<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 1994
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)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
___________________ _________________________________________
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class Name of each exchange on which registered
_______________________ _________________________________________
Common Stock, par value OTC, NASDAQ National Market System
$2.50 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
____ ____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments to this
Form 10-K. [X]
The aggregate market value of the Corporation's voting stock
held by non-affiliates of the registrant as of February 28, 1995,
was $177,069,056.
The number of shares outstanding of the registrant's common
stock, as of March 31, 1995, was 30,244,414.
DOCUMENT INCORPORATED BY REFERENCE
Portions of Riggs National Corporation's definitive Proxy
Statement to Stockholders are incorporated by
reference, except for Items 402 (k) and (l) of Regulation S-K, in
Parts I and III of this Annual Report.
<PAGE>
FORM 10-K INDEX
<TABLE>
<CAPTION>
PART I Page(s)
<S> <C>
Item 1--Business 3
Item 2--Properties 5
Item 3--Legal Proceedings 5
Item 4--Submission of Matters
to a Vote of Security Holders 5
PART II
Item 5--Market for Registrant's Common Equity and
Related Stockholder Matters 6
Item 6--Selected Financial Data 6
Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8--Financial Statements and Supplementary Data 31
Item 9--Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 67
PART III
Item 10--Directors and Executive Officers of
the Registrant (A),67
Item 11--Executive Compensation 69
Item 12--Security Ownership of Certain
Beneficial Owners and Management 69
Item 13--Certain Relationships and Related Transactions 69
PART IV
Item 14--Exhibits, Financial Statement Schedules,and
Reports on Form 8-K 70
</TABLE>
[FN]
(A) Portions of Riggs National Corporation's definitive Proxy
Statement to Stockholders are incorporated by reference,
except for Items 402 (k) and (l) of Regulation S-K, in Parts
I and III of this Annual Report.
2
<PAGE>
PART I
ITEM 1.
BUSINESS
RIGGS NATIONAL CORPORATION
Riggs National Corporation ("the Corporation") is a multi-bank
holding company registered under the Bank Holding Company Act of
1956, as amended (the "BHCA"), and incorporated in the State of
Delaware. The Corporation engages in a variety of banking-
related activities, either directly or through subsidiaries. The
Corporation currently has banking subsidiaries in Washington,
D.C.; Virginia; Maryland; Miami, Florida; London, England; Paris,
France; and Nassau, Bahamas. Additionally, the Corporation
provides investment advisory services domestically through a
subsidiary registered under the Investment Advisers Act of 1940.
Subsidiaries of the Corporation located in the Bahamas and
France provide trust and corporate services, as well as
traditional banking services.
The Corporation provides a wide range of financial services
to a broad customer base. These include traditional retail
banking, corporate and commercial banking, and trust and
investment advisory services. The Corporation's trust group
provides fiduciary and administrative services, including
financial management and tax planning for individuals, investment
and accounting services for corporate and nonprofit
organizations, estate planning and trust administration, as well
as bond trusteeship for state and local governments and public
companies.
_____________________________________
THE RIGGS NATIONAL BANK OF WASHINGTON, D.C.
The Corporation's principal subsidiary is The Riggs National Bank
of Washington, D.C. ("Riggs-Washington"), a national banking
association founded in 1836 and incorporated under the national
banking laws of the United States in 1896. Riggs-Washington had
assets of $3.84 billion, deposits of $3.11 billion, and
stockholders' equity of $280.7 million at December 31, 1994.
Riggs-Washington operates 33 branches and an investment
advisory subsidiary in Washington, D.C., commercial banks in
London, England, an Edge Act subsidiary in Miami, Florida, branch
offices in London, England and Nassau, Bahamas, and a Bahamian
bank and trust company. At December 31, 1994, Riggs-Washington
and its subsidiaries had 1,470 full-time equivalent employees.
As a commercial bank, Riggs-Washington provides a wide array
of financial services to customers in the Washington metropolitan
area, throughout the United States and internationally.
Riggs-Washington's Corporate and Commercial Banking Groups
provide services to customers ranging from small regional
businesses to major multinational companies. These services
include lines of credit, secured and unsecured term loans,
letters of credit, credit support facilities, foreign currency
transactions and cash management.
Riggs-Washington's Trust and Financial Services Group
provides fiduciary and administrative services, including
financial management and tax planning for individuals, investment
and accounting services for corporate and non-profit
organizations, estate planning and trust administration, as well
as bond trusteeship for state and local governments and public
companies.
Riggs-Washington provides investment advisory services
through Riggs Investment Management Corporation ("RIMCO"), a
wholly owned subsidiary incorporated under the laws of Delaware
and registered under the Investment Advisers Act of 1940.
Riggs-Washington's Retail Banking Group provides a variety of
services including checking, NOW, savings and money market
accounts, loans and personal lines of credit, certificates of
deposit and individual retirement accounts. Additionally, the
Retail Banking Group provides 24-hour banking services through a
network of Riggs's automated teller machines ("ATMs") and through
national and regional ATM networks.
Riggs-Washington's International Banking Group furnishes a
variety of financial services including issuing letters of credit
in connection with trade and other transactions, taking deposits,
foreign exchange, private banking and cash management. Customers
include embassies and foreign missions in Washington, D.C.,
foreign governments, central banks, and over 200 correspondent
banks around the world. These services are provided through both
domestic and international offices.
The Riggs Bank and Trust Company (Bahamas) Limited, in
Nassau, provides trust services for international private banking
customers. Riggs-Washington operates a branch in the U.S.
Embassy in London which services the Embassy, its employees and
official visitors. In 1991, Riggs-Washington opened a banking
subsidiary under the laws of France. A full service commercial
bank, The Riggs National Bank (Europe) S.A. ("Riggs-Europe") has
one branch located in the U.S. Embassy in Paris. In addition to
serving the Embassy, its employees and official visitors, the
Riggs-Europe office also assists the U.S. Government with
disbursement activities for the Department of Defense and
Department of State for all their facilities in Europe.
In August 1994, the Corporation sold its investment in three
foreign investment advisory subsidiaries; Riggs Valmet, Limited
and Riggs Valmet Holdings, Limited located in Gibraltar and Riggs
Valmet, S.A. located in Geneva, Switzerland. The Corporation
sold these subsidiaries as part of its financial restructuring
plan, began in the second quarter of 1993, which included, among
other strategies, the exiting of certain unprofitable lines of
business. See "Management's Discussion and Analysis--Performance
Enhancing Strategies-Financial Restructurings" for further
details on the sale of these subsidiaries.
3
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RIGGS AP BANK LIMITED
Riggs AP Bank Limited ("Riggs AP"), a merchant bank located in
London, England is a wholly owned subsidiary of Riggs-Washington.
Riggs AP provides traditional corporate banking services,
commercial property financing, investment banking services and
trade finance. At December 31, 1994, Riggs AP had total assets
of $174.0 million representing 3.9% of the Corporation's total
assets and had loans of $94.1 million or 46.0% of the
Corporation's total foreign loans and 3.7% of total loans.
_____________________________________
THE RIGGS NATIONAL BANK OF VIRGINIA
The Riggs National Bank of Virginia ("Riggs-Virginia") is a
nationally chartered full-service commercial bank. At December
31, 1994, Riggs-Virginia had assets of $351.1 million, deposits
of $317.2 million and stockholder's equity of $32.4 million.
Riggs-Virginia's 17 branches are located in Northern Virginia.
At December 31, 1994, Riggs-Virginia had 97 full-time equivalent
employees.
_____________________________________
THE RIGGS NATIONAL BANK OF MARYLAND
The Riggs National Bank of Maryland ("Riggs-Maryland") is a
nationally chartered full-service commercial bank. At December
31, 1994, Riggs-Maryland had assets of $189.8 million, deposits
of $175.1 million, and stockholder's equity of $13.4 million.
Riggs-Maryland's 10 branches are all located in Montgomery and
Prince Georges counties, Maryland. At December 31, 1994, Riggs-
Maryland had 53 full-time equivalent employees.
_____________________________________
SUPERVISION AND REGULATION
The Corporation and certain of its subsidiaries are subject to
the supervision of and regulation by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"). The
Corporation's national banking subsidiaries and certain of their
subsidiaries are subject to the supervision of and regulation by
the Office of the Comptroller of the Currency (the "OCC"). Other
federal, state and foreign laws govern many aspects of the
businesses of the Corporation and its subsidiaries.
Under the BHCA, bank holding companies may not directly or
indirectly acquire the ownership or control of five percent or
more of the voting shares or substantially all of the assets of
any company, including a bank, without the prior approval of the
Federal Reserve Board. The BHCA also restricts the types of
businesses and activities in which a bank holding company and its
subsidiaries may engage. Generally, activities are limited to
banking and activities found by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto.
Until recently, the BHCA generally prohibits the Federal Reserve
Board from approving an application from a bank holding company
to acquire a bank or bank holding companies unless such an
acquisition is specifically authorized by statute of the state in
which the bank whose shares to be acquired is located. A
majority of states have adopted statutes permitting out-of-state
bank holding companies to acquire in-state banks and bank holding
companies, but usually only if the state in which the acquiring
company is located permits reciprocal acquisitions of its banks
and bank holding companies. The District of Columbia has
authorized banks outside a thirteen-state region to acquire
District banks provided they make substantial financial
commitments to the District of Columbia.
On September 29, 1994, President Clinton signed the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act"). The Interstate Act amends the BHCA to
authorize the Federal Reserve Board to permit bank holding
companies to engage in interstate acquisitions one year after the
date of enactment, interstate branching through interstate
mergers beginning in June 1997 (subject to individual states
ability, in certain circumstances, to prohibit such merger
activity by enacting legislation prior to June 1997), interstate
consolidations of affiliated banks beginning in June 1997, and
other de novo interstate branching if authorized by state law.
The Corporation is assessing the impact of this legislation on
the banking industry and the Corporation.
The Corporation is required to maintain minimum levels of
qualifying capital under Federal Reserve Board risk-based capital
guidelines. For full discussion of these guidelines, see
"Management's Discussion and Analysis--Capital Resources" and
"Notes to Consolidated Financial Statements-Note 10."
Pursuant to the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), in September 1992, the
Federal Deposit Insurance Corporation ("FDIC") issued
regulations to implement a risk-based deposit insurance
assessment system under which the assessment rate for an insured
depository institution varies according to the level of risk
incurred in its activities. An institution's risk category is
based partly upon whether the institution is assigned to one of
the following "supervisory subgroups": "healthy"; "supervisory
concern"; or "substantial supervisory concern." Based on its
capital category and supervisory subgroup, each insured
institution is assigned an annual FDIC assessment rate, which
currently varies between $.23 and $.31 per $100 of deposits. The
FDIC announced in February 1995, that in anticipation of the FDIC
insurance fund being restored to its statutory required level,
which is 1.25% of insured deposits, by mid-year 1995, the FDIC
staff has recommended to its Board that deposit insurance
premiums for well-capitalized banks be reduced from $.23 to $.04
per $100 of deposits. This recommendation is currently under
review by the FDIC Board. Management is studying this
recommendation and will report the potential impact to the
Corporation of such a change in deposit premiums as more
information becomes available.
FDICIA contains numerous other provisions, such as the
requirement that the federal banking agencies take "prompt
corrective action" in respect of depository institutions that do
not meet minimum capital requirements.
4
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FDICIA required each Federal banking agency, including the OCC,
to specify within nine months after the date of enactment of the statute,
by regulation, the levels at which an insured institution would be
considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." In October 1992, each of the
federal banking agencies, including the OCC, issued uniform final
regulations defining such capital levels.
Under these regulations, the following table details the
minimum capital levels for each category:
<TABLE>
<CAPTION>
Capital Category
____________________________________________________
Combined Tangible
Tier I Tier I and II Leverage Equity
____________________________________________________
Ratios:
<S> <C> <C> <C> <C>
Well Capitalized 6% or above 10% or above 5% or above N/A
Adequately
Capitalized 4% or above 8% or above 4% or above N/A
Undercapitalized Less than 4% Less than 8% Less than 4% N/A
Significantly
Undercapitalized Less than 3% Less than 6% Less than 3% N/A
Critically
Undercapitalized N/A N/A N/A 2% or less
</TABLE>
Beyond the minimum capital levels, well capitalized
institutions may not be subject to any order or written
directive to meet and maintain a specific capital level.
Each of the bank subsidiaries of the Corporation exceeds
current minimum regulatory capital requirements, and
qualifies, at a minimum, as "well capitalized." The
applicable federal bank regulator for a depository
institution may, under certain circumstances, reclassify a
"well capitalized" institution as "adequately capitalized"
or require an "adequately capitalized" or "undercapitalized"
institution to comply with supervisory actions as if it were
in the next lower category. Such a reclassification may be
made if the regulatory agency determines that the
institution is in an unsafe or unsound condition (which
could include unsatisfactory examination ratings). A
summary of applicable regulatory capital ratios and the
minimums required by the OCC under its capital guidelines
for Riggs-Washington, Riggs-Virginia and Riggs-Maryland on a
historical basis are shown in Note 10, "Reserve Balances,
Funds Restrictions, Regulatory Matters and Capital
Requirements."
FDICIA generally prohibits a depository institution from
making any capital distribution (including payment of a
dividend) or paying any management fee to its holding
company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions
are subject to increased regulatory monitoring and growth
limitations and are required to submit capital restoration
plans.
There are legal restrictions on the extent to which the
Corporation and its non-bank subsidiaries may borrow or
otherwise obtain credit from Riggs-Washington, Riggs-
Virginia, and Riggs-Maryland. Subject to certain limited
exceptions, a bank subsidiary may not extend credit to the
Corporation or to any other affiliate (as defined) in an
amount which exceeds 10% of its capital stock and surplus
and may not extend credit in the aggregate to such
affiliates in an amount which exceeds 20% of its capital
stock and surplus. Further, there are legal requirements as
to the type, amount and quality of collateral which must
secure such extensions of credit by each bank subsidiary to
the Corporation or to other affiliates. Finally, extensions
of credit and other transactions between a bank subsidiary
and the Corporation or other affiliates must be on terms and
under circumstances, including credit standards, that are
substantially the same or at least as favorable to such a
bank subsidiary as those prevailing at the time for
comparable transactions with non-affiliated companies.
Under Federal Reserve Board policy, bank holding
companies are expected to act as a source of financial
strength to their subsidiary banks and to commit resources
to support such banks in circumstances where a bank holding
company might not do so absent such policy. In addition,
any capital loans by a bank holding company to any of its
subsidiary banks are subordinate in right of payment to
deposits and to certain other indebtedness of such
subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee
and entitled to a priority of payment.
ITEM 2.
PROPERTIES
The Corporation owns properties located in Washington, D.C.
which house its executive offices, 12 of its branches and
certain operational units of Riggs-Washington. The
Corporation also owns an office building and a residential
property in London, England, and leases various properties
in Washington, D.C.; London, England; Miami, Florida;
Northern Virginia; Maryland; and Paris, France.
ITEM 3.
LEGAL PROCEEDINGS
In the normal course of business, the Corporation is
involved in various types of litigation, including
litigation with borrowers who are in default under their
loan agreements. In certain instances, borrowers have
asserted or threatened counterclaims and defenses based on
various "lender liability" theories.
In the opinion of management, based on its assessment
and consultation with outside counsel, litigation which is
currently pending against the Corporation will not have a
material impact on the financial condition or future
operations of the Corporation as a whole.
5
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The Corporation is contesting in Tax court the
disallowance of Brazilian Foreign Tax Credits by the
Internal Revenue Service. The net tax benefit of these tax
credits have not been recognized for financial reporting
purposes, therefore, there will be no adverse impact on
earnings if the Internal Revenue Service were to prevail.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for vote
during the fourth quarter of 1994.
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The common stock of Riggs National Corporation is traded in
the Over-the-Counter Market, NASDAQ National Market System.
The NASDAQ symbol for the common stock is "RIGS."
A history of the Corporation's stock prices and
dividends can be found under Quarterly Stock Information on
Page 65 of this Form 10-K.
As of December 31, 1994, there were 3,712 stockholders
of record.
Other information required by this item is set forth in
Notes 10 and 13 on Pages 49 and 54, respectively, of this
Form 10-K.
ITEM 6.
FINANCIAL REVIEW
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1994 1993 1992 1991 1990
____________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Interest Income $266,005 $256,951 $327,540 $474,815 $649,010
Interest Expense 112,723 122,130 189,604 319,719 476,397
____________________________________________________________________________________
Net Interest Income 153,282 134,821 137,936 155,096 172,613
Less: Provision for Loan Losses 6,300 69,290 52,067 43,655 106,408
____________________________________________________________________________________
Net Interest Income after
Provision for Loan Losses 146,982 65,531 85,869 111,441 66,205
Noninterest Income Excluding
Securities Gains, Net 85,298 88,509 96,200 92,961 78,179
Securities Gains, Net 226 24,141 34,213 13,692 1,263
Provision for Losses on
Accelerated Disposition of Real
Estate Assets -- -- -- 49,800 --
Noninterest Expense 199,020 266,752 238,403 240,371 236,277
____________________________________________________________________________________
Income (Loss) before Taxes and
Extraordinary Item 33,486 (88,571) (22,121) (72,077) (90,630)
Applicable Income Tax (Benefit)
Expense (533) 5,640 (1,069) (6,130) (29,413)
____________________________________________________________________________________
Income (Loss) before Extraordinary
Item, Net of Taxes 34,019 (94,211) (21,052) (65,947) (61,217)
Extraordinary Item - Gain on
Purchase of Debt, Net of Taxes -- -- -- 2,486 4,569
____________________________________________________________________________________
Net Income (Loss) 34,019 (94,211) (21,052) (63,461) (56,648)
Less: Dividends on Preferred Stock 12,124 1,434 358 -- --
____________________________________________________________________________________
Net Income (Loss) Available for
Common Stock $21,895 $(95,645)$(21,410)$(63,461)$(56,648)
Earnings (Loss) Per Common Share:
Income (Loss) before Extraordinary
Item, Net of Taxes $ .72 $(3.65) $(.87) $(4.79) $(4.44)
Extraordinary Item - Gain on
Purchase of Debt, Net of Taxes -- -- -- .18 .33
____________________________________________________________________________________
Earnings (Loss) Per Common Share $.72 $(3.65) $(.87) $(4.61) $(4.11)
------------------------------------------------------------------------------------
Dividends Declared Per Common Share* $ -- $ -- $ -- $ .05 $1.087
____________________________________________________________________________________
</TABLE>
[FN]
* A cash dividend of $.15 per common share applicable to the fourth quarter of
1990 was declared on January 22, 1991, and paid on February 15, 1991.
6
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ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
EARNINGS SUMMARY
In 1994, Riggs National Corporation ("the Corporation")
achieved its first profitable year since 1989, with total
net income of $34.0 million. By comparison, the Corporation
had net losses of $94.2 million and $21.1 million in 1993
and 1992. Earnings per common share for 1994 were $.72,
compared to losses per common share of $3.65 and $.87 in
1993 and 1992. Results for 1994 reflected the benefits of an
$18.5 million pretax increase in net interest income, and
reductions of $63.0 million in the provision for loan
losses, as well as reductions of $14.9 million in other real
estate owned expense. These improvements are the result of
an enhanced asset mix and reductions in nonperforming
assets, in addition to general improvements in the economic
conditions domestically and in the United Kingdom.
The financial results for 1993 and 1992 reflect the
then-ongoing deterioration of the Corporation's domestic
real estate-commercial loan portfolio, combined with foreign
corporate and real estate-commercial loans, primarily in the
United Kingdom. The deterioration of these portfolios was
evident, as the Corporation recorded provisions for loan
losses of $69.3 million and $52.1 million in 1993 and 1992,
compared to $6.3 million in 1994. The results for 1993 also
include the impact of restructuring charges totaling $34.6
million, recorded during the first half of 1993, for the
financial restructuring of both domestic and foreign
operations and the implementation of a cost- reduction and
revenue-enhancing strategy.
Key measurements of profitability include the
Corporation's net income to average stockholders' equity and
the net interest margin. Net income to average stockholders'
equity was 12.01% for 1994, compared with negative ratios
for 1993 and 1992. The net interest margin for 1994 was
3.89%, the highest margin in over a decade, compared with
margins of 3.23% and 3.13% for 1993 and 1992. The favorable
increase in the net interest margin reflects the improvement
in earnings and asset deployment during 1994.
PERFORMANCE-ENHANCING STRATEGIES
During 1994, the Corporation continued the self-evaluation
of its goals and market position. These initiatives included
enhancing the retail banking system, strengthening the
Corporation's management team and the continued positive
impact of 1993's initiatives.
COMMUNITY BANKING STRATEGIES. As the largest commercial
bank holding company headquartered in the nation's capital,
the Corporation is uniquely positioned in the center of an
affluent market that combines significant public- and
private-sector customers. The Corporation attained this
position by steadily growing and prospering in the
Washington, D.C., area for 159 years, and being the only
Washington, D.C.-based bank of size to survive the economic
and industry travails of the late 1980s and early 1990s.
This leaves the Corporation competing with a host of
community banks and the "super regionals." In order to
differentiate itself from the competition, the Corporation
offers its customers a breadth of financial products typical
of a regional bank with the personalized service and local
decision-making of a community bank. The Corporation
believes that this "community bank" strategy allows it to
offer a broader product line than its smaller competitors,
while its personalized service and local decision-making
give the Corporation a distinct advantage over its larger
regional competitors. Local decision-making and a commitment
to the community are the key to retaining existing customers
and building new relationships.
During 1994, the Corporation conducted a detailed
analysis of its retail banking system, determining the best
use of its location, branch facilities, product lines and
personnel. Though this process is ongoing, the Corporation
has already sold or consolidated two retail branches. The
review of the retail banking system was based on a detailed
analysis conducted by internal management, combined with
outside experts. 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.
MANAGEMENT TEAM. In July 1994, the Corporation announced
the election of Fred L. Bollerer to the position of
president and chief executive officer of Riggs-Washington
and as a director of the Corporation. Mr. Bollerer had
served as executive vice president of Riggs-Washington in
the general banking group since 1993, after holding
executive positions in several other large financial
institutions over the past 20 years. Mr. Bollerer replaced
Paul M. Homan, who voluntarily resigned in May 1994.
7
<PAGE>
In addition to the election of Mr. Bollerer, the
Corporation completed a two-year management restructuring
process with the appointment of a new chief credit officer
and a new chief technology officer, each with extensive
banking experience.
DEBT AND EQUITY TRANSACTIONS IN 1994. In February 1994, the
Corporation sold $125 million of 8.5% subordinated notes due
in February 2006. The notes were sold at par and are not
callable for five years. The notes were sold under a shelf
registration statement declared effective on January 13,
1994. The net proceeds from the sale totaled $120.7 million
and were used in March 1994 to redeem $51.5 million of
subordinated notes and $69.2 million of subordinated capital
notes, both bearing an interest rate of 5.25% and maturing
in 1996.
On September 27, 1994, the Corporation repurchased all
764,537 shares of its 7.5% Cumulative Convertible Preferred
Stock, Series A, from the Norwich Union Life Insurance
Society. The Series A preferred shares were convertible into
2,002,141 shares of common stock.
BANKSTART '93. In January 1993, the Corporation initiated
BankStart '93, a comprehensive, corporation-wide project
designed to make it more cost-efficient and operationally
effective. Each line of business was reexamined in order to
identify opportunities to improve efficiencies and reduce
costs. The goal of the project was to identify revenue
enhancements, productivity advances, expense reductions and
product line modifications needed to facilitate the
Corporation's return to consistent profitability. A
significant portion of the expense reduction came from
reduced staffing. When the program began, the authorized
number of full-time positions for the Corporation's domestic
subsidiaries was 2,060, declining to 1,667 at December 31,
1993. Subsequent to the initiation of BankStart '93, the
Corporation identified market opportunities available in its
retail and relationship banking network. This strategy
necessitated several staff additions, although such
additions, when netted against the remaining BankStart '93
and other reductions, resulted in a decrease in the staff
complement, which stood at 1,624 positions at year-end 1994.
In the first quarter of 1993, the Corporation took a
restructuring charge of $13.8 million, representing
management's estimate of the cost of implementing BankStart
'93. During the first half of 1994, the implementation of
BankStart '93 was substantially completed and a $2.1 million
recovery was recognized. This recovery was the result of
lower-than-anticipated expenses associated with staff
reductions. Accrued and unpaid restructuring expenses
totaled $908 thousand at year-end 1994, with disbursements
expected to be made during the first half of 1995.
FINANCIAL RESTRUCTURINGS. At the end of the second quarter
of 1993, the Corporation announced a financial restructuring
designed to facilitate its return to profitability. The
steps taken included charging off the doubtful portions of
all loans, exiting unprofitable lines of business in the
United Kingdom, reducing investments in certain foreign
subsidiaries and increasing reserves against problem assets
in order to facilitate their disposition. These actions led
to second-quarter provisions for loan losses of $49.2
million, restructuring charges of $20.8 million, and
expenses for other real estate owned of $16.9 million. Of
the $49.2 million in provisions for loan losses, $24.7
million related to commercial real estate in the Washington,
D.C., area, and $24.5 million related to commercial property
loans and corporate loans in the United Kingdom. At December
31, 1994, the restructurings were substantially complete.
Accrued and unpaid restructuring expenses totaled $1.1
million at December 31, 1994, with related disbursements
expected to be made during the first half of 1995.
As a part of the financial restructuring, the
Corporation adopted a plan for its London operations (the
combination of the London branch of Riggs-Washington and the
subsidiary, Riggs AP Bank). This plan addressed the
potential risk in the loan and other real estate owned
portfolios in its London operations, and was designed to
facilitate the disposition of certain troubled assets and to
exit unprofitable lines of business. The London operations
have been reorganized on a basis consistent with the
Corporation's domestic strategy to segregate ongoing banking
business from the management of problem assets.
8
<PAGE>
In June 1993, Riggs AP Bank transferred all $152.8
million of its nonperforming and classified loans to Riggs-
Washington. These assets were transferred at book value, net
of related reserves, and continue to be serviced by Riggs AP
Bank. Ongoing business lines are now centered on financing
income-producing commercial real estate properties in the
United Kingdom, as well as financing international trade
transactions, primarily for mid-sized corporations based in
the United Kingdom. The Corporation has substantially
completed its withdrawal from certain business activities in
the United Kingdom, including commercial leasing, corporate
finance and trading activity in foreign exchange and money
market instruments. In August 1994, the Corporation sold its
investment in three foreign investment advisory
subsidiaries: Riggs Valmet, Limited and Riggs Valmet
Holdings, Limited, located in Gibraltar, and Riggs Valmet,
S.A., located in Geneva, Switzerland. The Corporation sold
these subsidiaries as part of its financial restructuring
plan, which included the exiting of certain unprofitable
lines of business. The sale of these subsidiaries was made
in the aggregate to one foreign purchaser and resulted in a
net pretax loss of $1.6 million during 1994, which included
$900 thousand from the write-off of foreign exchange
translation adjustments.
REGULATORY MATTERS
On May 14, 1993, the Corporation entered into a Memorandum
of Understanding ("MOU") with the Federal Reserve Bank of
Richmond ("Federal Reserve"), and Riggs-Washington entered
into a Written Agreement with the Office of the Comptroller
of the Currency (the "OCC"). The MOU and the Written
Agreement were the result of regulatory concern over
financial and operational weaknesses and continued losses
related primarily to the Corporation's domestic and United
Kingdom commercial real estate exposure.
Under the original terms of the Written Agreement,
Riggs-Washington appointed a committee of its Board of
Directors to monitor and coordinate compliance with the
requirements of the Written Agreement during 1993 and 1994.
On September 15, 1994, the Corporation was notified by the
OCC that it had terminated the Written Agreement.
Under the terms of the MOU, the Corporation must notify
the Federal Reserve in advance of dividend declarations, the
issuance and/or redemption of long-term debt and the use of
cash assets in certain circumstances. The Corporation is
also required to submit plans and reports to the Federal
Reserve relating to capital, asset quality, loan-loss
reserves and operations, including contingency measures if
projected operational results do not occur.
In addition, the Audit Committee of the Corporation's
Board of Directors has reviewed and submitted a report to
the Federal Reserve on the adequacy of data submitted to it
and the Board, and the Corporation has appointed a
compliance committee of Directors to monitor performance
under the MOU. As of year-end 1994, the Corporation was in
substantial compliance with the provisions and requirements
of the MOU.
9
<PAGE>
EARNING ASSETS
MONEY MARKET ASSETS
Short-term instruments such as time deposits with other
banks, federal funds sold and resale agreements represent
alternatives for the Corporation for the deployment of
excess short-term liquidity. These investments are lower-
yielding and are highly interest-rate-sensitive. Funds
available for short-term investments generally are a
function of daily movements in the Corporation's deposit and
loan portfolios, combined with the Corporation's overall
interest-rate risk and asset/liability strategy. At December
31, 1994, total money market assets declined by $17.7
million, or 4.4%, when compared with year-end 1993, as the
Corporation's shift to higher-yielding, longer-term assets
continued, with increases in the total average loans and
securities available for sale during the year. The total
average of time deposits with other banks and federal funds
sold and resale agreements fell from $862.8 million in 1993
to $377.4 million in 1994.
SECURITIES AVAILABLE FOR SALE
Securities available for sale totaled $598.3 million at
December 31, 1994, compared with $708.1 million at year-end
1993, though average securities available for sale totaled
$582.1 million, an increase of $16.6 million from 1993's
average portfolio. Securities available for sale decreased
$109.9 million (15.5%) during 1994, as proceeds from
maturities and sales during the period, combined with
proceeds from maturing securities held-to-maturity and money
market investments, were used to fund reductions in deposit
balances during the year, and, to a lesser extent, were used
to fund originations and purchases of residential mortgage
loans.
In the first quarter of 1993, in view of management's
intention to use certain securities as part of its
asset/liability strategy and the possibility that securities
could be sold in response to changes in interest rates or
for liquidity purposes, $983 million of securities were
classified as held for sale. In the second quarter of 1993,
$696 million in securities held for sale were sold for a
pretax gain of $25.9 million. Proceeds from this sale were
used to purchase shorter-duration and variable-rate
securities classified as held for sale, in addition to money
market assets.
In May 1993, Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115), was issued, effective for
fiscal years beginning after December 15, 1993. This
pronouncement requires, among other items, the determination
at the acquisition date of a security whether such security
is purchased with the intent and ability to hold to
maturity, whether it is purchased with the intent to trade,
or whether the security is available for sale. Under prior
accounting policy, securities were classified as held for
investment if the Corporation had the ability to hold
securities to maturity and the intent to hold such
securities for the foreseeable future. All other securities
were classified as held for sale or trading.
The Corporation adopted SFAS No. 115 on December 31,
1993, which entailed a thorough review of the securities
portfolio. This review resulted in the net transfer of
$168.7 million in securities at December 31, 1993, from the
available for sale portfolio to the held-to-maturity
______________________________________
MATURITIES OF SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
December 31, 1994
____________________________________________
Gross Gross Book/
Amortized Unrealized Unrealized Market
(In thousands) Cost Gains Losses Value
___________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury Securities:
Due within 1 year $123,387 $ _ $ 1,467 $121,920
Due after 1 year but
within 5 years 15,075 _ 808 14,267
Government Agencies Securities:
Due after 1 year but
within 5 years 26,557 _ 1,919 24,638
Obligations of States and
Political Subdivisions*:
Due within 1 year 8,800 _ 800 8,000
Mortgage-Backed Securities:
Due within 1 year 3,972 _ 24 3,948
Due after 1 year but
within 5 years 434,167 _ 23,126 411,041
Other Securities:
Due within 1 year 5,550 _ _ 5,550
Due after 10 years 8,913 _ _ 8,913
___________________________________________________________________________
Total Securities Available
for Sale $626,421 $ _ $28,144 $598,277
</TABLE>
[FN]
* The securities within the category of "Securities Available for Sale -
Obligations of States and Political Subdivisions" are on a nonaccrual
basis as of December 31, 1994. All contractual payments to date have
been received. See "Nonaccrual, Renegotiated and Past Due Loans."
10
<PAGE>
portfolio. All unrealized gains and losses from securities
available for sale are excluded from earnings, with
unrealized gains and losses recorded, net, in stockholders'
equity until realized. After taking into effect the $168.7
million net transfer on December 31, 1993, the new
accounting treatment for the securities available for sale
portfolio under SFAS No. 115 resulted in a $1.28 million net
unrealized gain being recorded in stockholders' equity.
In 1994, the impact of a rising interest-rate
environment on bond prices and the Corporation's securities
available for sale portfolio resulted in decreased
valuations during 1994 and the recording of $29.4 million in
unrealized losses to stockholders' equity for the year, for
a net unrealized loss balance of $28.1 million at year-end
1994.
Securities available for sale pledged to secure deposits
and certain borrowings amounted to $367.5 million at
December 31, 1994, and $372.8 million at December 31, 1993.
SECURITIES HELD-TO-MATURITY
Securities held-to-maturity totaled $443.2 million at
December 31, 1994, down $216.9 million, or 32.9%, from the
level at December 31, 1993. The average balance in
securities held-to-maturity was $470.7 million for 1994,
compared with $709.8 million for 1993. At December 31, 1994,
securities held-to-maturity had no gross unrealized gains
and gross unrealized losses of $8.2 million. At December 31,
1994, this portfolio consisted primarily of U.S. Treasury
securities, with 77.4% of the portfolio maturing in one year
or less. A portion of the securities held-to-maturity
portfolio is pledged to secure certain borrowings and
deposits, with total securities pledged of $370.1 million at
December 31, 1994, and $271.2 million at year-end 1993. The
decrease in the securities held-to-maturity portfolio in
1994 was due to proceeds from maturities being used, along
with reductions in money market assets, to fund overall
reductions in deposits during the year.
As discussed in "Securities Available for Sale," the
Corporation has specific policies in place, in compliance
with SFAS No. 115, that require the determination at the
acquisition date whether a security should be included in
the securities held-to-maturity portfolio; a security is
included if it was purchased with the intent and the ability
to hold the security to maturity, and the Corporation does
not anticipate disposing of it for liquidity purposes or for
the recognition of unrealized gains and losses. The
Corporation has policies that require, on an ongoing basis,
that a determination be made whether a security should
continue to be in the held-to-maturity portfolio or be
transferred to the securities available for sale portfolio.
The table below details the securities held-to-maturity
portfolio at December 31, 1994, 1993 and 1992:
____________________________________
BOOK VALUE OF SECURITIES HELD-TO-MATURITY
<TABLE>
<CAPTION>
December 31,
(In thousands) 1994 1993 1992*
___________________________________________________________________________
<S> <C> <C> <C>
U.S. Treasury Securities $318,163 $629,282 $579,576
Government Agencies Securities 125,000 _ _
Obligations of States and
Political Subdivisions _ 1,999 1,999
Mortgage-Backed Securities _ _ 173,782
Other Securities _ 28,781 40,036
___________________________________________________________________________
Total Securities Held-to-Maturity $443,163 $660,062 $795,393
</TABLE>
[FN]
* Investment Securities for 1992 are presented in the Securities
Held-to-Maturity category. See Note 1: "Summary of Significant
Accounting Policies."
11
<PAGE>
LOANS
As of December 31, 1994, loans, net of premiums, discounts
and deferred fees, were $2.55 billion, an increase of $21.8
million (0.9%) from the year-end 1993 loan balance. This
increase was due, in part, to purchases in the first quarter
of 1994 of $90 million in residential mortgage loans, which
were part of an overall asset/liability strategy started in
1993 to shift certain shorter-term assets to longer-term
maturities. Substantially all of the loans purchased during
the first quarter of 1994 were newly originated, fixed-rate
residential mortgages with original maturities of 15 or 30
years, have an average effective bond equivalent yield of
6.30% and are secured by properties located in various
regions throughout the United States. The purchases,
combined with local-area originations in 1994, were
partially offset by loan curtailments and payoffs,
particularly with respect to residential mortgage loans and
real estate-commercial/construction loans.
