<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 0-9756
RIGGS NATIONAL CORPORATION
______________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 52-1217953
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1503 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20005
_______________________________________________________
(Address of principal executive offices)
(Zip Code)
(202) 835-6000
__________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or shorter periods that the registrant was required to
file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practical date.
COMMON STOCK, $2.50 PAR VALUE 30,258,414 SHARES
_____________________________ ___________________________
(Title of Class) Outstanding at May 15, 1995
<PAGE>
RIGGS NATIONAL CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three months ended March 31, 1995 and 1994 3
Consolidated Statements of Condition
March 31, 1995 and 1994, and December 31, 1994 4
Consolidated Statements of Changes in Stockholders' Equity
Three months ended March 31, 1995 and March 31, 1994 5
Consolidated Statements of Cash Flows
Three months ended March 31, 1995 and 1994 6
Financial Ratios and Other Financial Data 7
Notes to the Consolidated Statements 8-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 29
2
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
______________________________________________________________________________________________________________________________
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans:
Taxable $49,111 $45,618
Tax-Exempt 567 1,505
------ ------
Total Interest and Fees on Loans 49,678 47,123
------ ------
Interest and Dividends on Securities Available for Sale 9,315 6,461
Interest and Dividends on Securities Held-to-Maturity 6,145 6,488
Interest on Money Market Assets:
Time Deposits with Other Banks 3,483 2,630
Federal Funds Sold and Reverse Repurchase Agreements 3,604 1,196
------ ------
Total Interest on Money Market Assets 7,087 3,826
------ ------
Total Interest Income 72,225 63,898
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 4,904 4,758
Money Market Deposit Accounts 7,921 6,290
Time Deposits in Domestic Offices 9,255 6,019
Time Deposits in Foreign Offices 4,408 2,809
------ ------
Total Interest on Deposits 26,488 19,876
------ ------
Interest on Short-Term Borrowings and Long-Term Debt:
Federal Funds Purchased and Repurchase Agreements 2,216 594
U.S. Treasury Demand Notes and Other Short-Term Borrowings 662 628
Long-Term Debt 4,807 5,841
------ ------
Total Interest on Short-Term Borrowings and Long-Term Debt 7,685 7,063
------ ------
Total Interest Expense 34,173 26,939
------ ------
Net Interest Income 38,052 36,959
Less: Provision for Loan Losses - 2,100
------ ------
Net Interest Income after Provision for Loan Losses 38,052 34,859
NONINTEREST INCOME
Service Charges and Fees 8,763 10,767
Trust Income 6,642 7,457
Gain on Settlement of Mortgage Insurance Claims - 4,739
Other Noninterest Income 2,547 2,452
Securities Gains, Net 46 1,356
------ ------
Total Noninterest Income 17,998 26,771
NONINTEREST EXPENSE
Salaries and Wages 16,157 16,645
Pensions and Other Employee Benefits 4,628 4,897
Occupancy, Net 5,272 6,015
Data Processing Services 4,358 4,423
Furniture and Equipment 2,006 2,614
FDIC Insurance 1,989 2,432
Advertising and Public Relations 1,254 1,391
Other Real Estate Owned (Income) Expense, Net (1,084) 1,286
Other Noninterest Expense 12,571 13,884
------ ------
Total Noninterest Expense 47,151 53,587
Income before Taxes 8,899 8,043
Applicable Income Tax Expense 104 130
------ ------
Net Income 8,795 7,913
Dividends on Preferred Stock (2,688) (3,345)
------ ------
Net Income Available for Common Stock $6,107 $4,568
EARNINGS PER COMMON SHARE $.20 $.15
</TABLE>
3
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) MARCH 31, MARCH 31, DECEMBER 31,
(UNAUDITED IN MARCH 31, 1995 AND 1994) 1995 1994 1994
_______________________________________________________________________________________________________________
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 198,636 $ 336,771 $ 206,953
Money Market Assets:
