
1995 and $311.0 million (141.2%) since the end of the first half of 1994.
Short-term borrowings are an additional source of funds that the Corporation has
established to meet certain asset/liability and daily cash management
objectives. The Corporation's increase in short-term borrowings during the first
half of 1995 was primarily to fund the net purchase of $367.7 million in
securities, which is part of a strategy to "pre-invest" in higher yielding
securities in the first half of 1995, to replace a portfolio of securities
scheduled to mature in the second half of 1995. The purchase of the securities
in the first half of 1995 allowed the Corporation to secure favorable yields
against anticipated declines in rates over the second half of 1995.
In May 1995, the Corporation was approved by the Federal Housing Finance Board
to become a member of the Federal Home Loan Bank of Atlanta (FHLB-Atlanta). On
June 14, 1995, the Board of Directors accepted membership with FHLB-Atlanta. The
Corporation will utilize the FHLB-Atlanta as a source for short-term borrowings
at favorable rates as well as a source of lower rate financing for Community
Reinvestment Act (CRA) loans.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
<TABLE>
<CAPTION>
CHANGE
JUNE 30, ---------------
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Funds Purchased and Repurchase Agreements $195,631 $ 69,930 $125,701 179.8%
U.S. Treasury Notes and Other Borrowed Funds 335,750 150,406 185,344 123.2
-------- -------- -------- ------
Total Short-Term Borrowings 531,381 220,336 311,045 141.2
Floating-Rate Subordinated Capital Notes due 1996 26,100 26,100 -- --
Subordinated Debentures due 2009 66,525 66,525 -- --
Subordinated Notes due 2006 125,000 125,000 -- --
-------- -------- -------- ------
Total Long-Term Debt 217,625 217,625 -- --
-------- -------- -------- ------
Total Short-Term Borrowings and Long-Term Debt $749,006 $437,961 $311,045 71.0%
</TABLE>
LIQUIDITY
The Corporation seeks to maintain sufficient liquidity to meet the needs of
depositors, borrowers and creditors, at a reasonable cost and without undue
stress on the operations of the Corporation and its banking subsidiaries. The
Corporation's Asset-Liability Committee actively analyzes and manages liquidity
in coordination with other areas of the organization (see "Interest Rate Risk
Management"). At June 30, 1995, the Corporation's liquid assets, on a
consolidated basis, which include cash and due from banks, U.S. Treasury
securities and Government obligations, federal funds sold, reverse repurchase
agreements and time deposits at other banks, totaled $2.0 billion (41.7% of
total assets). This compares with $1.6 billion (36.5%) at December 31, 1994, and
$1.6 billion (35.1%) at June 30, 1994. The increase in total liquid assets and
the percentage of liquid assets to total assets from June 30, 1994, were the
result of cash inflows from short-term borrowings and the Corporation's deposit
initiatives, combined with loan maturities. The Corporation expects liquid
assets to remain at approximately the June 30, 1995 level for the foreseeable
future.
The liquidity position of the Corporation is enhanced by the stable source of
funds maintained through the Corporation's core deposit relationships, in
addition to its ability to attract new deposits and other sources of funds, such
as short-term borrowings and assets available for securitization.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
INTEREST RATE RISK MANAGEMENT
The Corporation's asset/liability management function is controlled by the
Asset/Liability Committee ("ALCO"), which is comprised of representatives who
lead the major divisions within the Corporation. The objective of the group is
to prudently manage the assets and liabilities of the Corporation to provide
both an optimum and stable net interest margin while maintaining adequate levels
of liquidity and capital. This approach entails the management of overall risk
of the organization, in conjunction with the acquisition and deployment of
funds.
ALCO monitors and modifies exposure to changes in interest rates based upon its
view of current and prospective market and economic conditions. The traditional
measurement of an organization's exposure to interest-rate fluctuations, such as
interest sensitivity, entails a "static gap" measurement portraying a snapshot
of the balance sheet at one point in time. However, this methodology does not
adequately measure the Corporation's exposure to interest-rate risk. The balance
sheet must be viewed within a dynamic framework in which relationships may vary
over time in virtually every segment of the statement of condition.