_________________________________
YEAR-END LOANS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1994 1993 1992 1991 1990
______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial and
Financial $ 400,660 $ 412,006 $ 369,885 $ 532,143 $ 805,319
Real Estate-Commercial/
Construction 323,835 388,442 533,685 619,298 808,099
Residential Mortgage 1,317,169 1,149,363 529,382 725,337 840,403
Home Equity 220,910 234,049 273,586 321,690 341,100
Consumer 75,887 82,819 107,382 158,872 249,124
______________________________________________________________________________
Total Domestic 2,338,461 2,266,679 1,813,920 2,357,340 3,044,045
Foreign:
Governments and Official
Institutions 26,013 28,113 29,319 27,377 30,477
Banks and Other Financial
Institutions 11,517 14,999 24,734 28,481 65,722
Commercial and Industrial
and Commercial Property 146,153 192,770 291,496 581,499 689,137
Other 20,875 19,514 25,948 23,886 33,228
______________________________________________________________________________
Total Foreign 204,558 255,396 371,497 661,243 818,564
______________________________________________________________________________
Total Loans 2,543,019 2,522,075 2,185,417 3,018,583 3,862,609
Less: Unearned Discount
(Unamortized Premium) and
Net Deferred Fees (6,905) (6,058) 4,360 12,116 24,228
______________________________________________________________________________
Total Loans, Net of Unearned
Discount (Unamortized
Premium) and Net
Deferred Fees 2,549,924 2,528,133 2,181,057 3,006,467 3,838,381
Less: Reserve for
Loan Losses 97,039 86,513 84,155 103,674 108,887
______________________________________________________________________________
Total Net Loans $2,452,885 $2,441,620 $2,096,902 $2,902,793 $3,729,494
</TABLE>
_________________________________
Domestic commercial and financial loans were $400.7
million at December 31, 1994, a decrease of $11.3 million,
or 2.8%, from $412.0 million at December 31, 1993. This
slight decrease was attributable to curtailments and loan
maturities that were not aggressively repriced at renewal,
offset by new commercial loan originations.
Domestic real estate-commercial/construction loans were
$323.8 million at December 31, 1994, a decrease of $64.6
million from the level at year-end 1993. This decrease was
the result of loan curtailments and payoffs, transfers to
other real estate owned and limited new lending by the
Corporation in this sector.
Domestic real estate-commercial/construction loans were
12.7% of total loans and 7.3% of total assets at year-end
1994, compared with 15.4% and 8.1%, respectively, at year-
end 1993. Permanent domestic commercial office buildings
represented 26.8% of total real estate-commercial/
construction loans. The remainder of the domestic portfolio
comprised residential and commercial development properties,
in addition to permanent loans financing churches,
warehouses, shopping centers and hotels. The domestic real
estate-commercial/construction portfolio is secured by
properties concentrated predominantly in the Washington,
D.C., metropolitan area.
12
<PAGE>
REAL ESTATE - COMMERCIAL/CONSTRUCTION LOANS - GEOGRAPHIC
DISTRIBUTION BY TYPE - DECEMBER 31, 1994
<TABLE>
<CAPTION>
(In thousands) Geographic Location
___________________________________________________________________________
District of United
Project Type Columbia Virginia Maryland Kingdom Other Total
___________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Land Acquisition and
Construction
Development $ 28,824 $ 23,337 $19,685 $ -- $ -- $ 71,846
Multifamily
Residential 8,899 14,355 5,698 -- 893 29,845
Commercial:
Office Buildings 48,264 44,329 21,523 -- 2,407 116,523
Shopping Centers 11,202 19,509 23,956 -- -- 54,667
Hotels 4,598 5,589 -- -- -- 10,187
Industrial/Warehouse -- 11,371 4,982 -- -- 16,353
Churches 5,506 2,895 6,100 -- -- 14,501
Other 913 5,953 2,974 -- 73 9,913
___________________________________________________________________________
Total Commercial 70,483 89,646 59,535 -- 2,480 222,144
___________________________________________________________________________
Foreign -- -- -- 109,640 1,133 110,773
___________________________________________________________________________
Total Real Estate-
Commercial/
Construction Loans $108,206 $127,338 $84,918 $109,640 $4,506 $434,608
</TABLE>
Residential mortgage loans totaled $1.32 billion at
December 31, 1994, an increase of $167.8 million (14.6%)
from the year-earlier level. This increase is the result of
the local-area originations and purchases in the open market
during 1994. The purchase and origination activity during
1994 was partially offset by principal curtailments and
payoffs, which slowed during 1994 as refinancings abated
with the rise in mortgage rates during the year.
Residential mortgage loans represented 51.8% of the
Corporation's loan portfolio at year-end 1994 and generally
provide for a higher credit quality than other loans. The
historically lower charge-off levels over the last five
years attest to the quality of this portfolio (see the
"Reserve for Loan Losses and Summary of Charge-Offs and
Recoveries" section).
Home equity loans, which are primarily floating-rate
loans secured by first or second trusts on single-family
residential properties, decreased $13.1 million to $220.9
million at December 31, 1994. This decrease was caused
largely by refinancings and the highly competitive nature of
this product in the metropolitan Washington, D.C., area.
Consumer loans were $75.9 million at year-end 1994,
decreasing $6.9 million from $82.8 million at December 31,
1993, as a result of limited originations of installment
loans and student loans in the domestic markets.
Foreign loans totaled $204.6 million at December 31,
1994, a decrease of $50.8 million from the year-end 1993
total of $255.4 million. Foreign loans in the Corporation's
London operations were $148.2 million at December 31, 1994,
and constituted 72.4% of total foreign loans. A majority of
the decline in the foreign loan portfolio was due to
repayments, as the London operations' lending activities
have been significantly reduced because of the previously
discussed financial restructuring and limited new lending in
the foreign sector. At December 31, 1994, 70.4% of Riggs AP
Bank's loan portfolio was secured by commercial-leased
properties, with the remainder in corporate loans.
____________________________
YEAR-END MATURITIES AND RATE SENSITIVITY
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------
Less Than Over
(In thousands) 1 Year 1-5 Years 5 Years Total
___________________________________________________________________________
<S> <C> <C> <C> <C>
Maturities:
Commercial and Financial $236,384 $158,756 $ 5,520 $ 400,660
Real Estate-Commercial/
Construction 165,393 121,369 37,073 323,835
Residential Mortgage 119,416 389,969 807,784 1,317,169
Foreign 15,471 67,621 21,466 204,558
___________________________________________________________________________
Total $636,664 $737,715 $871,843 $2,246,222
Rate Sensitivity:
With Fixed Interest Rates $192,044 $566,538 $595,590 $1,354,172
With Floating and
Adjustable Interest Rates 444,620 171,177 276,253 892,050
___________________________________________________________________________
Total $636,664 $737,715 $871,843 $2,246,222
</TABLE>
13
<PAGE>
CROSS-BORDER OUTSTANDINGS
The Corporation extends credit to borrowers domiciled
outside of the United States through several of its banking
subsidiaries. These assets may be impacted by changing
economic conditions in their respective countries.
Management routinely reviews these credits and continually
monitors the international economic climate and assesses the
impact of these changes on current and proposed foreign-
domiciled borrowers.
Cross-border outstandings include loans, acceptances,
interest-bearing deposits with other banks, investments,
accrued interest and other monetary assets, which are
denominated in U.S. dollars or other non-local currencies.
In addition, cross-border outstandings include legally
enforceable guarantees issued on behalf of non-local third
parties and local currency outstandings to the extent they
are not funded by local currency borrowings. Cross-border
outstandings are then reduced by tangible liquid collateral
and any legally enforceable guarantees issued by non-local
third parties on behalf of the respective country.
At December 31, 1994, the Corporation had no cross-
border outstandings exceeding 1% of its total assets to
countries experiencing difficulties in repaying their
external debt.
At December 31, 1994, the United Kingdom was the only
country with cross-border outstandings in excess of 1% of
the Corporation's total assets that had loans in either a
nonperforming or past-due status. The French cross-border
outstandings were current as of year-end 1994. Nonaccrual
loans in the United Kingdom totaled $10.6 million at
December 31, 1994, as compared with $37.7 million at
December 31, 1993. There were no past-due loans in the
United Kingdom at December 31, 1994, and $4 thousand in
past-due loans at year-end 1993.
At December 31, 1994, the Corporation had identified
approximately $4.3 million in potential problem loans in the
United Kingdom and none in France. These loans, which are
primarily commercial property and corporate loans, were
performing at December 31 and therefore not included as
nonaccrual or past due.
_______________________________
CROSS-BORDER OUTSTANDINGS THAT EXCEED 1% OF TOTAL ASSETS
<TABLE>
<CAPTION>
Governments Banks and Commercial
and Official Other Financial and
(In thousands) Institutions Institutions Industrial Other Total
_________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
AS OF
DECEMBER 31, 1994
UNITED KINGDOM $ 257 $ 57,715 $ 84,725 $6,704 $149,401
FRANCE 36,105 25,011 3 -- 61,119
_________________________________________________________________________________
As of
December 31, 1993
United Kingdom 765 29,235 154,660 2,170 186,830
_________________________________________________________________________________
As of
December 31, 1992
United Kingdom 8,925 129,666 151,873 36,888 327,352
Italy -- 103,711 -- 3,274 106,985
France -- 52,583 -- 69 52,652
---------------------------------------------------------------------------------
</TABLE>
CROSS-BORDER OUTSTANDINGS IN EXCESS OF 1% OF TOTAL ASSETS WITH
NONPERFORMING OR PAST-DUE LOANS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1994 1993 1992
______________________________________________________________________
<S> <C> <C> <C>
United Kingdom:
Aggregate Outstandings $149,401 $186,830 $327,352
Nonaccrual Loans $10,634 $37,696 $27,715
Renegotiated Loans 267 834 --
_______________________________________________________________________
Total Nonperforming Loans $10,901 $38,530 $27,715
_______________________________________________________________________
Past-Due Loans $ -- $ 4 $ --
-----------------------------------------------------------------------
</TABLE>
CROSS-BORDER OUTSTANDINGS BETWEEN .75% AND 1% OF TOTAL ASSETS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1994 1993 1992
________________________________________________________________________
<S> <C> <C> <C>
Australia
Countries None None and Austria
_________________________________________________________________________
Aggregate Outstandings $-- $-- $80,445
</TABLE>
14
<PAGE>
ASSET QUALITY
NONPERFORMING ASSET SUMMARY
Nonperforming assets, which include nonaccrual loans,
renegotiated loans, and other real estate owned (net of
reserves), totaled $75.7 million at year-end 1994, a
$137.6 million (64.5%) decrease from the year-end 1993
total of $213.3 million. This significant decrease in
nonperforming assets during 1994 was attributable to sales
and paydowns of $100.7 million, nonaccrual and
renegotiated loans' returning to accrual status of $36.0
million, and net charge-offs/writedowns of $15.2 million,
which were partially offset by exchange rate fluctuations
of $1.9 million, combined with net additions in 1994 of
$12.4 million.
_______________________________
NONPERFORMING ASSETS AND PAST-DUE LOANS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1994 1993 1992 1991 1990
____________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Nonperforming Assets:
Nonaccrual Loans:/1/
Domestic $11,518 $ 85,075 $152,812 $151,114 $184,669
Foreign 15,865 45,099 52,613 78,855 21,245
____________________________________________________________________________
Total Nonaccrual Loans 27,383 130,174 205,425 229,969 205,914
Renegotiated Loans:/2/
Domestic 288 29,465 11,806 -- --
Foreign 267 834 -- -- --
____________________________________________________________________________
Total Renegotiated Loans 555 30,299 11,806 -- --
Real Estate Assets Subject
to Accelerated
Disposition, Net -- -- -- 89,389 --
Other Real Estate
Owned, Net:
Domestic 44,068 45,049 62,810 7,542 73,029
Foreign 3,695 7,754 26,579 4,211 53
____________________________________________________________________________
Total Other Real Estate
Owned, Net 47,763 52,803 89,389 11,753 73,082
____________________________________________________________________________
Total Nonperforming
Assets, Net $75,701 $213,276 $306,620 $331,111 $278,996
Past-Due Loans:/3/
Domestic $ 6,091 $ 3,315 $ 1,369 $ 2,743 $ 46,756
Foreign 30 4 55 790 8,733
____________________________________________________________________________
Total Past-Due Loans $ 6,121 $ 3,319 $ 1,424 $ 3,533 $ 55,489
Total Loans, Net of Unearned
Discount (Unamortized
Premium) and Net
Deferred Fees $2,549,924 $2,528,133 $2,181,057 $3,006,467 $3,838,381
Ratio of Nonaccrual
Loans to Total Loans 1.07% 5.15% 9.42% 7.65% 5.37%
Ratio of Nonperforming
Assets to Total Loans
and Other Real Estate
Owned, Net 2.91% 8.26% 13.50% 10.97% 7.13%
</TABLE>
[FN]
/1/ Loans (other than consumer) that are contractually past due 90 days
or more in either principal or interest that are not well-secured
and in the process of collection.
/2/ Loans for which terms are being renegotiated to provide a reduction
of interest or principal as a result of a deterioration in the
financial position of the borrower in accordance with Statement of
Financial Accounting Standards No. 15. Renegotiated loans do not
include $13.6 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.
15
<PAGE>
NONACCRUAL, RENEGOTIATED AND PAST-DUE LOANS
At December 31, 1994, nonaccrual loans, including both
domestic and foreign loans, were $27.4 million, or 1.1% of
total loans, compared with $130.2 million, or 5.15% of total
loans, at December 31, 1993. Loans (other than consumer) are
placed on nonaccrual status when, in management's opinion,
there is doubt as to the ability to collect either interest
or principal, or when interest or principal is 90 days or
more past due and the loan is not well-secured and in the
process of collection. Consumer loans are generally charged
off when they become 120 days past due. The significant
decrease in nonaccrual loans during 1994 was due primarily
to a decrease in domestic nonaccrual loans from $85.1
million at year-end 1993 to $11.5 million at year-end 1994.
This decrease was attributable to sales and repayments of
$42.7 million, nonaccrual loans' returning to accrual status
of $19.7 million, charge-offs of $4.6 million and transfers
of nonaccrual loans to other real estate owned of $21.3
million. These decreases more than offset net additions to
nonaccrual loans, and renegotiated loans transferred to
nonaccrual status, of $7.3 million and $7.4 million,
respectively, during the period.
Nonaccrual foreign loans decreased $29.2 million during
1994, to $15.9 million at December 31, 1994. This decrease
was the result of sales, repayments, transfers to other real
estate owned, charge-offs and other reductions totaling
$34.7 million, exceeding net additions and exchange rate
fluctuations of $5.5 million during 1994. The majority of
foreign nonaccrual loans are real estate-commercial mortgage
loans in the United Kingdom ($11.3 million), which declined
by 71.0% during 1994 through the effort by the Corporation's
London operations and improvements in the United Kingdom
economy.
Renegotiated loans totaled $555 thousand at December
31, 1994, compared with $30.3 million at year-end 1993.
Domestic renegotiated loans ($288 thousand) consisted
generally of commercial real estate loans that were
renegotiated to provide a reduction or deferral of interest
or principal as a result of a deterioration in the financial
position of the borrower. Renegotiated loans decreased over
$29.7 million in 1994, as payoffs and principal repayments
accounted for $2.7 million of the decrease, with $14.9
million attributed to renegotiated loans' (performing in
accordance with their renegotiated market terms) returning
to accrual status, $2.5 million due to transfers to other
real estate owned, $2.2 million attributed to charge-offs,
and an additional $7.4 million due to transfers of
renegotiated loans to nonaccrual status.
Past-due loans consist predominantly of residential real
estate and consumer loans that are well-secured and in the
process of collection and on which the Corporation is
accruing interest. Past-due loans increased $2.8 million in
1994, to $6.1 million.
At December 31, 1994, the Corporation had identified
approximately $26.0 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
$21.7 million in domestic loans (principally real estate-
commercial/construction loans) and $4.3 million of
commercial property and corporate loans originated in the
United Kingdom.
In addition, the Corporation had $8.0 million in other
potential problem assets at December 31, 1994. This amount
consisted of $10.0 million, par value, of Orange County,
California, variable-rate one-year bonds due in July and
August 1995, 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 year-end 1994. Due to Orange County's
bankruptcy declaration on December 6, 1994, these bonds are
on a nonaccrual basis and have been written down to their
fair value. Interest on the bonds is current, but due to the
uncertainty of the outcome of the bankruptcy proceedings,
there is no assurance that future payments will be received.
_______________________________
INTEREST INCOME ON NONACCRUAL AND RENEGOTIATED LOANS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1994 1993 1992 1991 1990
___________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Interest Income at
Original Terms:
Nonaccrual Loans-
Domestic $3,571 $10,639 $15,155 $19,033 $18,097
Foreign 2,476 5,601 3,325 7,741 1,538
Renegotiated Loans 444 1,845 296 -- --
___________________________________________________________________________
Total $6,491 $18,085 $18,776 $26,774 $19,635
Actual Interest
Income Recognized:
Nonaccrual Loans--
Domestic Loans $ 458 $ 1,506 $ 5,345 $ 2,823 $10,755
Foreign Loans 1,075 2,128 116 1,139 64
Renegotiated Loans -- 346 94 -- --
___________________________________________________________________________
Total $1,533 $ 3,980 $ 5,555 $ 3,962 $10,819
</TABLE>
16
<PAGE>
NONACCRUAL AND RENEGOTIATED REAL ESTATE-COMMERCIAL/CONSTRUCTION LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
DECEMBER 31, 1994
<TABLE>
<CAPTION>
(In thousands) Geographic Location
___________________________________________________________________________
District of United
Project Type Columbia Virginia Maryland Kingdom Other Total
___________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Land Acquisition and
Construction
Development $ -- $ 650 $ 600 $ -- $ -- $ 1,250
Multifamily Residential 561 999 -- -- -- 1,560
Commercial:
Office Buildings 323 296 647 -- -- 1,266
Industrial/Warehouse -- 121 353 -- -- 474
Churches 306 -- -- -- -- 306
Other -- 185 19 -- -- 204
Foreign -- -- -- 3,325 653 3,978
___________________________________________________________________________
Total Nonaccrual and
Renegotiated Real
Estate-Commercial/
Construction Loans $1,190 $2,251 $1,619 $3,325 $653 $9,038
</TABLE>
PROVISION AND RESERVE FOR LOAN LOSSES
The provision for loan losses totaled $6.3 million for 1994,
compared with a provision of $69.3 million for the prior
year and $52.1 million for 1992. Approximately $14.2 million
of the provision for 1994 related to domestic loans, offset
by negative provisions of $7.9 million related to the
foreign loan portfolio. The significantly reduced provision
for loan losses in 1994 is indicative of the reductions in
nonperforming assets, combined with reduced investments in
foreign and domestic real estate-construction and commercial
loans, as well as overall improvements in the related real
estate and commercial markets in 1994. Domestic real estate-
construction and commercial loans accounted for $39.6
million of the 1993 provision total, with the remainder due
to loans originated in the United Kingdom.
The Corporation's banking subsidiaries maintain reserves
for loan losses that are available to absorb potential
losses in the current loan portfolio. The reserve for loan
losses is increased by loan-loss provisions and recoveries
of previously charged-off loans and is reduced by loan
charge-offs. The Corporation's reserve for loan losses is
based on management's assessment of existing conditions and
reflects potential losses determined to be probable and
subject to reasonable estimation. The Corporation determines
the appropriate balance of the reserve for loan losses based
upon an analysis of risk factors affecting the entire loan
portfolio and specific reviews of individual loans. The
analysis includes the primary source of repayment on
individual loans and groups of similar loans, the liquidity
and financial condition of the borrowers and guarantors,
historical charge-offs/writedowns within loan categories and
the general economic conditions and other factors existing
at the determination date.
On a quarterly basis, the Loan Loss Reserve Committee
evaluates the adequacy of the reserve for loan losses. The
Board of Directors reviews management's determination of the
adequacy of the reserve for loan losses. The loan portfolios
are continually monitored by management to identify loans
requiring particular attention.
Net recoveries for 1994 totaled $3.0 million, a
significant improvement from 1993's net charge-offs of $66.4
million. Total net recoveries for 1994 included $1.8 million
from foreign loans and $2.0 million from domestic
commercial/construction loans. These net recoveries were
offset in 1994 by net charge-offs totaling $0.8 million from
domestic consumer, home equity, residential mortgage, and
commercial and financial loans. Domestic commercial real
estate and foreign net recovery totals of $2.0 million and
$1.8 million, respectively, for 1994 compare with net
charge-offs of $34.5 million and $26.7 million for 1993. The
1993 charge-off levels reflected the deterioration of the
domestic and foreign commercial real estate markets and
related valuations conducted during the period.
The reserve for loan losses was $97.0 million, or 3.81%
of total loans, at December 31, 1994, compared with $86.5
million, or 3.42% of total loans, at December 31, 1993. The
Corporation's coverage ratio was 347.3% at year-end 1994, up
significantly from 53.9% at year-end 1993. Improvement in
the coverage ratio was due to the significant reduction in
nonperforming loans. The coverage ratio is calculated by
dividing the reserve for loan losses by the sum of
nonaccrual and renegotiated loans.
The Corporation's estimated allocation of its reserve
for loan losses is shown on the following page. Reserve for
loan loss allocations for certain portfolio categories
represent management's assessment of existing conditions and
risk factors within these categories. The substantial
increase in the qualitative factors allocation during 1994
is attributable to the significant improvement in asset
quality during the year.
17
<PAGE>
RESERVE FOR LOAN LOSSES AND SUMMARY OF
CHARGE-OFFS AND RECOVERIES
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992 1991 1990
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance, January 1 $86,513 $84,155 $103,674 $108,887 $ 39,863
Provision for Loan Losses 6,300 69,290 52,067 43,655 106,408
Loans Charged Off:
Commercial and
Financial 593 4,703 3,192 7,457 11,643
Real Estate-Commercial/
Construction 6,800 41,170 31,528 27,576 21,329
Residential Mortgage 409 96 215 25 --
Home Equity 98 201 453 450 639
Consumer 1,511 1,864 2,745 3,864 2,430
Foreign 3,219 31,400 35,575 13,172 3,185
________________________________________________________________________________
Total Loans Charged Off 12,630 79,434 73,708 52,544 39,226
________________________________________________________________________________
Recoveries on Charged-Off
Loans:
Commercial and Financial 695 527 616 1,033 220
Real Estate-Commercial/
Construction 8,847 6,699 3,172 -- --
Residential Mortgage 136 145 15 14 14
Home Equity 4 -- -- 26 --
Consumer 942 938 1,231 908 547
Foreign 5,034 4,712 279 1,678 84
________________________________________________________________________________
Total Recoveries on
Charged-Off Loans 15,658 13,021 5,313 3,659 865
________________________________________________________________________________
Net Charge-Offs
(Recoveries) (3,028) 66,413 68,395 48,885 38,361
Foreign Exchange
Translation Adjustments 1,198 (519) (3,191) 17 977
________________________________________________________________________________
Balance, December 31 $97,039 $86,513 $84,155 $103,674 $108,887
--------------------------------------------------------------------------------
Ratio of Net Charge-Offs
(Recoveries) to Average
Loans (.12)% 3.04% 2.66% 1.43% .94%
Ratio of Reserve for Loan
Losses to Total Loans 3.81% 3.42% 3.86% 3.45% 2.84%
</TABLE>
_________________________________
ALLOCATION OF THE RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992 1991 1990
_________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Commercial $11,658 $ 8,836 $ 7,775 $ 6,459 $ 5,219
Real Estate 11,988 29,544 41,699 46,633 71,686
Consumer 6,178 2,905 3,658 2,323 2,783
Foreign 11,981 19,651 25,266 31,434 21,015
Based on Qualitative Factors 55,234 25,577 5,757 16,825 8,184
_________________________________________________________________________________
Balance, December 31 $97,039 $86,513 $84,155 $103,674 $108,887
</TABLE>
DISTRIBUTION OF YEAR-END LOANS
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992 1991 1990
_________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Commercial 15.8% 16.3% 17.0% 17.6% 20.8%
Real Estate 64.5 61.0 48.6 44.6 42.7
Consumer 11.7 12.6 17.4 15.9 15.3
Foreign 8.0 10.1 17.0 21.9 21.2
_________________________________________________________________________________
Balance, December 31 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
18
<PAGE>
OTHER REAL ESTATE OWNED, NET
Other real estate owned decreased slightly to $47.8 million
at December 31, 1994, from $52.8 million at December 31,
1993. The decrease resulted from sales and repayments of
$28.7 million and $5.7 million in writedowns being partially
offset by net additions and foreign exchange translation
adjustments of $29.4 million during the period. Loans are
transferred to other real estate owned when acquired, or
deemed to be acquired through foreclosure.
At December 31, 1994, residential and commercial land
composed 69.0% of other real estate owned, with office,
industrial, retail, and other types of properties accounting
for the remainder of the portfolio. Approximately 86.9% of
the other real estate owned properties were located in the
Washington, D. C., metropolitan area at year-end 1994, with
the remainder located in the eastern section of the United
States and in the United Kingdom.
_____________________________
OTHER REAL ESTATE OWNED-GEOGRAPHIC
DISTRIBUTION BY TYPE-DECEMBER 31, 1994
<TABLE>
<CAPTION>
(In thousands) Geographic Location
---------------------------------------------------------------------------------
District of United
Project Type Columbia Virginia Maryland Kingdom Other Total
_________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Land $ 447 $23,720 $ 8,809 $ -- $ -- $32,976
Single-Family
Residential 1,122 14 374 -- 15 1,525
Office Buildings/Retail 335 817 5,496 1,882 2,562 11,092
Industrial/Warehouse 357 -- -- 1,025 -- 1,382
Shopping Centers -- -- -- 788 -- 788
_________________________________________________________________________________
Total Other Real Estate
Owned, Net $2,261 $24,551 $14,679 $3,695 $2,577 $47,763
</TABLE>
DEPOSITS
Total deposits at December 31, 1994, were $3.60 billion,
compared with $3.77 billion at year-end 1993, a decrease of
$171.0 million, or 4.5%. Average domestic deposits were
$3.47 billion for 1994, down from $3.74 billion for 1993.
Average core deposits (total deposits in domestic offices,
excluding negotiable certificates of deposit) were $3.45
billion, down $264.0 million, or 7.1%, from 1993's balance
of $3.72 billion. Average foreign deposits decreased $222.9
million, to $257.4 million, as a result of the Corporation's
decision in 1993 to phase out the deposit-gathering business
within its London operations. The declines experienced in
1994 compare with decreases in 1993 of $663.8 million for
total deposits, or 15.0% of total deposits outstanding, with
total average domestic deposits decreasing $168.1 million
and total average foreign deposits decreasing $251.3
million. The decreases in deposits over the past two years
are attributable to the historically low interest-rate
environment, resulting in banking customers' seeking higher-
yielding investments outside the banking system, such as
mutual funds, bonds, insurance products and other similar
instruments. During this two-year period, within the
metropolitan Washington, D.C., area, several banking
institutions have been using aggressive pricing strategies,
including offering deposit customers above-market rates on
certain products and/or reduced-fee account relationships,
to counter the lower interest-rate environment. The
Corporation's management believes such strategies have
significant negative short- and long-term effects, including
the potential of allocating deposit inflows into long-term,
fixed-rate earning assets, and thus increasing the
Corporation's interest-rate risk and liability-sensitive
position as these lower-yielding, shorter-term deposits
potentially reprice upwards. (See "Interest-Rate Risk
Management" section of this report.)
With steadily increasing short-term interest rates
experienced in 1994, combined with a weakened equity and
bond market during the year, deposit products have slowly
returned to favor with customers, especially in the latter
half of 1994. This is seen when reviewing the increase in
the yield for one-year treasury bills, frequently used as a
benchmark for deposit-related products, which increased from
a yield of 3.6% in December 1993 to a yield of 7.0% in
December 1994. In tandem with these developments, the
Corporation initiated several deposit programs targeting
banking customers and potential customers with deposit-
related products that provide short to intermediate terms,
allowing the customers to obtain attractive yields on their
investments while also providing flexibility to customers in
the current rising interest-rate environment. The early
results of these programs were a net increase in deposits of
$54.2 million during the fourth quarter of 1994, with
additional increases anticipated in 1995.
In addition to new deposit products in 1994, the
Corporation also conducted a detailed analysis of its retail
banking system, determining the best use of its retail
banking locations, branch facilities, product lines and
personnel. Though this process is ongoing, the Corporation
sold one retail branch and consolidated another during 1994.
The review of the retail banking system was based on a
detailed analysis conducted by internal management, combined
with outside experts. The Corporation currently does not
anticipate significant
19
<PAGE>
branch sales or consolidations, but the Corporation
isactively seeking enhancements to existing retail banking
branches to attract new customers and improve service
quality and the overall profitability of the branches, and
is searching for opportunities to establish new retail
banking branches in strategic locations.
_______________________________
AVERAGE DEPOSITS AND SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
1994 1993 1992
__________________ _________________ __________________
Average Average Average
(In thousands) Balances Rates Balances Rates Balances Rates
______________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Deposits in Domestic
Offices:
Noninterest-Bearing
Demand Deposits $ 786,153 $ 818,142 $ 834,300
Savings and NOW
Accounts 903,756 2.15% 921,801 2.11% 865,608 3.09%
Money Market
Deposits 1,029,548 2.59 1,157,883 2.47 1,220,784 3.45
Other Core Deposits 734,592 3.35 820,235 3.23 972,841 4.21
_______________________________________________________________________________
Total Average Core
Deposits 3,454,049 3,718,061 3,893,533
Negotiable
Certificates of
Deposit 15,669 3.83 25,657 6.61 18,290 9.94
_______________________________________________________________________________
Total Average
Deposits in
Domestic Offices 3,469,718 3,743,718 3,911,823
Deposits in Foreign
Offices:*
Noninterest-Bearing
Demand Deposits 11,496 13,337 11,284
Interest-Bearing Bank
Deposits 47,039 9.85 131,283 10.54 234,490 13.57
Negotiable Certificates
of Deposit -- -- 17,182 6.42 51,640 9.86
Interest-Bearing
Non-Bank Deposits 198,844 3.83 318,446 3.13 434,174 4.99
_______________________________________________________________________________
Total Average Deposits
in Foreign Offices 257,379 480,248 731,588
_______________________________________________________________________________
Total Average
Deposits $3,727,097 $4,223,966 $4,643,411
_______________________________________________________________________________
Short-Term Borrowings:
Federal Funds
Purchased and
Repurchase
Agreements $ 150,678 4.56% $ 164,899 2.77% $ 87,339 2.86%
U.S. Treasury
Demand Notes and
Other Short-Term
Borrowings 61,058 3.71 67,731 2.79 40,235 3.18
________________________________________________________________________________
Total Average
Short-Term
Borrowings $ 211,736 $ 232,630 $ 127,574
</TABLE>
[FN]
* A majority of interest-bearing deposits in foreign offices are denominated in
amounts of $100 thousand or more.
SHORT-TERM BORROWINGS
Short-term borrowings, comprising federal funds purchased
and repurchase agreements, U.S. Treasury demand notes and
other borrowed funds, totaled $293.4 million at December 31,
1994, a decrease of $160.6 million from the prior year-end
balance. Average short-term borrowings for 1994 totaled
$211.7 million, also down from 1993's average total of
$232.6 million. Short-term borrowings are an additional
source of funds that the Corporation has established to meet
certain asset/liability, as well as daily cash management,
objectives. The decreases in short-term borrowings were the
result of rising short-term interest rates in 1994, combined
with the overall flattening of the yield curve, thus
resulting in reduced margins from this source of funds. See
Note 8 to the Consolidated Financial Statements for
additional information.
LONG-TERM DEBT
Long-term debt totaled $217.6 million at December 31, 1994,
up slightly from its balance at December 31, 1993. Long-term
debt includes floating-rate subordinated notes maturing in
1996, which totaled $26.1 million at year-end 1994. These
subordinated notes had an interest rate of 6.56% at December
31, 1994, an increase of 131 basis points from year-end
1993. Long-term debt also includes subordinated debentures
due in 2009, bearing a fixed rate of interest of 9.65% per
annum.
In February 1994, the Corporation issued $125 million of
8.5% Subordinated Notes, due February 2006. The notes were
priced at par and are not callable for five years. The
Corporation used the net proceeds from the offering, $120.7
million, to redeem subordinated notes and subordinated
capital notes due in 1996. The proceeds were placed in
short-term investments prior to the redemption of the
floating-rate notes in March 1994. The Corporation's long-
term debt is discussed more fully in Note 8 to the
Consolidated Financial Statements.
20
<PAGE>
CAPITAL RESOURCES
Total stockholders' equity at December 31, 1994, was $267.7
million, or 6.1% of total assets, down $25.5 million from
the year-end 1993 total. The decrease during 1994 was the
result of earnings totaling $34.0 million, as well as
foreign exchange translation and other activity totaling
$1.1 million, which, in the aggregate, were more than offset
by $29.4 million of unrealized losses on securities in the
Corporation's available for sale portfolio, the repurchase
of the Preferred Stock, Series A, totaling $19.1 million and
dividends on preferred stock of $12.1 million. In September
1994, the Corporation repurchased all of the 764,537 shares
of its 7.5% cumulative convertible preferred stock, Series
A, from the Norwich Union Life Insurance Society. This
repurchase reduced dividends payable by $358 thousand in
1994 and will reduce dividends payable by $1.4 million
annually thereafter. The Series A preferred shares were
convertible into 2,002,141 shares of common stock.
Under the Federal Reserve Board's risk-based capital
guidelines, bank holding companies are required to meet a
minimum ratio of qualifying total capital (combined Tier I
and Tier II) to risk-weighted assets of 8.00%, at least half
of which must be composed of core (Tier I) capital elements.
The Corporation's total and core capital ratios were 18.50%
and 11.48%, respectively, at December 31, 1994.
The Federal Reserve Board has established an additional
capital adequacy guideline referred to as the leverage
ratio, as amended by the Prompt Corrective Action
regulations promulgated under FDICIA, which measures the
ratio of Tier I capital to average quarterly 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, must maintain at least a minimum ratio of
4.00%, or higher, if determined necessary by the Federal
Reserve Board through its assessment of the Corporation's
asset quality, earnings performance, interest-rate risk and
liquidity. The Corporation's leverage ratio was 6.42% at
December 31, 1994.
The Corporation's policy is to ensure that its bank
subsidiaries are capitalized in accordance with regulatory
guidelines. The three national bank subsidiaries of the
Corporation are subject to minimum capital ratios prescribed
by the OCC, which are the same as those for the Federal
Reserve Board. The following table summarizes the actual and
required capital ratios for the Corporation and each of its
banking subsidiaries:
-----------------------------------
CAPITAL RATIOS
<TABLE>
<CAPTION>
December 31, Required
1994 1993 Minimums
_____________________________________________________________________________
<S> <C> <C> <C>
Riggs National Corporation
Tier I 11.48% 10.76% 4.00%
Combined Tier I and Tier II 18.50 16.81 8.00
Leverage* 6.42 6.03 4.00
The Riggs National Bank of
Washington, D. C.
Tier I 13.35 10.69 4.00
Combined Tier I and Tier II 14.64 11.97 8.00
Leverage* 7.39 6.13 4.00
The Riggs National Bank of Virginia
Tier I 18.18 17.05 4.00
Combined Tier I and Tier II 19.43 18.31 8.00
Leverage* 9.74 8.94 4.00
The Riggs National Bank of Maryland
Tier I 13.21 11.46 4.00
Combined Tier I and Tier II 14.46 12.71 8.00
Leverage* 7.33 6.69 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. The Federal Reserve Board has
not indicated a requirement higher than 4.00% at December 31, 1994.
21
<PAGE>
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 December 31, 1994, 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 sensitivity position.
22
<PAGE>
NET INTEREST INCOME
Net interest income is derived by subtracting the cost of
funds from the income received on earning assets. Earning
assets comprise mainly loans and securities, while interest-
bearing liabilities are mostly deposits and short-term
borrowings. Net interest income is impacted by variations in
the volume and mix of these assets and liabilities, as well
as fluctuations in interest rates. Net interest income on a
tax-equivalent basis which is presented below to show the
comparability of assets with different tax attributes (net
interest income plus an amount equal to the tax savings on
tax-exempt interest), totaled $156.7 million for 1994, an
increase of $17.2 million, or 12.3%, from the $139.5 million
earned in 1993. The positive impact on earnings of a $464.5
million decline in average interest-bearing liabilities was
partially offset by a $288.2 million decrease in average
earning assets. Also having a positive impact on the
Corporation's net interest income was a $148.6 million
average decrease in nonperforming assets between 1993 and
1994, combined with the continued shift to longer-term,
higher-yielding assets from shorter-term investments. Loans
were 64.5% of average earning assets during 1994, compared
with 50.5% for 1993. The net interest margin (net interest
income on a tax-equivalent basis divided by average earning
assets) was 3.89% for 1994, an increase of 66 basis points
from the 3.23% net interest margin for 1993 because of the
aforementioned changes in earning assets and interest-
bearing liabilities. Net interest spread (the difference
between the average tax-equivalent rate earned and the
average rate incurred on interest-bearing liabilities) for
1994 was 3.34%, a 46-basis-point improvement from 1993's
spread of 2.88%.