Time Deposits with Other Banks 255,037 203,632 228,224
Federal Funds Sold and Reverse Repurchase Agreements 192,000 185,200 160,000
--------- --------- ---------
Total Money Market Assets 447,037 388,832 388,224
--------- --------- ---------
Securities Available for Sale (at Market Value) 601,246 571,146 598,277
Securities Held-to-Maturity (Market Value: March 31, 1995, $514,838;
March 31, 1994, $577,467; December 31, 1994, $434,993) 518,808 577,434 443,163
Loans 2,531,486 2,641,041 2,549,924
Reserve for Loan Losses 94,299 86,711 97,039
--------- --------- ---------
Net Loans 2,437,187 2,554,330 2,452,885
--------- --------- ---------
Premises and Equipment, Net 150,079 158,900 151,532
Accrued Interest Receivable 29,094 23,780 27,904
Other Real Estate Owned, Net 46,141 51,403 47,763
Other Assets 110,296 118,597 108,964
--------- --------- ---------
Total Assets $ 4,538,524 $ 4,781,193 $ 4,425,665
LIABILITIES
Noninterest-Bearing Demand Deposits $ 836,660 $ 940,180 $ 827,023
Interest-Bearing Deposits:
Savings and NOW Accounts 856,555 943,249 900,209
Money Market Deposit Accounts 957,234 1,072,172 966,348
Time Deposits in Domestic Offices 886,509 598,755 625,432
Time Deposits in Foreign Offices 286,866 231,045 283,782
--------- --------- ---------
Total Interest-Bearing Deposits 2,987,164 2,845,221 2,775,771
--------- --------- ---------
Total Deposits 3,823,824 3,785,401 3,602,794
--------- --------- ---------
Short-Term Borrowings:
Federal Funds Purchased and Repurchase Agreements 102,346 287,921 264,878
U.S. Treasury Demand Notes and Other Short-Term Borrowings 39,700 150,441 28,559
--------- --------- ---------
Total Short-Term Borrowings 142,046 438,362 293,437
--------- --------- ---------
Other Liabilities 67,942 51,117 44,146
Long-Term Debt 217,625 217,625 217,625
--------- --------- ---------
Total Liabilities 4,251,437 4,492,505 4,158,002
STOCKHOLDERS' EQUITY
Preferred Stock-$1.00 Par Value
Shares Authorized - 25,000,000 at March 31, 1995 and 1994, and
December 31, 1994; Liquidation Preference - $25 per share
Cumulative Convertible Series A - 764,537 shares
at March 31, 1994 -- 765 --
Noncumulative Perpetual Series B - 4,000,000 shares at
March 31, 1995 and 1994, and December 31, 1994 4,000 4,000 4,000
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at March 31, 1995 and 1994, and
December 31, 1994;
Shares Issued - 31,145,212 at March 31, 1995, 31,124,012 at
March 31, 1994 and 31,145,212 at December 31, 1994 77,863 77,810 77,863
Surplus - Preferred Stock 91,192 109,473 91,192
Surplus - Common Stock 156,123 156,004 156,123
Foreign Exchange Translation Adjustments (481) (1,579) (634)
Undivided Profits (Accumulated Deficit) (2,907) (26,397) (9,014)
Unrealized Loss on Securities Available for Sale, Net (14,980) (7,665) (28,144)
Treasury Stock-900,798 shares at March 31, 1995 and 1994, and
December 31, 1994 (23,723) (23,723) (23,723)
--------- --------- ---------
Total Stockholders' Equity 287,087 288,688 267,663
--------- --------- ---------
Total Liabilities and Stockholders' Equity $ 4,538,524 $ 4,781,193 $ 4,425,665
</TABLE>
4
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN UNDIVIDED GAIN(LOSS)
PREFERRED COMMON EXCHANGE PROFITS ON SECURITIES TOTAL
STOCK STOCK TRANSLATION (ACCUM. AVAILABLE TREASURY STOCKHOLDERS'
$1.00 PAR $2.50 PAR SURPLUS ADJUSTMENTS DEFICIT) FOR SALE, NET STOCK EQUITY
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 $4,765 $77,807 $265,564 $(1,527) $(30,965) $1,276 $(23,723) $293,197
Net Income - - - - 7,913 - - 7,913
Issuance of
Common Stock--
Stock Option Plan - 3 8 - - - - 11
Cash Dividends --
Preferred - - - - (3,345) - - (3,345)
Unrealized Loss on
Securities Available
for Sale, Net - - - - - (8,941) - (8,941)
Foreign Exchange
Translation Adjustments - - - (52) - - - (52)
Other - - (95) - - - - (95)
----- ------ ------- ----- ------ ----- ------- -------
Balance,
March 31, 1994 $4,765 $77,810 $265,477 $(1,579) $(26,397) $(7,665) $(23,723) $288,688
Balance,
December 31, 1994 $4,000 $77,863 $247,315 $(634) $(9,014) $(28,144) $(23,723) $267,663
Net Income - - - - 8,795 - - 8,795
Cash Dividends--
Preferred - - - - (2,688) - - (2,688)