The Corporation manages interest-rate risk through the use of a simulation model
allowing for various interest-rate scenarios to be portrayed. The model
forecasts the impact on earnings of these rate scenarios over a 36-month time
horizon assuming selected changes in the mix of assets and liabilities, spread
relationships, and management actions. A "most likely" scenario is forecasted
based upon a consensus view of the marketplace. Alternatives, which reflect
interest rates moving significantly higher or lower than this view, are also
evaluated, with the results compared against risk tolerance limits established
by corporate policy. The Corporation's current policy establishes limits for
possible fluctuations in net interest income for an ensuing 12-month period
under the "most likely" scenario described above. At June 30, 1995, the
Corporation maintained a relatively balanced interest-rate risk position. This
position would serve to insulate the Corporation against interest rates moving
significantly in either direction.
In managing the Corporation's interest-rate risk, ALCO also utilizes financial
derivatives in the normal course of business. These products might include
interest-rate swaps, caps, collars, floors, futures, and options, among others.
Financial derivatives are employed to assist in the management and/or reduction
of interest-rate risk for the Corporation and can effectively alter the interest
sensitivity of segments of the statement of condition for specified periods of
time. All of these vehicles are considered "off-balance sheet" as they do not
impact the actual levels of assets or liabilities of the Corporation.
Management finds that all of the methodologies discussed above provide a
meaningful representation of the Corporation's interest-rate sensitivity, though
factors other than changes in the interest-rate environment, such as levels of
nonearning assets, and changes in the composition of earning assets, may impact
net interest income. Management believes its current rate sensitivity level is
appropriate, considering the Corporation's economic outlook and the conservative
approach taken in the review and monitoring of the Corporation's interest-rate
risk position.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
Total stockholders' equity at June 30, 1995 was $305.5 million, up $37.8 million
from the year-end 1994 total and $18.4 million from June 30, 1994. The increase
from year-end 1994 was the result of earnings totaling $18.2 million combined
with a reduction in net unrealized losses in the Corporation's securities
available for sale portfolio of $24.9 million, partially offset by dividends on
preferred stock of $5.4 million. The increase in stockholders' equity over the
preceding year is attributable to earnings during the period combined with a
$13.3 million decrease in net unrealized losses in the Corporation's securities
available for sale portfolio. These increases were offset by the repurchase of
the Preferred Stock, Series A totaling $19.1 million in 1994.
The Corporation's total (combined Tier I and Tier II) and core (Tier I) capital
ratios were 18.93% and 11.76%, respectively, at June 30, 1995, compared with
18.50% and 11.48% at December 31, 1994 and 18.18% and 11.27% at June 30, 1994,
respectively. The Federal Reserve Board's risk-based capital guidelines require
bank holding companies 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 Federal Reserve
Board has established an additional capital adequacy guideline-the leverage
ratio, which measures the ratio of 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%. Those that are not in the most highly rated category,
including the Corporation, are expected to maintain minimum ratios of at least
4.00%, or higher, if determined appropriate by the Federal Reserve Board through
its assessment of the Corporation'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 above the 4.00% minimum.
The Corporation's leverage ratio was 6.54% at June 30, 1995, compared with
leverage ratios of 6.42% and 6.59% at December 31, 1994 and June 30, 1994,
respectively. Regulatory capital ratios do not include the impact of net
unrealized losses on the securities available for sale portfolio totaling $3.2
million at June 30, 1995. The Corporation's equity to assets ratio, which does
include these unrealized losses, remains solid, with a ratio of 6.27% at June
30, 1995 compared to 6.05% and 6.36% at December 31, 1994, and June 30, 1994,
respectively.