Interest lost on nonaccrual and renegotiated loans
totaled $5.0 million for 1994, which negatively impacted the
net interest margin by approximately 12 basis points for the
year. In 1993, interest lost totaled $14.1 million and
negatively impacted the net interest margin in that year by
approximately 32 basis points.
The Corporation established the goal in 1993 of
increasing its loan-to-deposit ratio above 70% in 1994. The
Corporation met this goal, and the loan-to-deposit ratio
stood at 71% at December 31, 1994. The Corporation believes
this strategy also contributed to the overall improvement in
net interest income in 1994.
-------------------------------
NET INTEREST INCOME CHANGES*
<TABLE>
<CAPTION>
1994 Versus 1993 1993 Versus 1992
----------------------- -----------------------
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) $ 7,786 $ 26,275 $ 34,061 $(31,005) $(31,486) $(62,491)
Securities
Available for
Sale 8,461 663 9,124 (8,577) 14,587 6,010
Securities Held-to-
Maturity:
U.S. Treasury
Securities (5,374) 5,369 (5) (278) (18,249) (18,527)
Government Agencies
Securities -- 5,108 5,108 -- -- --
Obligations of States
and Political
Subdivisions 8 (161) (153) -- -- --
Mortgage-Backed
Securities -- (21,858) (21,858) (892) 19,025 18,133
Other Securities (688) (2,171) (2,859) 1,379 (2,905) (1,526)
Time Deposits with
Other Banks 1,075 (9,792) (8,717) (463) (7,067) (7,530)
Federal Funds Sold and
Reverse Repurchase
Agreements 4,477 (11,382) (6,905) (2,732) (3,744) (6,476)
________________________________________________________________________
Total Interest
Income 15,745 (7,949) 7,796 (42,568) (29,839) (72,407)
Interest Expense:
Savings and NOW
Accounts 340 (406) (66) (9,082) 1,615 (7,467)
Money Market Deposit
Accounts 1,283 (3,346) (2,063) (11,574) (2,146) (13,720)
Time Deposits in
Domestic Offices 907 (3,265) (2,358) (8,906) (5,694) (14,600)
Time Deposits
in Foreign
Offices (2,197) (10,853) (13,050) (16,154) (17,173) (33,327)
Federal Funds
Purchased and
Repurchase
Agreements 2,729 (424) 2,305 (82) 2,146 2,064
U.S. Treasury Demand
Notes and Other Short-
Term Borrowings 580 (199) 381 (173) 782 609
Long-Term Debt 4,019 1,425 5,444 (418) (615) (1,033)
-----------------------------------------------------------------------
Total Interest
Expense 7,661 (17,068) (9,407) (46,389) (21,085) (67,474)
-----------------------------------------------------------------------
Net Interest
Income $ 8,084 $ 9,119 $17,203 $ 3,821 $ (8,754) $ (4,933)
</TABLE>
[FN]
* 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 34% and
local tax rates as applicable.
23
<PAGE>
THREE-YEAR AVERAGE CONSOLIDATED STATEMENTS OF
CONDITION AND RATES/1/
<TABLE>
<CAPTION>
1994 1993 1992
________________________ _________________________ ________________________
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
(In thousands) Balances Expense Rates Balances Expense Rates Balances Expense Rates
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans:
Commercial-
Taxable $ 381,721 $ 24,734 6.48% $ 279,484 $ 18,921 6.77% $ 314,832 $ 22,721 7.22%
Commercial-
Tax-Exempt 61,233 6,547 10.69 83,773 7,686 9.17 102,809 11,148 10.84
Real Estate-
Commercial/
Construction 353,006 30,575 8.66 454,657 30,544 6.72 590,766 41,581 7.04
Residential
Mortgage 1,303,327 92,164 7.07 692,707 53,353 7.70 619,745 7,076 9.21
Home Equity 225,117 17,037 7.57 261,870 18,079 6.90 301,189 22,602 7.50
Consumer 75,663 8,957 11.84 90,255 10,938 12.12 125,016 15,762 12.61
Foreign 201,457 16,884 8.38 319,070 23,316 7.31 514,688 54,438 10.58
________________________________________________________________________________________________
Total Loans
(Including
Fees) 2,601,524 196,898 7.57 2,181,816 162,837 7.46 2,569,041 225,328 8.77
Securities
Available
for Sale/2/ 582,076 31,119 5.35 565,447 21,995 3.89 242,890 15,985 6.58
Securities Held-
to-Maturity:
U.S. Treasury
Securities 372,085 17,315 4.65 272,272 17,320 6.36 559,502 35,847 6.41
Government
Agencies
Securities 85,840 5,108 5.95 -- -- -- -- -- --
Obligations of
States and
Political
Subdivisions 487 52 10.68 1,999 205 10.26 1,999 205 10.26
Mortgage-Backed
Securities -- -- -- 397,314 21,858 5.50 54,109 3,725 6.88
Other
Securities 12,278 962 7.84 38,260 3,821 9.99 70,505 5,347 7.58
________________________________________________________________________________________________
Total Securities
Held-to-
Maturity 470,690 23,437 4.98 709,845 43,204 6.09 686,115 45,124 6.58
Time Deposits
with Other Banks 189,425 9,786 5.17 379,755 18,503 4.87 524,902 26,033 4.96
Federal Funds
Sold and
Reverse
Repurchase
Agreements 187,955 8,139 4.33 483,044 15,044 3.11 596,165 21,520 3.61
________________________________________________________________________________________________
Total Earning
Assets and
Average Rate
Earned 4,031,670 269,379 6.68 4,319,907 261,583 6.06 4,619,113 333,990 7.23
Less: Reserve
for Loan Losses 92,258 85,450 82,498
Cash and Due
from Banks 219,609 287,912 296,893
Premises and
Equipment, Net 156,525 168,227 183,080
Other Assets 185,031 244,453 259,367
________________________________________________________________________________________________
Total Assets $4,500,577 $4,935,049 $5,275,955
Liabilities
and Stockholders'
Equity
Interest-Bearing
Deposits:
Savings and
NOW Accounts$ 908,582 $ 19,512 2.15% $ 926,363 $ 19,578 2.11% $ 871,347 $ 27,045 3.10%
Money Market
Deposit
Accounts 1,042,664 26,947 2.58 1,176,873 29,010 2.47 1,241,790 42,730 3.44
Time Deposits
in Domestic
Offices 750,258 25,816 3.44 845,892 28,174 3.33 991,130 42,774 4.32
Time Deposits
in Foreign
Offices 227,943 11,282 4.95 443,359 24,332 5.49 693,560 57,659 8.31
________________________________________________________________________________________________
Total Interest-
Bearing
Deposits 2,929,447 83,557 2.85 3,392,487 101,094 2.98 3,797,827 170,208 4.48
Short-Term
Borrowings:
Federal Funds
Purchased and
Repurchase
Agreements 150,678 6,871 4.56 164,899 4,566 2.77 87,339 2,502 2.86
U.S. Treasury
Demand Notes
and Other
Short-Term
Borrowings 61,058 2,268 3.71 67,731 1,887 2.79 40,235 1,278 3.18
Long-Term Debt 232,790 20,027 8.60 213,325 14,583 6.84 222,162 15,616 7.03
________________________________________________________________________________________________
Total Interest-
Bearing Funds
and Average
Rate Incurred 3,373,973 112,723 3.34 3,838,442 122,130 3.18 4,147,563 189,604 4.57
Demand Deposits 797,650 831,479 845,584
Other Liabilities 45,699 45,215 19,210
Stockholders'
Equity 283,255 219,913 263,598
________________________________________________________________________________________________
Total Liabilities
and Stockholders'
Equity $4,500,577 $4,935,049 $5,275,955
Net Interest
Income and
Spread $156,656 3.34% $139,453 2.88% $144,386 2.66%
________________________________________________________________________________________________
Net Interest
Margin on
Earning Assets 3.89% 3.23% 3.13%
</TABLE>
[FN]
/1/ Income and rates are computed on a tax-equivalent basis using
a Federal income tax rate of 34% and local tax rates as
applicable. Loan amounts include nonaccrual and renegotiated
loans. Average foreign assets, excluding net pool funds
provided, details of which can be found on page 74 of this
report, were 9.1%, 14.6% and 21.5% of average total assets for
the periods presented, respectively. Average foreign
liabilities were 14.7%, 18.1% and 23.9% of average total
liabilities for the periods presented, respectively.
/2/ Securities available for sale are presented net of valuation
allowances; if presented gross of valuation allowances, the
Corporation's adjusted net interest spread and margin would
total 3.32% and 3.87%, respectively, at year-end 1994, with no
effect to 1993 or 1992.
24
<PAGE>
NONINTEREST INCOME
Noninterest income for 1994 was $85.5 million, down
$27.1 million, or 24.1%, from that for 1993. Excluding
securities gains of $226 thousand and $24.1 million for
1994 and 1993, respectively, and $4.7 million of
nonrecurring noninterest income related to a mortgage
insurance settlement recognized in 1994, noninterest
income decreased $8.0 million, or 9.0%. Trust income of
$28.6 million was down slightly ($270 thousand, or
.9%), as the Corporation discontinued providing stock
transfer services for certain corporate trust
customers. Total assets under management by the
Financial Services Group at December 31, 1994, were
approximately $4.1 billion, down from $4.3 billion at
year-end 1993. The market value of trust and custodial
assets of the Corporation's Financial Services Group
decreased $431.0 million, or 5.1%, to $8.0 billion at
December 31, 1994, due to the exit from the corporate
stock transfer business, combined with reductions in
total corporate accounts. International noncredit
commissions and fees were $5.4 million, a decrease of
$4.1 million, or 42.9%, primarily because of the sale
of three foreign investment advisory subsidiaries in
the second half of 1994. The gain on settlement of
mortgage insurance claims resulted from the settlement
of claims stemming from other real estate owned
properties in the United Kingdom. Service charges for
1994 of $36.8 million decreased $2.5 million, or 6.4%,
primarily because of a decline in deposit balances from
a year earlier (see "Deposits" section of this report).
Foreign exchange income decreased $530 thousand, or
18.9%, in 1994, due primarily to the previously
discussed restructuring of Riggs AP Bank and the
exiting of foreign exchange trading-related activities.
Other noninterest income of $7.5 million was down $586
thousand, due primarily to income recognized in 1993
from trading future positions.
____________________________
NONINTEREST INCOME
<TABLE>
<CAPTION>
Change
---------------------
(In thousands) 1994 1993 Amount Percent
________________________________________________________________________
<S> <C> <C> <C> <C>
Trust Income $28,587 $ 28,857 $ (270) (.9)%
Service Charges 36,836 39,343 (2,507) (6.4)
International Noncredit
Commissions and Fees 5,391 9,448 (4,057) (42.9)
Gain on Settlement
of Mortgage
Insurance Claims 4,739 -- 4,739 --
Foreign Exchange Income 2,271 2,801 (530) (18.9)
Other Noninterest Income 7,474 8,060 (586) (7.3)
______________________________________________________________________
Noninterest Income
Excluding Securities
Gains, Net 85,298 88,509 (3,211) (3.6)
Securities Gains, Net 226 24,141 (23,915) (99.1)
______________________________________________________________________
Total
Noninterest Income $85,524 $112,650 $(27,126) (24.1)%
</TABLE>
NONINTEREST EXPENSE
Noninterest expense for the year ended December 31,
1994, was $199.0 million, down $67.7 million from
$266.8 million for 1993. Noninterest expense for 1993
included restructuring expense of $34.6 million, of
which $20.8 million related to Riggs AP Bank. The Riggs
AP Bank charge consisted of $1.6 million in severance-
related expenses, $11.5 million from the write-off of a
foreign currency translation account associated with
Riggs-Washington's investment in Riggs AP Bank, and
$7.7 million of other restructuring expense. The $20.8
million of restructuring expense related to Riggs AP
Bank included $14.2 million of noncash expenses, which
included the aforementioned $11.5 million write-off of
the foreign currency translation account, the write-off
of $2.2 million of fixed assets and a $0.5 million
write-off of goodwill. The remaining $6.6 million was
accrued to offset expenses related to severance and
excess space and equipment leases that will be charged
against the accrual when paid. Also included in the
$34.6 million in restructuring expense was $13.8
million in expenses related to the implementation of
BankStart '93. The restructuring expenses related to
BankStart '93 consisted of $7.0 million in consulting
fees, $4.0 million in severance-related costs, $1.0
million in occupancy-related costs and $1.8 million in
other costs. Implementation of BankStart '93 began in
April 1993.
During the first half of 1994, the implementation
of BankStart '93 was substantially completed and a $2.1
million recovery was recognized. This recovery was the
result of lower-than-anticipated expenses associated
with staff reductions. Accrued and unpaid restructuring
expenses totaled $908 thousand at year-end 1994, with
related disbursements expected to be made during the
first half of 1995.
25
<PAGE>
Other real estate owned income, net, totaled $1.4
million in 1994, down 110.4% from $13.5 million in net
expense in 1993. This decrease is attributed to the
overall decrease in additions within this portfolio in
1994, as well as to the general improvement in the real
estate markets during the year.
Excluding restructuring and other real estate owned
expense, noninterest expense for 1994 was down $16.2
million, or 7.4%, from the total of $218.7 million for
1993. Salaries and related benefits were $81.5 million
for 1994, a decrease of $6.5 million, as a reduction in
salary and wage expense combined with decreases in
medical and life insurance premiums, pension expenses
and relocation expenses. Net occupancy expense of $23.6
million was down $2.1 million, or 8.3%, due to
decreases in net rent expense of $2.0 million, the
result of increases in rental income from buildings
owned and subleases in 1994.
Furniture and equipment expense of $9.2 million
decreased $1.9 million, or 17.3%, due to decreases in
depreciation and rental expense of $1.2 million, with
the balance of the decrease due to reductions in repair
expenses.
FDIC insurance expense of $9.6 million in 1994 was
down $708 thousand from 1993's total, because of
reductions in the deposit base during the period. Data
processing expense of $16.9 million was up $350
thousand for the year. Other noninterest expense
totaled $52.0 million, down $4.9 million, or 8.5%, from
the $56.9 million for 1993. Accounting for the decrease
was $3.8 million of noncredit-related other losses and
$1.1 million in reduced appraisal expenses in 1994.
____________________________
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Change
---------------------
(In thousands) 1994 1993 Amount Percent
______________________________________________________________________________
<S> <C> <C> <C> <C>
Salaries and Wages $ 64,892 $ 69,978 $ (5,086) (7.3)%
Pensions and Other Employee
Benefits 16,605 18,048 (1,443) (8.0)
______________________________________________________________________________
Total Staff Expense 81,497 88,026 (6,529) (7.4)
______________________________________________________________________________
Occupancy Expense, Net 23,637 25,763 (2,126) (8.3)
Data Processing Services 16,935 16,585 350 2.1
Other Real Estate Owned
Expense (Income), Net (1,403) 13,513 (14,916) (110.4)
Furniture and Equipment
Expense 9,224 11,153 (1,929) (17.3)
FDIC Insurance Expense 9,601 10,309 (708) (6.9)
Advertising and Public
Relations 6,006 5,971 35 0.6
Legal Fees 3,581 4,024 (443) (11.0)
Restructuring Expense (2,059) 34,554 (36,613) (106.0)
Other Noninterest Expense 52,001 56,854 (4,853) (8.5)
______________________________________________________________________________
Total Noninterest Expense $199,020 $266,752 $(67,732) (25.4)%
</TABLE>
INCOME TAXES
The Corporation's provision or benefit for income taxes
includes both federal and state income taxes. The
Corporation's 1993 provision for income taxes of $5.6
million resulted from management's analysis of the
Corporation's ability to realize tax benefits
previously booked. The 1994 benefit of $.5 million was
primarily the result of the favorable settlement of an
outstanding issue with the United Kingdom Inland
Revenue.
In 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"), which requires the
Corporation to implement new accounting and disclosure
rules for income taxes. The adoption of SFAS No. 109
did not result in a cumulative adjustment since it was
not apparent at implementation of SFAS No. 109 that
future income or the establishment of certain tax
planning strategies would be sufficient to realize
deferred tax assets in future periods in excess of the
Corporation's carryback potential. Further tax
discussion and a reconciliation of the effective tax
rate to the 1994 federal statutory rate of 34% can be
found in Note 12 to the Consolidated Financial
Statements.
26
<PAGE>
FOURTH QUARTER 1994 VS. FOURTH QUARTER 1993
For the fourth quarter of 1994, the Corporation
reported net income of $8.0 million, or $.17 per common
share, compared with $3.1 million, or $.09 per common
share, for the fourth quarter of 1993. Results for the
fourth quarter of 1994 reflected no provisions for loan
losses, down from the $2.1 million recognized in the
fourth quarter of 1993. Nonperforming assets totaled
$75.7 million at December 31, 1994, a decrease of $18.8
million in the fourth quarter of 1994 and a decrease of
$137.6 million from $213.3 million at December 31,
1993.
---------------------------------------
FOURTH QUARTER CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
December 31, Change
(In thousands, except per share amounts) 1994 1993 Amount
______________________________________________________________________________
<S> <C> <C> <C>
Interest Income $70,265 $61,916 $8,349
Interest Expense 31,659 26,746 4,913
______________________________________________________________________________
Net Interest Income 38,606 35,170 3,436
Less: Provision for Loan Losses _ 2,125 (2,125)
-----------------------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses 38,606 33,045 5,561
Noninterest Income 17,398 21,239 (3,841)
Noninterest Expense 48,102 51,121 (3,019)
______________________________________________________________________________
Income before Taxes 7,902 3,163 4,739
Applicable Income Tax (Benefit) Expense (141) 82 (223)
______________________________________________________________________________
Net Income $8,043 $3,081 $4,962
Earnings Per Common Share $ .17 $ .09 $ .08
</TABLE>
Net interest income on a tax-equivalent basis for
the fourth quarter of 1994 was $39.4 million, an
increase of $3.3 million, or 9.2%, year to year,
reflecting the positive impact of a $158.3 million
decrease in average nonperforming assets between the
periods and continued improvement in the asset mix. The
net interest margin was 3.92% during the fourth quarter
of 1994, up 49 basis points from that for the fourth
quarter of 1993. Interest lost on nonaccrual loans had
the effect of negatively impacting the net interest
margin by approximately 7 basis points during the
fourth quarter of 1994, compared with 16 basis points
for the same period in the prior year. The net interest
spread was 3.31% for the quarter ended December 31,
1994, up 31 basis points from that for the same period
in the prior year.
Net recoveries in the fourth quarter of 1994
totaled $1.4 million, level when compared with $1.5
million in net recoveries for the fourth quarter of
1993. Charge-offs in the fourth quarter of 1994 totaled
$2.3 million and were more than offset by $3.7 million
in recoveries during the period. The year-earlier
charge-offs totaled $9.1 million, offset by $10.6
million in recoveries during the quarter.
Noninterest income for the fourth quarter of 1994
was $17.4 million, a decrease of $3.8 million, or
18.1%, when compared with that for the like period in
1993. Trust income of $7.0 million was down $198
thousand, as the Corporation experienced a slight
decrease in total trust accounts during the quarter,
when compared with the prior period. Service charges of
$8.8 million were down $2.8 million, primarily because
of reduced investment advisory fees, which decreased
$2.5 million, reflecting the sale of several foreign
investment advisory subsidiaries in the second half of
1994. Securities gains/losses decreased $1.4 million,
the result of losses realized from the Corporation's
purchase of $10 million (par value) of Orange County,
California, variable-rate, one-year bonds (see Note 2
to the Consolidated Financial Statements).
Noninterest expense for the fourth quarter of 1994
totaled $48.1 million, compared with $51.1 million a
year earlier, an improvement of $3.0 million, or 5.9%.
Salaries and related benefits of $19.5 million were
down $1.2 million as a result of reduced staff levels.
Net occupancy expense was down $212 thousand, to $5.6
million, in the fourth quarter of 1994 because of
decreases in property rent expense, utilities and
repairs. Furniture and equipment expense decreased $353
thousand because of reductions in depreciation,
maintenance and repairs, and equipment rentals. Other
real estate owned income, net of expense, was $249
thousand, a decrease of $1.6 million when compared with
1993's fourth-quarter other real estate owned expense,
the result of reduced activity within this portfolio.
Other noninterest expense totaled $21.2 million for the
fourth quarter of 1994, a slight increase of $400
thousand.
27
<PAGE>
FOURTH QUARTER NET INTEREST INCOME CHANGES*
<TABLE>
<CAPTION>
Three Months Ended
December 31, Due to
(In thousands) 1994 1993 Change Rate Volume
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Interest Income:
Loans (Including Fees) $ 50,605 $43,282 $ 7,323 $ 4,788 $ 2,535
Securities Available
for Sale 9,302 7,087 2,215 4,777 (2,562)
Securities Held-to-Maturity:
U.S. Treasury Securities 4,363 2,503 1,860 (1,333) 3,193
Government Agencies
Securities 1,846 -- 1,846 -- 1,846
Obligations of States and
Political Subdivisions -- 51 (51) -- (51)
Mortgage-Backed Securities -- 4,309 (4,309) -- (4,309)
Other Securities 16 1,113 (1,097) (579) (518)
Time Deposits with
Other Banks 2,724 3,049 (325) (133) (192)
Federal Funds Sold and Reverse
Repurchase Agreements 2,230 1,452 778 988 (210)
_________________________________________________________________________________
Total Interest Income 71,086 62,846 8,240 8,508 (268)
Interest Expense:
Savings and NOW Accounts 5,048 4,821 227 503 (276)
Money Market
Deposit Accounts 7,392 6,665 727 1,265 (538)
Time Deposits in
Domestic Offices 7,703 5,915 1,788 3,251 (1,463)
Time Deposits in
Foreign Offices 3,019 4,205 (1,186) (1,572) 386
Federal Funds Purchased and
Repurchase Agreements 3,401 1,141 2,260 1,174 1,086
U.S. Treasury Demand Notes
and Other Short-
Term Borrowings 354 337 17 208 (191)
Long-Term Debt 4,742 3,662 1,080 1,004 76
________________________________________________________________________________
Total Interest Expense 31,659 26,746 4,913 5,833 (920)
________________________________________________________________________________
Net Interest Income $39,427 $36,100 $ 3,327 $ 2,675 $ 652
</TABLE>
* The dollar amount of changes in interest income and interest expense
attributable to changes in rate/volume (change in rate multiplied by change
in volume) has been allocated between rate and volume variances based on the
percentage relationship of such variances to each other. Income and rates are
computed on a tax-equivalent basis using a Federal tax rate of 34% for 1994
and 1993 and local tax rates.
1993 vs. 1992
The Corporation reported a net loss of $94.2 million,
or $3.65 per common share, for 1993, compared with a
net loss of $21.1 million, or $.87 per common share,
for 1992. The 1993 results included provisions for loan
losses of $69.3 million, other real estate owned
expenses, net, of $13.5 million, and securities gains,
net, of $24.1 million. The 1992 results included
provisions for loan losses of $52.1 million, other real
estate owned expenses, net, of $15.7 million,
securities gains of $34.2 million and the recognition
of $5.9 million of nonrecurring interest income related
to a tax receivable.
Average earning assets during 1993 decreased $299.2
million, or 6.5%, to $4.32 billion. This decline
reflected across-the-board reductions in the average
balance of each loan category (other than residential
mortgage loans) due to weak loan demand in the first
half of 1993 and net cash inflows' being used to
partially fund reductions in deposits, as discussed
below. Average loans were $2.18 billion during 1993,
down $387.2 million, or 15.1%, from the average for
1992.
Money market assets, which consist of time deposits
with other banks and federal funds sold and reverse
repurchase agreements, ended 1993 at $405.9 million,
down significantly from $1.26 billion a year earlier.
These assets averaged $862.8 million and $1.12 billion,
respectively, for 1993 and 1992. This reduction was
part of an overall asset/liability management strategy
to shift certain shorter-term assets to longer-term
maturities.
Securities available for sale totaled $708.1
million at December 31, 1993, compared with $159.6
million at year-end 1992. In the first quarter of 1993,
in view of management's intention to use certain
securities as part of its asset/liability management
strategy and the possibility that securities could be
sold in response to changes in interest rates or for
liquidity purposes, $983 million of securities were
classified as held for sale. In the second quarter of
1993, $696 million in securities held for sale were
sold for a pretax gain of $25.9 million. Proceeds from
this sale were used to purchase shorter-duration and
variable-rate securities classified as held for sale,
in addition to money market assets.
28
<PAGE>
The Corporation adopted SFAS No. 115 on December
31, 1993, which required that management express its
intent regarding the securities portfolio based on
management's intent for the securities at that time.
This review resulted in the net transfer of $168.7
million in securities at December 31, 1993, from the
available for sale portfolio to the held-to-maturity
portfolio. After taking into account the $168.7 million
net transfer on December 31, 1993, the new accounting
treatment for the securities available-for-sale
portfolio under SFAS No. 115 resulted in a $1.28
million net unrealized gain in stockholders' equity.
Securities held-to-maturity totaled $660.1 million
at December 31, 1993, down $135.3 million, or 17.0%,
from the level at December 31, 1992. The average
balance in securities held-to-maturity was $709.8
million for 1993, compared with $686.1 million for
1992. At December 31, 1993, securities held-to-maturity
had gross unrealized gains of $729 thousand and gross
unrealized losses of $18 thousand. The decrease in this
portfolio was due to the transfer in the first quarter
of 1993 of $983 million in investment securities to the
held-for-sale portfolio, as discussed above. At
December 31, 1993, this portfolio consisted primarily
of U.S. Treasury securities, with 97.6% of the
portfolio maturing in one year or less.
As of December 31, 1993, loans, net of unamortized
premiums, unearned discounts and unearned fees, were
$2.53 billion, an increase of $347.1 million (15.9%)
from the year-end 1992 loan balance. This increase was
due to the purchase of $435.9 million in residential
mortgage loans in the latter half of 1993, which was
part of an overall asset/liability management strategy
to shift certain shorter-term assets to longer-term
maturities.
The purchases, combined with local-area
originations in 1993, were partially offset by loan
curtailments and payoffs, particularly with respect to
residential mortgage loans, as the result of the high
level of mortgage loans refinanced during 1993 and, to
a lesser extent, transfers of loans to other real
estate owned. Domestic commercial and financial loans
were $412.0 million at December 31, 1993, an increase
of $42.1 million, or 11.4%, when compared with $369.9
million at December 31, 1992. This increase was
attributable to new commercial loan originations in the
fourth quarter of 1993. Domestic real estate-
commercial/construction loans were $388.4 million at
December 31, 1993, a decrease of $145.2 million from
year-end 1992. This decrease was the result of loan
curtailments and payoffs, transfers to other real
estate owned and limited new lending by the Corporation
in this sector. Domestic real estate-
commercial/construction loans were 15.4% of total loans
and 8.1% of total assets at year-end 1993, compared
with 24.4% and 10.5%, respectively, for year-end 1992.
Residential mortgage loans totaled $1.15 billion at
December 31, 1993, an increase of $620.0 million
(117.1%) from the year-earlier level. This increase was
the result of the local area originations and purchases
in the open market during 1993. The purchase and
origination activity during 1993 was partially offset
by high levels of principal curtailments and payoffs,
the result of increased mortgage loan refinance
activity as consumers took advantage of the lowest
mortgage loan interest-rate environment since the late
1960s.
Home equity loans, which are primarily floating-
rate loans secured by first or second trusts on single-
family residential properties, decreased $39.5 million
to $234.1 million at December 31, 1993. This decrease
was caused largely by refinancing resulting from the
lower interest-rate environment.
Consumer loans were $82.8 million at year-end 1993,
decreasing $24.6 million from $107.4 million at
December 31, 1992, as a result of limited originations
of installment loans and student loans in the domestic
markets.
Foreign loans totaled $255.4 million at December
31, 1993, a decrease of $116.1 million from the year-
end 1992 total of $371.5 million. Foreign loans in the
Corporation's London operations were $199.8 million at
December 31, 1993, and constituted 78.2% of the
Corporation's total foreign loans. Approximately 59.7%
of the decline in the foreign loan portfolio was due to
repayments, with 4.0% due to exchange rate fluctuation,
9.3% related to transfers to other real estate owned
and 27.0% due to charge-offs during the year. Riggs AP
Bank's lending activities have been significantly
reduced because of the weak economic conditions in the
United Kingdom and the previously discussed financial
restructuring.
Nonperforming assets, which include nonaccrual
loans, renegotiated loans, and other real estate owned
(net of reserves), totaled $213.3 million at year-end
1993, a $93.3 million (30.4%) decrease from the year-
end 1992 total of $306.6 million. This significant
decrease in nonperforming assets during 1993 was
attributable to sales of $140.0 million, and net
charge-offs/writedowns of $90.5 million, combined with
exchange rate fluctuations and other reductions of $3.4
million that were partially offset by net additions in
1993 of $140.6 million.
Provisions for loan losses totaled $69.3 million
for 1993, compared with provisions of $52.1 million for
1992. Net charge-offs were $66.4 million, or 3.04% of
average loans, during 1993, compared with $68.4
million, or 2.66% of average loans, during 1992. The
reserve for loan losses was $86.5 million, or 3.42% of
loans, at December 31, 1993, compared with $84.2
million, or 3.86% of loans, at December 31, 1992. The
ratio of loan-loss reserves to nonaccrual and
renegotiated loans (coverage ratio) was 53.9% at
December 31, 1993, compared with 38.7% a year earlier.
29
<PAGE>
Total deposits at December 31, 1993, were $3.77
billion, compared with $4.44 billion at year-end 1992,
a decrease of $663.8 million, or 15.0%. Foreign
deposits decreased $350.7 million, to $262.7 million,
as a result of the Corporation's decision to phase out
the deposit-gathering business in its London
operations. Average domestic deposits were $3.74
billion for 1993, down from $3.91 billion for 1992. The
reductions in year-end and average domestic deposits
were due to reductions in demand for certificates of
deposit and other deposit products, the result of the
continued lower interest-rate environment. Average core
deposits (total deposits in domestic offices, excluding
negotiable certificates of deposit) were $3.72 billion,
down $175.5 million, or 4.5%, from 1992's $3.89
billion.
Stockholders' equity increased to $293.2 million at
December 31, 1993, from $245.4 million at December 31,
1992. This increase was due to the issuance of $95.3
million of 10.75% Cumulative Perpetual Preferred Stock-
Series B and $37.0 million of common stock in October
1993, partially offset by the $94.2 million loss.
Net interest income on a tax-equivalent basis
totaled $139.5 million for 1993, down $4.9 million, or
3.4%, from the $144.4 million in 1992. The positive
impact on earnings of a $309.1 million decline in
average interest-bearing liabilities during 1993,
combined with the added benefit of a 139-average-basis-
point reduction in the interest rate paid, was
partially offset by a $299.2 million decrease in
average earning assets and a 117-average-basis-point
reduction in the rate earned for 1993. Loans were 50.5%
of average earning assets during 1993, compared with
55.6% for 1992. The net interest margin was 3.23%
during 1993, an increase of 10 basis points from the
3.13% net interest margin for 1992, because of the
aforementioned changes in earning assets and interest-
bearing liabilities. Net interest spread (the
difference between the average tax-equivalent rate
earned and the average rate incurred on interest-
bearing liabilities) for 1993 was 2.88%, a 22-basis-
point improvement from 1992's spread of 2.66%. Interest
lost on nonaccrual and renegotiated loans totaled $14.1
million for 1993, which had the effect of impacting the
net interest margin by approximately 32 basis points
for 1993. In 1992, interest lost totaled $13.2 million
and had the effect of impacting the net interest margin
in that year by approximately 28 basis points.
Noninterest income for 1993 was $112.7 million,
down $17.8 million, or 13.6%, from 1992. Excluding
securities gains, net, of $24.1 million and $34.2
million for 1993 and 1992, respectively, and $5.9
million of nonrecurring interest income related to a
tax receivable recognized in 1992, noninterest income
decreased $1.8 million, or 2.0%. Trust income of $28.9
million was up $1.3 million, or 4.8%, as increases in
fees on trust and investment services more than offset
decreases in corporate custodial accounts. Service
charges for 1993 of $39.3 million increased $0.9
million, or 2.4%, primarily because of an increase in
advisory fee income. Foreign exchange income decreased
$2.2 million, or 43.9%, in 1993, primarily because of
the previously discussed restructuring of Riggs AP Bank
and the exiting of foreign exchange trading-related
activities. Other noninterest income of $8.1 million
was down $1.8 million as letter-of-credit fees
decreased $1.1 million during 1993.
Noninterest expense for 1993 was $266.8 million,
compared with $238.4 million for 1992. Noninterest
expense for 1993 included restructuring expense of
$34.6 million, of which $20.8 million related to Riggs
AP Bank. Also included in the $34.6 million in
restructuring expense was $13.8 million in expenses
related to the implementation of BankStart '93.
Other real estate owned expense, net of revenues,
was $13.5 million, down 13.9% from $15.7 million
incurred in 1992. For the first half of 1992,
writedowns and disposition-related losses and expenses
from the Corporation's asset-disposition program
totaling $35.2 million were charged to the program-
related reserves rather than other real estate owned
expense. Had these amounts been charged to noninterest
expense, other real estate owned expense for 1993 would
have decreased $37.4 million from the adjusted 1992
level. This decrease is attributed to the overall
decrease in other real estate owned, which totaled
$89.4 million at December 31, 1992, and decreased $36.6
million (40.9%) during 1993.
The Corporation's provision for income taxes
includes both federal and state income taxes. The rise
in the provision for income taxes to $5.6 million for
1993 from the benefit of $1.1 million for 1992 was
attributable primarily to the Corporation's inability
to utilize the tax benefits of the provision for loan
losses and other real estate owned. The provision for
income taxes for 1993 was more than the amount
determined by application of the Federal statutory
income tax rate, principally because of tax preference
items and the Corporation's inability to carry back the
full potential of the net operating losses.