Unrealized Gain on
Securities Available
for Sale, Net - - - - - 13,164 - 13,164
Foreign Exchange
Translation Adjustments - - - 153 - - - 153
Other - - - - - - - -
----- ------ ------- ----- ----- ------ ------ --------
Balance,
March 31, 1995 $4,000 $77,863 $247,315 $(481) $(2,907) $(14,980) $(23,723) $287,087
</TABLE>
5
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
Increase (decrease) in cash and cash equivalents 1995 1994
_____________________________________________________________________________________________________________________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $8,795 $7,913
Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:
Provisions for Loan Losses - 2,100
Provisions for Other Real Estate Owned Writedowns (53) 1,317
Depreciation Expense and Amortization of Leasehold Improvements 3,011 3,073
Amortization of Purchase Accounting Adjustments 901 966
Gains on Securities Sales (46) (1,356)
Gains on Sales from Other Real Estate Owned (661) (222)
Increase in Accrued Interest Receivable (1,190) (869)
Increase in Other Assets (2,233) (2,302)
Increase (Decrease) in Other Liabilities 23,796 (1,145)
------ ------
Total Adjustments 23,525 1,562
------ -----
Net Cash Provided By Operating Activities 32,320 9,475
------ -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Increase In Time Deposits with Other Banks (26,813) (2,686)
Proceeds from Maturities of Securities Available for Sale 10,966 43,282
Proceeds from Sales of Securities Available for Sale 46 193,048
Purchase of Securities Available for Sale (771) (97,998)
Proceeds from the Maturity of Securities Held-to-Maturity - 478,098
Proceeds from Sales of Securities Held-to-Maturity - 1,825
Purchase of Securities Held-to-Maturity (75,645) (397,257)
Net Decrease (Increase) in Loans 15,052 (118,493)
Proceeds from Sales of Other Real Estate Owned 2,450 5,488
Net Increase in Premises and Equipment (1,558) (875)
Other, Net 532 (556)
------- -------
Net Cash (Used In) Provided By Investing Activities (75,741) 103,876
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in:
Demand, NOW, Savings and Money Market Deposit Accounts (43,131) 53,293
Time Deposits 264,161 (41,716)
Federal Funds Purchased and Repurchase Agreements (162,532) (14,409)
U.S. Treasury Demand Notes and Other Short-Term Borrowings 11,141 (1,256)
Net Proceeds From the Issuance of Long-Term Debt - 121,250
Repayment of Long-Term Debt - (120,700)
Net Proceeds From the Issuance of Common Stock - 11
Dividend Payments - Preferred (2,688) (3,345)
Other, Net - (95)
------ ------
Net Cash Provided By (Used In) Financing Activities 66,951 (6,967)
------ ------
Effect of Exchange Rate Changes 153 (52)
------ ------
Net Increase in Cash and Cash Equivalents 23,683 106,332
Cash and Cash Equivalents at Beginning of Period 366,953 415,639
------- -------
Cash and Cash Equivalents at End of Period $390,636 $521,971
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
NONCASH ACTIVITIES:
Loans Transferred to Other Real Estate Owned $- $3,601
CASH PAID DURING THE YEAR FOR:
Interest Paid (Net of Amount Capitalized) $33,627 $23,422
Income Tax Payments (Refund) 1 (4,417)
</TABLE>
6
<PAGE>
RIGGS NATIONAL CORPORATION
FINANCIAL RATIOS AND OTHER FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED MARCH 31, 1995 1994
_________________________________________________________________________________________________________
<S> <C> <C>
PERFORMANCE:
Net Income to Average Assets .80% .69%
Net Income to Average Earning Assets .88% .77%
Net Income to Average Stockholders' Equity 12.99% 10.91%
Net Income Available to Common Stock
to Average Common Equity 13.81% 10.30%
Net Interest Income to Average Earning Assets 3.91% 3.70%
ASSET QUALITY:
Nonaccrual Loans as a % of Total Loans .90% 4.16%
Nonaccrual Loans as a % of Average Loans .90% 4.23%
Nonperforming Assets as a % of Total Loans and OREO 2.69% 6.44%
Nonperforming Assets as a % of Total Assets 1.53% 3.62%
Nonaccrual and Renegotiated Loans as a % of Total Loans .91% 4.61%
Net Charge-Offs as a % of Average Loans .13% .08%
Reserve for Loan Losses as a % of Total Loans 3.73% 3.28%