The Corporation ensures that its operating 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 Office
of the Comptroller of the Currency, which are generally the same as those of the
Federal Reserve Board. The following table details the actual and required
minimum ratios for the Corporation and its insured bank subsidiaries:
CAPITAL RATIOS
<TABLE>
<CAPTION>
REQUIRED
JUNE 30, 1995 DEC. 31, 1994 JUNE 30, 1994 MINIMUMS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RIGGS NATIONAL CORPORATION:
Tier I 11.76% 11.48% 11.27% 4.00%
Combined Tier I and Tier II 18.93 18.50 18.18 8.00
Leverage* 6.54 6.42 6.59 4.00
THE RIGGS NATIONAL BANK OF WASHINGTON, D.C.:
Tier I 14.05 13.35 11.86 4.00
Combined Tier I and Tier II 15.34 14.64 13.14 8.00
Leverage* 7.78 7.39 6.92 4.00
THE RIGGS NATIONAL BANK OF VIRGINIA:
Tier I 18.70 18.18 17.47 4.00
Combined Tier I and Tier II 19.79 19.43 18.72 8.00
Leverage* 9.44 9.74 9.43 4.00
THE RIGGS NATIONAL BANK OF MARYLAND:
Tier I 13.29 13.21 11.86 4.00
Combined Tier I and Tier II 14.54 14.46 13.11 8.00
Leverage* 7.29 7.33 6.59 4.00
</TABLE>
[FN]
* Most bank holding companies and national banks, including the Corporation
and the Corporation's national bank subsidiaries, are expected to
maintain at least a 4.00% minimum leverage ratio, or higher, if determined
appropriate by the Federal Reserve Board and other regulators. The
Federal Reserve Board has not indicated a requirement higher than 4.00%
at June 30, 1995.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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 $38.9 million in
the second quarter of 1995, down $50 thousand from the first quarter of 1995 and
$103 thousand from the second quarter of 1994. Net interest income on a
tax-equivalent basis was $77.8 million for the first half of 1995, compared with
$77.0 for the same period in the prior year. The net interest margin (net
interest income on a tax-equivalent basis divided by average earning assets) for
the second quarter of 1995 was 3.71% (see schedule of the following page), a
decrease of 20 basis point from 3.91% for the first quarter of 1995 and 21 basis
points from 3.92% for the second quarter of 1994. The net interest margin for
the six-month periods ended June 30, 1995 and 1994 was level at 3.81%. With the
rising rates in 1994, the Corporation's assets generally repriced faster than
liabilities. However, the interest rate increases of 1994 abated during the
first quarter of 1995. Thus during the first half of 1995, asset repricing has
leveled resulting initially in a leveling of the Corporation's net interest
margin, and in the most recent quarter, a movement downward in the net interest
margin. The Corporation anticipates the net interest margin will continue to
experience some downward pressure in future periods. The loan-to-deposit ratio
stood at 68.2% at June 30, 1995, down slightly from the year-end 1994 ratio of
70.8%, the result of the aforementioned deposit increases. The ratio of loans to
average earning assets was 60.7% for the second quarter of 1995, compared with
ratios of 62.6% and 66.0% for the first quarter of 1995 and the second quarter
of 1994, respectively.
NET INTEREST INCOME CHANGES (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1995 VS 1994 JUNE 30, 1995 VS 1994
DUE TO DUE TO TOTAL DUE TO DUE TO TOTAL
(IN THOUSANDS) RATE VOLUME CHANGE RATE VOLUME CHANGE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans (Including Fees) $ 24,420 $(21,603) $ 2,817 $ 18,137 $(13,046) $ 5,091
Securities Available for Sale 1,220 1,081 2,301 4,731 424 5,155
Securities Held-to-Maturity 1,859 2,613 4,472 3,653 527 4,180
Time Deposits with Other Banks 1,159 827 1,986 1,499 1,340 2,839
Federal Funds Sold and Reverse
Repurchase Agreements 9,050 (8,430) 620 2,362 666 3,028
-------- --------- -------- -------- --------- --------
Total Interest Income 37,708 (25,512) 12,196 30,382 (10,089) 20,293
Interest Expense:
Savings and NOW Accounts 9,874 (9,813) 61 4,850 (4,643) 207
Money Market Deposit Accounts 18,502 (16,789) 1,713 10,526 (7,182) 3,344
Time Deposits in Domestic Offices 4,063 1,333 5,396 7,775 857 8,632
Time Deposits in Foreign Offices 692 1,276 1,968 1,316 2,251 3,567
Federal Funds Purchased and
Repurchase Agreements 918 1,433 2,351 1,796 2,177 3,973
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 572 178 750 1,850 (1,066) 784
Long-Term Debt 60 -- 60 2,158 (3,132) (974)
-------- --------- -------- -------- --------- --------
Total Interest Expense 34,681 (22,382) 12,299 30,271 (10,738) 19,533
-------- --------- -------- -------- --------- --------
Net Interest Income $ 3,027 $ (3,130) $ (103) $ 111 $ 649 $ 760
</TABLE>
[FN]
(1) - 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
income tax rate of 35% and local tax rates as applicable.