30
<PAGE>
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
Page(s)
<S> <C>
(a) The following consolidated financial
statements and related documents are set
forth in this Annual Report on Form 10-K as
follows:
Riggs National Corporation and Subsidiaries:
Consolidated Statements of Income 32
Consolidated Statements of Condition 33
Consolidated Statements of Changes in
Stockholders' Equity 34
Consolidated Statements of Changes in
Cash Flows 35
Notes to Consolidated Financial
Statements 36-61
Management's Report on Financial Statements 62
Report of Independent Public Accountants 63
(b) The following supplementary data is set forth
in this Annual Report on Form 10-K as follows:
Quarterly Financial Information 64-65
Consolidated Financial Ratios and Other
Information 64
Quarterly Stock Information 65
</TABLE>
31
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands, except per share amounts) 1994 1993 1992
____________________________________________________________________________________
<S> <C> <C> <C>
Interest Income
Interest and Fees on Loans:
Taxable $190,351 $155,152 $214,180
Tax-Exempt 4,174 4,916 7,144
____________________________________________________________________________________
Total Interest and Fees on Loans 194,525 160,068 221,324
Interest and Dividends on Securities
Available for Sale 30,916 21,995 15,985
Interest and Dividends on Securities
Held-to-Maturity 22,639 41,341 42,678
Interest on Money Market Assets:
Time Deposits with Other Banks 9,786 18,503 26,033
Federal Funds Sold and Reverse
Repurchase Agreements 8,139 15,044 21,520
____________________________________________________________________________________
Total Interest on Money Market Assets 17,925 33,547 47,553
____________________________________________________________________________________
Total Interest Income 266,005 256,951 327,540
Interest Expense
Interest on Deposits:
Savings and NOW Accounts 19,512 19,578 27,045
Money Market Deposit Accounts 26,947 29,010 42,730
Time Deposits in Domestic Offices 25,241 28,174 42,774
Time Deposits in Foreign Offices 11,857 24,332 57,659
____________________________________________________________________________________
Total Interest on Deposits 83,557 101,094 170,208
Interest on Short-Term Borrowings
and Long-Term Debt:
Federal Funds Purchased and Repurchase
Agreements 6,871 4,566 2,502
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 2,268 1,887 1,278
Long-Term Debt 20,027 14,583 15,616
____________________________________________________________________________________
Total Interest on Short-Term Borrowings and
Long-Term Debt 29,166 21,036 19,396
____________________________________________________________________________________
Total Interest Expense 112,723 122,130 189,604
____________________________________________________________________________________
Net Interest Income 153,282 134,821 137,936
Less: Provision for Loan Losses 6,300 69,290 52,067
____________________________________________________________________________________
Net Interest Income after Provision for
Loan Losses 146,982 65,531 85,869
Noninterest Income
Trust Income 28,587 28,857 27,530
Service Charges 36,836 39,343 38,436
International Non-Credit Commissions
and Fees 5,391 9,448 9,458
Gain on Settlement of Mortgage Insurance Claims 4,739 -- --
Interest on Income Tax Receivable -- -- 5,903
Other Noninterest Income 9,745 10,861 14,873
Securities Gains, Net 226 24,141 34,213
____________________________________________________________________________________
Total Noninterest Income 85,524 112,650 130,413
Noninterest Expense
Salaries and Wages 64,892 69,978 74,145
Pensions and Other Employee Benefits 16,605 18,048 15,141
Occupancy, Net 23,637 25,763 28,354
Data Processing Services 16,935 16,585 17,684
Other Real Estate Owned Expense (Income), Net (1,403) 13,513 15,703
Furniture and Equipment 9,224 11,153 12,792
FDIC Insurance 9,601 10,309 8,789
Advertising and Public Relations 6,006 5,971 6,129
Legal Fees 3,581 4,024 5,121
Restructuring Expense (2,059) 34,554 _
Other Noninterest Expense 52,001 56,854 54,545
____________________________________________________________________________________
Total Noninterest Expense 199,020 266,752 238,403
____________________________________________________________________________________
Income (Loss) before Taxes 33,486 (88,571) (22,121)
Applicable Income Tax (Benefit) Expense (533) 5,640 (1,069)
____________________________________________________________________________________
Net Income (Loss) 34,019 (94,211) (21,052)
Less: Dividends on Preferred Stock 12,124 1,434 358
____________________________________________________________________________________
Net Income (Loss) Available for Common Stock $ 21,895 $ (95,645) $ (21,410)
Earnings (Loss) Per Common Share $ .72 $ (3.65) $ (.87)
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31,
(In thousands, except per share amounts) 1994 1993
______________________________________________________________________________
<S> <C> <C>
Assets
Cash and Due from Banks $ 206,953 $ 210,639
Money Market Assets:
Time Deposits with Other Banks 228,224 200,946
Federal Funds Sold and Reverse Repurchase
Agreements 160,000 205,000
______________________________________________________________________________
Total Money Market Assets 388,224 405,946
Securities Available for Sale (at Market Value) 598,277 708,137
Securities Held-to-Maturity (Market Value:
1994 $434,993; 1993, $660,773) 443,163 660,062
Loans 2,549,924 2,528,133
Reserve for Loan Losses 97,039 86,513
______________________________________________________________________________
Net Loans 2,452,885 2,441,620
Premises and Equipment, Net 151,532 161,098
Accrued Interest Receivable 27,904 22,911
Other Real Estate Owned, Net 47,763 52,803
Other Assets 108,964 117,021
______________________________________________________________________________
Total Assets $4,425,665 $4,780,237
Liabilities
Deposits:
Noninterest-Bearing Demand Deposits $ 827,023 $ 864,549
Interest-Bearing Deposits:
Savings and NOW Accounts 900,209 955,711
Money Market Deposit Accounts 966,348 1,082,048
Time Deposits in Domestic Offices 625,432 643,736
Time Deposits in Foreign Offices 283,782 227,780
______________________________________________________________________________
Total Interest-Bearing Deposits 2,775,771 2,909,275
______________________________________________________________________________
Total Deposits 3,602,794 3,773,824
Short-Term Borrowings:
Federal Funds Purchased and
Repurchase Agreements 264,878 302,330
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 28,559 151,697
______________________________________________________________________________
Total Short-Term Borrowings 293,437 454,027
Other Liabilities 44,146 45,864
Long-Term Debt 217,625 213,325
______________________________________________________________________________
Total Liabilities 4,158,002 4,487,040
Stockholders' Equity
Preferred Stock - $1.00 Par Value
Shares Authorized - 25,000,000 at December 31,
1994, and 1993;
Liquidation Preference - $25 per share
Cumulative Convertible Series A - 764,537 shares
at December 31, 1993 -- 765
Noncumulative Perpetual Series B - 4,000,000
shares at December 31, 1994, and 1993 4,000 4,000
Common Stock - $2.50 Par Value
Shares Authorized - 50,000,000 at December 31,
1994, and 1993
Shares Issued - 31,145,212 at December 31,
1994, and 31,122,812 at December 31, 1993 77,863 77,807
Surplus:
Preferred Stock 91,192 109,541
Common Stock 156,123 156,023
Foreign Exchange Translation Adjustments (634) (1,527)
Undivided Profits (Accumulated Deficit) (9,014) (30,965)
Unrealized Gain (Loss) on Securities
Available for Sale, Net (28,144) 1,276
Treasury Stock - 900,798 shares at December 31,
1994, and 1993 (23,723) (23,723)
______________________________________________________________________________
Total Stockholders' Equity 267,663 293,197
______________________________________________________________________________
Total Liabilities and Stockholders' Equity $4,425,665 $4,780,237
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Unrealized
Foreign Undivided Gain (Loss)
(In thousands, Preferred Common Exchange Profits on Securities Total
except per share Stock Stock Translation (Accum. Available Treasury Stockholders'
amounts) $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, 1991 $ -- $ 36,695 $111,119 $(5,202) $ 86,090 $ -- $(23,723) $204,979
Issuance of Series
A Preferred
Stock - 764,537
shares 765 18,232 18,997
Issuance of Common
Stock - 11,445,000
shares 28,612 20,453 49,065
Net Loss (21,052) (21,052)
Foreign Exchange
Translation
Adjustments (6,211) (6,211)
Cash Dividends
Declared: Series
A Preferred Stock,
$.46875 Per Share (358) (358)
_______________________________________________________________________________________________________
Balance, December
31, 1992 $ 765 $ 65,307 $149,804 $(11,413) $ 64,680 $ -- $(23,723) $245,420
Issuance of Series
B Preferred
Stock - 4,000,000
shares 4,000 91,309 95,309
Issuance of Common
Stock - 5,000,000
shares 12,500 24,451 36,951
Net Loss (94,211) (94,211)
Unrealized Gain on
Securities
Available for
Sale, Net 1,276 1,276
Foreign Exchange
Translation
Adjustments 9,886 9,886
Cash Dividends
Declared: Series
A Preferred Stock,
$1.875 Per Share (1,434) (1,434)
_______________________________________________________________________________________________________
Balance, December
31, 1993 $4,765 $ 77,807 $265,564 $(1,527) $(30,965) $ 1,276 $(23,723) $293,197
Repurchase of
Series A
Preferred
Stock - 764,537
shares (765) (18,232) (116) (19,113)
Issuance of Common
Stock for stock
option plans
- 22,400 shares 56 145 201
Net Income 34,019 34,019
Unrealized Loss on
Securities
Available for
Sale, Net (29,420) (29,420)
Foreign Exchange
Translation
Adjustments 893 893
Cash Dividends
Declared:
Series A
Preferred Stock,
$1.40625
Per Share (1,075) (1,075)
Series B
Preferred Stock,
$2.76215
Per Share (11,049) (11,049)
Other (162) 172 10
______________________________________________________________________________________________________
Balance, December
31, 1994 $4,000 $77,863 $247,315 $ (634) $(9,014) $(28,144) $(23,723) $267,663
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1994 1993 1992
______________________________________________________________________________
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 34,019 $ (94,211) $ (21,052)
Adjustments to Reconcile Net Income
(Loss) to Cash Provided by (Used in)
Operating Activities:
Provisions for Loan Losses 6,300 69,290 52,067
Provisions for Other Real Estate
Owned Writedowns 3,333 11,330 11,923
Depreciation Expense and
Amortization of Leasehold
Improvements 12,554 13,169 14,162
Amortization of Purchase
Accounting Adjustments 3,795 5,673 4,373
Provision (Benefit) for Deferred
Taxes (642) 5,598 4,558
Restructuring Charges (2,059) 34,554 --
(Gains) Losses on Securities
Available for Sale (226) (26,975) (34,213)
(Gains) Losses on Sales of Other
Real Estate Owned (4,711) (2,702) (396)
(Increase) Decrease in Accrued
Interest Receivable (4,993) 3,822 9,456
(Increase) Decrease in Other Assets 8,593 19,521 (21,171)
Increase (Decrease) in Other
Liabilities 402 (21,019) (36,732)
____________________________________________________________________________
Total Adjustments 22,346 112,261 4,027
____________________________________________________________________________
Net Cash Provided by (Used in)
Operating Activities 56,365 18,050 (17,025)
____________________________________________________________________________
Cash Flows from Investing Activities:
Net (Increase) Decrease in Time
Deposits with Other Banks (27,278) 447,506 (174,424)
Proceeds from Maturities of
Securities Available for Sale 122,619 -- --
Proceeds from Sales of Securities
Available for Sale 193,048 736,310 1,092,085
Purchase of Securities Available
for Sale (233,885) (879,125) (1,073,668)
Proceeds from Maturities of
Securities Held-to-Maturity 1,050,000 768,607 237,598
Proceeds from Sales of Securities
Held-to-Maturity 4,825 -- 26,925
Purchase of Securities Held-to-
Maturity (839,042) (1,010,754) (618,899)
Net (Increase) Decrease in Loans (41,747) (417,461) 722,292
Proceeds from Sales of Other Real
Estate Owned 29,869 31,930 52,053
Net (Increase) Decrease in
Premises and Equipment (2,988) 127 1,860
Other, Net 731 (520) (19,983)
____________________________________________________________________________
Net Cash Provided by (Used in)
Investing Activities 256,152 (323,380) 245,839
____________________________________________________________________________
Cash Flows from Financing Activities:
Net Increase (Decrease) in
Demand, Savings, NOW and Money
Market Deposit Accounts (208,728) (195,694) 141,713
Net Increase (Decrease) in
Time Deposits 37,698 (468,080) (616,487)
Net Increase (Decrease) in
Federal Funds Purchased and
Repurchase Agreements (37,452) 249,909 (22,283)
Net Increase (Decrease) in U.S.
Treasury Demand Notes and Other
Short-Term Borrowings (123,138) 63,618 36,898
Repurchase of Preferred Stock -
Series A (19,113) -- --
Proceeds from the Issuance of
Common Stock 201 132,260 49,065
Net Proceeds from the Issuance of
Long-Term Debt 121,250 -- --
Repayments of Long-Term Debt (120,700) -- --
Dividend Payments - Preferred (12,124) (1,434) (358)
Other, Net 10 -- --
____________________________________________________________________________
Net Cash Provided by (Used in)
Financing Activities (362,096) (219,421) (411,452)
____________________________________________________________________________
Effect of Exchange Rate Changes 893 9,886 (6,211)
____________________________________________________________________________
Net Increase (Decrease) in Cash and
Cash Equivalents (48,686) (514,865) (188,849)
Cash and Cash Equivalents at
Beginning of Year 415,639 930,504 1,119,353
____________________________________________________________________________
Cash and Cash Equivalents at End of
Year $ 366,953 $ 415,639 $ 930,504
Supplemental Schedule of Noncash
Investing and Financing Activities:
Loans Transferred to Other Real
Estate Owned $ 27,934 $ 134,248 $ 132,468
Loans to Finance the Sale of Other
Real Estate Owned 4,950 30,276 25,585
Loans Transferred to Real Estate
Assets Subject to Accelerated
Disposition, Net -- -- 13,670
Other Real Estate Owned Transferred
to Real Estate Assets Subject to
Accelerated Disposition, Net -- -- 5,418
Preferred Stock Issued in Exchange
for Long-Term Debt -- -- 18,997
Supplemental Disclosures:
Interest Paid (net of amount
capitalized) $ 107,534 $ 125,540 $ 197,738
Income Tax Payments (Refund) (7,235) (4,269) (7,202)
</TABLE>
The accompanying notes are an integral part of these statements.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________________________________________________________________
(Dollar amounts in thousands, except per share amounts
and as indicated)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
____________________________________________________________
The following summary of significant accounting
policies of Riggs National Corporation ("the
Corporation"), including its principal subsidiaries,
The Riggs National Bank of Washington, D.C. ("Riggs-
Washington") and Riggs AP Bank Limited ("Riggs AP") and
other subsidiaries, The Riggs National Bank of Virginia
("Riggs-Virginia"), and The Riggs National Bank of
Maryland ("Riggs-Maryland"), is presented to assist the
reader in understanding the financial, statistical and
other data presented in this report.
GENERAL ACCOUNTING POLICIES
The accounting and reporting policies of the
Corporation are in accordance with generally accepted
accounting principles and conform to general practice
within the banking industry.
For purposes of reporting cash flows, cash
equivalents include cash on hand, amounts due from
banks and federal funds sold and reverse repurchase
agreements. Generally, federal funds are purchased and
sold for one-day periods.
The consolidated financial statements include the
accounts of the Corporation and its subsidiaries, after
elimination of all intercompany transactions.
Certain reclassifications have been made to the 1993
and 1992 balances to conform with the 1994
classifications.
SECURITIES HELD-TO-MATURITY AND
SECURITIES AVAILABLE FOR SALE
Effective December 31, 1993, the Corporation adopted
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). This pronouncement is
effective for fiscal years beginning after December 15,
1993 (with early adoption encouraged), and may not be
applied retroactively to prior years' financial
statements. SFAS No. 115 requires, among other items,
the determination at the acquisition date of a security
whether such security is purchased with the intent and
ability to hold to maturity, whether it is purchased
with the intent to trade, or whether the security is
available for sale. Under SFAS No. 115, securities
available for sale are carried at fair value, with
unrealized gains and losses, net of tax, included as a
separate component of stockholders' equity. This is
contrary to prior accounting policy, under which the
Corporation carried these securities at the lower of
cost or market, with any adjustments included in
earnings. Management has established policies that
require the periodic review of the securities portfolio
for proper classification of securities under SFAS No.
115 (see Note 2, "Securities").
LOANS
Loans are carried at the principal amount outstanding,
net of unearned discounts, unamortized premiums and
deferred fees and costs. Interest on loans and
amortization of unearned discounts/premiums and
deferred fees and costs are computed by methods that
generally result in level rates of return on principal
amounts outstanding. Loan origination fees and certain
direct loan origination costs are deferred, and the net
amount is amortized as an adjustment of the related
loan's yield. The Corporation generally amortizes these
amounts in a manner that approximates a level yield
over the estimated lives of the loans.
The Corporation discontinues the accrual of interest on
loans based on delinquency status, an evaluation of the
related collateral and the financial strength of the
borrower. Generally, loans are placed on nonaccrual
status when the loans are contractually in default in
either principal or interest for 90 days or more and
the loans are not well-secured and in the process of
collection. Income recognition on consumer loans is
discontinued and the loans are charged off after a
delinquency period of 120 days. At that point, any
accrued interest that has not actually been collected
is reversed.
At December 31, 1993, the Corporation implemented a
narrower definition of in-substance foreclosure, as
required by regulatory agencies. This definition is
also consistent with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for
Impairment of a Loan." This definition is discussed in
detail below, and the related loan disclosures have
been adjusted to reflect this new definition.
RESERVE FOR LOAN LOSSES
The reserve for loan losses is maintained at a level
that, in the opinion of management, is adequate to
absorb potential losses in the loan portfolio. The
adequacy of the reserve is based on management's review
and evaluation of the individual credits in the loan
portfolio, historical loss experience by loan type,
current and anticipated, economic conditions, and where
applicable, the estimated value of the underlying
collateral.
The provision for loan losses is charged against
earnings in amounts necessary to maintain an adequate
reserve for loan losses. A loan is charged off when, in
the opinion of management, the loan cannot be fully
collected. Recoveries of loans previously charged off
are added to the reserve.
IMPLEMENTATION OF INTERAGENCY GUIDANCE ON REPORTING OF
IN-SUBSTANCE FORECLOSURES
At December 31, 1993, the Corporation implemented the
narrower definition of in-substance foreclosure
required by the March 10, 1993, Interagency Policy
Statement on Credit Availability and the June 10, 1993,
Interagency Guidance on Reporting of In-Substance
Foreclosures.
36
<PAGE>
Under previous financial accounting guidelines, a
nonaccrual loan was transferred from loans to other
real estate owned when foreclosure was probable or the
loan was considered in-substance foreclosed, which by
definition in the Securities and Exchange Commission's
Financial Reporting Release No. 28 meant that the
borrower had little or no equity in the property,
proceeds for repayment of the loan could be expected to
come only from the operation or sale of the collateral,
and the debtor had either abandoned control of the
collateral or it was doubtful that the debtor would be
able to rebuild equity in the collateral or otherwise
repay the loan in the foreseeable future. Loans
considered in-substance foreclosed must be recorded at
the lower of cost or fair value.
Under the revised regulatory accounting guidelines,
a loan is recognized as an in-substance foreclosure
when the Corporation has possession of an asset prior
to obtaining legal title. This definition is consistent
with Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a
Loan," which will be required for fiscal years
beginning after December 15, 1994. This change in
treatment impacts only the classification of accounts
in the financial statements for 1993 and prior years,
and does not result in a change in the accounting
policy related to the determination of the assets'
carrying values. The impact of this change in
definition of in-substance foreclosures on certain
categories in the Corporation's financial statements is
presented in the following table. The Consolidated
Statements of Condition, Income and Cash Flows and the
Notes to Consolidated Financial Statements reflect
these reclassifications.
ADJUSTMENTS TO IMPLEMENT NEW DEFINITION OF
IN-SUBSTANCE FORECLOSURES
<TABLE>
<CAPTION>
1993 1992
__________________________________________________________________
<S> <C> <C>
Consolidated Statements of Condition
Increase (Decrease) in:
Loans, Net $ 34,964 $ 43,351
Reserve for Loan Losses 1,221 848
Other Real Estate Owned, Net (33,743) (42,503)
__________________________________________________________________
Net Effect on Total Assets $ -- $ --
Consolidated Statements of Income
Increase (Decrease) in:
Provision for Loan Losses $ 8,049 $ 2,278
OREO Expense, Net (8,049) (2,278)
__________________________________________________________________
Net Effect on Pretax Income $ -- $ --
Provision for Loan Losses
As Reported $ 69,290 $ 49,789
As Adjusted 69,290 52,067
Other Real Estate Owned Expense, Net
As Reported $ 13,513 $ 17,981
As Adjusted 13,513 15,703
</TABLE>
OTHER REAL ESTATE OWNED
Other real estate owned is property acquired or deemed
to have been acquired through foreclosure. See the
"Implementation of Interagency Guidance on Reporting of
In-Substance Foreclosures" section, discussed in detail
above.
Other real estate owned is recorded at the lower of
fair value less estimated costs to sell, or cost.
Initial writedowns of other real estate owned are
charged to the reserve for loan losses. Revenues and
expenses incurred in connection with ownership of the
properties, and subsequent writedowns and gains and
losses upon sale, are included, net, in other real
estate owned expense.
PREMISES AND EQUIPMENT
Premises, leasehold improvements and furniture and
equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and
amortization of premises, leasehold improvements, and
furniture and equipment are computed using the
straight-line method. Ranges of useful lives for
computing depreciation and amortization are as follows:
<TABLE>
<CAPTION>
Years
____________________________________________________
<S> <C>
Premises 25 to 35
Leasehold Improvements 5 to 20
Furniture and Equipment 5 to 15
</TABLE>
Major improvements and alterations to premises and
leaseholds are capitalized. Leasehold improvements are
amortized over the shorter of the terms of the
respective leases or the estimated useful lives of the
improvements.
OTHER ASSETS
Included in other assets are intangible assets, such as
goodwill, which is the excess of cost over net assets
of acquired entities, and core-deposit intangibles.
Goodwill is amortized on the straight-line method over
25 years. The Corporation had unamortized goodwill of
$5.0 million at December 31, 1994, and amortization
expense of $397 thousand, $565 thousand, and $716
thousand for 1994, 1993, and 1992, respectively. Core-
deposit intangibles represent the net present value of
the future income streams related to deposits acquired
through mergers or acquisitions, and are amortized on
an accelerated basis over 10 years. The unamortized
core-deposit intangibles recorded on the Corporation's
books at December 31, 1994, were $18.0 million, and
amortization expense of $3.4 million, $3.5 million, and
$3.7 million was recorded for 1994, 1993, and 1992,
respectively.
INCOME TAXES
Effective January 1, 1993, the Corporation adopted
Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which mandates
the asset and liability method of accounting for income
taxes. The Corporation had previously accounted for
taxes under the deferral method required by Accounting
Principles Board ("APB") Opinion No. 11.
37
<PAGE>
PENSION PLANS
The Corporation maintains a noncontributory defined
benefit pension plan for substantially all employees of
the Corporation and its subsidiaries. The net periodic
pension expense includes a service cost component and
an interest cost component, reflecting the expected
return on plan assets, and the effect of deferring and
amortizing certain actuarial gains and losses, prior
service costs and the unrecognized net transition asset
over 12 years.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share are calculated by
dividing net earnings after deduction of preferred
stock dividends by the weighted-average number of
shares of common stock and common stock equivalents
outstanding during each period. Stock options are
considered common stock equivalents, unless determined
to be anti-dilutive. The weighted-average shares
outstanding were 30,230,213 for 1994, 26,208,315 for
1993 and 24,534,063 for 1992.
Fully diluted earnings per common share were not
presented because outstanding preferred shares, when
converted to Common Stock, as well as the assumed
exercise of outstanding stock options, were not
dilutive.
FOREIGN CURRENCY TRANSLATION
The functional currency amounts of assets and
liabilities of foreign entities are translated into
U.S. dollars at year-end exchange rates. Income and
expense items are translated using appropriately
weighted-average exchange rates for the period.
Functional currency to U.S. dollars translation gains
and losses, net of related hedge transactions, are
credited or charged directly to the stockholders'
equity account, "Foreign Exchange Translation
Adjustments."
FOREIGN EXCHANGE INCOME
Foreign currency trading and exchange positions,
including spot and forward exchange contracts, are
valued monthly, and the resulting profits and losses
are recorded in foreign exchange trading income. The
amounts of net foreign exchange trading gains included
in the accompanying consolidated statements of income
under other noninterest income were $2.3 million for
1994, $2.8 million for 1993 and $5.0 million for 1992.
FINANCIAL DERIVATIVES
Gains and losses on futures and forward contracts used
to hedge certain interest-sensitive assets and
liabilities are deferred and amortized over the life of
the hedged transaction as an adjustment to yield. Fees
received or paid when entering certain financial
derivative transactions are deferred and amortized over
the lives of the agreements.
Interest-rate agreements are entered into as hedges
against fluctuations in the interest rates of
specifically identified assets or liabilities. There is
no effect on total assets or liabilities of the
Corporation. Net receivables or payables under
agreements designated as hedges are recorded as
adjustments to interest income or interest expense
related to the hedged asset or liability.
NEW FINANCIAL ACCOUNTING STANDARDS
In May 1993, SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," was issued, specifying how
allowances for credit losses related to impaired loans,
as defined in the Statement, should be determined. Upon
implementation of the Statement, the Corporation will
be required to identify and measure impaired loans in
its loan portfolio. For the most part, measurement will
be based on the present value of expected future cash
flows discounted at the loan's effective interest rate
or, for collateral-dependent loans, on the fair value
of the collateral. If the valuation of the impaired
loan is less than the recorded investment in the loan,
the Corporation will recognize an impairment by
creating a valuation allowance with a corresponding
charge to provision for loan losses or by adjusting an
existing valuation allowance for the impaired loan,
with the corresponding amount reflected in earnings.
This Statement is effective for financial statements
for fiscal years beginning after December 15, 1994.
In October 1994, SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan," was issued,
amending SFAS No. 114, issued in May 1993. The new
Statement allows for use of existing methods for
recognizing interest income on impaired loans; however,
SFAS No. 118 does not provide specific guidance on how
a creditor should recognize interest income on an
impaired loan. SFAS No. 118 also provides additional
disclosure guidance for the reporting of impaired
loans. Implementation of SFAS No. 118 is required for
fiscal years beginning after December 15, 1994. The
Corporation implemented SFAS Nos. 114 and 118 on
January 1, 1995, and its adoption did not have a
material effect on the Corporation's financial
position.
Also in October 1994, SFAS No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value
of Financial Instruments," was issued. The new
Statement requires certain disclosures about financial
derivatives, including the amounts, nature and terms of
the instruments. It also requires that a distinction be
made between financial instruments held or issued for
trading purposes and those held or issued for purposes
other than trading. SFAS No. 119 required disclosures
are effective for years ending after December 15, 1994.
The Corporation has presented such disclosures in Note
9, Commitments and Contingencies.
38
<PAGE>
NOTE 2. SECURITIES
_____________________
Effective December 31, 1993, the Corporation adopted
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). This pronouncement is
discussed in detail in Note 1, "Summary of Significant
Accounting Policies." Implementation of SFAS No. 115
included a review of the securities portfolio based on
management's intent for those securities at that time,
which resulted in the net transfer of $168.7 million in
securities available for sale to the held-to-maturity
portfolio. SFAS No. 115 requires that all unrealized
gains and losses from the securities available for sale
portfolio be recorded, net of tax effect, in
stockholders' equity until realized. This treatment is
contrary to previous accounting policy, which required
such securities to be carried at lower of cost or
market, with any unrealized gains and losses included
in earnings.
During 1994, the rising interest-rate environment
negatively impacted bond prices and the market value of
the Corporation's securities available for sale
portfolio. At December 31, a $28.1 million unrealized
loss on the available for sale portfolio, net of tax
effect, was recorded in stockholders' equity.
_____________________________
SECURITIES AVAILABLE FOR SALE
A comparison of cost and market value for securities
available for sale at year-end follows:
<TABLE>
<CAPTION>
1994 1993
______________________________________ ______________________________________
Gross Gross Book/ Gross Gross Book/
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
__________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Securities $138,462 $-- $2,275 $136,187 $145,309 $741 $139 $145,911
Government
Agencies
Securities 26,557 -- 1,919 24,638 -- -- -- --
Obligations of
States &
Political
Subdivisions 8,800 -- 800 8,000 -- -- -- --
Mortgage-Backed
Securities 438,139 -- 23,150 414,989 559,638 1,403 729 560,312
Other Securities 14,463 -- -- 14,463 1,914 -- -- 1,914
________________________________________________________________________________ _________
Total Securities
Available for
Sale $626,421 $-- $28,144 $598,277 $706,861 $2,144 $868 $708,137
</TABLE>
Proceeds from the sale of securities available for
sale totaled $193 million during 1994, as compared with
$736 million during 1993. During 1994, gross gains from
the sale of securities available for sale totaled $1.7
million, with gross losses of $376 thousand during the
year, compared with $27.0 million in gross gains and no
gross losses for 1993. The weighted-average yield to
maturity for securities available for sale at December
31, 1994, as well as maturity information, is provided
in the table on the following page.
The "Other Securities" category consists of $8.9
million of Federal Reserve Stock and $5.6 million of
U.S. Treasury mutual funds at December 31, 1994. The
Federal Reserve Stock has no readily available market
value quotation and has its year-end book value
included as an approximation of its market value in the
table above.
Securities available for sale pledged to secure
deposits and other borrowings amounted to $367.5
million at December 31, 1994, and $372.8 million at
December 31, 1993. The "Obligations of States and
Political Subdivisions" category includes $10 million
(par value) of Orange County, California, variable-
rate, one-year bonds due July and August 1995, with an
amortized cost balance of $8.8 million at December 31,
1994. Interest on the bonds is current; however,
because of the Orange County bankruptcy filing on
December 6, 1994, management cannot predict whether or
if interest payments will remain current.
_________________________________
SECURITIES HELD-TO-MATURITY
A comparison of book and market value for the
securities held-to-maturity at year-end follows:
<TABLE>
<CAPTION>
1994 1993
___________________________________ ___________________________________
Gross Gross Gross Gross
Book Unrealized Unrealized Market Book Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
__________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Securities $318,163 $-- $3,041 $315,122 $629,282 $502 $ -- $629,784
Government
Agencies
Securities 125,000 -- 5,129 119,871 -- -- -- --
Obligations of
States &
Political
Subdivisions -- -- -- -- 1,999 80 -- 2,079
Mortgage-Backed
Securities -- -- -- -- -- -- -- --
Other Securities -- -- -- -- 28,781 147 18 28,910
__________________________________________________________________________________________
Total Securities
Held-to-
Maturity $443,163 $-- $8,170 $434,993 $660,062 $729 $18 $660,773
</TABLE>
39
<PAGE>
During 1994, there were $4.8 million of sales from
the held-to-maturity portfolio, the result of increased
credit risk experienced with these securities. Gross
gains on the sale of these securities were $7 thousand,
and there were no gross losses in 1994. The weighted-
average yield to maturity for securities held-to-
maturity at December 31, 1994, as well as maturity
information, is provided in the table below. The "Other
Securities" category at year-end 1993 consisted
primarily of floating-rate notes and preference shares
of United Kingdom companies.
Securities held-to-maturity pledged to secure
deposits and other borrowings amounted to $370.1
million on December 31, 1994, and $271.2 million at
year-end 1993.
_____________________________
The maturity distribution of securities at December 31,
1994, follows:
<TABLE>
<CAPTION>
Obligations
Government of States
U.S. Treasury Agencies and Political Other
Securities Securities Subdivisions Securities Total
____________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
Within 1 year
Amortized Cost $123,387 $ -- $8,800 $ 5,550 $137,737
Book/Market 121,920 -- 8,000 5,550 135,470
Yield* 5.84% -- 6.02% 4.70% 5.80%
After 1 but within 5 years
Amortized Cost 15,075 26,557 -- 128,673 170,305
Book/Market 14,267 24,638 -- 120,772 159,677
Yield* 4.05% 6.02% -- 5.74% 5.63%
After 5 but within 10 years
Amortized Cost -- -- -- 278,443 278,443
Book/Market -- -- -- 263,732 263,732
Yield* -- -- -- 5.16% 5.16%
After 10 years
Amortized Cost -- -- -- 39,936 39,936
Book/Market -- -- -- 39,398 39,398
Yield* -- -- -- 4.22% 4.22%
____________________________________________________________________________________
Total Securities Available for Sale
Amortized Cost $138,462 $26,557 $8,800 $452,602 $626,421
Book/Market 136,187 24,638 8,000 429,452 598,277
Yield* 5.64% 6.02% 6.02% 5.24% 5.37%
SECURITIES HELD-TO-MATURITY
Within 1 year
Book $318,163 $25,000 $ -- $ -- $343,163
Market 315,122 24,871 -- -- 339,993
Yield* 5.38% 5.16% -- -- 5.36%
After 1 but within 5 years
Book -- 100,000 -- -- 100,000
Market -- 95,000 -- -- 95,000
Yield* -- 6.79% -- -- 6.79%
____________________________________________________________________________________
Total Securities Held-to-Maturity
Book $318,163 $125,000 $ -- $ -- $443,163
Market 315,122 119,871 -- -- 434,993
Yield* 5.38% 6.46% -- -- 5.68%
</TABLE>
[FN]
* Weighted-average yield to maturity at December 31, 1994. The securities
within the category of "Securities Available for Sale- Obligations of
States and Political Subdivisions" are taxable securities and
are on a nonaccrual basis as of December 31, 1994. All contractual
payments to date have been received.
40
<PAGE>
NOTE 3. LOANS AND RESERVE FOR LOAN LOSSES
_________________________________________________
The following schedule reflects loans by type
at year-end:
<TABLE>
<CAPTION>
Loan Type 1994 1993
___________________________________________________________
<S> <C> <C>
Commercial and Financial $ 400,660 $ 412,006
Real Estate-Commercial/
Construction 323,835 388,442
Residential Mortgage 1,317,169 1,149,363
Home Equity 220,910 234,049
Consumer 75,887 82,819
Foreign 204,558 255,396
___________________________________________________________
Loans 2,543,019 2,522,075
Less: Unamortized Premiums,
Discounts and Deferred Fees (6,905) (6,058)
___________________________________________________________
Total Loans, Net $2,549,924 $2,528,133
</TABLE>
A summary of nonperforming and renegotiated loans, loans
contractually past due 90 days or more and potential problem loans
at year-end follows:
<TABLE>
<CAPTION>
Loan Type 1994 1993
___________________________________________________________
<S> <C> <C>
Nonaccrual Loans $27,383 $130,174
Renegotiated Loans 555 30,299
Past-Due Loans 6,121 3,319
Potential Problem Loans 26,038 14,279
</TABLE>
At December 31, 1993, the Corporation implemented a narrower
definition of in-substance foreclosure, as required by regulatory
agencies; see Note 1, "Summary of Significant Accounting
Policies."
An analysis of the changes in the reserve for loan losses
follows:
<TABLE>
<CAPTION>
1994 1993 1992
___________________________________________________________
<S> <C> <C> <C>
Balance, January 1 $86,513 $84,155 $103,674
Provision for Loan Losses 6,300 69,290 52,067
Loans Charged-Off 12,630 79,434 73,708
Less: Recoveries on
Charged-Off Loans 15,658 13,021 5,313
___________________________________________________________
Net Charge-Offs (Recoveries) (3,028) 66,413 68,395
Foreign Exchange Translation
Adjustments 1,198 (519) (3,191)
___________________________________________________________
Balance, December 31 $97,039 $86,513 $84,155
</TABLE>
The level of the reserve for loan losses is based
on management's estimates of the amount required to
reflect the collection risks in the loan portfolio
based on circumstances and conditions known at the
time. The adequacy of the reserve for loan losses is
based on management's review and evaluation of the
individual credits in the loan portfolio, historical
loss experience by loan type, current and anticipated
economic conditions and, where applicable, the
estimated value of the underlying collateral.
41
<PAGE>
NOTE 4. TRANSACTIONS WITH RELATED PARTIES
_______________________________________________________
The Corporation and its banking subsidiaries have had
and expect to have transactions in the ordinary course
of business with many of the Corporation's directors,
executive officers, their associates and family
members.
During 1994, Allbritton Communications Company
("ACC"), a company indirectly wholly owned by Mr.
Allbritton (chairman of the board and chief executive
officer of the Corporation), paid Riggs-Washington $251
thousand to lease space in two office buildings owned
by Riggs-Washington. In early 1992, ACC exercised its
option to extend one of the leases through 1996. During
1994, the second lease, which expired in December 1993,
was also extended through 1996, pursuant to a three-
year renewal option.
Riggs-Washington has in the past sold
participations in commercial real estate loans to
University State Bank ("University"), a Texas bank that
is indirectly wholly owned by Mr. Allbritton. The
participations sold to University were in loans bearing
floating rates of interest. The purchase price of each
of the participations was equal to the outstanding
principal amount of the portion of the loan purchased.
Riggs-Washington receives a servicing fee of 0.25% on
each of the loans in which participations were sold to
University and, in some transactions, shared a portion
of the loan fees with University. No loan
participations were sold to University during 1994. On
December 31, 1994, there were $14.4 million in loan
participations outstanding to University. As of that
date, University's total assets were $202.5 million and
its total loans outstanding were $100.4 million.
In December 1994, the Corporation purchased $10.0
million, par value, of Orange County, California,
variable rate one-year bonds due in July and August
1995. The bonds were purchased from the Corporation's
proprietary RIMCO Monument Money Market Fund, which is
an indirect subsidiary of the Corporation and is
affiliated with the Riggs Investment Management
Corporation (a subsidiary of Riggs-Washington). Due to
Orange County's bankruptcy declaration on December 6,
1994, the bonds were written down to their fair value
and are currently on nonaccrual status. Interest on the
bonds is current as of December 31, 1994 (see Note 2,
"Securities").
The table below reflects information concerning
loans by banking subsidiaries of the Corporation to
directors and executive officers of the Corporation,
their associates and family members, and directors of
Riggs-Washington and Riggs AP, their associates and
family members. In addition to the amounts set forth in
the table, the Corporation's banking subsidiaries had
$7.4 million of letters of credit outstanding at
December 31, 1994. There were no loans included in the
table below that were nonaccrual, past due,
restructured or potential problems at December 31,
1994.