Reserve for Loan Losses as a % of Nonaccrual and
Renegotiated Loans 408.45% 71.15%
Period End Stockholders' Equity to Total Assets 6.33% 6.04%
PER COMMON SHARE:
Net Income $.20 $.15
Book Value (at period end) $6.34 $5.77
Common Shares Outstanding (at period end) 30,244,414 30,223,214
Average Common Shares Outstanding 30,244,414 30,222,107
CAPITAL RATIOS AT PERIOD END:
Tier I 11.63% 10.84%
Combined Tier I and Tier II 18.72% 17.53%
Leverage 6.48% 6.15%
</TABLE>
7
<PAGE>
RIGGS NATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, of a normal recurring nature, necessary to present
fairly, in conformity with generally accepted accounting principles applied on a
consistent basis, the Corporation's consolidated financial position at March 31,
1995 and 1994, and December 31, 1994 (audited), and the related changes in
stockholders' equity, the consolidated statements of income and cash flows for
the three months ended March 31, 1995, and 1994. These statements should be read
in conjunction with the financial statements and accompanying notes included in
the Corporation's latest annual report. Certain reclassifications have been made
to prior-period amounts to conform with the current year's presentation. The
results of operations for the first three months of 1995 are not necessarily
indicative of the results to be expected for the full 1995 year.
NOTE 2. COMMON SHARES
Earnings per common share are calculated using the weighted average number of
shares of common stock outstanding during the period. The weighted average
shares outstanding were 30,244,414 for the first quarter of 1995, and 30,222,107
for the same period in 1994. The weighted average number of shares of common
stock outstanding does not include shares granted under the 1993 Riggs National
Corporation Stock Option Plan (the "1993 Plan") or shares granted under the 1994
Riggs National Corporation Stock Option Plan (the "1994 Plan"). Under the 1993
Plan, options to purchase up to 1,250,000 shares of common stock may be granted
to key employees of the Corporation. As of March 31, 1995, options to purchase
855,200 shares had been granted in the 1993 Plan at prices ranging from $9.00 to
$10.50 per share and are currently not dilutive. Under the 1994 Plan, options to
purchase up to 1,250,000 shares of common stock may be granted to key employees
of the Corporation. As of March 31, 1995, no options to purchase shares had been
granted under the 1994 Plan.
NOTE 3. RESERVE FOR LOAN LOSSES
Changes in the reserve for loan losses are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
_____________________________________________________________________________________________________________
<S> <C> <C>
Balance, beginning of period $97,039 $86,513
Provision for loan losses - 2,100
Loans charged-off:
Domestic 596 2,038
Foreign 4,846 2,505
------ ------
Total loans charged-off 5,442 4,543
Recoveries on charged-off loans:
Domestic 555 1,990
Foreign 1,501 570
------ ------
Total recoveries on charged-off loans 2,056 2,560
Net loans charged-off 3,386 1,983
Foreign exchange translation adjustments 646 81
------ ------
Balance, end of period $94,299 $86,711
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. OTHER REAL ESTATE OWNED
Changes in other real estate owned, net of reserves, are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
________________________________________________________________________________________________________
<S> <C> <C>
Balance, beginning of period $47,763 $52,803
Additions - 3,601
Deductions:
Sales and repayments 1,789 3,727
Charge-offs - 1,317
Other (53) -
------- -------
Total Deductions 1,736 5,044
Foreign exchange translation adjustments 114 43
------- -------
Balance, end of period $46,141 $51,403
</TABLE>
NOTE 5. 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. Under SFAS No. 114,
the Corporation is required to identify and measure impaired loans in its loan
portfolio. For the most part, measurement is 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. In October 1994, SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan," was issued, amending SFAS No. 114. SFAS No.