25
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994
(TAX-EQUIVALENT BASIS) (1) AVERAGE INCOME/ AVERAGE INCOME/
(IN THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Commercial - Taxable $ 406,542 $ 8,329 8.22 % $ 390,259 $ 6,116 6.29 %
Commercial - Tax-Exempt 34,498 924 10.74 63,254 1,496 9.49
Real Estate - Commercial/Construction 328,709 8,036 9.81 360,663 6,985 7.77
Residential Mortgage 1,326,318 23,639 7.15 1,301,574 23,431 7.22
Home Equity 229,121 5,196 9.10 222,246 3,941 7.11
Consumer 73,290 2,220 12.15 73,383 2,207 12.06
Foreign 152,868 3,437 9.02 222,141 4,788 8.65
---------- ------- ------- ---------- ------- -------
Total Loans (Including Fees) 2,551,346 51,781 8.14 2,633,520 48,964 7.46
---------- ------- ------- ---------- ------- -------
Securities Available for Sale (3) 623,801 9,617 6.18 548,134 7,316 5.35
Securities Held-to-Maturity 604,542 9,130 6.06 411,273 4,658 4.54
Time Deposits with Other Banks 239,979 4,035 6.74 179,440 2,049 4.58
Federal Funds Sold and Resale Agreements 182,687 2,788 6.12 217,465 2,168 4.00
---------- ------- ------- ---------- ------- -------
Total Earning Assets and Average Rate Earned 4,202,355 77,351 7.38 3,989,832 65,155 6.55
---------- ------- ------- ---------- ------- -------
Less: Reserve for Loan Losses 97,141 89,579
Cash and Due from Banks 202,490 219,010
Premises and Equipment, Net 150,029 158,170
Other Assets 182,503 185,241
---------- ----------
Total Assets $4,640,236 $4,462,674
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts $819,036 $4,803 2.35 % $925,608 $4,742 2.05 %
Money Market Deposit Accounts 941,536 8,092 3.45 1,051,344 6,379 2.43
Time Deposits in Domestic Offices 867,558 11,280 5.22 724,946 5,884 3.26
Time Deposits in Foreign Offices 305,023 4,597 6.04 214,529 2,629 4.92
---------- ------- ------- ---------- ------- -------
Total Interest-Bearing Deposits 2,933,153 28,772 3.93 2,916,427 19,634 2.70
---------- ------- ------- ---------- ------- -------
Borrowed Funds:
Federal Funds Purchased and
Repurchase Agreements 218,569 3,349 6.15 107,953 998 3.71
U.S. Treasury Notes and Other Borrowed Funds 107,275 1,563 5.84 90,009 813 3.62
Long-Term Debt 217,625 4,804 8.85 217,624 4,744 8.74
---------- ------- ------- ---------- ------- -------
Total Interest-Bearing Funds and Average Rate Paid 3,476,622 38,488 4.44 3,332,013 26,189 3.15
---------- ------- ------- ---------- ------- -------
Demand Deposits 818,491 799,543
Other Liabilities 50,772 49,255
Stockholders' Equity 294,351 281,863
---------- ----------
Total Liabilities and Stockholders' Equity $4,640,236 $4,462,674
NET INTEREST INCOME AND SPREAD $38,863 2.94 % $38,966 3.40 %
------- ------
NET INTEREST MARGIN ON EARNING ASSETS 3.71 % 3.92 %
</TABLE>
[FN]
(1) - Income and rates are computed on a tax-equivalent basis using a Federal
income tax rate of 35% and local tax rates as applicable.