In the opinion of management, these credit
transactions did not, at the time they were entered
into, involve more than the normal risk of
collectibility or present other unfavorable features.
____________________________________________
<TABLE>
<CAPTION>
December 31, Amounts December 31,
1993 Additions Collected 1994
________________________________________________________________________
<S> <C> <C> <C> <C>
Loans to Directors,
Executive Officers
and Family Members $18,212 $ 37,808 $ 39,899 $16,121
Loans to Companies of
which Directors
were Principal
Stockholders or
Directors 25,019 67,585 78,096 14,508
______________________________________________________________________
Total Loans $43,231 $105,393 $117,995 $30,629
Percent of Loans 1.77% 1.25%
</TABLE>
42
<PAGE>
NOTE 5. OTHER REAL ESTATE OWNED
_______________________________________________________
Other real estate owned at December 31, 1994, and 1993
is summarized as follows:
<TABLE>
<CAPTION>
1994 1993
____________________________________________________________
<S> <C> <C>
Foreclosed Property - Domestic $45,934 $46,565
Foreclosed Property - Foreign 4,099 9,954
____________________________________________________________
50,033 56,519
Less: Reserve for Other Real
Estate Owned 2,270 3,716
____________________________________________________________
Total Other Real Estate
Owned, Net $47,763 $52,803
</TABLE>
At December 31, 1993, the Corporation implemented a
narrower definition of in-substance foreclosure as
required by regulatory agencies. See Note 1, "Summary
of Significant Accounting Policies."
Total net operating income, including net gains
from sales, from other real estate owned totaled $1.4
million for the year ended December 31, 1994, compared
with net expenses of $13.5 million and $15.7 million
for 1993 and 1992, respectively. Provisions for other
real estate owned totaled $3.3 million, $11.3 million
and $11.9 million for the same periods. Net gains from
sales of other real estate owned totaled $4.7 million
for 1994, $2.7 million for 1993 and $.4 million for
1992.
RESERVE FOR OTHER REAL ESTATE OWNED
An analysis of the changes in the reserves for other
real estate owned follows:
<TABLE>
<CAPTION>
1994 1993 1992
__________________________________________________________
<S> <C> <C> <C>
Balance, January 1 $3,716 $ 6,637 $49,176
Additions:
Provision for OREO
Losses 3,333 11,330 11,923
Other 763 2,330 1,718
___________________________________________________________
Total Additions 4,096 13,660 13,641
Deductions:
Loss on Sales and
Selling Expenses 763 735 33,868
Charge-Offs 4,877 14,516 19,294
Other -- 1,221 1,996
___________________________________________________________
Total Deductions 5,640 16,472 55,158
Foreign Exchange
Translation Adjustments 98 (109) (1,022)
___________________________________________________________
Balance, December 31 $2,270 $ 3,716 $ 6,637
</TABLE>
NOTE 6. PREMISES AND EQUIPMENT
_______________________________________________________
Investments in premises and equipment at year-end were
as follows:
<TABLE>
<CAPTION>
1994 1993
_______________________________________________________
<S> <C> <C>
Premises and Land $ 140,224 $ 138,171
Furniture and Equipment 67,146 65,080
Leasehold Improvements 59,287 59,718
Accumulated Depreciation
and Amortization (115,201) (101,873)
_______________________________________________________
Subtotal 151,456 161,096
Capital Leases 80 9
Accumulated Amortization (4) (7)
_______________________________________________________
Total Premises and Equipment $151,532 $161,098
</TABLE>
Depreciation and amortization expense amounted to
$12.6 million in 1994, $13.2 million in 1993 and $14.2
million in 1992.
The Corporation is committed to the following
future minimum lease payments under non-cancelable
operating lease agreements covering equipment and
premises. These commitments expire intermittently
through 2009 in varying amounts.
The total minimum lease payments under these
commitments at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Operating
Leases
___________________________________________
<S> <C>
1995 $13,163
1996 10,737
1997 6,303
1998 5,276
1999 3,642
2000 and after 12,376
___________________________________________
Total Minimum Lease Payments $51,497
</TABLE>
Total minimum operating lease payments included in
the preceding table have not been reduced by future
minimum payments from sublease rental agreements that
expire intermittently through 1999. Minimum sublease
rental income for 1995 totals approximately $800
thousand. Rental expense for all operating leases
(cancelable and non-cancelable), less rental income for
owned and leased properties, consisted of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
__________________________________________________
<S> <C> <C> <C>
Rental Expense $15,273 $15,961 $17,686
Rental Income (4,911) (2,847) (3,914)
__________________________________________________
Net Rental Expense $10,362 $13,114 $13,772
</TABLE>
43
<PAGE>
NOTE 7. TIME DEPOSITS, $100 THOUSAND OR MORE
____________________________________________
The following table reflects the year-end balances and
maturities for the Corporation's time deposits in
domestic offices of $100 thousand or more:
<TABLE>
<CAPTION>
1994 1993
_______________________________________________________
<S> <C> <C>
Certificates of Deposit:
Due within Three Months $ 72,074 $94,665
Three to Six Months 26,138 39,313
Six to Twelve Months 25,776 23,276
Over Twelve Months 21,072 13,045
_______________________________________________________
Total $145,060 $170,299
</TABLE>
Average time deposits of $100 thousand or more in
domestic offices were $284 million in 1994, 10.4% below
the $317 million for 1993.
Interest expense related to time deposits of $100
thousand or more in domestic offices amounted to $4.7
million in 1994, $5.5 million in 1993 and $10.3 million
in 1992.
The average rate paid on time deposits of $100
thousand or more for 1994 was 1.65%, 7 basis points
below the average rate paid during 1993.
A majority of time deposits in foreign offices were
in denominations of $100 thousand or more.
NOTE 8. BORROWINGS
_______________________________________________________
SHORT-TERM BORROWINGS
Short-term borrowings outstanding at year-end and other
related information follow:
<TABLE>
<CAPTION>
Federal Funds Purchased U.S. Treasury Demand Notes
and Repurchase Agreements and Other Short-Term Borrowings
1994 1993 1992 1994 1993 1992
________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31 $ 264,878 $302,330 $ 52,241 $ 28,559 $151,697 $88,079
Average Amount
Outstanding* 150,678 164,899 87,339 61,058 67,731 40,235
Average Rate Paid* 4.56% 2.77% 2.86% 3.71% 2.79% 3.18%
Maximum Amount Outstanding
at any Month-End 308,850 302,330 252,821 235,517 151,697 100,733
</TABLE>
[FN]
* Average amounts are based on daily balances. Average rates are computed on
actual interest expense divided by average amounts outstanding.
Federal funds purchased consist of borrowings from
other financial institutions that have maturities
ranging from one to 180 days. Repurchase agreements are
transactions with customers and brokers secured by
either securities or resale agreements, which mature
generally within 30 days. U.S. Treasury demand notes
consist of treasury tax and loan account funds
transferred to interest-bearing demand notes with no
fixed maturity, subject to call by the Federal Reserve.
Other short-term borrowings are primarily borrowings
from other financial institutions.
_______________________________________
LONG-TERM DEBT
Long-term debt outstanding at year-end and other
related information follow:
<TABLE>
<CAPTION>
Balance Outstanding
Interest Rate December 31,
December 31, 1994 1994 1993
__________________________________________________________________
<S> <C> <C> <C>
Parent Corporation:
Floating-Rate Subordinated
Notes due 1996 -- $ -- $ 51,500
Floating-Rate Subordinated
Capital Notes due 1996 6.56% 26,100 95,300
Subordinated Debentures
due 2009 9.65 66,525 66,525
Subordinated Notes due 2006 8.50 125,000 --
__________________________________________________________________
Total Long-Term Debt $217,625 $213,325
</TABLE>
44
<PAGE>
FLOATING-RATE SUBORDINATED NOTES DUE 1996
The Floating-Rate Subordinated Notes due 1996 (the
"Subordinated Notes") were issued in the Euromarket on
September 18, 1984.
During 1991, the Corporation purchased, on the open
market and at a discount, $8.5 million of the
Subordinated Notes, resulting in pretax gains of $2.5
million. In March 1994, the Corporation redeemed the
remaining $51.5 million of the Subordinated Notes.
FLOATING-RATE SUBORDINATED CAPITAL NOTES DUE 1996
The Floating-Rate Subordinated Capital Notes due 1996
(the "Subordinated Capital Notes") were originally
issued in the Euromarket on December 18, 1985, carry
interest at rates determined quarterly by a formula
based upon the London Interbank Rate Offering ("LIBOR")
and are subject to a minimum rate of 5.25%. Under the
indenture related to the Subordinated Capital Notes,
the Corporation was required to issue common stock or
perpetual preferred stock totaling $95.3 million before
the maturity date of the notes. This requirement was
fulfilled during 1993. During 1991, the Corporation
purchased, on the open market and at a discount, $4.7
million of the Subordinated Capital Notes, resulting in
pretax gains of $1.7 million. In March 1994, the
Corporation redeemed, at par, $69.2 million of the
Subordinated Capital Notes. The net financial statement
loss from the 1994 redemption was not material.
FIXED-RATE SUBORDINATED DEBENTURES DUE 2009
On June 6, 1989, the Corporation sold $100 million of
9.65% Subordinated Debentures due June 15, 2009. The
debentures may not be redeemed prior to maturity and
are unsecured subordinated obligations of the
Corporation. In April 1990, the Corporation purchased,
on the open market and at a discount, $33.5 million of
the Subordinated Debentures, resulting in pretax gains
of $7.7 million.
FIXED-RATE SUBORDINATED NOTES DUE 2006
On February 1, 1994, the Corporation sold $125 million
of 8.5% Subordinated Notes, due 2006. The notes were
priced at par and are not callable for five years. The
notes were sold under a shelf registration statement
declared effective on January 13, 1994. The Corporation
used the net proceeds from the offering, $120.7
million, to redeem Floating-Rate Subordinated Notes and
Subordinated Capital Notes due in 1996, as described
above.
NOTE 9. COMMITMENTS AND CONTINGENCIES
_____________________________________
OFF-BALANCE-SHEET RISK
In the normal course of business, the Corporation
enters into various transactions that, in accordance
with generally accepted accounting principles, are not
included on the consolidated statements of condition.
These transactions are referred to as "off-balance-
sheet" commitments and differ from the Corporation's
balance sheet activities in that they do not give rise
to funded assets or liabilities. The Corporation offers
such products to enable its customers to meet their
financing objectives, as well as to manage their
interest and currency rate risk. Offering these
products provides the Corporation with fee income. The
Corporation also enters into derivative transactions to
manage its own risks arising from movements in interest
and currency rates. Off-balance-sheet activities, for
customers and as hedging transactions, involve varying
degrees of credit, interest-rate or liquidity risk in
excess of amounts recognized on the consolidated
statements of condition. The Corporation seeks to
minimize its exposure to loss under these commitments
by subjecting them to credit approval and monitoring
procedures, as well as by entering into offsetting or
matching positions to hedge interest-rate and currency-
rate risk.
Outstanding commitments and contingent liabilities
that do not appear in the consolidated financial
statements at December 31, 1994, and 1993, are as
follows:
<TABLE>
<CAPTION>
1994 1993
_______________________________________________________
<S> <C> <C>
Commitments to Extend Credit:
Commercial $273,665 $277,466
_______________________________________________________
Real Estate:
Commercial/Construction 28,956 38,360
Mortgage 16,565 137,080
Home Equity 181,393 194,774
_______________________________________________________
Total Real Estate 226,914 370,214
_______________________________________________________
Consumer 62,763 66,181
_______________________________________________________
Total Commitments to Extend Credit $563,342 $713,861
Letters of Credit:
Commercial $ 47,976 $ 56,860
Standby - Financial 24,344 35,159
Standby - Performance 21,533 49,032
_______________________________________________________
Total Letters of Credit $ 93,853 $141,051
Derivative Instruments:
Foreign Currency Contracts -
Commitments to Purchase $ 41,377 $ 33,935
Commitments to Sell 144,279 204,428
Interest-Rate Agreements -
Notional Principal Amount:
Interest-Rate Swaps 251,536 273,552
Interest-Rate Option Contracts
(Corridors) 400,000 --
</TABLE>
45
<PAGE>
COMMITMENTS TO EXTEND CREDIT
The Corporation enters into contractual commitments to
extend credit, normally with fixed expiration dates or
termination clauses, at specified rates and for
specific purposes. Customers use credit commitments to
ensure that funds will be available for working capital
purposes, for capital expenditures and to ensure access
to funds at specified terms and conditions.
Substantially all of the Corporation's commitments to
extend credit are contingent upon customers' meeting
and satisfying other conditions at the time of loan
funding. The contractual amount of commitments to
extend credit for which the Corporation has received a
commitment fee, or which were otherwise legally
binding, was $563.3 million at December 31, 1994;
approximately 67% of these commitments were scheduled
to expire within one year. Since many of the
commitments are expected to expire without being drawn
upon, the total contractual amounts do not necessarily
represent future funding requirements.
CONCENTRATION OF CREDIT RISK
The Corporation regularly assesses the quality of its
commercial credit exposures and assigns risk ratings to
substantially all extensions of credit in its
commercial, real estate and international portfolios.
The Corporation seeks to identify as early as possible
problems that may result from economic downturns or
deteriorating conditions in certain markets or with
respect to specific credits. Lending officers have the
primary responsibility for monitoring credit quality,
identifying problem credits and recommending changes in
risk ratings. When signs of credit deterioration are
detected, credit or other specialists may become
involved to minimize the Corporation's exposure to
future credit losses. The Loan Review Department
provides an independent assessment of credit ratings,
credit quality and the credit management process. This
assessment is achieved through regular reviews of loan
documentation, collateral, risk ratings and problem
loan classifications.
Credit risk is reduced by maintaining a loan
portfolio that is diverse in terms of type of loan,
industry concentration, geographic distribution, and
borrower concentration, thus minimizing the adverse
impact of any single event or set of occurrences.
Geographically, the Corporation's loans are
concentrated in the Baltimore-Washington, D.C.-Richmond
corridor and the United Kingdom. All categories of
loans in the domestic portfolio are predominantly to
borrowers located in the Washington metropolitan area.
Loans originated by the Corporation's United Kingdom
subsidiary represent 46% of foreign loans and are
predominantly to borrowers located in the United
Kingdom.
At December 31, 1994, approximately $435 million,
or 17%, of the Corporation's loan portfolio consisted
of loans secured by real estate (excluding single-
family residential loans), approximately 74% and 25% of
which, respectively, were secured by properties located
in the Washington, D.C., area and in the United
Kingdom. In addition, the Corporation had $47.8 million
in other real estate owned at December 31, 1994.
These commercial and real estate markets have been
experiencing problems, including declining occupancy
and rental rates and property values, which have
resulted in delinquency and defaults on certain
commercial real estate loans in the Corporation's
portfolio. Additional provisions and writedowns will
depend on future economic conditions in the United
States and the United Kingdom, as well as on changes in
the local real estate market and the impact of these
events on the Corporation's borrowers. Domestic real
estate-commercial/construction loans represent the only
category of loans in which the Corporation has a
concentration of credit risk at year-end 1994. These
loans totaled $323.8 million and represented 13% of the
total loan portfolio at December 31, 1994.
Approximately half of the Corporation's real estate-
commercial/construction portfolio is for the
development of residential properties. The remainder of
the portfolio is for the development of commercial
properties, including office buildings, warehouses,
shopping centers and hotels.
Approximately 60% of the Corporation's loan
portfolio is secured by the primary residence of the
borrower. At December 31, 1994, residential mortgage
loans were $1.32 billion and home equity loans were
$220.9 million.
LETTERS OF CREDIT
There are two major types of letters of credit:
commercial and standby letters of credit. A commercial
letter of credit is normally a short-term instrument
used to finance a commercial contract for the shipment
of goods from seller to buyer. This type of letter of
credit ensures prompt payment to the seller in
accordance with its terms. Although the commercial
letter of credit is contingent upon the satisfaction of
specified conditions, it represents a current exposure
if the customer defaults on the underlying transaction.
Commercial letters of credit issued by the Corporation
totaled $48.0 million at December 31, 1994.
A standby letter of credit can be either financial
or performance-based. Financial standby letters of
credit obligate the Corporation to disburse funds to a
third party if the Corporation's customer fails to
repay an outstanding loan or debt instrument under the
terms of the agreement with the beneficiary.
Performance standby letters of credit obligate the
Corporation to disburse funds if the customer fails to
perform some contractual or nonfinancial obligation
under the terms of the agreement with the beneficiary.
The Corporation's policies generally require that all
standby letter of credit arrangements contain security
and debt covenants similar to those contained in
46
<PAGE>
loan agreements. At December 31, 1994, financial
standby letters of credit and performance standby
letters of credit totaled $24.3 million and $21.5
million, respectively.
FOREIGN CURRENCY CONTRACTS
Capital markets products include commitments to
purchase and sell foreign exchange, futures, forward
and option contracts. The Corporation utilizes these
products to manage its exposure to movements in
interest and currency rates, and to generate revenue by
assisting customers in managing their own exposure to
such rate movements. These products normally include
the exchange of securities, foreign currency, or
payments based on an agreed upon notional principal
balance. The types of risk associated with these
products are as follows: credit or performance risk,
currency-rate risk, and interest-rate risk. Performance
risk relates to the ability of a counterparty to meet
its obligations under the contract. Performance risk is
limited to the cost of replacing the contract at
current rates, and does not include the notional
principal balance or other index/instrument used to
determine payment streams.
Currency-rate risk and interest-rate risk arise
from changes in the market value of positions stemming
from movements in currency and interest rates. The
Corporation limits its exposure to market value changes
by entering into offsetting or matching positions. The
Corporation establishes and monitors limits of exposure
on unmatched positions.
Commitments to purchase and sell foreign exchange
facilitate the management of currency-rate risk by
ensuring that at some future date a customer will have
a specific currency at a specified rate. The
Corporation enters into these contracts to serve its
customers and to hedge its own risk positions
associated with its asset and liability management. In
addition to entering into offsetting or matching
positions to offset foreign currency-rate risk, the
Corporation has established limits on the aggregate
amount of open positions, forward trading gaps and
total volume of contracts outstanding, as well as
counterparty and country limits. At December 31, 1994,
commitments to purchase and sell foreign exchange were
$41.4 million and $144.3 million, respectively. The
difference between these positions is effectively
hedged through the Corporation's sterling equity
investment in Riggs AP.
INTEREST-RATE AGREEMENTS AND CONTRACTS
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. Interest-rate
agreements, such as interest-rate swap agreements,
involve two parties that have agreed to exchange
periodic payments calculated with reference to fixed or
variable interest rates applied to an agreed upon
notional principal amount. Notional amounts are used to
determine the amount of payments exchanged and do not
represent an obligation to exchange principal balances.
Interest-rate swaps are entered into as hedges against
fluctuations in the interest rate of specifically
identified assets or liabilities and reduce the
Corporation's interest-rate risk. The Corporation is
exposed to certain levels of credit and market risk
when entering interest-rate agreements. Credit risk, or
the risk that the counterparty will default on its
agreed upon payments, is measured as the cost of
replacing, at current market rates, the defaulted
agreement.
The Corporation minimizes credit risk by adhering
to underwriting standards similar to those used in
other credit transactions, as well as by obtaining
collateral, if deemed appropriate under the specific
circumstances. In addition, all the Corporation's
interest-rate swap agreements have been transacted with
either major investment or commercial banks. Market
risk arises from changes in the market values
(replacement cost of agreements at current prices) of
agreements outstanding, the result of changes in
interest rates or security values underlying the
interest-rate agreements. Market risk is minimized
primarily since the Corporation uses interest-rate
swaps to hedge certain assets and liabilities, and thus
termination of an agreement would be an infrequent
event.
Interest-rate option contracts obligate a contract
"seller" to make payments to a contract "purchaser" in
the event that a designated interest-rate index exceeds
a contractual "ceiling" level or falls below a
contractual "floor" level, or both, as in a "corridor"
transaction. The Corporation has entered into such
contracts to obtain a specific hedge of certain assets,
liabilities or to offset previously entered derivative
positions. The credit and market risk for interest-rate
option contracts is similar to that for interest-rate
swap agreements as described above.
In October 1994, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting
Standards No. 119 ("SFAS No. 119"), "Disclosure about
Derivative Financial Instruments and Fair Value of
Financial Instruments." SFAS No. 119 provides guidance
for proper disclosure for financial instruments,
including interest-rate swaps and option contracts (see
Note 1, "Summary of Significant Accounting Policies").
47
<PAGE>
Other than swaps entered into for customers, the
Corporation's involvement with off-balance-sheet
financial derivative instruments has been for hedging
purposes. Such transactions have no effect on the level
of total assets or liabilities of the Corporation. Net
receivables or payables under agreements designated as
hedges are recorded when realized or accrued as
adjustments to interest income or interest expense
related to the hedged asset or liability. Related fees
are deferred and amortized over the lives of the
agreements as an adjustment to interest income or
interest expense related to the hedged assets or
liabilities. Unrealized gains and losses will not be
reflected in the accompanying financial statements
unless the hedges are terminated.
At year-end 1994, the Corporation's financial
derivative instruments included a $200 million
interest-rate swap agreement, entered into in July
1993, to hedge money market assets against the
possibility of declining interest rates. Through the
end of 1994, this swap agreement has performed as
anticipated. The swap agreement entails the receipt of
a fixed rate by the Corporation for the five-year term
of 5.38%. The Corporation agreed to pay 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 interest-rate swap
agreement matures in July 1998. At December 31, 1994,
total receivables and payables relating to unpaid
interest income/expense from the swap agreement totaled
$1.9 million and $2.1 million, respectively, with no
unamortized fees outstanding. Total interest income
recorded in 1994 from this swap transaction was $2.1
million, compared with $187 thousand in interest
expense recorded, for a total net affect on net
interest income of $1.9 million for 1994. As interest
rates began to rise in early 1994, the level of
interest-rate risk of the Corporation increased. The
market value (replacement cost) of the swap agreement
has fluctuated, from an unrealized gain of $0.9 million
at year-end 1993, to an unrealized loss of
approximately $16.8 million at December 31, 1994.
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 interest-rate
risk related to the above-mentioned interest-rate swap
agreement. One of the corridors was for a term of two
years, and the other for three years. 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%, and
would have to make payments if three-month Libor
exceeded 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. At December 31, 1994, the Corporation was
receiving interest payments based on a three-month
Libor rate of 5.69%. These corridor agreements mature
in April 1996 and April 1997.
In August 1994, the Corporation entered into
another corridor transaction in the amount of $200
million (notional). This corridor, executed to hedge
the costs of certain short-term borrowings against
rising interest rates, also 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. As of year-end
1994, the current Libor rate on the agreement was below
6.00% and no payments were received by the Corporation.
The terminating corridor agreement matures in August
1996.
At December 31, 1994, total receivables and
payables relating to unpaid interest income/expense
from all the corridor transactions totaled an aggregate
$2.1 million and $2.0 million, respectively, with
aggregate unamortized fees totaling $1.7 million and
aggregate unrealized gains of approximately $2.2
million at year-end 1994. Total aggregate net interest
income recorded in 1994 from these corridor
transactions was $108 thousand, which was more than
offset by the amortization of prepaid costs totaling
$1.0 million for 1994.
OTHER COMMITMENTS
During the first quarter of 1991, the Corporation
entered into a ten-year outsourcing agreement with
Integrated Systems Solutions Corp. ("ISSC"), a
subsidiary of IBM, pursuant to which ISSC is managing
the operations directly associated with computer and
telecommunications functions of the Corporation.
Payments for the remaining six years of the contract
are approximately $100.7 million. Total expense under
this contract for 1994 was $14.4 million, compared with
total expenses of $13.9 million and $14.1 million for
1993 and 1992, respectively.
LITIGATION
In the normal course of business, the Corporation is
involved in various types of litigation, including
litigation with borrowers that are in default under
their loan agreements. In certain instances, borrowers
have asserted or threatened counterclaims and defenses
based on various "lender liability" theories. In the
opinion of management, based on its assessment and
consultation with outside counsel, litigation that is
currently pending against the Corporation will not have
a material impact on the financial condition or future
operations of the Corporation, as a whole.
48
<PAGE>
NOTE 10. RESERVE BALANCE, FUNDS RESTRICTIONS, REGULATORY
MATTERS AND CAPITAL REQUIREMENTS
_______________________________________________________
RESERVE BALANCES
Riggs-Washington, Riggs-Virginia and Riggs-Maryland
must maintain reserves against deposits and
Eurocurrency liabilities in accordance with Regulation
D of the Federal Reserve Act. The total average reserve
balances amounted to $64.8 million in 1994 and $102.2
million in 1993.
FUNDS RESTRICTIONS
The Federal Reserve Act ("The Act") imposes
restrictions upon the amount of loans or advances that
banks, such as Riggs-Washington, Riggs-Virginia and
Riggs-Maryland, may extend to the Corporation and its
non-bank subsidiaries ("affiliates"). Loans by any bank
to any one affiliate are limited to 10% of the bank's
capital stock and surplus. Further, aggregate loans by
any one bank to all of its affiliates may not exceed
20% of its capital stock and surplus. In addition, the
Act requires that borrowings by affiliates be secured
by designated amounts of collateral.
The National Bank Act limits dividends payable by
national banks without approval of the Comptroller of
the Currency to net profits (as defined) retained in
the current and preceding two calendar years. The
payment of dividends by the Corporation's national bank
subsidiaries may also be affected by other factors,
such as requirements for the maintenance of adequate
capital. In addition, the Comptroller of the Currency
is authorized to determine, under certain circumstances
relating to the financial condition of a national bank,
whether the payment of dividends would be an unsafe or
unsound banking practice and to prohibit payment
thereof.
Riggs-Washington had combined net losses (as
defined) of approximately $49.4 million for 1994 and
1993. Thus, Riggs-Washington's ability to pay dividends
to the Corporation in 1995 will depend on whether its
earnings exceed such losses. Riggs-Virginia had
combined net income (as defined) of approximately $7.8
million for 1994 and 1993, respectively, while Riggs-
Maryland had combined net income of $1.3 million for
the same period.
During 1992, 1993 and 1994, Riggs-Virginia made
dividend payments to the Corporation totaling $836
thousand, $1.2 million and $1.8 million, respectively.
Riggs-Washington and Riggs-Maryland made no dividend
payments to the Corporation in 1992, 1993 or 1994.
REGULATORY MATTERS
On May 14, 1993, the Corporation entered into a
Memorandum of Understanding with the Federal Reserve
Bank of Richmond ("Reserve Bank") and Riggs-Washington
entered into a Written Agreement with the Office of the
Comptroller of the Currency (the "OCC"). The Memorandum
of Understanding and the Written Agreement were the
result of regulatory concern over financial and
operational weaknesses and continued losses related
primarily to the Corporation's domestic and United
Kingdom commercial real estate exposure.
Under the terms of the Memorandum of Understanding,
the Corporation will notify the Reserve Bank in advance
of dividend declarations, the issuance and/or
redemption of long-term debt and use of cash assets in
certain circumstances. The Corporation is also required
to submit plans and reports to the Reserve Bank
relating to capital, asset quality, loan-loss reserves
and operations, including contingency measures if
projected operational results do not occur. In
addition, the Audit Committee of the Corporation's
Board of Directors will review and submit a report to
the Reserve Bank on the adequacy of data submitted to
it and the Board, and the Corporation has appointed a
compliance committee of Directors to monitor
performance under the Memorandum of Understanding. At
year-end 1994, the Corporation was in substantial
compliance with the provisions and regulations of the
Memorandum of Understanding.
Under the original terms of the Written Agreement,
Riggs-Washington had previously appointed a committee
of its Board of Directors to monitor and coordinate
compliance with the agreement. Riggs-Washington had
satisfactorily complied with the requirements of the
Written Agreement during 1993 and 1994, and was
informed on September 15, 1994, that the OCC had
terminated the Written Agreement.
CAPITAL REQUIREMENTS
Under the Federal Reserve Board's risk-based capital
guidelines, bank holding companies are required to meet
a minimum ratio of qualifying total (combined Tier I
and Tier II) capital to risk-weighted assets of 8.00%,
at least half of which must be composed of core (Tier
I) capital elements. The Corporation's total and core
capital ratios were 18.50% and 11.48%, respectively, at
December 31, 1994, as compared with 16.81% and 10.76%
at December 31, 1993.
The Federal Reserve Board has established an
additional capital adequacy guideline referred to as
the leverage ratio, as amended by the Prompt Corrective
Action regulations promulgated by the Federal Deposit
Insurance Corporation Improvement Act of 1991
("FDICIA"), which measures Tier I capital to quarterly
average assets. The most highly rated bank holding
companies are required to maintain minimum leverage
ratios 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 6.42% at December 31,
1994.
49
<PAGE>
As a result of enactment of FDICIA, the Federal
Reserve Board and the other federal bank regulatory
agencies have placed a greater emphasis on capital
ratios of banking organizations. FDICIA expressly
conditions the ability of a banking organization to
engage in certain activities on the maintenance of
capital levels equal to or in excess of minimum
guidelines and imposes restrictions on banking
organizations that fail to meet minimum guidelines. In
addition, the Federal Reserve Board has shown an
increased emphasis on the leverage ratio as a
regulatory tool.
The Corporation's policy is to ensure that its
operating subsidiaries are capitalized within the
appropriate regulatory guidelines. During 1993, the
Corporation contributed $38 million to Riggs-Washington
to ensure that its capitalization would be in excess of
the regulatory guidelines. The Corporation did not make
any such contribution in 1994 and has no current plans
to make any substantial capital contributions to its
subsidiary banks. The three national bank subsidiaries
of the Corporation are subject to minimum capital
ratios prescribed by the Office of the Comptroller of
the Currency, which are the same as those of the
Federal Reserve Board.
In the event that the Corporation, or any of its
banking subsidiaries, falls below the minimum capital
requirements, regulatory action may be taken. With
respect to the banking subsidiaries, the OCC can take
action under the "prompt corrective action" provision
of FDICIA. Such actions can vary depending on the
severity of the capital position, and may include the
refiling of a capital plan, restrictions on growth, and
other actions the regulators may deem to be appropriate
in order to achieve compliance with capital
requirements. FDICIA requires each banking agency,
including the OCC, to specify levels at which insured
institutions would have the classifications "well
capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized"
and "critically undercapitalized."
Each of the bank subsidiaries of the Corporation
exceeds current minimum regulatory capital requirements
and qualifies, at a minimum, as "well capitalized"
under the FDICIA regulations. In addition, under
Federal Reserve Board policy, bank holding companies
are expected to act as a source of financial strength
to their subsidiary banks and to commit resources to
support such banks. The Corporation's ability to
provide financial strength for its subsidiaries will
depend on, among other things, its liquidity position
and Federal Reserve approval.
At December 31, 1993, the Corporation adopted SFAS
No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." This pronouncement requires,
among other items, the reporting of unrealized gains
and losses on securities available for sale, net of tax
effect, in stockholders' equity, contrary to previous
accounting policy, which reported such unrealized gains
and losses in earnings. At December 31, 1994, the
Corporation reported net unrealized losses of $28.1
million in stockholders' equity. The year-end net
unrealized losses were excluded from Tier I and Tier II
capital for regulatory reporting purposes per current
regulatory agency guidance. The regulatory agencies had
reviewed the current reporting guidelines in
relationship to SFAS No. 115, and decided not to amend
the applicable regulatory capital rules to include SFAS
No. 115-related adjustments in equity. Thus, the
capital ratios disclosed at December 31, 1994, and
1993, do not include the $28.1 million in net
unrealized losses and $1.3 million in net unrealized
gains, respectively, from the securities available for
sale portfolio.
The following table reflects the actual and
required minimum ratios for the Corporation and its
national banking subsidiaries:
CAPITAL RATIOS
<TABLE>
<CAPTION>
December 31, Required
1994 1993 Minimums
__________________________________________________________________
<S> <C> <C> <C>
Riggs National Corporation
Tier I 11.48% 10.76% 4.00%
Combined Tier I and Tier II 18.50 16.81 8.00
Leverage* 6.42 6.03 4.00
The Riggs National Bank of Washington, D.C.
Tier I 13.35 10.69 4.00
Combined Tier I and Tier II 14.64 11.97 8.00
Leverage* 7.39 6.13 4.00
The Riggs National Bank of Virginia
Tier I 18.18 17.05 4.00
Combined Tier I and Tier II 19.43 18.31 8.00
Leverage* 9.74 8.94 4.00
The Riggs National Bank of Maryland
Tier I 13.21 11.46 4.00
Combined Tier I and Tier II 14.46 12.71 8.00
Leverage* 7.33 6.69 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 Corporation's
primary regulators. The Corporation's regulators have not
indicated a requirement higher than 4.00% at December 31, 1994.
50
<PAGE>
NOTE 11. DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS
________________________________________
The following methods and assumptions were used to
estimate the fair value of each class of financial
instrument for which it is practicable to estimate that
value:
CASH AND MONEY MARKET ASSETS
For short-term investments that reprice or mature in 90
days or less, the carrying amount is a reasonable
estimate of fair value.
SECURITIES HELD-TO-MATURITY AND
SECURITIES AVAILABLE FOR SALE
For U.S. Treasury securities, government agencies
securities, municipal securities and mortgage-backed
securities, fair values are based on quoted market
prices or dealer quotes. For "Other Securities," fair
value equals quoted market prices, if available. If a
quoted market price is not readily available, as is the
case for $8.9 million of Federal Reserve Bank stock at
December 31, 1994, and 1993, management believes that
the asset's carrying value approximates fair value.
LOANS
The fair value of loans is estimated by discounting the
expected future cash flows using the current rates at
which similar loans would be made to borrowers with
similar credit ratings and for the same remaining
maturities. For short-term loans, defined as those
maturing or repricing in 90 days or less, management
believes the carrying amount is a reasonable estimate
of fair value. Criticized loans are predominantly
collateral-dependent; therefore, their carrying value
net of related reserves is a reasonable estimate of
fair value.
DEPOSIT LIABILITIES
The fair value of demand deposit, savings and NOW
accounts, and money market deposit accounts is the
amount payable on demand at the reporting date. The
fair value of investment and negotiable certificates of
deposit, and foreign time deposits with a repricing or
maturity date extending beyond 90 days, is estimated
using a discounted cash flow at the rates currently
offered for deposits of similar remaining maturities.
The value attributable to the Corporation's core
deposits, representing the relatively low-cost funding
afforded by core depositor relationships, has not been
considered in the calculation of fair value of deposit
liabilities.
SHORT-TERM BORROWINGS
For short-term liabilities, defined as those repricing
or maturing in 90 days or less, the carrying amount is
a reasonable estimate of fair value.
LONG-TERM DEBT
For the Corporation's long-term debt, fair values are
based on dealer quotes.
COMMITMENTS TO EXTEND CREDIT, AND STANDBY AND
COMMERCIAL LETTERS OF CREDIT
The fair value of loan commitments and letters of
credit, both standby and commercial, is assumed to
equal the carrying value, which is immaterial.
Extensions of credit under these commitments, if
exercised, would result in loans priced at market
terms.
FOREIGN EXCHANGE CONTRACTS
The fair value of foreign exchange contracts represents
the net asset or liability already recorded by the
Corporation, since these contracts are revalued on a
daily basis.
FINANCIAL DERIVATIVES
The fair value of financial derivatives is equal to the
replacement value of the derivative. The replacement
value is defined as the amount the Corporation would
receive or pay to terminate the agreement at the
reporting date, taking into account the current market
rate of interest and the current creditworthiness of
the derivative counterparties.
ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Corporation's
financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
__________________ ___________________
Carrying Fair Carrying Fair
Amount Value Amount Value
__________________________________________________________________________
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and Due from Banks $ 206,953 $ 206,953 $ 210,639 $ 210,639
Money Market Assets 388,224 388,224 405,946 405,946
Securities Available
for Sale 598,277 598,277 708,137 708,137
Securities Held-to-
Maturity 443,163 434,993 660,062 660,773
Loans 2,549,924 2,422,212 2,528,133 2,454,962
Reserve for Loan Losses 97,039 -- 86,513 --
__________________________________________________________________________
Total Net Loans 2,452,885 2,422,212 2,441,620 2,454,962
FINANCIAL LIABILITIES:
Deposits 3,602,794 3,600,549 3,773,824 3,776,108
Short-Term
Borrowings 293,437 293,437 454,027 454,027
Long-Term Debt 217,625 203,780 213,325 232,409
OFF-BALANCE-SHEET
COMMITMENTS - ASSET (LIABILITY):
Foreign Exchange Contracts (112) (112) 232 232
Interest-Rate Agreements
Interest-Rate Swaps (563) (17,285) 113 (1,676)
Forward-Rate Agreements -- -- (91) (91)
Interest-Rate Option
Contracts 2,918 5,968 -- --
</TABLE>
51
<PAGE>
Changes in interest rates, assumptions or
estimation methodologies may have a material effect on
these estimated fair values. As a result, the
Corporation's ability to actually realize these derived
values cannot be assured. Management is concerned that
reasonable comparability between financial institutions
may not be likely because of the wide range of
permitted valuation techniques and numerous estimates
that must be made, given the absence of active
secondary markets for many of the financial
instruments. This lack of uniform valuation
methodologies introduces a greater degree of
subjectivity to these estimated fair values. In
addition, the estimated fair values exclude
nonfinancial assets, such as premises and equipment,
and certain intangibles, such as core deposit premiums
and customer relationships. Thus, the aggregate fair
values presented do not represent the underlying value
of the Corporation.
NOTE 12. INCOME TAXES
_____________________
In February 1992, SFAS No. 109, "Accounting for Income
Taxes," was issued. SFAS No. 109 establishes financial
accounting and reporting standards for the effects of
income taxes that result from the Corporation's
activities during the current and preceding years. It
requires an asset and liability approach in accounting
for income taxes versus the deferred method previously
used under Accounting Principles Board No. 11 ("APB No.
11").
Under SFAS No. 109, deferred income taxes are
recorded using enacted tax laws and rates for the years
in which taxes are expected to be paid. In addition,
SFAS No. 109 provides for the recognition of deferred
tax assets based on tax loss and tax credit
carryforwards, to the extent that realization of such
assets is more likely than not. Under APB No. 11
deferred tax assets were generally recognized only to
the extent realization of such assets was assured
beyond a reasonable doubt, which was generally
demonstrated by the Corporation's ability to carry back
tax losses or tax credits to recover taxes previously
paid.
The Corporation adopted SFAS No. 109 on January 1,
1993, and the effect of adoption was not material.
Income tax provisions for 1992 were determined under
APB No. 11 and have not been restated to reflect
adoption of SFAS No. 109.
Income (loss) before income taxes relating to the
operations of domestic offices (onshore) and foreign
offices (offshore) was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
_____________________________________________________________
<S> <C> <C> <C>
Domestic Offices $13,716 $(28,980) $ 3,920
Foreign Offices 19,770 (59,591) (26,041)
_____________________________________________________________
Total $33,486 $(88,571) $(22,121)
</TABLE>
The current and deferred portions of the income tax
provision (benefit) were as follows:
<TABLE>
<CAPTION>
1994 1993 1992*
_____________________________________________________________
<S> <C> <C> <C>
Current Provision (Benefit):
Federal $ 643 $ (24) $(5,645)
State 364 254 257
Foreign (898) (188) (239)
______________________________________________________________
Total Current Provision
(Benefit) 109 42 (5,627)
Deferred Provision (Benefit):
Federal (642) 5,309 4,453
State -- -- --
Foreign -- 289 105
______________________________________________________________
Total Deferred Provision
(Benefit) (642) 5,598 4,558
______________________________________________________________
Provision for Income Tax
Expense (Benefit) $(533) $5,640 $(1,069)
</TABLE>
[FN]
* Restated to reflect reclassification of current and
deferred taxes based on actual timing differences
determined upon filing of tax returns.
52
<PAGE>
RECONCILIATION OF STATUTORY TAX RATES TO
EFFECTIVE TAX RATES:
<TABLE>
<CAPTION>
1994 1993 1992
_______________________________________________________________
<S> <C> <C> <C>
Income Tax Computed at Federal
Statutory Rate of 34% for
1994, 1993 and 1992 $11,386 $(30,114) $(7,522)
Add (Deduct):
State Tax, Net of Federal
Tax Benefit 241 168 170
Tax-Exempt Security Interest (11) (44) (44)
Tax-Exempt Loan Interest (1,427) (1,688) (2,445)
Tax-Exempt Interest
Disallowance 27 45 76
Amortization of Fair Value
Adjustments 100 100 100
Stock Dividend Deduction (31) (33) (19)
Alternative Minimum Tax 642 -- --
Tax Benefit (Expense) on
Transfer of Foreign Assets
not Recognized (1,928) 3,119 --
Tax Benefit (Expense) on
Foreign Exchange Translation
Adjustment not Recognized (1,108) 5,591 --
Tax Benefit of Net Operating
Loss not Recognized -- 27,504 7,979
Tax Benefit of Net Operating
Loss Carryforwards (7,068) -- --
Other, Net (1,356) 992 636
_______________________________________________________________
Provision for Income Tax
Expense (Benefit) $ (533) $ 5,640 $(1,069)
_______________________________________________________________
Effective Tax Rate (1.6)% (6.4)% 4.8%
</TABLE>
The components of income tax liabilities (assets) that
result from temporary differences in the recognition of
revenue and expenses for income tax and financial
reporting purposes at December 31, 1994 and 1993,
follow:
SOURCES OF TEMPORARY DIFFERENCES RESULTING IN
DEFERRED TAX LIABILITIES (ASSETS):
<TABLE>
<CAPTION>
1994 1993
__________________________________________________________________
<S> <C> <C>
Excess Tax Over Book Depreciation $ 597 $ 1,056
Pension Plan and Post-Retirement 137 1,032
Other, Net 1,182 --
__________________________________________________________________
Total Deferred Tax Liabilities 1,916 2,088
Accrual to Cash Basis Conversion (812) (366)
Provision for Losses (34,645) (34,445)
Other Real Estate Owned (11,415) (14,314)
Deferred Loan Fees (362) (459)
Unrealized Loss on Securities -- (42)
Alternative Minimum Tax Carryover (5,461) (5,072)
Other Tax Credit Carryovers (886) (886)
Net Operating Loss Carryover (13,937) (22,479)
Capital Loss Carryover (1,145) --
Amortization of Derivative Contract Payment (504) --
Other, Net (3,044) (3,293)
__________________________________________________________________
Total Deferred Tax Assets (72,211) (81,356)
Valuation Allowance 64,834 74,694
__________________________________________________________________
Net Deferred Tax Liability (Asset) $ (5,461) $ (4,574)
</TABLE>
53
<PAGE>
At December 31, 1993, and 1994, the Corporation
maintained a valuation allowance of approximately $74.7
million and $64.8 million, respectively, to reduce the
net deferred tax asset to $4.6 million and $5.5
million, respectively.
The net change in the valuation allowance for
deferred tax assets during 1994 was a decrease of $9.9
million. The change related to a reduction in
unbenefited regular deferred assets of $9.5 million,
primarily due to the utilization of net operating loss
carryforwards and an increase in the benefit of the
alternative tax credit carryforwards of $0.4 million.
The deferred tax assets include, among other items,
investment tax credit carryforwards for federal income
tax purposes of $0.8 million that are available to
reduce future federal income tax through 2004, $0.1
million in foreign tax credit carryforwards that are
available to reduce future income tax through 1997, and
alternative minimum tax credit carryforwards of $5.5
million that are available to reduce future federal
regular income taxes over an indefinite period. In
addition, the deferred tax assets include the benefit
of tax loss carryforwards of $13.9 million, detailed as
follows:
<TABLE>
<CAPTION>
Expire
in 2008 Unlimited Total
_______________________________________________________
<S> <C> <C> <C>
Federal Taxes $3,302 $ -- $ 3,302
State Taxes 513 -- 513
Foreign Taxes -- 10,122 10,122
__________________________________________________________________
Total $3,815 $10,122 $13,937
</TABLE>
NOTE 13. COMMON AND PREFERRED STOCK
___________________________________
The Corporation is authorized to issue 50 million
shares of Common Stock, par value $2.50 (the "Common
Stock"). At December 31, 1994, the Corporation had
30,244,414 shares issued and outstanding.
On October 21, 1993, the Corporation issued
5,000,000 shares of Common Stock, at a price of $7.75
per share, in transactions exempt from the registration
requirements of the Securities Act of 1933. The net
proceeds from the sale of the Common Stock totaled
approximately $37.0 million.
Pursuant to a rights offering that commenced on
December 12, 1991, and expired on January 23, 1992, the
Corporation sold 11,445,000 shares of Common Stock,
representing all of the shares offered, at a
subscription price of $4.375 per share. Net proceeds
from the offering were $49.1 million.
The Corporation is authorized to issue 25 million
shares of Preferred Stock, the conditions of which will
be set at the time of issuance. On October 21, 1993,
the Corporation issued 4,000,000 shares of 10.75%
Noncumulative Perpetual Preferred Stock, Series B
("Series B Preferred"), in transactions exempt from the
registration requirements of the Securities Act of
1933. The Series B Preferred shares have a liquidation
preference of $25 per share, no preemptive rights,
limited public market and are non-voting (subject to
certain limited exceptions). The Series B Preferred is
not redeemable prior to October 1, 1998, at which time,
at the Corporation's option, the Corporation may redeem
in whole or in part the Series B Preferred at prices
ranging from $27.25 in October 1998 to $25.00 in
October 2008 and thereafter, plus accrued but unpaid
dividends.
There is no mandatory redemption or sinking fund
obligation associated with the Series B Preferred.
Dividends are payable on February 1, May 1, August 1
and November 1 of each year and are noncumulative. The
proceeds from the Series B Preferred issuance, net of
expenses, was $95.3 million.
During the second quarter of 1992, the Corporation
issued 764,537 shares of 7.5% Cumulative Convertible
Preferred Stock, Series A ("Series A Preferred"), to
Norwich Union Life Insurance Society, a major insurance
company headquartered in Norwich, England. The Series A
Preferred was issued in exchange for debt of Riggs AP
Bank Ltd., the Corporation's indirectly owned United
Kingdom banking subsidiary. The Series A Preferred had
no preemptive rights and were non-voting, subject to
certain limited exceptions. The Series A Preferred
shares had a liquidation preference of $25 per share
and were convertible at the holder's option into
2,002,141 shares of common stock, at $9.5465 per share.
On September 27, 1994, the Corporation repurchased
all 764,537 shares of its 7.5% Cumulative Convertible
Preferred Stock, Series A. The purchase price was $19.1
million, which is equal to the original issue price in
June 1992.
54
<PAGE>
NOTE 14. BENEFIT PLANS
______________________
PENSION PLANS
RIGGS NATIONAL CORPORATION
Under the Corporation's noncontributory defined benefit
pension plan, available to substantially all employees
who qualify with respect to age and length of service,
benefits are normally based on years of service and the
average of the highest base annual salary for a
consecutive five-year period prior to retirement.
RECONCILIATION OF FUNDED STATUS AND
PREPAID PENSION COST
<TABLE>
<CAPTION>
1994 1993 1992
_______________________________________________________________
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit
obligation:
Vested benefits $(60,167) $(61,010) $(50,017)
Nonvested benefits (1,195) (3,415) (2,666)
_______________________________________________________________
Total $(61,362) $(64,425) $(52,683)
_______________________________________________________________
Actuarial present value of
projected benefit
obligation, for
services rendered to date $(67,368) $(77,243) $(62,878)
Plan assets at fair value_
primarily unit funds 62,831 66,780 64,624
_______________________________________________________________
Plan assets in excess (deficit)
of projected benefit
obligation $ (4,537) $(10,463) $ 1,746
Unrecognized net loss from
past experience different
from that assumed and
effects of changes in
assumptions 12,463 19,757 9,040
Unrecognized balance of
initial net asset (2,189) (2,920) (3,651)
Unrecognized prior service cost (1,166) (1,278) (1,602)
_______________________________________________________________
Prepaid pension cost $ 4,571 $ 5,096 $ 5,533
</TABLE>
The Corporation's funding policy is to contribute
an amount at least equal to the minimum required
contribution under the Employee Retirement Income
Security Act.
The assets of the Corporation's pension plan
consist of an Immediate Participation Guarantee
contract with a life insurance company and funds held
in trust by the Corporation. The monies held in trust
are invested primarily in fixed-income and equity
pooled funds.
NET PERIODIC PENSION COST
<TABLE>
<CAPTION>
1994 1993 1992
_______________________________________________________________
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 1,357 $ 1,773 $ 1,828
Interest cost on projected
benefit obligation 5,329 5,427 5,149
Actual return on plan assets (788) (7,840) (5,039)
Net amortization and deferral (5,373) 1,285 (1,323)
_______________________________________________________________
Net periodic pension cost $ 525 $ 645 $ 615
Assumptions used in accounting
for the plan were: 1994 1993 1992
_______________________________________________________________
Weighted-average discount rate 8.50% 7.50% 8.75%
Rates of increase in
compensation levels 4.00% 5.00% 5.00%
Expected long-term rate of
return on plan assets 10.00% 10.00% 10.00%
_______________________________________________________________
</TABLE>
55
<PAGE>
RIGGS AP BANK
The Riggs AP pension plan provides monthly pension
payments upon normal retirement at age 60 or upon later
retirement to substantially all employees. The plan has
a final-pay benefit formula that takes into account
years of service.
RECONCILIATION OF FUNDED STATUS AND
PREPAID PENSION COST - RIGGS AP
<TABLE>
<CAPTION>
1994 1993 1992
_______________________________________________________________
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit
obligation:
Vested benefits $(8,608) $(10,767) $ (9,868)
Nonvested benefits -- -- (5)
_______________________________________________________________
Total $(8,608) $(10,767) $ (9,873)
_______________________________________________________________
Actuarial present value
of projected benefit
obligation, for service
rendered to date $(9,024) $(12,105) $(10,637)
Plan assets at fair value _
primarily unit funds 11,693 14,876 13,028
_______________________________________________________________
Plan assets in excess of
projected benefit
obligation $ 2,669 $ 2,771 $ 2,391
Unrecognized net loss (gain)
from past experience
different from that assumed
and effects of changes in
assumptions (3,009) (2,638) (1,938)
Unrecognized balance of
initial net asset (1,367) (1,499) (1,742)
_______________________________________________________________
Accrued pension cost $(1,707) $(1,366) $(1,289)
</TABLE>
Riggs AP's annual pension costs are determined
based on the Projected Unit Credit Cost Method, with
specific amortization schedules for the various
categories of plan liabilities. Actuarial assumptions
are selected based on guidelines established by the
Financial Accounting Standards Board.
NET PERIODIC PENSION COST - RIGGS AP
<TABLE>
<CAPTION>
1994 1993 1992
_______________________________________________________________
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 489 $ 489 $ 625
Interest cost on projected
benefit obligation 733 917 1,009
Actual return on plan assets 521 (1,021) (1,158)
Net amortization and
deferral (1,571) (208) (237)
_______________________________________________________________
Net periodic pension cost $ 172 $ 177 $ 239
_______________________________________________________________
Assumptions used in
accounting for the plan
were: 1994 1993 1992
_______________________________________________________________
Weighted-average discount
rate 8.5% 8.0% 9.0%
Rates of increase in
compensation levels 6.5% 7.0% 7.0%
Expected long-term rate of
return on plan assets 8.5% 9.0% 9.0%
</TABLE>
OTHER BENEFIT PLANS
Effective January 1, 1993, the Corporation adopted a
Supplemental Executive Retirement plan to provide
supplemental retirement income and preretirement death
benefits to certain key employees. The amount of
benefits is based on the participant's corporate title,
functional responsibility and service as a member of
the Board of Directors. Upon the later of a
participant's termination of employment or attainment
of age 62, the participant will receive the vested
portion of the supplemental retirement benefit, payable
for the life of the participant, but for no more than
15 years.
In October 1993, the Corporation began sponsorship
of a defined contribution plan, under Section 401(k) of
the Internal Revenue Code, which is available to
substantially all employees. Employees' annual
contributions may be partially matched, as determined
by the Board of Directors. The Corporation did not
provide a matching contribution to the Plan in 1993 or
1994.
POSTRETIREMENT BENEFITS
The Corporation provides certain health care and life
insurance benefits for retired employees. Three benefit
plans are provided: Medical and Hospitalization
Insurance, Dental Insurance and Life Insurance.
Substantially all active employees may become eligible
for benefits if they reach normal retirement age or if
they retire earlier with at least ten years' service.
Similar benefits for active employees are provided
through an insurance company and several health
maintenance organizations. The Corporation recognizes
the cost of providing those benefits by expensing the
annual insurance premiums, which were $6.1 million in
1994, $6.6 million in 1993 and $6.4 million in 1992.
In December 1990, the Financial Accounting
Standards Board issued SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
Pensions." The Statement requires a significant change
in the Corporation's historical practice of accounting
for postretirement benefits on a pay-as-you-go (cash)
basis by requiring accrual of the expected cost of
benefits during the years that the employee renders the
necessary service. The Statement is generally effective
for fiscal years beginning after December 15, 1992,
except that its application to plans outside the United
States (such as Riggs AP's plan) was delayed to fiscal
years beginning after December 15, 1994. The
Corporation implemented SFAS No. 106 on January 1,
1993, resulting in an accumulated transition obligation
of $13.0 million, which the
56
<PAGE>
Corporation elected to recognize over a 20-year period.
The Corporation incurred approximately $2.4 million in
1994 for postretirement health and life insurance
expenses, which included $651 thousand relating to the
amortization of the transition obligation.
The net periodic costs for postretirement health and
life insurance benefits are as follows:
<TABLE>
<CAPTION>
1994 1993
______________________________________________________
<S> <C> <C>
Service Cost $ 283 $ 596
Interest Cost 1,264 1,128
Other 893 652
______________________________________________________
Total $2,440 $2,376
</TABLE>
The funding status of the postretirement plans and
the amounts recognized in the Corporation's Statements
of Financial Condition at December 31, 1994, and 1993,
follow:
<TABLE>
<CAPTION>
1994 1993
______________________________________________________
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 11,143 $ 10,865
Fully eligible active plan
participants 1,416 1,867
Other active plan participants 3,425 2,343
______________________________________________________
Total 15,984 15,075
Unrecognized transition
obligation (11,725) (12,377)
Unrecognized net loss (4,045) (4,080)
Unrecognized prior service cost 2,434 2,782
______________________________________________________
Accrued postretirement
benefit cost $ 2,648 $ 1,400
</TABLE>
The assumed health care cost trend rate ranged from 6%
to 11% for 1994 and from 8% to 12% for 1993, gradually
decreasing to 6% by the year 2004 and remaining
constant thereafter. A discount rate of 7.5% was used
in 1994 and 1993 to determine the accumulated
postretirement benefit obligation. Increasing the
assumed health care cost trend rate by one percentage
point would increase the accumulated postretirement
benefit obligation at December 31, 1994, by $1.5
million, and increase the net periodic postretirement
benefit cost for 1994 by $172 thousand.
STOCK OPTION PLANS
On March 10, 1993, the Board of Directors of the
Corporation adopted the "1993 Stock Option Plan" (the
"1993 Plan"), which was approved at the May 14, 1993,
Annual Meeting of Shareholders. The 1993 Plan provides
for the issuance of options to purchase shares of
Common Stock of the Corporation. Key employees of the
Corporation and certain subsidiaries may be granted
either incentive or nonqualified stock options.
Generally, the exercise price cannot be less than the
fair market value of the Common Stock at the date of
grant. The aggregate number of shares of Common Stock
reserved for issuance upon exercise of options granted
under the 1993 Plan is 1,250,000. Unless previously
terminated by the Board of Directors, the Plan will
terminate on March 10, 2003.
A summary of the stock option activity under the
1993 Plan follows:
<TABLE>
<CAPTION>
Stock Average Price
Options Per Share
______________________________________________________
<S> <C> <C>
Outstanding at
December 31, 1992 -- $ --
Granted 742,000 8.53
Exercised -- --
Terminated -- --
_________________________________________________
Outstanding at
December 31, 1993 742,000 8.53
Granted 596,000 9.77
Exercised 22,400 9.00
Terminated 463,200 8.24
_________________________________________________
Outstanding at
December 31, 1994 852,400 $9.54
</TABLE>
On May 11, 1994, the shareholders approved the
Corporation's 1994 Stock Option Plan (the "1994 Plan"),
which was adopted by the Corporation's Board of
Directors in February 1994. Under the 1994 Plan,
options to purchase up to 1,250,000 shares of Common
Stock may be granted to key employees. As of December
31, 1994, no shares had been granted under the 1994
Plan.
57
<PAGE>
NOTE 15. FOREIGN ACTIVITIES
___________________________
Foreign activities are those conducted with customers
domiciled outside the United States, regardless of the
location of the banking office. Foreign business
activity is substantially integrated within the
Corporation. As a result, it is not possible to
definitively classify the business of most operating
activities as entirely domestic or foreign. The Foreign
Consolidated Statements of Condition shown below
reflect the portion of the Corporation's consolidated
statements of condition which can be attributed to
transactions with customers who are domiciled outside
the United States.
_______________________________
FOREIGN CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
_________________________________________________________________
<S> <C> <C> <C>
ASSETS
Deposits with Banks in Foreign
Countries:
Interest-Bearing $176,384 $144,446 $538,822
Other 2,299 6,775 7,024
__________________________________________________________________
Total Deposits with Banks in
Foreign Countries 178,683 151,221 545,846
Securities Available for Sale -- 1,915 --
Securities Held-to-Maturity -- 13,659 41,896
__________________________________________________________________
Loans to Foreign Customers:
Governments and Official
Institutions 26,013 28,113 29,319
Banks and Financial
Institutions 11,517 14,999 24,734
Commercial and Industrial and
Commercial Property 146,104 192,576 290,517
Other 20,886 19,530 25,999
__________________________________________________________________
Total Loans, Net of Unearned
Discount 204,520 255,218 370,569
Less: Reserve for Loan Losses 22,899 27,785 25,481
__________________________________________________________________
Total Net Loans 181,621 227,433 345,088
Pool Funds Provided, Net/1/ 351,157 202,960 45,028
Other Assets 47,161 65,467 98,839
__________________________________________________________________
Total Assets $758,622 $662,655 $1,076,697
LIABILITIES
Foreign Deposits:
Banks in Foreign Countries $ 53,575 $ 50,507 $ 165,660
Governments and Official
Institutions 201,905 142,769 150,249
Other 390,262 410,900 678,425
__________________________________________________________________
Total Deposits/2/ 645,742 604,176 994,334
Short-Term Borrowings 228 373 31
Other Liabilities 112,652 58,106 82,332
__________________________________________________________________
Total Liabilities $758,622 $662,655 $1,076,697
SUPPLEMENTAL DATA ON FOREIGN
DEPOSITS
Demand $135,746 $138,241 $ 127,813
Savings, NOW and Money
Market 236,241 252,785 334,773
Time/3/ 273,755 213,150 531,748
__________________________________________________________________
Total Foreign Deposits $645,742 $604,176 $994,334
</TABLE>
[FN]
/1/ Pool Funds Provided, Net are amounts contributed by foreign
activities to fund domestic activities.
/2/ Total foreign deposits in domestic offices totaled $370.5
million, $395.4 million and $480.0 million at December 31,
1994, 1993 and 1992, respectively.
/3/ A majority of time deposits are in amounts of $100 thousand or
more.
58
<PAGE>
The table to the right reflects changes in the
reserve for loan losses on loans to customers domiciled
outside the United States. Allocations of the provision
for loan losses are based upon actual charge-off
experience and additional amounts deemed necessary in
relation to risks inherent in the foreign loan
portfolio.
The table below reflects foreign activity assets by
geographical location for the last three years and
selected categories of the Consolidated Statements of
Income. Loans made to, or deposits placed with, a
branch of a foreign bank located outside the foreign
bank's home country are considered as loans to, or
deposits with, the foreign bank. To measure
profitability of foreign activity, the Corporation has
established an integral pricing system for units that
are users or providers of funds. Noninterest income and
expense allocations are based on earning assets and
interest-bearing liabilities identified with each
geographical area.
FOREIGN RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1994 1993 1992
______________________________________________________
<S> <C> <C> <C>
Balance, January 1 $27,785 $25,481 $31,434
Provisions for Loan
Losses (7,899) 29,511 32,534
Loans Charged-Off 3,219 31,400 35,575
Less: Recoveries on
Charged-Off Loans 5,034 4,712 279
______________________________________________________
Net Charge-Offs
(Recoveries) (1,815) 26,688 35,296
Foreign Exchange
Translation
Adjustments 1,198 (519) (3,191)
______________________________________________________
Balance, December 31 $22,899 $27,785 $25,481
</TABLE>
________________________________________
<TABLE>
<CAPTION>
GEOGRAPHICAL PERFORMANCE
Income (Loss) Net
Total Assets Total Total before Income
December 31, Revenue Expenses Income Taxes (Loss)
_________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Middle East and Africa 1994 $53,890 $10,581 $11,704 $(1,123) $(1,105)
1993 51,703 10,575 11,536 (961) (1,023)
1992 32,719 12,162 13,400 (1,238) (1,174)
_________________________________________________________________________________
Europe 1994 291,837 22,825 11,592 11,233 11,054
1993 296,693 33,538 92,604 (59,066) (62,829)
1992 671,297 66,826 96,981 (30,155) (28,609)
_________________________________________________________________________________
Asia/Pacific 1994 12,122 3,184 1,765 1,419 1,396
1993 11,755 4,681 2,823 1,858 1,976
1992 10,234 4,750 6,064 (1,314) (1,246)
________________________________________________________________________________
South and Central America1994 9,869 7,940 3,192 4,748 4,673
1993 22,200 10,278 6,028 4,250 4,521
1992 42,904 12,957 9,517 3,440 3,263
________________________________________________________________________________
Caribbean 1994 26,093 1,209 1,780 (571) (562)
1993 73,456 1,774 1,745 29 31
1992 244,522 3,639 3,968 (329) (312)
_________________________________________________________________________________
Other 1994 13,654 1,353 690 663 653
1993 3,888 2,065 1,520 545 579
1992 29,993 1,609 1,478 131 124
________________________________________________________________________________
Total Foreign* 1994 $407,465 $47,092 $ 30,723 $ 16,369 $ 16,109
1993 459,695 62,911 116,256 (53,345) (56,745)
1992 1,031,669 101,943 131,408 (29,465) (27,954)
________________________________________________________________________________
Percentage of Foreign 1994 9% 13% 10% 49% 47%
To Consolidated 1993 10 17 25 n/a n/a
1992 20 22 27 n/a n/a
</TABLE>
[FN]
* Total foreign assets at December 31, 1994, 1993 and 1992, exclude net
pool funds contributed by foreign activities to fund domestic activities.
59
<PAGE>
NOTE 16. PARENT CORPORATION FINANCIAL STATEMENTS
________________________________________________
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
______________________________________________________________________________
<S> <C> <C> <C>
REVENUES
Dividends from Subsidiaries $ 1,850 $ 1,594 $ 1,003
Interest on Loans -- -- 15
Interest on Time Deposit Placements 43 173 1,156
Interest on Reverse Repurchase Agreements 6,287 1,755 1,520
Interest and Dividends on Securities
Held-to-Maturity 217 809 533
Other Operating Income 1,484 2,502 3,720
______________________________________________________________________________
Total Revenues 9,881 6,833 7,947
OPERATING EXPENSES
Interest Expense 20,229 15,009 14,603
Other Operating Expenses 4,710 3,995 12,922
______________________________________________________________________________
Total Operating Expenses 24,939 19,004 27,525
Income (Loss) before Taxes (15,058) (12,171) (19,578)
Applicable Income Tax (Benefit) Expense* (10,478) (1,780) (2,999)
______________________________________________________________________________
Income (Loss) before Undistributed
Earnings (Losses) of Subsidiaries (4,580) (10,391) (16,579)
Undistributed Earnings (Losses) of
Subsidiaries 38,599 (83,820) (4,473)
______________________________________________________________________________
Net Income (Loss) $ 34,019 $(94,211) $(21,052)
</TABLE>
[FN]
* Applicable income taxes are provided for based on parent corporation income
only and do not reflect the tax expense or benefit of the subsidiaries'
operations.
STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31,
1994 1993
______________________________________________________________________________
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 1,099 $ 1,548
Intercompany Reverse Repurchase Agreements 114,400 157,960
Securities Held-to-Maturity -- 134,783
Securities Available for Sale 8,000 --
Premises and Equipment, Net 9,921 10,258
Investment in Subsidiaries 333,430 323,266
Other Assets 24,476 14,992
______________________________________________________________________________
Total Assets $491,326 $642,807
LIABILITIES
Intercompany Repurchase Agreements $ -- $134,660
Other Liabilities 6,038 1,625
Long-Term Debt 217,625 213,325
______________________________________________________________________________
Total Liabilities 223,663 349,610
STOCKHOLDERS' EQUITY
Preferred Stock - $1.00 Par Value
Shares Authorized - 25,000,000 at
December 31, 1994, and 1993;
Liquidation Preference - $25 per
share Cumulative Convertible
Series A - 764,537 shares at
December 31, 1993 -- 765
Noncumulative Perpetual Series B -
4,000,000 shares at December 31,
1994, and 1993 4,000 4,000
Common Stock - $2.50 Par Value
Shares Authorized - 50,000,000 at
December 31, 1994, and 1993 Shares
Issued - 31,145,212 at December 31,
1994, and 31,122,812 at December 31,
1993 77,863 77,807
Surplus:
Preferred Stock 91,192 109,541
Common Stock 156,123 156,023
Foreign Exchange Translation Adjustments (634) (1,527)
Undivided Profits (Accumulated Deficit) (9,014) (30,965)
Unrealized Gain (Loss) on Securities
Available for Sale, Net (28,144) 1,276
Treasury Stock - 900,798 shares at
December 31, 1994, and 1993 (23,723) (23,723)
______________________________________________________________________________
Total Stockholders' Equity 267,663 293,197
______________________________________________________________________________
Total Liabilities and Stockholders' Equity $491,326 $642,807
</TABLE>
60
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
____________________________________________________________________________________
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $34,019 $(94,211) $(21,052)
Adjustments to Reconcile Net Income
(Loss) to Net Cash
(Used In) Provided by Operating Activities:
Provisions for Loan Losses, Other Real
Estate Owned, Depreciation and
Purchase Accounting 1,431 1,537 9,667
Losses on Securities Available for Sale 1,198 -- --
Increase in Other Assets (10,326) (2,407) (3,734)
Increase in Other Liabilities 8,163 163 1,007
Undistributed (Earnings) Losses of Subsidiaries (38,599) 83,820 4,473
____________________________________________________________________________________
Total Adjustments (38,133) 83,113 11,413
____________________________________________________________________________________
Net Cash (Used In) Provided by Operating
Activities (4,114) (11,098) (9,639)
____________________________________________________________________________________
Cash Flows from Investing Activities:
Proceeds from Securities Held-to-Maturity 134,783 -- 500
Purchase of Securities Held-to-Maturity -- (134,783) --
Purchase of Securities Available for Sale (10,000) -- --
Net Decrease in Capital Notes of Banking
Subsidiaries -- -- 11,598
Net Decrease in Loans -- -- 3,000
Net (Increase) Decrease in Premises, Net (252) (1) 82
Net Increase in Investment in Subsidiaries (11) (50,040) (2,188)
Other, Net -- 1,679 1,137
____________________________________________________________________________________
Net Cash Provided by (Used in) Investing
Activities 124,520 (183,145) 14,129
____________________________________________________________________________________
Cash Flows from Financing Activities:
Net (Decrease) Increase in Short-Term
Borrowings (134,660) 134,660 --
Net Proceeds from the Issuance of
Long-Term Debt 121,250 -- --
Repayments of Long-Term Debt (120,700) -- --
Net Proceeds from the (Repurchase)
Issuance of Preferred Stock (19,113) 95,309 --
Net Proceeds from Issuance of Common Stock 201 36,951 49,065
Dividend Payments (12,124) (1,434) (358)
Other, Net (162) -- --
____________________________________________________________________________________
Net Cash (Used In) Provided by Financing
Activities (165,308) 265,486 48,707
____________________________________________________________________________________
Effect of Exchange Rate Changes 893 9,886 (6,211)
____________________________________________________________________________________
Net (Decrease) Increase in Cash and
Cash Equivalents (44,009) 81,129 46,986
Cash and Cash Equivalents at
Beginning of Year 159,508 78,379 31,393
____________________________________________________________________________________
Cash and Cash Equivalents at
End of Year $115,499 $159,508 $78,379
Supplemental Schedule of Noncash Investing
and Financing Activities:
Preferred Stock Issued in Exchange for
Long-Term Debt $ -- $ -- $18,997
Supplemental Disclosures:
Interest Paid $19,145 $14,469 $14,647
Income Tax (Refunds) (7,409) -- (7,061)
</TABLE>
61
<PAGE>
MANAGEMENT'S REPORT OF FINANCIAL STATEMENTS
TO OUR STOCKHOLDERS:
Management is responsible for the integrity of all financial
data included in this Annual Report. The financial
statements and related notes are prepared in accordance with
generally accepted accounting principles and include certain
amounts based on management's best estimates and judgment.
Financial information beyond the financial statements is
presented in a manner consistent with the Corporation's
financial statements.
Management maintains a system of accounting internal
control that includes an internal audit program. The
internal control system provides reasonable assurance that
assets are safeguarded against loss from unauthorized use or
disposition, transactions are properly authorized and
accounting records are reliable for the timely preparation
of financial statements. The foundation of the internal
control system is the Corporation's Code of Ethics, which
provides a guide to all employees consistent with the
highest standards of business conduct. The internal control
system is further supported by management's policies and
established accounting procedures. The internal control
system is monitored and modified continually to improve the
system and respond to changes in business environment and
operations.
The Board of Directors has an Audit Committee composed
of five outside and independent directors. The Committee
meets periodically with independent public accountants,
internal auditors and management to determine the
effectiveness of the internal control system and to review
the scope and/or results of audits and other related
matters. The independent public accountants and internal
auditors have direct access to the Corporation's Audit
Committee.
The consolidated financial statements have been audited
by Arthur Andersen LLP, independent public accountants, in
accordance with generally accepted auditing standards, whose
audit includes a review of the system of internal controls,
test of accounting records and other auditing procedures
considered necessary to formulate an opinion on the
consolidated financial statements. Management recognizes
that there are inherent limitations within any system of
internal controls, including the Corporation's, which relate
to the overall cost of the internal control system and the
resulting effectiveness thereof. Management believes that
the Corporation's system of internal controls provides
reasonable assurance that financial data are recorded
properly and in a timely manner for the preparation of
reliable financial statements.