118 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. Both statements are effective for fiscal years beginning after December
15, 1994. The Corporation implemented SFAS Nos. 114 and 118 on January 1, 1995,
and their adoption did not have a material effect on the Corporation's financial
position.
9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6. INCOME TAXES
The provision for income taxes is based on income reported for consolidated
financial statement purposes and includes deferred taxes resulting from the
recognition of certain revenues and expenses in different periods for tax
reporting purposes.
Income before income taxes relating to the operations of domestic offices and
foreign offices for the three months ended March 31, 1995 and 1994, were as
follows:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
_____________________________________________________________________________________________________________
<S> <C> <C>
Domestic Offices $8,355 $ 236
Foreign Offices 544 7,807
----- -----
Total $8,899 $8,043
</TABLE>
The provision for income taxes for the three months ended March 31, 1995 and
1994 consisted of the following:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
______________________________________________________________________________________________________________
<S> <C> <C>
Current Provision:
Federal $(923) $-
State 99 77
Foreign 5 53
---- ----
Total Current Provision (819) 130
Deferred Provision:
Federal 923 -
State - -
Foreign - -
---- ----
Total Deferred Provision 923 -
Applicable Income Tax Expense $104 $130
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Corporation enters into various
transactions that, in accordance with generally accepted accounting principles,
are not included on the consolidated statements of condition. These transactions
are referred to as "off-balance-sheet" commitments and differ from the
Corporation's balance sheet activities in that they do not give rise to funded
assets or liabilities. The Corporation enters into derivative transactions to
manage its own risks arising from movements in interest and currency rates.
Off-balance-sheet activities involve varying degrees of credit, interest-rate
or liquidity risk in excess of amounts recognized on the consolidated
statements of condition. The Corporation seeks to minimize its exposure to
loss under these commitments by subjecting them to credit approval and
monitoring procedures.
Outstanding commitments and contingent liabilities that do not appear in the
consolidated financial statements at March 31, 1995, and 1994, are as follows:
<TABLE>
<CAPTION>
CONTRACTUAL OR
NOTIONAL VALUE
MARCH 31,
1995 1994
________________________________________________________________________________________________________________
<S> <C> <C>
Commitments to Extend Credit:
Commercial $276,985 $241,792
Real Estate 223,559 257,161
Consumer 65,350 65,656
-------- --------
Total Commitments to Extend Credit $565,894 $564,609
Letters of Credit:
Commercial $60,854 $98,061
Standby-Financial 24,731 32,215
Standby-Performance 18,512 45,439
-------- --------
Total Letters of Credit $104,097 $175,715
Financial Instruments with off-balance sheet market risk:
Foreign exchange contracts:
Commitments to purchase $24,700 $24,309
Commitments to sell 126,032 203,905
Interest rate swap agreements 289,075 266,380
Interest rate option contracts (corridors) 400,000 -
</TABLE>
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 swaps, 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 to temporarily
alter the interest sensitivity of specifically identified assets or liabilities
and reduce the Corporation's interest-rate risk.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED
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.
At March 31, 1995, the Corporation's financial derivative instruments included a
$200 million (notional principal amount) interest-rate swap agreement, entered
into in July 1993, to hedge money market assets against the possibility of
declining interest rates. Through the first quarter of 1995, 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%, maturing in July 1998.
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. At March 31, 1995, total
receivables and payables relating to unpaid interest income/expense from the
swap agreement totaled $1.9 million and $2.3 million, respectively, and there
were no fees associated with these transactions. The total aggregate net
interest expense recorded in the first quarter of 1995 from this swap
transaction was $398 thousand, which is included in interest income relating
to the money market assets. The market value (replacement cost) of the swap
agreement has fluctuated, from an unrealized loss of $16.8 million at December
31, 1994, to an unrealized loss of $10.5 million at March 31, 1995.
Based on the possibility of further short-term rate increases by the Federal
Reserve, in April 1994, the Corporation purchased two $100 million (notional
principal balance) corridors to reduce its interest-rate risk exposure.