(2) - Nonperforming loans are included in average balances used to determine
rates.
(3) - Securities available for sale averages and rates are based on amortized
costs.
26
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994
(TAX-EQUIVALENT BASIS) (1) AVERAGE INCOME/ AVERAGE INCOME/
(IN THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Commercial - Taxable $ 397,878 $ 16,039 8.13 % $ 374,662 $11,055 5.95 %
Commercial - Tax-Exempt 35,443 1,842 10.48 69,600 3,881 11.24
Real Estate - Commercial/Construction 322,527 15,552 9.72 372,778 14,786 8.00
Residential Mortgage 1,326,576 47,183 7.17 1,277,987 45,547 7.19
Home Equity 226,934 10,097 8.97 225,526 7,832 7.00
Consumer 73,601 4,388 12.02 75,548 4,464 11.92
Foreign 157,387 6,925 8.87 220,019 9,370 8.59
---------- -------- ------- ---------- ------- -------
Total Loans (Including Fees) 2,540,346 102,026 8.10 2,616,120 96,935 7.47
---------- -------- ------- ---------- ------- -------
Securities Available for Sale (3) 611,049 18,932 6.25 593,241 13,777 4.68
Securities Held-to-Maturity 526,806 15,569 5.96 504,268 11,389 4.55
Time Deposits with Other Banks 228,071 7,518 6.65 182,005 4,679 5.18
Federal Funds Sold and Resale Agreements 214,280 6,392 6.02 182,521 3,364 3.72
---------- -------- ------- ---------- ------- -------
Total Earning Assets and Average Rate Earned 4,120,552 150,437 7.36 4,078,155 130,144 6.44
---------- -------- ------- ---------- ------- -------
Less: Reserve for Loan Losses 97,398 88,269
Cash and Due from Banks 202,553 229,938
Premises and Equipment, Net 150,488 159,227
Other Assets 182,861 185,622
---------- ----------
Total Assets $4,559,056 $4,564,673
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts $833,449 $9,707 2.35 % $932,289 $9,500 2.05 %
Money Market Deposit Accounts 956,989 16,013 3.37 1,056,285 12,669 2.42
Time Deposits in Domestic Offices 837,193 20,535 4.95 783,943 11,903 3.06
Time Deposits in Foreign Offices 295,722 9,005 6.14 216,598 5,438 5.06
---------- -------- ------- ---------- ------- -------
Total Interest-Bearing Deposits 2,923,353 55,260 3.81 2,989,115 39,510 2.67
---------- -------- ------- ---------- ------- -------
Borrowed Funds:
Federal Funds Purchased and
Repurchase Agreements 184,175 5,565 6.09 94,272 1,592 3.41
U.S. Treasury Notes and Other Borrowed Funds 78,059 2,225 5.75 88,244 1,441 3.29
Long-Term Debt 217,625 9,611 8.91 248,206 10,585 8.60
---------- -------- ------- ---------- ------- -------
Total Interest-Bearing Funds and Average Rate Paid 3,403,212 72,661 4.31 3,419,837 53,128 3.13
---------- -------- ------- ---------- ------- -------
Demand Deposits 823,293 808,617
Other Liabilities 48,077 48,250
Stockholders' Equity 284,474 287,969
---------- ----------
Total Liabilities and Stockholders' Equity $4,559,056 $4,564,673
NET INTEREST INCOME AND SPREAD $77,776 3.06 % $77,016 3.31 %
------ ------
NET INTEREST MARGIN ON EARNING ASSETS 3.81 % 3.81 %
</TABLE>
[FN]
(1) - Income and rates are computed on a tax-equivalent basis using a
Federal income tax rate of 35% and local tax rates as applicable.
(2) - Nonperforming loans are included in average balances used to determine
rates.