/s/Joe L. Allbritton /s/Timothy C. Coughlin /s/John L. Davis
Chairman of the President Chief
Board and Financial
Chief Executive Officer Officer
62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO RIGGS NATIONAL CORPORATION:
We have audited the accompanying consolidated statements of
condition of RIGGS NATIONAL CORPORATION (a Delaware corporation)
and its subsidiaries as of December 31, 1994, and 1993,
and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial
statements are the responsibility of Riggs National Corporation's
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the
financial statements of Riggs AP Bank Limited (an indirect,
wholly owned subsidiary), which statements reflect total assets
of 10.3%, and total interest income of 20.7%, of the related
consolidated totals for 1992. Those statements were audited
by other auditors whose report has been furnished to us, and
our opinion, insofar as it relates to the amounts included
for Riggs AP Bank Limited, is based solely on the report of
the other auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the
report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of
other auditors, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Riggs National Corporation and its
subsidiaries as of December 31, 1994, and 1993, and the
results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Washington, D.C.,
January 23, 1995
63
<PAGE>
SUPPLEMENTAL FINANCIAL DATA
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1994
Unaudited for the Years Ended
December 31, 1994, 1993 and 1992
(In Thousands, Except Per First Second Third Fourth
Share Amounts) Quarter Quarter Quarter Quarter
_______________________________________________________________________
<S> <C> <C> <C> <C>
Interest Income $63,898 $64,423 $67,419 $70,265
Interest Expense 26,939 26,189 27,936 31,659
_______________________________________________________________________
Net Interest Income 36,959 38,234 39,483 38,606
Less: Provision for Loan Losses 2,100 2,100 2,100 --
_______________________________________________________________________
Net Interest Income (Loss)
after Provision for Loan Losses 34,859 36,134 37,383 38,606
Noninterest Income 26,771 22,562 18,793 17,398
Noninterest Expense 53,587 49,556 47,775 48,102
_______________________________________________________________________
Income (Loss) before Taxes 8,043 9,140 8,401 7,902
Applicable Income Tax (Benefit)
Expense 130 (693) 171 (141)
_______________________________________________________________________
Net Income (Loss) 7,913 9,833 8,230 8,043
Less: Dividends on Preferred Stock 3,345 3,046 3,045 2,688
_______________________________________________________________________
Net Income (Loss) Available
for Common Stock $ 4,568 $ 6,787 $ 5,185 $ 5,355
_______________________________________________________________________
Earnings (Loss) Per Common Share $ .15 $ .23 $ .17 $ .17
</TABLE>
CONSOLIDATED FINANCIAL RATIOS AND OTHER INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
_______________________________________________________________________
<S> <C> <C> <C> <C> <C>
NET INCOME TO AVERAGE:
Earning Assets .84% (2.18)% (.46)% (1.18)% (.89)%
Total Assets .76 (1.91) (.40) (1.04) (.80)
Stockholders'Equity 12.01 (42.84) (7.99) (25.19) (16.63)
_______________________________________________________________________
AVERAGE:
Loans to Deposits 69.80% 51.65% 55.33% 64.64% 71.38%
Stockholders'Equity
to Loans 10.89 10.08 10.26 7.36 8.35
Stockholders'Equity
to Deposits 7.60 5.21 5.68 4.76 5.96
Stockholders'Equity
to Assets 6.29 4.46 5.00 4.15 4.82
_______________________________________________________________________
AT DECEMBER 31:
Reserve for Loan Losses
to Net Loans 3.81% 3.42% 3.86% 3.45% 2.84%
Common Stockholders 3,712 4,488 4,481 4,389 4,365
Employees 1,624 1,667 2,147 2,187 2,426
Banking Offices 68 75 76 75 76
_______________________________________________________________________
PER SHARE DATA:
Dividend Payout
Ratio n/a n/a n/a n/a n/a
Average Common Shares
Outstanding 30,230,213 26,208,315 24,534,063 13,777,014 13,777,014
Book Value per
Common Share $5.70 $5.92 $8.98 $14.88 $20.16
________________________________________________________________________
</TABLE>
64
<PAGE>
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1993
Unaudited for the Years Ended
December 31, 1994, 1993 and 1992
(In Thousands, Except Per First Second Third Fourth
Share Amounts) Quarter Quarter Quarter Quarter
_______________________________________________________________________
<S> <C> <C> <C> <C>
Interest Income $ 67,784 $65,290 $ 61,961 $61,916
Interest Expense 33,829 32,044 29,511 26,746
_______________________________________________________________________
Net Interest Income 33,955 33,246 32,450 35,170
Less: Provision for Loan Losses 14,200 49,193 3,772 2,125
_______________________________________________________________________
Net Interest Income (Loss)
after Provision for Loan Losses 19,755 (15,947) 28,678 33,045
Noninterest Income 22,250 47,274 21,887 21,239
Noninterest Expense 69,461 98,660 47,510 51,121
_______________________________________________________________________
Income (Loss) before Taxes (27,456) (67,333) 3,055 3,163
Applicable Income Tax (Benefit)
Expense 165 5,300 93 82
_______________________________________________________________________
Net Income (Loss) (27,621) (72,633) 2,962 3,081
Less: Dividends on Preferred Stock 358 358 359 359
_______________________________________________________________________
Net Income (Loss) Available
for Common Stock $(27,979)$(72,991) $2,603 $2,722
_______________________________________________________________________
Earnings (Loss) Per Common Share $ (1.11)$ (2.89) $ .10 $ .09
</TABLE>
<TABLE>
<CAPTION>
1992
Unaudited for the Years Ended
December 31, 1994, 1993 and 1992
(In Thousands, Except Per First Second Third Fourth
Share Amounts) Quarter Quarter Quarter Quarter
_______________________________________________________________________
<S> <C> <C> <C> <C>
Interest Income $ 90,155 $89,017 $ 79,178 $69,190
Interest Expense 54,464 52,646 45,421 37,073
_______________________________________________________________________
Net Interest Income 35,691 36,371 33,757 32,117
Less: Provision for Loan Losses 6,375 11,657 6,780 27,255
_______________________________________________________________________
Net Interest Income (Loss)
after Provision for Loan Losses 29,316 24,714 26,977 4,862
Noninterest Income 27,073 30,668 45,180 27,492
Noninterest Expense 56,603 57,585 66,860 57,355
_______________________________________________________________________
Income (Loss) before Taxes (214) (2,203) 5,297 (25,001)
Applicable Income Tax (Benefit)
Expense (19) (190) 80 (940)
_______________________________________________________________________
Net Income (Loss) (195) (2,013) 5,217 (24,061)
Less: Dividends on Preferred Stock -- -- -- 358
_______________________________________________________________________
Net Income (Loss) Available
for Common Stock $ (195) $(2,013) $5,217 $(24,419)
_______________________________________________________________________
Earnings (Loss) Per Common Share $ (.01) $ (.08) $ .21 $ (.97)
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY STOCK INFORMATION*
Price Range Dividends
High Low Declared
----------------------------------------------------------------------
<S> <C> <C> <C>
1994 Fourth Quarter $10.50 $7.50 $_
Third Quarter 11.25 8.75 _
Second Quarter 10.25 7.75 _
First Quarter 10.75 8.375 _
__________________________________________________________________
1993 Fourth Quarter $9.375 $7.875 $_
Third Quarter 9.50 6.25 _
Second Quarter 10.625 7.125 _
First Quarter 11.625 7.75 _
____________________________________________________________________
1992 Fourth Quarter $10.125 $7.00 $_
Third Quarter 8.25 6.375 _
Second Quarter 8.625 6.375 _
First Quarter 9.25 4.25 _
_____________________________________________________________________
</TABLE>
* The high and low information listed above represents high and low
sales prices as reported on the NASDAQ National Market System.
65
<PAGE>
THREE-YEAR FOREIGN AVERAGE CONSOLIDATED STATEMENTS OF
CONDITION AND RATES
<TABLE>
<CAPTION>
1994 1993 1992
Average Average Average
(In Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
thousands) Balances Expense Rates Balances Expense Rates Balances Expense Rates
_______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans, Net
of Unearned
Discounts $ 237,617 $18,397 7.74% $319,070 $23,316 7.31% $514,688 $54,422 10.57%
Securities 5,967 909 15.23 22,600 2,942 13.02 52,361 4,127 7.88
Time Deposits
with Other
Banks 132,753 6,286 4.74 315,490 14,035 4.45 443,054 23,392 5.28
Pool Funds
Provided,
Net* 285,210 13,547 4.75 190,348 6,281 3.30 169,161 6,437 3.81
_______________________________________________________________________________________________
Total Earning
Assets and
Average Rate
Earned 661,547 39,139 5.92 847,508 46,574 5.50 1,179,264 88,378 7.49
Less: Reserve
for Loan
Losses 24,589 28,834 19,816
Cash and Due
from Banks 25,571 26,714 29,417
Premises and
Equipment,
Net 16,482 19,038 24,596
Other Assets 17,710 44,309 89,864
_______________________________________________________________________________________________
Total
Assets $696,721 $908,735 $1,303,325
Liabilities and Stockholders' Equity
Interest-Bearing
Deposits:
Savings, NOW
and Money
Market $252,225 $6,047 2.40% $315,119 $7,268 2.31% $352,167 $11,498 3.27%
Other
Time 207,427 11,341 5.47 376,399 22,929 6.09 664,496 57,111 8.59
_______________________________________________________________________________________________
Total Interest-Bearing
Deposits 459,652 17,388 3.78 691,518 30,197 4.37 1,016,663 68,609 6.75
Short-Term
Borrowings 4,093 135 3.29 389 19 4.84 498 22 4.40
Long-Term
Debt -- -- -- -- -- -- 8,837 1,013 11.46
_______________________________________________________________________________________________
Total Interest-Bearing Funds
and Average
Rate
Incurred 463,745 17,523 3.78 691,907 30,216 4.37 1,025,998 69,644 6.79
Demand
Deposits 143,470 143,521 131,858
Other Liabilities and
Stockholders'
Equity 89,506 73,307 145,469
_______________________________________________________________________________________________
Total Liabilities and
Stockholders'
Equity $696,721 $908,735 $1,303,325
Net Interest Income
and Spread $21,616 2.14% $16,358 1.13% $18,734 .70%
Net Interest Margin on
Earning Assets 3.27% 1.93% 1.59%
</TABLE>
[FN]
* Pool Funds Provided, Net, are amounts contributed by foreign activities
to fund domestic activities.
<TABLE>
<CAPTION>
FOREIGN NET INTEREST INCOME CHANGES*
1994 Versus 1993 1993 Versus 1992
__________________________ ____________________________
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) $1,309 $(6,228) $(4,919) $(13,934) $(17,172) $(31,106)
Securities 430 (2,463) (2,033) 1,873 (3,058) (1,185)
Time Deposits with
Other Banks 861 (8,610) (7,749) (3,304) (6,053) (9,357)
Pool Funds Supplied,
Net 3,405 3,861 7,266 (915) 759 (156)
_________________________________________________________________________________________
Total Interest Income 6,005 (13,440) (7,435) (16,280) (25,524) (41,804)
Interest Expense:
Savings, NOW and Money
Market Accounts 275 (1,496) (1,221) (3,114) (1,116) (4,230)
Other Time Deposits (2,142) (9,446) (11,588) (13,729) (20,453) (34,182)
Short-Term Borrowings (8) 124 116 2 (5) (3)
Long-Term Debt -- -- -- (506) (507) (1,013)
_________________________________________________________________________________________
Total Interest Expense (1,875) (10,818) (12,693) (17,347) (22,081) (39,428)
_________________________________________________________________________________________
Net Interest Income $7,880 $(2,622) $5,258 $ 1,067 $ (3,443) $ (2,376)
</TABLE>
[FN]
* 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.
66
<PAGE>
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item pertaining to
directors of the Corporation is included in the
Corporation's proxy statement for its 1995 Annual
Meeting of Stockholders. The information required by
this Item pertaining to executive officers of the
Corporation is as follows:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER* POSITION AGE
<S> <C> <C>
Joe L. Allbritton Chairman of the Board and Chief 70
Executive Officer of the Corporation
and Chairman of the Board of
Riggs-Washington
Robert L. Sloan Vice Chairman of the Board 48
Timothy C. Coughlin President of the Corporation 52
Fred L. Bollerer Director of the Corporation and 52
President and Chief Executive
Officer of Riggs-Washington
John L. Davis Chief Financial Officer of the 53
Corporation and Executive Vice
President and Chief Financial Officer
of Riggs-Washington
Randall R. Reeves Senior Executive Vice President and 47
Head of Special Assets Group of
Riggs-Washington
Joseph W. Barr Executive Vice President of 45
Riggs-Washington - Head of
Retail Banking
Irving R. Beimler Executive Vice President of 48
Riggs-Washington - Chief Credit Officer
Paul Cushman, III Executive Vice President of 34
Riggs-Washington - Head of
International Banking Group
Henry A. Dudley, Jr. Executive Vice President of 48
Riggs-Washington - Head of
Financial Services Group
S. Dean Lesiak Executive Vice President of 42
Riggs-Washington - Head of Risk
Management
James R. Mayo Executive Vice President of 55
Riggs-Washington - Head of Technology
Services Group
Alfred J. Serafino Executive Vice President of 46
Riggs-Washington - Head of
Relationship Banking
</TABLE>
* Executive officers of Riggs National Corporation, including
certain executive officers of Riggs-Washington, as of March 15,
1995.
67
<PAGE>
EXPERIENCE OF MANAGEMENT
Joe L. Allbritton has been Chairman of the Board and
Chief Executive Officer of the Corporation since 1981.
He has served as Chairman of the Board of Riggs-
Washington since 1983 and was the Chief Executive
Officer of Riggs-Washington from 1982 to June 1993.
Mr. Allbritton was the beneficial owner of
approximately 33% of the Common Stock of the
Corporation as of March 31, 1994. He also serves as
Chairman of the Board of, and is the owner of,
Perpetual Corporation, Allbritton Communications
Company, Westfield News Advertiser, Inc. and University
Bancshares, Inc.
Robert L. Sloan was appointed Vice Chairman of the
Board in July, 1994. Mr. Sloan has served as a
Director of the Corporation since May 1993. Mr. Sloan
also is Chief Executive Officer of Sibley Memorial
Hospital.
Timothy C. Coughlin has served as President of the
Corporation since 1992. He served as President and
Chief Operating Officer of Riggs-Washington from 1983
to 1992. He has been a Director of the Corporation
since 1988 and a Director of Riggs-Washington since
1983.
Fred L. Bollerer was appointed President and Chief
Executive Officer of Riggs-Washington during July 1994
after serving as Executive Vice President in charge of
the General Banking Group since October 1993. During
1988 and 1989, Mr. Bollerer was the President and Chief
Operating Officer of First American, N.A. of
Washington, D.C. From 1989 to 1993, Mr. Bollerer was
the Chairman and Chief Executive Officer of First
American Metro Corporation.
John L. Davis joined the Corporation in June 1993
and is Chief Financial Officer of the Corporation and
Executive Vice President and Chief Financial Officer of
Riggs-Washington. Mr. Davis served as Senior Vice
President and Controller of First Florida Bank, N.A.
from 1990 to 1992 and as Senior Vice President and
Chief Financial Officer of First Union National Bank of
Georgia from 1987 to 1990.
Randall R. Reeves joined the Corporation in 1991 as
Executive Vice President. He has served as Senior
Executive Vice President and Chief Credit Officer from
1992 to September 1994, and as Acting Chief Operating
Officer of Riggs-Washington from July 1992 to June
1993. Mr. Reeves currently serves as Senior Executive
Vice President and Head of Special Assets Group of
Riggs-Washington.
Joseph W. Barr joined the Corporation as Executive
Vice President in charge of Retail Banking in July
1993. He served as Executive Vice President in charge
of Retail Banking at First American Metro Corp. from
1992 to June 1993 and as Executive Vice President in
charge of Community Banking at Perpetual Savings Bank,
F.S.B. from 1989 to 1992.
Irving R. Beimler joined the Corporation during
November 1994 as Executive Vice President and Chief
Credit Officer. Mr. Beimler was Executive Vice
President and Manager of Credit Administration for
Fleet Bank of New York, Albany.
Paul Cushman, III has served as Executive Vice
President of Riggs-Washington in charge of the
International Banking Group since 1992. He was Senior
Vice President of Riggs-Washington from 1989 to 1992
and Vice President of Riggs-Washington from 1987 to
1989.
Henry A. Dudley, Jr. , Executive Vice President, was
recently appointed Head of the Riggs' Financial
Services Group, which includes the Trust Division,
Riggs Investment Management Corporation (RIMCO), and
the Domestic Private Banking Division. He previously
served as Executive Vice President of the Domestic
Private Banking Division, Senior Vice President of
Corporate Banking and Vice President of the
International Division.
S. Dean Lesiak joined the Corporation in July 1993
as Executive Vice President of Riggs-Washington in
charge of Risk Management. He served as Chief
Compliance Officer of First Florida Banks, Inc. from
1992 to 1993, as Senior Vice President--Senior Credit
Policy Officer of First Florida Banks, Inc. from 1988
to 1991, and as a Senior Loan Review Officer, Society
Corporation, Cleveland, Ohio from 1984 to 1989 . Mr.
Lesiak also served as a National Bank Examiner at the
OCC for over ten years.
James R. Mayo joined the Corporation during October
1994 as Executive Vice President and Chief Technology
Officer. He was Service Center Manager of First
Union/South Florida Operations, Pompano Beach.
Alfred J. Serafino joined the Corporation in October
1988 as an Executive Vice President in Commercial
Banking. He served as President and Chief Executive
Officer of Riggs-Maryland, where he remained until
February 1991, before he was transferred to the
Commercial Real Estate Group, Riggs-Washington. Mr.
Serafino served as Regional Executive Officer in charge
of the Maryland West Commercial Division at Sovran Bank
for 12 years.
68
<PAGE>
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is included in
Riggs National Corporation's definitive Proxy Statement
to Stockholders, which is incorporated by reference,
except for Items 402 (k) and (l) of Regulation S-K.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is included in
Riggs National Corporation's definitive Proxy Statement
to Stockholders, which is incorporated by reference,
except for Items 402 (k) and (l) of Regulation S-K.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in
Note 4 to the Financial Statements of this Form 10-K
and in Riggs National Corporation's definitive Proxy
Statement to Stockholders, which is incorporated by
reference, except for Items 402 (k) and (l) of
Regulation S-K.
69
<PAGE>
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
<TABLE>
<CAPTION>
14(a) Page(s)
<S> <C>
The following are submitted under Item 8:
Consolidated Statements of Income--Years
Ended December 31, 1994, 1993 and 1992. 32
Consolidated Statements of Condition--
At December 31, 1994 and 1993. 33
Consolidated Statements of Changes in
Stockholders' Equity--Years Ended
December 31, 1994, 1993 and 1992. 34
Consolidated Statements of Cash Flows--
Years Ended December 31, 1994, 1993
and 1992. 35
Notes to Consolidated Financial Statements
as of December 31, 1994, 1993 and 1992. 36-61
Management's Report on Financial
Statements 62
Report of Independent Public Accountants 63
</TABLE>
14(b) Reports on Form 8-K
None.
14(c) Exhibits
The exhibits listed on the Index to Exhibits on Pages
72 through 73 hereof are incorporated by reference or
filed herewith in response to this item.
70
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RIGGS NATIONAL CORPORATION /s/ JOE L. ALLBRITTON
___________________________
Joe L. Allbritton, Chairman
of the Board and Chief
Executive Officer
March 31, 1995
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in
the capacities and on the date indicated.
/s/ TIMOTHY C. COUGHLIN President
________________________
Timothy C. Coughlin
/s/ JOHN L. DAVIS Chief Financial Officer
________________________ (Principal Financial
John L. Davis and Accounting Officer)
BARBARA B. ALLBRITTON* Director
_______________________
(Barbara B. Allbritton)
ROBERT L. ALLBRITTON* Director
_______________________
Robert L. Allbritton
FRED L. BOLLERER* Director
_______________________
(Fred L. Bollerer)
CALVIN CAFRITZ* Director
_______________________
Calvin Cafritz
CHARLES A. CAMALIER, III* Director
__________________________
(Charles A. Camalier)
RONALD E. CUNEO* Director
_____________________
(Ronald E. Cuneo)
FLOYD E. DAVIS, III* Director
______________________
(Floyd E. Davis, III)
JACQUELINE C. DUCHANGE* Director
________________________
(Jacqueline C. Duchange)
MICHELA A. ENGLISH* Director
_____________________
(Michela A. English)
DR. JAMES E. FITZGERALD* Director
_________________________
(Dr. James E. Fitzgerald)
DAVID J.GLADSTONE* Director
_____________________
(David J. Gladstone)
LAWRENCE I. HEBERT* Director
_____________________
(Lawrence I. Hebert)
MICHAEL J. JACKSON* Director
_____________________
(Michael J. Jackson)
LEO J. O'DONOVAN, S.J.* Director
________________________
(Leo J. O'Donovan, S.J.)
STEVEN B. PFEIFFER* Director
_____________________
(Steven B. Pfeiffer)
JOHN A. SARGENT* Director
__________________
(John A. Sargent)
ROBERT L. SLOAN* Vice Chairman
_________________ of the Board
(Robert L. Sloan)
JAMES W. SYMINGTON* Director
_____________________
(James W. Symington)
JACK VALENTI* Director
______________
(Jack Valenti)
EDDIE N. WILLIAMS* Director
____________________
(Eddie N. Williams)
*By: /s/ MARY B. LeMONT
________________________________
Mary B. LeMont, Attorney-in-fact
March 31, 1995
71
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description Pages
__________________________________________________________________
<C> <S> <C>
(2.1) Agreement and Plan of Reorganization by
and between Riggs National Corporation and
Guaranty Bank and Trust Company dated June
11, 1986 and related Stock Purchase Agreement
(Incorporated by reference to the Registrant's
Form 10-Q for the quarter ended June 30, 1986,
SEC File No. 0-9756.)
(2.2) Agreement and Plan of Reorganization by and
between Riggs National Corporation and First
Fidelity Bank, dated June 17, 1987 and related
Stock Purchase Agreement(Incorporated by reference
to Exhibit 2.1 and Appendix B of Registration
Statement on Form S-4, Registration No. 33-16473,
filed September 4, 1987, SEC File No. 0-9756.)
(2.3) Purchase and Assumption Agreement among Federal
Deposit Insurance Corporation,Receiver of the
National Bank of Washington, Federal Deposit
Insurance Corporation and The Riggs National Bank
of Washington, D.C. dated as of August 10, 1990.
Indemnity Agreement between Federal Deposit Insurance
Corporation and The Riggs National Bank of Washington,
D.C. dated as of August 10, 1990. (Incorporated by
reference to the Registrant's Form 10-Q for the
quarter ended June 30, 1990, SEC File No. 0-9756.)
(3.1) Certificate of Incorporation as Amended (Incorporated
by reference to the Registrant's Form 10-Q for the
quarter ended September 30, 1989, SEC File No. 0-9756.)
(3.2) By-laws of the Registrant with amendments through
February 12, 1992. (Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year
1993, SEC File No. 0-9756.)
(4.1) Indenture dated September 15, 1984 with respect to
$60 million Floating Rate Subordinated Notes due 1996
(Incorporated by reference to the Registrant's Form
10-Q for the quarter ended September 30, 1984, SEC
File No. 0-9756.)
(4.2) Indenture dated December 18, 1985 with respect to $100
million Floating Rate Subordinated Capital Notes due
1996 (Incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year 1985, SEC File
No. 0-9756.)
(4.3) Indenture dated June 1, 1989 with respect to $100
million 9.65% Subordinated Debentures due 2009
(Incorporated by reference to the Registrant's Form 8-K
dated June 20, 1989, SEC File No. 0-9756.)
(4.4) Indenture dated January 1, 1994 with respect to $125
million, 8.5% Subordinated Debentures due 2006.
(Incorporated by reference to the Registrant's Form 10-Q
for the quarter ended March 31, 1994, SEC File No.
0-9756.)
(10.1) Agreement dated April 22, 1981 between 1120 Vermont Avenue
Associates and The Riggs National Bank of Washington, D.C.
(Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year 1981, SEC File
No. 0-9756.)
(10.2) Corrected Version of Riggs National Corporation 1984
Stock Appreciation Rights Plan as Amended February 15,
1989 and previously filed with the Registrant's Annual
Report on Form 10-K for the year 1988, SEC File No. 0-9756.
(Incorporated by reference to the Registrant's Annual
report on Form 10-K for the year 1989, SEC File
No. 0-9756.)
(10.3) Split Dollar Life Insurance Plan Agreements.
(Incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year 1989, SEC File
No. 0-9756.)
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Pages
__________________________________________________________________
<C> <S> <C>
(10.5) Supplemental Executive Retirement Plan as amended
September 15, 1993. (Incorporated by reference to
the Registrant's Form 10-Q for the quarter ended
September 30, 1993, SEC File No. 0-9756.)
(10.6) Management Employment Arrangement dated June 9, 1993.
(Incorporated by reference to the Registrant's Form
10-Q for the quarter ended June 30, 1993, SEC File
No. 0-9756.)
(10.7) 1993 Stock Option Plan as amended May 11, 1994, and
the 1994 Stock Option Plan. (Incorporated by reference
to the Registrant's Form 10-Q for the quarter ended
June 30, 1994, SEC File No. 0-9756.)
(10.8) Letter Confirming Compensation of the President of
The Riggs National Bank of Washington, D.C., dated
October 5, 1994. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended
September 30, 1994, SEC File No. 0-9756.)
(10.9) Deferred Compensation Plan for Directors. (Incorporated
by reference to the Registrant's Form 10-Q for the
quarter ended September 30, 1994, SEC File No. 0-9756.)
(10.10)Description of 1994 Bonus Plan. (Incorporated by
reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1994, SEC File No. 0-9756.)
(10.11)Supplemental Executive Retirement Plan, as amended Exhibit 10.11
December 14, 1994. 1-30
(10.12)Trust Agreement, dated December 14, 1994, for the Exhibit 10.12
Supplemental Executive Retirement Plan and the Split 1-17
Dollar Life Insurance and Supplemental Death
Benefit Plans.
(18) Letter from Arthur Andersen & Co. regarding change in
accounting principle. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended March 31,
1990, SEC File No. 0-9756.)
(21) Subsidiaries of the Registrant: The Corporation's only
significant subsidiaries, as defined in Regulation S-X, are
The Riggs National Bank of Washington, D.C., organized
under the national banking laws of the United States and
Riggs AP Bank Limited, organized under the laws of the
United Kingdom.
(22) Proxy Statement dated October 6, 1989 and incorporated
by reference (Commission File No. 0-9756.)
(23.1) Report of Ernst and Young Exhibit 23.1
(23.2) Consent of Ernst and Young Exhibit 23.2
(24) Power of Attorney Exhibit 24
1-3
Exhibits omitted are not required or not applicable.
</TABLE>
Portions of Riggs National Corporation's definitive Proxy
Statement to Stockholders, except for Items 402 (k) and (l) of
Regulation S-K are incorporated by reference in Parts I and III of
this Annual Report.
73
<PAGE>
RIGGS NATIONAL CORPORATION
__________________________
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
______________________________________
Effective January 1, 1993,
Amended and Restated As of December 14, 1994
<PAGE>
RIGGS NATIONAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Article I
Purpose; Effective Date
_______________________
1.1 Purpose. The purpose of this Supplemental Executive Retirement
_______
Plan (the "Plan"), as established by Riggs National Corporation (the
"Corporation") and initially effective as of January 1, 1993, is to provide
supplemental retirement benefits to certain key employees of the Corporation
and its subsidiaries. It is intended that the Plan will aid in retaining and
attracting individuals of exceptional ability by providing them with these
benefits.
1.2 Effective Date. This Restated Plan shall be effective as of
______________
December 14, 1994.
Article II
Definitions
___________
For the purposes of this Plan, the following terms shall have the meanings
indicated unless the context clearly indicates otherwise:
- 2 -
<PAGE>
2.1 Administrative Committee. "Administrative Committee" means the
________________________
Pension and Benefits Committee of The Riggs National Bank of Washington, D.C.
or its successor committee as may be appointed by the Board to administer the
Plan pursuant to Article VII.
2.2 Beneficiary. "Beneficiary" means the person, persons or entity as
___________
designated by the Participant, entitled under Article VI to receive any Plan
benefits payable after the Participant's death.
2.3 Board. "Board" means the Board of Directors of the Corporation.
_____
2.4 Cause. "Cause" means any act materially detrimental to the best
_____
interests of the Employer and that constitutes on the part of the Participant
personal dishonesty, willful misconduct in clear conflict with reasonable
standards of employee conduct, breach of fiduciary duty involving personal
profit, intentional failure to perform duties of the Participant's position,
willful violation of law, governmental rule or regulation (other than traffic
violations or similar offenses) or final cease and desist order, or for any
reason which would constitute grounds for removal from office by the
appropriate Federal banking agencies under applicable law.
- 3 -
<PAGE>
2.5 Change of Control. "Change of Control" means a sale of
_________________
substantially all of the Corporation's assets or the acquisition, whether
directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the
Securities Act of 1933 (the "Act"), or of record, of securities of the
Corporation representing twenty-five percent (25%) or more in the aggregate
voting power of the Corporation's then-outstanding Common Stock by any
"person" (within the meaning of Sections 13(d) and 14(d) of the Act),
including any corporation or group of associated persons acting in concert,
other than (i) the Corporation or its subsidiaries and/or (ii) any employee
pension benefit plan (within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) of the
Corporation or of its subsidiaries, including a trust established pursuant to
any such plan; provided, that a Change of Control will not result from (A) a
________
transfer of the Corporation's voting securities by a person who is the
beneficial owner, directly or indirectly, of twenty-five percent (25%) or more
of the voting securities of the Corporation (a "25 Percent Owner") to (i) a
member of such 25 Percent Owner's immediate family (within the meaning of Rule
16a-1(e) of the Act) either during such 25 Percent Owner's lifetime or by will
or the laws of descent and distribution; (ii) any trust as to which the 25
Percent Owner or a member (or members) of 25 Percent Owner's immediate family
(within the meaning of Rule 16a-1(e) of the Act) is the beneficiary; (iii) any
trust as to which the 25 Percent Owner is the settlor with sole power to
revoke; or (iv) any
- 4 -
<PAGE>
entity over which such 25 Percent Owner has the power, directly or indirectly,
to direct or cause the direction of the management and policies of the entity,
whether through the ownership of voting securities, by contract, or otherwise;
or (v) any charitable trust, foundation or corporation under Section 501
(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), which is
funded by the 25 Percent Owner; or (B) the acquisition of voting securities of
the Corporation by either (i) a person who was a 25 Percent Owner on the
effective date of the Plan or (ii) a person, trust or other entity described
in the foregoing clauses (A)(i)-(v) of this subsection.
2.6 Compensation Committee. "Compensation Committee" means the Joint
______________________
Compensation Committee of the Board of Directors of the Corporation and The
Riggs National Bank of Washington, D.C.
2.7 "Designated Participant". "Designated Participant" means a
_______________________
Participant who occupies one of the following positions or whose Participation
Agreement states that he is a Designated Participant:
Chairman of the Board of Riggs National Corporation or The Riggs
National Bank of Washington, D.C.
President, Riggs National Corporation or The Riggs National Bank of
Washington, D.C.
The following personnel of The Riggs National Bank of Washington,
D.C.:
Chief Credit Officer
Chief Financial Officer
- 5 -
<PAGE>
Chief Technology Officer
General Counsel
Head of Retail Banking
Head of Risk Management
Head of Special Assets
Head of Financial Services
Head of Human Resources
Head of Relationship Banking
Head of Marketing
Head of Communications
Head of CRA/Fair Lending
An employee who is a Designated Participant at any time during the six-month
period preceding the date of the public announcement of a Change of Control
shall continue to be treated as a Designated Participant for purposes of
Sections 5.2(c) and 10.5, notwithstanding any change in his employment status
or the terms and conditions of his employment during such period.
2.8 Disability. "Disability" in the case of a Participant covered by a
__________
long-term disability plan maintained by the Employer shall mean that the
Participant has a disability qualifying for benefits under the long-term
disability plan covering such Participant. In the case of a Participant not
covered by a long-term disability plan maintained by the Employer,
"Disability" shall mean the Participant is unable as a result of medically
- 6 -
<PAGE>
diagnosed disease, or injury, to perform the duties of the position which he
or she occupies with the Employer. For purposes of the preceding sentence,
any Disability which begins within twenty-four (24) months of the date of the
Participant's commencement of employment for the Employer will not be
determined to be a disability if it is caused, contributed to by, or results
from a pre-existing condition. A pre-existing condition means any sickness or
injury for which the Participant has received medical treatment, consultation,
care or services, including diagnostic measures, or for which the Participant
has taken prescribed drugs or medicines within a twelve (12) month period
prior to the date of the Participant's commencement of employment. In no
event shall a Participant be treated as having a Disability if such disability
results from a self-inflicted injury, participation in a felony or service in
the armed forces of any country. The Administrative Committee shall determine
the existence of a Disability and may rely on advice from a medical examiner
satisfactory to the Administrative Committee in making the determination.
2.9 Eligible Employee. "Eligible Employee" means a key employee of the
_________________
Corporation or a subsidiary of the Corporation holding the title of senior
vice-president or a more senior title and who, if his or her first day of
employment with an Employer based on his or her most recent date of hire with
an Employer, is on or after December 1, 1992, has reached the first
anniversary
- 7 -
<PAGE>
of his or her first day of employment.
2.10 Employer. "Employer" means Riggs National Corporation, its
________
successor corporations, and its subsidiary corporations and businesses.
2.11 Joint Annuitant. "Joint Annuitant" means the person designated as
_______________
such by the Participant in this Plan under the joint and survivor life form of
payment.
2.12 Participant. "Participant" means any Employee who has been made
___________
eligible pursuant to Article III to participate in this Plan, and who has not
yet received all of the benefits to which he is entitled hereunder.
2.13 Participation Agreement. "Participation Agreement" means the
_______________________
agreement provided by the Compensation Committee and agreed to by a
Participant which entitles the Participant to participate in the Plan.
2.14 Supplemental Retirement Benefit. "Supplemental Retirement Benefit"
_______________________________
means the benefit stated in the Participation Agreement and payable under
Article V of this Plan.
2.15 Termination for Good Reason. "Termination for Good Reason" shall
___________________________
mean a voluntary termination by the Participant
- 8 -
<PAGE>
within six months of the date (i) the Employer has notified the Participant
that the Participant has been transferred to a position with a permanent
regular place of employment more than twenty-five (25) miles from the
Participant's prior permanent regular place of employment, (ii) a material
reduction by the Employer in the Participant's base rate of pay, or (iii) the
Employer, without the consent of the Participant, implements a change in
Participant's duties or responsibilities in the nature of a demotion.
Reducing a Participant's title to below senior vice president (or equivalent
title) shall in all cases be treated as a change in duties in the nature of a
demotion.
2.16 Years of Participation. "Years of Participation" means the number
______________________
of complete years of service by the Participant with the Employer beginning on
the date the Participant's participation in this Plan commences and ending on
the earlier of (i) the date the Participant terminates employment with the
Employer or (ii) as provided in Section 5.2(f), the date the Participant
ceases to be an Eligible Employee. A Participant who has incurred a
Disability shall continue to receive years of service during the period of
such Disability for purposes of determining his or her "Years of
Participation."
- 9 -
<PAGE>
Article III
Eligibility and Participation
_____________________________
3.1 Eligibility. Eligibility to participate in the Plan shall be
___________
limited to those Eligible Employees who are designated by management, from
time to time, and approved by the Compensation Committee.
3.2 Participation. The effective date of an Eligible Employee's
_____________
participation in the Plan shall be the date specified in the Participation
Agreement provided to the Employee by the Compensation Committee. An Eligible
Employee shall become a Participant only if he or she has executed the
Participation Agreement and taken all other action required by the
Compensation Committee and the Administrative Committee to commence
participation.
Article IV
Death Benefits
--------------
4.1 Pre-Termination Death Benefit. If prior to the commencement date of
_____________________________
a Participant's Supplemental Retirement Benefit under Article V, a Participant
dies while employed by an Employer or during a period of Disability for which
the Participant continues to receive Years of Participation, the Corporation
shall pay a death benefit to the Participant's
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<PAGE>
Beneficiary. The pre-termination death benefit shall be payable monthly in
equal payments of one-twelfth the annual amount of the Participant's
Supplemental Retirement Benefit. The pre-termination death benefit shall be
payable to the Participant's Beneficiary for a term certain of fifteen (15)
years and shall commence as soon as practical after death of the Participant,
but in no event later than ninety (90) days after the Administrative Committee
receives notice of the Participant's death.
4.2 Post-Termination Death Benefit. If a Participant with a vested
______________________________
interest in his or her Supplemental Retirement Benefit dies following
termination of employment from the Employer, prior to the commencement date of
his or her benefit under Article V and with a surviving Beneficiary on the
date the Participant would have attained age sixty-two (62), the Corporation
shall pay a post-termination death benefit to the Participant's Beneficiary.
The annual amount of the post-termination death benefit is fifty percent (50%)
of the Participant's vested percentage of the annual amount of the
Participant's Supplemental Retirement Benefit (i.e., one-half the vested
Supplemental Retirement Benefit). The post-termination death benefit shall be
made in equal monthly payments of one-twelfth the annual amount. The post-
termination death benefit shall be payable to the Participant's Beneficiary
commencing on the first day of the month following the date on which the
Participant would have attained age sixty-two (62) and ending on the earlier
of the
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<PAGE>
Beneficiary's death or the payment of fifteen (15) years of payments. If a
Participant designates more than one person as a Beneficiary to share in his
or her post-termination death benefit, each person shall be treated as the
Beneficiary of that percentage of the post-termination death benefit as is
designated by the Participant and must survive until the Participant would
have attained age sixty-two (62) to receive the portion of the post-
termination death benefit for which such person is designated as Beneficiary.
Any portion of the post-termination benefit not payable to a Beneficiary as a
result of such Beneficiary's failure to survive until the Participant would
have attained age sixty-two (62) or failure to survive the fifteen (15) year
payment period shall not be payable to any other Beneficiary.