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%,
however, if Libor rose above 7.00%, then the Corporation would begin paying to
the counterparty Libor in excess of 7.00%. The net result was that the
floating-rate paid on the swap would be capped at 5.60% unless Libor rose above
7.00%. If rates exceeded 7.00%, the Corporation would effectively reduce the
actual floating-rate to be paid by 1.40% as a result of the corridor
(7.00%-5.60% = 1.40%). All rates are reset quarterly to coincide with the
interest-rate swap reset dates. At March 31, 1995, the Corporation was
receiving interest payments based on a three-month Libor rate of 6.38% at the
last reset date. 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 principal balance). This corridor, executed to
hedge the costs of certain short-term borrowings against rising interest rates,
included a termination agreement. A premium was also paid for this corridor,
with the cost amortized over the two-year life. Under the agreement, the
Corporation receives payments, calculated quarterly on the notional principal
amount, by the amount that three-month Libor exceeds 6.00%. Such payments will
cease, if three-month Libor would equal or exceed 8.00% on a reset date. As of
March 31, 1995, the Corporation was receiving interest payments based on a
three-month Libor rate of 6.31% at the last reset date. The "terminating
corridor" agreement matures in August 1996.
At March 31, 1995, total receivables and payables relating to unpaid interest
income/expense from all the corridor transactions totaled an aggregate $4.3
million and $4.0 million, respectively, with aggregate unamortized fees totaling
$2.4 million and aggregate unrealized gains of approximately $1.2 million at
quarter-end 1995. Total aggregate net interest income recorded in the first
quarter from these corridor transactions was $384 thousand, which was more than
offset by the amortization of prepaid costs totaling $413 thousand for the first
three months of 1995.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED
In March 1995, the Corporation entered into two $25 million (notional principal
balance) interest-rate swap agreements to alter the interest sensitivity of a
portion of the Corporation's real estate mortgage loan portfolio. The first swap
agreement entails the receipt of a floating rate by the Corporation for a
one-year term, at a rate equal to 3-month Libor, reset quarterly and maturing in
March 1996. At March 31, 1995, the Corporation was receiving interest payments
based on a 3-month Libor rate of 6.31% based upon the initial setting. The
Corporation agreed to pay a fixed rate of 6.73%. The second swap agreement
entails the receipt of a floating rate by the Corporation for a two-year term,
at a rate equal to 3-month Libor, reset quarterly and maturing in March 1997. At
March 31, 1995, the Corporation was receiving interest payments based on a
3-month Libor rate of 6.31% based upon the initial setting. The Corporation
agreed to pay a fixed rate of 6.97%. All payments are netted on a quarterly
basis. At March 31, 1995, total receivables and payables relating to unpaid
interest income/expense from the swap agreements totaled $140 thousand and $143
thousand, respectively, and are included in interest income relating to the
real estate mortgage loan portfolio. There were no fees associated with these
transactions. The total aggregate net interest expense recorded in the first
quarter of 1995 was $3 thousand.
NOTE 8. RECENT DEVELOPMENTS
On March 23, 1995, the Corporation signed a contract to purchase approximately 7
acres of land in Riverdale, Maryland in Prince George's County. The Corporation
intends to construct and occupy a 156,000 square foot office complex, which will
include several technology related functions that are presently located in
leased facilities, with the majority of the personnel coming from leased office
space at the 1120 Vermont Avenue location in Washington, D.C. Construction of
this facility is scheduled to begin in late June to early July 1995, subject to
the Corporation completing several stages of approvals with local governmental
authorities. The Corporation does not anticipate any substantial delays from the
approval process and expects the office complex to be completed in May 1996. The
Corporation has committed internal personnel and external resources to review
all of its occupancy needs through a "strategic occupancy" task force. The
selection of the Riverdale, Maryland site entailed extensive research and
analysis, including the review of the needs of the divisions to be moved, the
impact to employees moving to the facility, access to mass transit routes, in
addition to the overall effect on the Corporation's operating results. The
Corporation estimates that the relocation of personnel from leased locations to
this new facility will have an immediate positive impact on its results of
operations in 1996 and thereafter. The Corporation does not anticipate any
material impact to its financial condition or results of operations in the
current fiscal year from its plans for building this new office facility.