(3) - Securities available for sale averages and rates are based on
amortized costs.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NET INTEREST INCOME, CONTINUED
Interest income earned on nonaccrual and restructured loans totaled $295
thousand and $1.1 million for the six months ended June 30, 1995 and 1994,
respectively. Interest income that would have been earned under the original
terms of these loans was $1.2 million and $4.4 million, respectively, which
reduced the net interest margin by approximately 4 basis points in 1995 and 16
basis points in 1994.
INTEREST INCOME ON NONACCRUAL AND RENEGOTIATED LOANS (1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(IN THOUSANDS) JUNE 30, 1995
- ---------------------------------------------------------
<S> <C>
Interest Income at Original Terms:
Nonaccrual Loans:
Domestic Loans $ 511
Foreign Loans 638
Renegotiated Loans 50
------
Total $1,199
Actual Interest Income Recognized:
Nonaccrual Loans:
Domestic Loans $ 137
Foreign Loans 158
Renegotiated Loans --
------
Total $ 295
</TABLE>
[FN]
(1)- For loans on nonaccrual and a renegotiated status at June 30, 1995,
the table shows total interest income at original terms and actual
income recognized for the six months ended June 30, 1995.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NONINTEREST INCOME
Noninterest income for the second quarter of 1995 was $18.3 million, compared
with $18.0 million for the first quarter of 1995 and $22.6 million for the
second quarter of 1994. The $340 thousand increase in noninterest income from
the first quarter to the second quarter of 1995 was due to a $687 thousand
increase in trust income, partially offset by a $271 thousand decrease in
foreign exchange income and other noninterest income. The $4.2 million decrease
when comparing quarters on a year-to-year basis was attributable primarily to
decreases of $2.6 million of international noncredit commissions and fees and
$1.1 million of service charges. Noninterest income decreased $13.0 million when
comparing the first half of 1995 to the same period in 1994. This decrease was
due to decreases in international noncredit commissions and fees of $4.3
million, service charges of $1.4 million and trust income of $1.0 million. Also
contributing to this decrease was an insurance recovery in 1994 of $4.7 million.
The reductions in international commissions and fees for the three and six month
periods was the result of the sale of three foreign subsidiaries in the third
quarter of 1994. These subsidiaries contributed approximately $2.7 million in
commissions and fees in the second quarter of 1994 and $4.5 million in the first
half of 1994.
NONINTEREST INCOME
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, CHANGE JUNE 30, CHANGE
- ------------------------------------------------------------------------------ ----------------------------------------
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT 1995 1994 AMOUNT PERCENT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Service Charges $ 8,564 $ 9,675 $ (1,111) (11.5)% $ 17,107 $ 18,505 $ (1,398) (7.6)%
Trust Income 7,329 7,538 (209) (2.8) 13,971 14,995 (1,024) (6.8)
International Noncredit Commissions
and Fees 169 2,778 (2,609) (93.9) 389 4,715 (4,326) (91.7)
Gain on Settlement of Mortgage
Insurance Claims -- -- -- -- -- 4,739 (4,739) (100.0)
Foreign Exchange Income 521 588 (67) (11.4) 1,131 1,134 (3) (0.3)
Other Noninterest Income 1,755 1,915 (160) (8.4) 3,692 3,821 (129) (3.4)
-------- -------- --------- ------- -------- -------- --------- -------
Noninterest Income Excluding 18,338 22,494 (4,156) (18.5) 36,290 47,909 (11,619) (24.3)
Securities Gains, Net
Securities Gains, Net -- 68 (68) (100.0) 46 1,424 (1,378) (96.8)
-------- -------- --------- ------- -------- -------- --------- -------
Total Noninterest Income $ 18,338 $ 22,562 $ (4,224) (18.7)% $ 36,336 $ 49,333 $(12,997) (26.3)%
</TABLE>
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1995 was $46.9 million, a decrease
of $281 thousand when compared with the first quarter of 1995 and a decrease of
$2.7 million when compared with the second quarter of 1994. The decrease from
the first quarter of 1995 was primarily due to a decrease in full-time salaries
and bonuses of $896 thousand and a decrease in data processing services of $332
thousand, partially offset by increases in occupancy expense of $662 thousand,
advertising and public relations expense of $153 thousand and a decrease in
other real estate owned net gains of $195 thousand. The decrease from the second
quarter of 1994 was attributable to an increase in other real estate owned net
gains of $609 thousand and decreases in staff expenses of $1.3 million,
advertising and public relations of $129 thousand, FDIC insurance of $437
thousand, furniture and equipment expenses of $306 thousand and $2.1 million in
other noninterest expenses. Offsetting the aforementioned decreases was the
recording of a recovery in restructuring expense of $2.1 million in the 1994
period.