Article V
Supplemental Retirement Benefits
________________________________
5.1 Supplemental Retirement Benefit. If a Participant terminates
_______________________________
employment with Employer prior to Disability or death, the Participant shall
receive the vested portion of the Supplemental Retirement Benefit provided for
in the Participant's Participation Agreement, payable as provided for in
Section 5.3. The amount of the Participant's Supplemental Retirement Benefit
shall be specified by the Compensation Committee in the Participant's
Participation Agreement.
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<PAGE>
5.2 Vesting of Benefits.
___________________
a. Vesting Schedule for Initial Participants. Except as provided
_________________________________________
herein or within the Participant's Participation Agreement, Participants
whose effective date of participation is on the Effective Date shall
become vested in the benefits provided under this Plan based upon Years
of Participation in the following manner:
Years of Participation Vested Percentage
______________________ _________________
Less than 5 0%
5 but less than 6 50%
6 but less than 7 60%
7 but less than 8 70%
8 but less than 9 80%
9 but less than 10 90%
10 or more 100%
b. Vesting Schedule for Other Participants. Except as provided
_______________________________________
herein or within the Participant's Participation Agreement, Participants
whose effective date of participation is after the Effective Date shall
become vested in benefits provided under this Plan based upon Years of
Participation in the following manner:
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<PAGE>
Years of Participation Vested Percentage
______________________ _________________
Less than 10 0%
10 or more 100%
c. Vesting of Designated Participants in Connection With Change of
_______________________________________________________________
Control. Notwithstanding subparagraphs a. and b. above, (i) in the
_______
event of a Designated Participant's termination of employment from the
Employer occurring within the 6-month period before or after the date of
the public announcement of a Change of Control as a result of either a
termination by the Employer without Cause or a Termination for Good
Reason by the Employee, or (ii) in the event of a Change of Control, the
Designated Participant shall be 100% vested in his entire Supplemental
Retirement Benefit. For purposes of this Section 5.2(c), a termination
shall be deemed to occur within the 6-month period specified in the
preceding sentence if the Employee is notified of his termination during
such period, even if his employment terminates after the end of such
period.
d. Vesting of Certain Terminated Participants in Connection With
_____________________________________________________________
Change of Control. Notwithstanding subparagraphs a. and b. above, in the
_________________
event of a Participant's termination of employment from the Employer
occurring within the one-year period after a Change of Control as a
result of either (i) a termination by the
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<PAGE>
Employer without Cause, or (ii) a Termination for Good Reason by the
Employee, the Participant shall be 1 100% vested in his entire
Supplemental Retirement Benefit. For purposes of this subparagraph, a
termination of a Participant's employment by the Employer made within the
6-month period prior to a Change of Control shall be treated as occurring
on the date of such Change of Control.
e. Vesting Upon Death. Notwithstanding subparagraphs a. and b.,
__________________
above, in the event of the Participant's termination of employment with
an Employer due to the Participant's death, the Participant shall be 100%
vested in the pre-termination death benefit as stated in Paragraph 4.1,
above.
f. Change in Subsidiary. In the event a Participant is employed by a
____________________
corporate subsidiary of the Corporation which is not (or ceases to be) an
Employer under the terms of the Plan, the Participant shall be treated as
continuing in employment with an Employer while employed by such former
corporate subsidiary (or its successor company).
g. Demotion. In the event a Participant remains employed by the
________
Employer, but ceases to hold the title of senior vice president (or
equivalent title) or higher, the Participant shall cease to receive Years
of Participation during the period the Participant fails to hold such
title, unless the
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<PAGE>
Compensation Committee, in its discretion, determines otherwise.
h. Accelerated Vesting. Notwithstanding any provision of this Plan
___________________
to the contrary, the Compensation Committee may, in its sole discretion,
accelerate the vesting of benefits for any Participant.
5.3 Form and Timing of Payment. The vested percentage of the
__________________________
Supplemental Retirement Benefit specified in a Participant's Participation
Agreement is the annual amount paid for the life of the Participant, but for
no more than fifteen (15) years. The annual benefit shall be paid in monthly
installments of one-twelfth of the annual benefit and shall commence as soon
as practicable after the later of Participant's termination of employment from
an Employer or attainment of age sixty-two (62), but not later than ninety
(90) days after all information necessary to calculate the benefit amount has
been received by Employer. All payments shall be made as of first day of the
month. If the Participant elects to receive his or her vested benefit amount
in unreduced form as described in this paragraph, benefits are paid to the
Participant for up to fifteen (15) years and, in the event of the
Participant's death before fifteen (15) years of benefit payments, no further
benefits will be paid.
- 16 -
<PAGE>
The Participant may request benefits to be paid in reduced form through a
joint and survivor life type of payment. Any such request must comply with
any rules or regulations adopted by the Administrative Committee. Such rules
and regulations may include deadlines for electing or changing a Participant
request for payment in the joint and survivor type. Under the joint and
survivor type of payment, the Participant shall receive a benefit of seventy-
five percent (75%) of his or her vested Supplemental Retirement Benefit amount
for his or her life, but not more than fifteen (15) years. In the event of
the Participant's death before fifteen (15) years of benefit payments, the
Participant's Joint Annuitant, if then living, shall receive a monthly benefit
of fifty percent (50%) of the Participant's vested benefit until the earlier
of the Joint Annuitant's death or payment of benefits for a period equal to
fifteen (15) years reduced by the number of years of payments to the
Participant.
For example, if a Participant's total vested benefit is $10,000 per year
and the Participant elects to receive a joint and survivor life type of
payment, the Participant would receive $7,500 per year for life or fifteen
(15) years, whichever comes first. If the Participant dies prior to receipt
of fifteen (15) years of payments, the Participant's Joint Annuitant, if
surviving, would receive $5,000 per year, until the end of the earlier of the
remaining portion of the fifteen (15) years or the Joint Annuitant's death.
- 17 -
<PAGE>
For purposes of commencement of benefits, a Participant who is 100%
vested and remains employed by an Employer after age 62, but for less than 60
hours per month, shall be treated as having terminated employment. A
Participant who is receiving Supplemental Retirement Benefits and who is
rehired by an Employer and/or who performs more than 60 hours of service per
month shall at the discretion of the Administrative Committee have his or her
benefit payments suspended. Unless the Administrative Committee determines
otherwise at the time it determines to suspend a benefit payment, any payments
suspended shall not reduce the total payments to which the Participant or his
or her Beneficiary is entitled to receive from the Corporation under this
Plan.
5.4 Disabled Participant. A Participant with a Disability shall be
____________________
eligible to elect to commence the vested percentage of his or her Supplemental
Retirement Benefit on the later of (i) attainment of age sixty-two (62), or
(ii) the first day of the month following the month during which the
Participant attains a more than a zero percent vested interest in his or her
Supplemental Retirement Benefit. If the Participant elects to commence
benefits prior to the date the Participant has attained a one-hundred percent
(100%) vested interest, the Participant shall be treated as no longer having a
Disability and shall receive no additional Years of Participation service.
- 18 -
<PAGE>
Article VI
Beneficiary Designation
_______________________
6.1 Beneficiary Designation. Each Participant shall have the right to
_______________________
designate one (1) or more persons as Beneficiary (both primary as well as
secondary) to whom death benefits under Article IV of this Plan shall be paid
in the event of a Participant's death. Each Beneficiary designation shall be
in a written form prescribed by the Administrative Committee and shall be
effective only when filed with the Administrative Committee during the
Participant's lifetime.
6.2 Changing Beneficiary. Any Beneficiary designation may be changed by
____________________
a Participant without the consent of the previously named Beneficiary by the
filing of a new Beneficiary designation with the Administrative Committee.
The filing of a new designation shall cancel all designations previously
filed.
6.3 No Beneficiary Designation. If any Participant fails to designate a
__________________________
Beneficiary in the manner provided above, or if the designation is void, the
Participant's beneficiary shall be the person in the first of the following
classes in which there is a survivor:
(a) The Participant's surviving spouse.
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<PAGE>
(b) The Participant's children in equal shares, except that if any of
the children predeceases the Participant but leaves issue surviving,
then such issue shall take the right of representation the share the
deceased child would have taken if living.
(c) The personal representative of the Participant's or Beneficiary's
estate, as the case may be.
6.4 Effect of Payment. Payment to the Beneficiary shall completely
_________________
discharge the Employer's obligations under this Plan.
Article VII
Administration
7.1 Committee. The Plan shall be administered by the Administrative
_________
Committee, which shall be appointed by the Board. The initial Administrative
Committee shall be the same as the Pension and Benefits Committee of The Riggs
National Bank of Washington, D.C. (or its successor) and shall continue to
serve in this capacity until such time that it is replaced by the Board. A
majority vote of the Administrative Committee members shall control any
decision. Members of the Administrative Committee may be Participants under
this Plan, provided that no member of such Administrative Committee shall act
on any matter directly affecting such member's benefit entitlements under the
- 20 -
<PAGE>
Plan.
7.2 Duties. The Administrative Committee shall have the authority to
______
make, amend, interpret, and enforce all appropriate rules and regulations for
the administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in such administration.
Such authority includes, but is not limited to, the authority to interpret and
decide all questions involving a Participant's vested interest in his or her
Supplemental Retirement Benefit under Section 5.2.
7.3 Agents. The Administrative Committee may, from time to time, employ
______
agents and delegate to them such administrative duties as it sees fit, and may
from time to time consult with counsel who may be counsel to the Employer.
7.4 Binding Effect of Decisions. The decision or action of the
___________________________
Administrative Committee with respect to any question arising out of or in
connection with the administration, interpretation and application of the Plan
and the rules and regulations promulgated hereunder shall be final, conclusive
and binding upon all persons having any interest in the Plan.
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<PAGE>
Article VIII
Claims Procedure
________________
8.1 Claim. Any person or entity claiming a benefit, requesting an
_____
interpretation or ruling under the Plan, or requesting information under the
Plan (hereinafter referred to as "Claimant") shall present the request in
writing to the Administrative Committee, which shall respond in writing as
soon as practicable.
8.2 Denial of Claim. If the claim or request is denied, the written
_______________
notice of denial shall state:
(a) The reason for denial, with specific reference to the Plan
provisions on which the denial is based;
(b) A description of any additional material or information required
and an explanation of why it is necessary; and
(c) An explanation of the Plan's claims review procedures.
8.3 Review of Claim. Any Claimant whose claim or request is denied or
_______________
who has not received a response within sixty (60) days may request a review by
notice given in writing to the Administrative Committee. Such request must be
made within sixty (60) days after receipt by the Claimant of the written
notice of
- 22 -
<PAGE>
denial, or in the event Claimant has not received a response sixty (60) days
after receipt by the Administrative Committee of Claimant's claim or request.
The claim or request shall be reviewed by the Administrative Committee which
may, but shall not be required to, grant the Claimant a hearing. On review,
the Claimant may have representation, examine pertinent documents, and submit
issues and comments in writing.
8.4 Final Decision. The decision on review shall normally be made
______________
within sixty (60) days after the Administrative Committee's receipt of
Claimant's claim or request. If an extension of time is required for a
hearing or other special circumstances, the Claimant shall be notified and the
time limit shall be one hundred twenty (120) days. The decision shall be in
writing and shall state the reason and the relevant Plan provisions. All
decisions on review shall be final and bind all parties concerned.
Article IX
Termination, Suspension or Amendment
____________________________________
9.1 Termination, Suspension or Amendment of Plan. The Board may, in its
____________________________________________
sole discretion, terminate or suspend the Plan at any time, in whole or in
part. The Board may amend the Plan at any time. Any amendment may provide
different benefits or amounts of benefits from those herein set forth.
However, no
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<PAGE>
such termination, suspension or amendment (including an amendment to a
Participant's Participation Agreement) shall reduce or adversely affect
benefits in pay status or the Supplemental Retirement Benefit in which the
Participant has vested under any provision of Article 5. In connection with
the termination of the Plan, the Board may, in its sole discretion, accelerate
vesting in some or all Supplemental Retirement Benefits provided for in the
Participation Agreements in effect prior to the date of the termination and/or
accelerate payment of some or all benefits due under the Plan. If the Board
elects to accelerate payments due under the Plan, the lump-sum present value
of benefits due to a Participant under the Plan shall be determined by an
actuary selected by the Board, which actuary shall apply reasonable actuarial
assumptions. Payment by the Corporation to the Participant of the lump-sum
present value determined by the actuary shall discharge the Corporation from
any further liability to the Participant under the Plan.
Article X
Miscellaneous
_____________
10.1 Unfunded Plan. This Plan is intended to be an unfunded plan
_____________
maintained primarily to provide deferred compensation benefits for a select
group of "management or highly compensated employees" within the meaning of
Sections 201, 301, and 401 of ERISA, and therefore is exempt from the
provisions of
- 24 -
<PAGE>
Parts 2, 3 and 4 of Title I of ERISA. Accordingly, to the extent necessary,
the Board may remove certain employees as Participants if it is determined by
the United States Department of Labor, a court of competent jurisdiction, or
an opinion of counsel that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA (as currently in effect or
hereafter amended) which is not so exempt.
10.2 Exclusions; Misrepresentation. No benefit shall be paid to a
_____________________________
Participant's Beneficiary if the Participant's death occurs as a result of
injuries received from participation in a felony, as a result of attempted or
actual suicide or as a result of injuries received while serving in the armed
forces of any country. The Administrative Committee may also deny payment if
the Participant has made a material misrepresentation in any form or document
provided by the Participant to or for the benefit of the Corporation. A
material misrepresentation includes, but is not limited to, any statement or
representation to an insurance company from which the Corporation purchases
one or more contracts as an investment of the Corporation in order to fund its
contractual promises under this Plan and which misrepresentation results in
the failure or refusal of such insurer to honor the terms of or pay the death
benefit due under its contract(s) with the Corporation.
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<PAGE>
10.3 Sole Obligation of the Corporation. The obligation to make
__________________________________
benefit payments to any Participant under the Plan shall be an obligation
solely of the Corporation and its successors and assigns, and shall not be an
obligation of any subsidiary of the Corporation or of any other employer.
10.4 Unsecured General Creditor. Except as provided in Section 10.5,
__________________________
Participants and Beneficiaries shall be unsecured general creditors, with no
secured or preferential right to any assets of the Corporation, any other
employer or any other party for payment of benefits under this Plan. Any
property held by the Corporation for the purpose of generating the cash flow
for benefit payments shall remain its general, unpledged and unrestricted
assets. The Corporation's obligation under the Plan shall be an unfunded and
unsecured promise to pay money in the future.
10.5 Trust Fund. The Corporation shall be responsible for the payment
__________
of all benefits provided under the Plan. At its discretion, the Corporation
may establish one (1) or more trusts, with such trustees as the Compensation
Committee may approve, for the purpose of providing for the payment of such
benefits. Whether such trust is revocable or irrevocable, its assets shall be
held for payment of all the general creditors of the Corporation and its
subsidiaries in the event of bankruptcy or insolvency. To the extent any
benefits provided under the Plan
- 26 -
<PAGE>
are paid from any such trust, the Corporation shall have no further obligation
to pay that portion of the benefit due. If not paid from the trust, such
benefits shall remain the obligation of the Corporation. Notwithstanding any
provision of the Plan to the contrary, upon a Change of Control, the
Corporation shall, as soon as possible, but in no event later than 30 days
following the Change of Control, make irrevocable contributions to the trust,
in cash or property of any kind, in an amount that is sufficient (taking into
account the then current value of any other assets held in such trust) to pay
each Designated Participant (and Beneficiary) the benefits in which each
Designated Participant (and Beneficiary) is vested pursuant to Article 5 of
the Plan on the day after the Change of Control has occurred.
10.6 Nonassignability. Neither a Participant, a Beneficiary nor any
________________
other person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
unassignable and nontransferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a Participant, a
Beneficiary or any other person, nor be transferable by operation
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<PAGE>
of law in the event of a Participant's, a Beneficiary's or any other person's
bankruptcy or insolvency.
10.7 Not a Contract of Employment. This Plan shall not constitute
____________________________
a contract of employment between Employer and the Participant. Nothing in
this Plan shall give a Participant the right to be retained in the service of
Employer or to interfere with the right of Employer to discipline or discharge
a Participant at any time.
10.8 Protective Provisions. A Participant shall cooperate with
_____________________
Employer by furnishing any and all information requested by Employer in order
to facilitate the payment of benefits hereunder, and by taking such physical
examinations as Employer may deem necessary and by taking such other action as
may be requested by Employer.
10.9 Governing Law. The provisions of this Plan shall be construed
_____________
and interpreted according to the laws of the District of Columbia, except as
preempted by federal law.
10.10 Validity. If any provision of this Plan shall be held illegal or
________
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if
such illegal and invalid provision had never been inserted herein. In the
event
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<PAGE>
that the Corporation shall be prevented from making payment of benefits under
this Plan as a result of any law, regulation or other governmental action, the
Corporation, the Employers, the Administrative Committee, the Compensation
Committee, and the employees and officers of each shall have no liability to
any Participant or Beneficiary for any payments due under the Plan.
10.11 Notice. Any notice or filing required or permitted under the Plan
______
shall be sufficient if in writing and hand delivered or sent by registered or
certified mail. Such notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification. Mailed notices shall be directed
to the following addresses:
(a) If to the Corporation, to:
Riggs National Corporation
P.O. Box 1912
4th Floor, Human Resources
Washington, D.C. 20074
Attention: Director of Human Resources of
The Riggs National Bank of Washington, D.C.
(b) If to Participant or a Beneficiary, to:
The Participant or Beneficiary at the last known
address contained in the records of Riggs' Human
Resources department.
10.12 Withholding Payroll Taxes. The Employer shall withhold from
_________________________
payments hereunder any taxes required to be withheld from such payments under
local, state or federal law. A Beneficiary may, if then permitted under
applicable law, elect
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<PAGE>
not to have withholding of federal income tax pursuant to Section 3405(a)(2)
of the Code, or any successor provision thereto.
10.13 Payment to Guardian. If a Plan benefit is payable to a minor or a
___________________
person declared incompetent or a person incapable of handling the disposition
of property, the Administrative Committee may direct payment to the guardian,
legal representative or person having the care and custody of such minor,
incompetent or person. The Administrative Committee may require proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate
prior to distribution. Such distribution shall completely discharge the
Administrative Committee and the Corporation from all liability with respect
to such benefit.
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<PAGE>
TRUST AGREEMENT
_______________
AGREEMENT, dated _______________, 199_, by and between Riggs National
Corporation, a District of Columbia corporation having its principal office in
Washington, D.C. (the "Company"), as settlor, and The Riggs National Bank of
Washington, D.C., as trustee (the "Trustee").
WHEREAS, the Company has adopted the Riggs National Corporation
Supplemental Executive Retirement Plan and the Riggs National Corporation
Split Dollar Life Insurance and Supplemental Death Benefit Plan for Senior
Executive Officers (each a "Plan") which provide for the payment of benefits
to certain present and former employees of the Company and certain of its
subsidiaries and to beneficiaries designated by such employees (each such
employee, and after his death his beneficiary or each of his beneficiaries,
are hereinafter referred to as a "Participant").
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust")
and to contribute to the Trust assets that shall be held therein, subject to
the claims of creditors of the Company or any of its subsidiaries in the event
of Insolvency of the Company or any of its subsidiaries, as herein defined,
until paid to Plan Participants and their beneficiaries in such manner and at
such times as specified in each Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement under the Internal Revenue Code of 1986, as
amended (the "Code") and shall not affect the status of each Plan as an
unfunded plan maintained for
- 1 -
<PAGE>
the purpose of providing deferred compensation or death benefits for a select
group of management or highly compensated employees for purposes of Title I of
the Employee Retirement Income Security Act of 1974, as amended; and
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in meeting its
liabilities under each Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
______________________
(a) Company hereby deposits $________________ with Trustee in trust,
which shall become the principal of the Trust to be held, administered and
disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established is revocable by Company; it shall
become irrevocable upon a Change of Control, as defined herein.
(c) The Trust is intended to be a grantor trust, of which Company and
its subsidiaries are the grantors, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Code, and shall be construed
accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of Company and its subsidiaries and shall
be used exclusively for the uses and purposes of Plan participants and general
creditors as herein set
- 2 -
<PAGE>
forth. Plan participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust.
Any rights created under each Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against Company and its subsidiaries. Any assets held by the Trust will be
subject to the claims of general creditors of the Company and its subsidiaries
under federal and state law in the event of insolvency, as defined in Section
3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with Trustee
to augment the principal to be held, administered and disposed of by Trustee
as provided in this Trust Agreement. Neither Trustee nor any Plan participant
or beneficiary shall have any right to compel such additional deposits.
(f) Notwithstanding subsection (e), upon a Change of Control, Company
shall, as soon as possible, but in no event later than 30 days following the
Change of Control, as defined herein, make irrevocable contributions, in cash
or property of any kind, to the Trust in an amount that is sufficient (taking
into account the then current value of any other assets held hereunder) to pay
each Plan Participant who is a Designated Participant (as defined in the
Supplemental Executive Retirement Plan) or beneficiary the benefits to which
such Designated
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<PAGE>
Participants or their beneficiaries would be entitled pursuant to the terms of
each Plan as of day after the Change of Control occurred.
Section 2. Payments to Plan Participants and Their
_______________________________________
Beneficiaries.
_____________
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Plan participant (and
his or her beneficiaries), that provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under each
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of each Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under each Plan shall be determined by Company or such party as it
shall designate under each Plan, and any claim for such benefits shall be
considered and reviewed
- 4 -
<PAGE>
under the procedures set out in each Plan.
(c) Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of each Plan.
Company shall notify Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with
the terms of each Plan, Company shall make the balance of each such payment as
it falls due. Trustee shall notify Company where principal and earnings are
not sufficient.
Section 3. Trustee Responsibility Regarding Payments To
____________________________________________
Trust Beneficiary When Company or Any of Its
____________________________________________
Subsidiaries is Insolvent.
_________________________
(a) Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company or any of its subsidiaries is Insolvent.
Company or any of its subsidiaries shall be considered "Insolvent" for
purposes of this Trust Agreement if Company or any of its subsidiaries (i) is
unable to pay its debts as they become due, (ii) is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code, or (iii) is
determined to be insolvent by [any federal or state banking authority to which
it is subject].
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the
- 5 -
<PAGE>
Trust shall be subject to claims of general creditors of Company and its
subsidiaries under federal and state law as set forth below.
(1) The Board of Directors and the Chief ExecutiveOfficer of
Company shall have the duty to inform Trustee in writing of Insolvency of
Company or any of its subsidiaries. If a person claiming to be a
creditor of Company alleges in writing to Trustee that Company or any of
its subsidiaries has become Insolvent, Trustee shall determine whether
Company or any of its subsidiaries is Insolvent and, pending such
determination, Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Insolvency of Company or
any of its subsidiaries, or has received notice from Company or a person
claiming to be a creditor alleging that Company or any of its
subsidiaries is Insolvent, Trustee shall have no duty to inquire whether
Company or any of its subsidiaries is Insolvent. Trustee may in all
events rely on such evidence concerning solvency of Company or any of its
subsidiaries as may be furnished to Trustee and that provides Trustee
with a reasonable basis for making a determination concerning solvency of
Company or any of its subsidiaries.
(3) If at any time Trustee has determined that Company or any of
its subsidiaries is Insolvent, Trustee shall
- 6 -
<PAGE>
discontinue payments to Plan participants or their beneficiaries and
shall hold the assets of the Trust for the benefit of general creditors
of Company or its subsidiaries, as the case may be. Nothing in this
Trust Agreement shall in any way diminish any rights of Plan participants
or their beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under each Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after Trustee has determined that Company or any of
its subsidiaries is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of each Plan for the
period of such discontinuance, less the aggregate amount of any payments made
to Plan participants or their beneficiaries by Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
___________________
- 7 -
<PAGE>
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return
to Company or to divert to others any of the Trust assets before all payment
of benefits has been made to Plan participants and their beneficiaries
pursuant to the terms of each Plan.
Section 5. Investment Authority.
____________________
(a) Trustee shall have, with respect to the Trust, power in its
discretion to invest and reinvest in any property, real, personal or mixed,
wherever situated, foreign or domestic, including, without limitation, common
and preferred stocks (including stock of the Company), bonds, notes and
debentures (including obligations of the Company); leaseholds; mortgages
(including, without limitation, any collective or part interest in any bond
and mortgage or note and mortgage); certificates of deposit; insurance
policies and contracts; and oil, mineral or gas properties, royalties,
interests or rights (including equipment pertaining thereto). All rights
associated with assets of the Trust shall be exercised by Trustee or the
person designated by Trustee, and shall in no event be exercisable by or rest
with Plan participants, except that, with respect to Trust assets, voting
rights will be exercised by, and dividend rights will rest with, the Company;
provided, however, that the investment authority exercised by the Trustee
________ _______
hereunder shall be
- 8 -
<PAGE>
subject to any written investment policy guidelines (which may include asset
classes specified therein) delivered by the Company to the Trustee.
(b) Company shall have the right at any time, and from time to time in
its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by Company in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.
Section 6. Disposition of Income.
_____________________
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
_____________________
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Trustee shall maintain separate accounts for each Plan
and for each Participant of each such Plan; provided, however, that the
________ _______
maintenance of such separate accounts shall not affect the ability of the
Trustee to invest Trust assets on a collective basis. Within 60 days
following the close of each calendar year and within 60 days after the removal
or resignation of Trustee,
- 9 -
<PAGE>
Trustee shall deliver to Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities
and other property held in the Trust at the end of such year or as of the date
of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee.
_________________________
(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, the
Trustee shall incur no liability to any person for any action taken pursuant
to a direction, request or approval given by Company which is contemplated by,
and in conformity with, the terms of each Plan or this Trust and is given in
writing by Company. In the event of a dispute between Company and a party,
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising
- 10 -
<PAGE>
in connection with this Trust (other than any litigation resulting from the
gross negligence or willful neglect of the Trustee), Company agrees to
indemnify Trustee against Trustee's costs, expenses and liabilities
(including, without limitation, attorneys' fees and expenses) relating thereto
and to be primarily liable for such payments. If Company does not pay such
costs, expenses and liabilities in a reasonably timely manner, Trustee may
obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder and charge the
reasonable fees and expenses of such persons against the assets of the Trust
(unless paid by Company).
(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy, other
than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
- 11 -
<PAGE>
(f) Notwithstanding the provisions of Section 8(e) above, Trustee may
loan to Company the proceeds of any borrowing against an insurance policy held
as an asset of the Trust.
(g) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee.
____________________________________
Company shall pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
__________________________________
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 60 days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days notice or upon shorter
notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 60 days after
receipt of notices of
- 12 -
<PAGE>
resignation, removal or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
Section 11. Appointment of Successor.
________________________
If Trustee resigns or is removed in accordance with Section 10 hereof,
Company may appoint any third party, such as a bank trust department or other
party that may be granted corporate trustee powers under state law to replace
Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in the Trust assets.
The former Trustee shall execute any instrument necessary or reasonably
requested by Company or the successor Trustee to evidence the transfer.
- 13 -
<PAGE>
Section 12. Amendment or Termination.
________________________
(a) This Trust Agreement may be amended by a written instrument executed
by Trustee and Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of each Plan or shall make the Trust revocable
after it has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to any benefits
pursuant to the terms of each Plan unless sooner revoked in accordance with
Section 1(b) hereof. Upon termination of the Trust, any assets remaining in
the Trust shall be returned to Company.
Section 13. Miscellaneous
_____________
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the District of Columbia, to the extent not
preempted by federal law.
- 14 -
<PAGE>
(d) For purposes of this Trust Agreement, "Change of Control" means a
sale of substantially all of the Corporation's assets or the acquisition,
whether directly, indirectly, beneficially (within the meaning of Rule 13d-3
of the Securities Act of 1933 (the "Act"), or of record, of securities of the
Corporation representing twenty-five percent (25%) or more in the aggregate
voting power of the Corporation's then-outstanding Common Stock by any
"person" (within the meaning of Sections 13(d) and 14(d) of the Act),
including any corporation or group of associated persons acting in concert,
other than (i) the Corporation or its subsidiaries and/or (ii) any employee
pension benefit plan (within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) of the
Corporation or of its subsidiaries, including a trust established pursuant to
any such plan; provided, that a Change of Control will not result from (A) a
________
transfer of the Corporation's voting securities by a person who is the
beneficial owner, directly or indirectly, of twenty-five percent (25%) or more
of the voting securities of the Corporation (a "25 Percent Owner") to (i) a
member of such 25 Percent Owner's immediate family (within the meaning of Rule
16a-1(e) of the Act) either during such 25 Percent Owner's lifetime or by will
or the laws of descent and distribution; (ii) any trust as to which the 25
Percent Owner or a member (or members) of 25 Percent Owner's immediate family
(within the meaning of Rule 16a-1(e) of the Act)
- 15 -
<PAGE>
is the beneficiary; (iii) any trust as to which the 25 Percent Owner is the
settlor with sole power to revoke; or (iv) any entity over which such 25
Percent Owner has the power, directly or indirectly, to direct or cause the
direction of the management and policies of the entity, whether through the
ownership of voting securities, by contract, or otherwise; or (v) any
charitable trust, foundation or corporation under Section 501 (c)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"), which is funded by the
25 Percent Owner; or (B) the acquisition of voting securities of the
Corporation by either (i) a person who was a 25 Percent Owner on the effective
date of the Plan or (ii) a person, trust or other entity described in the
foregoing clauses (A)(i)-(v) of this subsection.
- 16 -
<PAGE>
IN WITNESS WHEREOF, Riggs National Corporation and The Riggs National
Bank of Washington, D.C. have executed this Agreement of Trust as of the day
and year first above written.
ATTEST: RIGGS NATIONAL CORPORATION
_____________________________ BY: ____________________________
[Title] [Title]
Dated: _________________
ATTEST: THE RIGGS NATIONAL BANK OF
WASHINGTON, D.C.
as Trustee
____________________________ BY: ____________________________
[Title] [Title]
Dated: _________________
- 17 -
<PAGE>
POWER OF ATTORNEY
Know all men by these presents that each person whose signature appears below
constitutes and appoints Mary B. LeMont his true and lawful attorney-in-fact
and with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign the Form 10-K for the
Riggs National Corporation for the fiscal year ending December 31, 1994,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing required and
necessary to be done in and about the premises, or fully to all
intent and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Capacity Date
_________ ________ ____
<S> <C> <C>
/s/ Barbara B. Allbritton Director 3/15/95
_________________________________________
Barbara B. Allbritton
/s/ Robert L. Allbritton 3/15/95
_________________________________________ Director
Robert L. Allbritton
/s/ Frederick L. Bollerer 3/15/95
_________________________________________ Director
Frederick L. Bollerer
/s/ Calvin Cafritz 3/15/95
_________________________________________ Director
Calvin Cafritz
/s/ Charles A. Camalier, III 3/15/95
_________________________________________ Director
Charles A. Camalier, III
/s/ Ronald E. Cuneo 3/15/95
_________________________________________ Director
Ronald E. Cuneo
/s/ Floyd E. Davis, III 3/15/95
_________________________________________ Director
Floyd E. Davis, III
</TABLE>
1
<PAGE>
POWER OF ATTORNEY
Page 2 of 3
<TABLE>
<CAPTION>
Signature Capacity Date
_________ ________ ____
<S> <C> <C>
/s/ Jacqueline C. Duchange 3/15/95
_________________________________________ Director
Jacqueline C. Duchange
/s/ Michela A. English 3/17/95
_________________________________________ Director
Michela A. English
/s/ James E. Fitzgerald 3/15/95
_________________________________________ Director
James E. Fitzgerald
/s/ David J. Gladstone 3/15/95
_________________________________________ Director
David J. Gladstone
/s/ Lawrence I. Hebert 3/15/95
_________________________________________ Director
Lawrence I. Hebert
/s/ Michael J. Jackson 3/15/95
_________________________________________ Director
Michael J. Jackson
/s/ Leo J. O'Donovan 3/15/95
_________________________________________ Director
Leo J. O'Donovan
/s/ Steven B. Pfeiffer 3/15/95
_________________________________________ Director
Steven B. Pfeiffer
/s/ John A. Sargent 3/15/95
_________________________________________ Director
John A. Sargent
</TABLE>
2
<PAGE>
POWER OF ATTORNEY
Page 3 of 3
<TABLE>
<CAPTION>
Signature Capacity Date
_________ ________ ____
<S> <C> <C>
/s/ Robert L. Sloan Vice Chairman 3/15/95
_________________________________________ of the Board
Robert L. Sloan
/s/ James W. Symington 3/15/95
_________________________________________ Director
James W. Symington
/s/ Jack Valenti 3/15/95
_________________________________________ Director
Jack Valenti
/s/ Eddie N. Williams 3/15/95
_________________________________________ Director
Eddie N. Williams
</TABLE>
3
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-K DATED DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000350847
<NAME> RIGGS NATIONAL CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 206,953
<INT-BEARING-DEPOSITS> 2,775,771
<FED-FUNDS-SOLD> 160,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 598,277
<INVESTMENTS-CARRYING> 443,163
<INVESTMENTS-MARKET> 434,993
<LOANS> 2,549,924
<ALLOWANCE> 97,039
<TOTAL-ASSETS> 4,425,665
<DEPOSITS> 3,602,794
<SHORT-TERM> 293,437
<LIABILITIES-OTHER> 44,146
<LONG-TERM> 217,625
<COMMON> 77,863
0
4,000
<OTHER-SE> 185,800
<TOTAL-LIABILITIES-AND-EQUITY> 4,425,665
<INTEREST-LOAN> 194,525
<INTEREST-INVEST> 53,555
<INTEREST-OTHER> 17,925
<INTEREST-TOTAL> 266,005
<INTEREST-DEPOSIT> 83,557
<INTEREST-EXPENSE> 112,723
<INTEREST-INCOME-NET> 153,282
<LOAN-LOSSES> 6,300
<SECURITIES-GAINS> 226
<EXPENSE-OTHER> 199,020
<INCOME-PRETAX> 33,486
<INCOME-PRE-EXTRAORDINARY> 34,019
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,019
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
<YIELD-ACTUAL> 3.89
<LOANS-NON> 27,383
<LOANS-PAST> 6,121
<LOANS-TROUBLED> 555
<LOANS-PROBLEM> 26,038
<ALLOWANCE-OPEN> 6,300
<CHARGE-OFFS> 12,630
<RECOVERIES> 15,658
<ALLOWANCE-CLOSE> 97,039
<ALLOWANCE-DOMESTIC> 74,140
<ALLOWANCE-FOREIGN> 22,899
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE MEMBERS OF RIGGS AP BANK LIMITED
We have audited the consolidated statements of income, retained earnings and
cash flows of Riggs AP Bank Limited and subsidiaries (the "Bank") for the
year ended December 31, 1992 (not separately included herein). These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, consolidated results of the Bank's operations and
its cash flows for the year ended December 31, 1992 in conformity with
United States generally accepted accounting principles.
The Bank is a wholly owned subsidiary of Riggs National Corporation (the
"Corporation") and, as discussed in Note 19 to the Bank's financial
statements, is substantially dependent on funding from its parent group of
companies. The financial statement impact on the Bank, if any, of regulatory
actions that may result from the failure of the Corporation, including its
subsidiaries, to comply with the capital plans or with the minimum regulatory
capital requirements described in Note 19, cannot presently be determined.
Accordingly, no adjustments that may result from the ultimate resolution of
this uncertainty have been made in the Bank's financial statements.
/s/ ERNST & YOUNG
Ernst & Young
Chartered Accountants
London, March 2, 1993
except for Note 19-Subsequent Events:
Regulatory and Other Developments
Relating to Riggs National Corporation
as to which the date is September 14, 1993
1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-51711 and No. 33-56485) and related Prospectuses
of Riggs National Corporation pertaining to the Riggs National Corporation
1993 Stock Option Plan and the Riggs National Corporation 1994 Stock Option
Plan, respectively, and in the Registration Statement and related Prospectus
(Form F-3 No. 33-50775) of Riggs National Corporation relating to the sale
of 4,000,000 Shares of its 10.75% Noncumulative Perpetual Preferred Stock,
Series B and 2,924,000 Shares of its Common Stock of our report with respect
to the financial statements of Riggs AP Bank Limited dated March 2, 1993,
except for Note 19-Subsequent Events: Regulatory and Other Developments
Relating to Riggs National Corporation as to which the date is September 14,
1993, included as Exhibit 28 to the Annual Report (Form 10-K) of Riggs
National Corporation for the year ended December 31, 1993, filed with the
Securities and Exchange Commission.
/s/ERNST & YOUNG
Ernst & Young
Chartered Accountants
London, England
March 31, 1995
1