Noninterest expense decreased $9.1 million when comparing the first half of 1995
to the same period in 1994. This decrease was primarily due to decreases in
staff expenses of $2.1 million, furniture and equipment of $914 thousand, FDIC
insurance of $880 thousand, consultant expense of $710 thousand and legal
expenses of $609 thousand. Also contributing to this decrease was an increase in
other real estate owned income of $3.0 million. Offsetting these decreases was a
restructuring expense reversal of $2.1 million recognized in the second quarter
of 1994. The sale of three foreign subsidiaries in the third quarter of 1994
accounted for reductions in salaries, occupancy, and furniture and equipment
expenses totaling approximately $4.5 million when comparing the results from the
first half of 1995 to the prior year.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NONINTEREST EXPENSE, CONTINUED
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, CHANGE JUNE 30, CHANGE
- -------------------------------------------------------------------------------- -----------------------------------------
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT 1995 1994 AMOUNT PERCENT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and Wages $15,997 $16,236 $ (239) (1.5)% $32,154 $32,881 $ (727) (2.2)%
Pensions and Other Employee
Benefits 3,892 4,953 (1,061) (21.4) 8,520 9,850 (1,330) (13.5)
-------- -------- -------- ------- -------- -------- -------- -------
Total Staff Expense 19,889 21,189 (1,300) (6.1) 40,674 42,731 (2,057) (4.8)
-------- -------- -------- ------- -------- -------- -------- -------
Occupancy, Net 5,934 5,574 360 6.5 11,206 11,589 (383) (3.3)
Data Processing Services 4,026 4,243 (217) (5.1) 8,384 8,666 (282) (3.3)
Furniture and Equipment 2,028 2,334 (306) (13.1) 4,034 4,948 (914) (18.5)
FDIC Insurance 1,994 2,431 (437) (18.0) 3,983 4,863 (880) (18.1)
Advertising and Public Relations 1,407 1,536 (129) (8.4) 2,661 2,927 (266) (9.1)
Other Real Estate Owned Expense
(Income), Net (889) (280) (609) 217.5 (1,973) 1,006 (2,979) (296.1)
Restructuring Expense -- (2,059) 2,059 (100.0) - (2,059) 2,059 (100.0)
Other Noninterest Expense 12,481 14,588 (2,107) (14.4) 25,052 28,472 (3,420) (12.0)
-------- -------- -------- ------- -------- -------- -------- -------
Total Noninterest Expense $46,870 $49,556 $(2,686) (5.4)% $94,021 $103,143 $(9,122) (8.8)%
</TABLE>
TAXES
The Corporation's provision for income taxes includes both federal, state and
foreign income taxes. Income tax expense totaling $87 thousand was recognized
for the quarter ended June 30, 1995, compared with income tax benefits of $693
thousand for the quarter ended June 30, 1994. Income tax expense totaling $191
thousand, compared with income tax benefits of $563 thousand, was recognized for
the six-month periods ended June 30, 1995 and 1994, respectively. The 1995 tax
provision was less than the statutory rate because of the Corporation's ability
to carryforward net operating losses.
30
<PAGE>
RIGGS NATIONAL CORPORATION
Exhibits and Signatures
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the shareholders of the Corporation was held on
May 10, 1995, in Washington, D.C. Chairman of the Board Joe L.
Allbritton presided and 27,671,706 of the 30,244,414 shares
outstanding as of the record date of March 31, 1995 were represented
at the meeting in person or by proxy.
1-Elections of Directors
----------------------
Nominees for membership on the Board of Directors of the Corporation,
listed below, were elected by the shareholders. The following
schedule lists the number of shares cast for each nominee:
<TABLE>
<CAPTION>
Total Total
Votes For Votes Withheld
--------------------------------------------------
<S> <C> <C>
Barbara B. Allbritton 26,716,947 150,545
Joe L. Allbritton 26,670,776 150,545
Robert L. Allbritton 26,672,678 150,545
Frederick L. Bollerer 26,834,923 150,545
Calvin Cafritz 27,376,906 150,545
Charles A. Camalier, III 26,853,503 150,545
Timothy C. Coughlin 26,832,896 150,545
Ronald E. Cuneo 27,374,878 150,545
Floyd E. Davis, III 27,378,548 150,545
Jacqueline C. Duchange 27,372,549 150,545
Michela A. English 27,376,778 150,545
James E. Fitzgerald 27,374,335 150,545
David J. Gladstone 27,250,465 150,545
Lawrence I. Hebert 26,852,520 150,545
Michael J. Jackson 27,361,453 150,545
Leo J. O'Donovan 27,371,794 150,545
Steven B. Pfeiffer 26,854,718 150,545
John A. Sargent 27,378,478 150,545
Robert L. Sloan 27,378,068 150,545
James W. Symington 26,829,396 150,545
Jack Valenti 27,240,370 150,545
Eddie N. Williams 27,373,291 150,545
</TABLE>
2-Proposal to Change the Annual Meeting Date
------------------------------------------
By a vote of 1,944,549 For, to 19,806,820 Against, with 807,494
Abstaining, the Corporation's shareholders rejected a proposal to
change the annual meeting date of the Riggs National Corporation.
3-Proposal to Require at Least Two Candidates for Each Board Vacancy
------------------------------------------------------------------
By a vote of 1,934,055 For, 19,903,125 Against, with 721,683
Abstaining, the Corporation's shareholders rejected a proposal that
at least two candidates be placed before the shareholders for each
board vacancy.
31
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: August 4, 1995 /s/ Timothy C. Coughlin
-------------- -----------------------
Timothy C. Coughlin
President
Date: August 4, 1995 /s/ John L. Davis
-------------- ------------------------
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
32
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q DATED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 228,743
<INT-BEARING-DEPOSITS> 245,511
<FED-FUNDS-SOLD> 200,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 629,188
<INVESTMENTS-CARRYING> 756,127
<INVESTMENTS-MARKET> 755,968
<LOANS> 2,571,494
<ALLOWANCE> 100,145
<TOTAL-ASSETS> 4,876,092
<DEPOSITS> 3,772,861
<SHORT-TERM> 531,381
<LIABILITIES-OTHER> 48,719
<LONG-TERM> 217,625
<COMMON> 77,898
0
4,000
<OTHER-SE> 223,608
<TOTAL-LIABILITIES-AND-EQUITY> 4,876,092
<INTEREST-LOAN> 100,875
<INTEREST-INVEST> 33,915
<INTEREST-OTHER> 13,910
<INTEREST-TOTAL> 148,700
<INTEREST-DEPOSIT> 55,260
<INTEREST-EXPENSE> 72,661
<INTEREST-INCOME-NET> 76,039
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 46
<EXPENSE-OTHER> 94,021
<INCOME-PRETAX> 18,354
<INCOME-PRE-EXTRAORDINARY> 18,354
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,163
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
<YIELD-ACTUAL> 3.81
<LOANS-NON> 14,419
<LOANS-PAST> 2,463
<LOANS-TROUBLED> 309
<LOANS-PROBLEM> 14,193
<ALLOWANCE-OPEN> 97,039
<CHARGE-OFFS> 5,953
<RECOVERIES> 8,755
<ALLOWANCE-CLOSE> 100,145
<ALLOWANCE-DOMESTIC> 92,825
<ALLOWANCE-FOREIGN> 7,320
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