NOTE 9. REGULATORY MATTERS
On May 14, 1993, the Corporation entered into a Memorandum of Understanding with
the Federal Reserve Bank of Richmond ("Federal Reserve"). The Memorandum of
Understanding was the result of regulatory concern over financial and
operational weaknesses and continued losses related primarily to the
Corporation's domestic and United Kingdom commercial real estate exposure. Under
the terms of the Memorandum of Understanding, the Corporation must notify the
Federal Reserve Bank in advance of dividend declarations, the issuance and/or
redemption of long-term debt and use of cash assets in certain circumstances.
The Corporation is also required to submit plans and reports to the Federal
Reserve Bank relating to capital, asset quality, loan loss reserves and
operations, including contingency measures if projected operational results do
not occur. As of March 31, 1995, the Corporation was in compliance with the
provisions and requirements of the Memorandum of Understanding.
13
<PAGE>
RIGGS NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
The Corporation reported consolidated net income of $8.8 million ($.20 per
common share) for the first quarter of 1995 compared with net income of $7.9
million ($.15 per common share) for the same quarter a year earlier. The first
quarter performance in 1995 is the Corporation's seventh consecutive profitable
quarter. Results for the first quarter of 1995 reflect the benefit of a $863
thousand (pretax) increase in net interest income (on a tax-equivalent basis,
see "Net Interest Income") and a $2.1 million reduction in the provision for
loan losses. The increase in net interest income in the latest period was the
result of improved asset mix and reductions in nonperforming assets. Also
contributing to the improved first quarter 1995 results was a $6.4 million (12%)
decrease in noninterest expense. The positive effects from the increase in net
interest income and reductions in noninterest expense were partially offset by a
decrease in noninterest income of $8.8 million (33%). A significant portion of
the decrease in noninterest income was due to a $4.7 million gain on settlement
of mortgage insurance claims, reductions in fees and other noninterest income
totaling $2.1 million due to the sale of three foreign subsidiaries in 1994 as
well as securities gains recorded in the first quarter of 1994. Excluding these
amounts, noninterest income would have decreased by $616 thousand (2%) between
the periods (see "Noninterest Income").
There was no provision for loan losses in the first quarter of 1995, the result
of improvement in asset quality as nonperforming assets were reduced over 60%
from $173.3 million at the end of the first quarter of 1994 to $69.2 million at
the end of the first quarter of 1995. The March 31, 1995 level of nonperforming
assets is the lowest since the third quarter of 1990. The Corporation's overall
asset quality continues to improve as a result of collection and
asset-management efforts as well as improved economic conditions domestically
and in the United Kingdom.
Assets totaled $4.54 billion at March 31, 1995, up $112.9 million from year-end
1994 and a decrease of $242.7 million from March 31, 1994. The decrease in total
assets from March 31, 1994 is attributable to decreases in loans of $109.6
million. Deposits at March 31, 1995 totaled $3.82 billion, an increase of $221.0
million from year-end 1994 and $38.4 million from March 31, 1994. The increase
over the last twelve months is primarily due to increases in domestic time
deposits, the result of the Corporation's banking relationship with the U.S.
Treasury, combined with several new initiatives in the deposit area (see
"Deposits"). Total liabilities increased during the first quarter of 1995 ($93.4
million) and decreased $241.1 million from a year ago. The decrease over the
preceding year is due to an overall reduction in the amount of borrowed funds
outstanding.
PERFORMANCE ENHANCING STRATEGIES
In 1993, the Corporation initiated several performance enhancing strategies to
improve the efficiency and effectiveness of its operations as well as the
financial restructuring of its domestic and foreign operations. In 1994, these
initiatives were substantially completed. Accrued and unpaid restructuring
expenses totaled $828 thousand and $756 thousand for the efficiency plan and the
financial restructuring plans, respectively, and are expected to be made in the
second quarter of 1995.
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 believes a "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 locations, branch facilities, product
lines and personnel. The Corporation has already sold or consolidated two retail
branches as part of this analysis. The Corporation currently does not anticipate
significant branch sales or consolidations, but the Corporation is actively
seeking enhancements to existing branches to attract new customers, improve
service quality and the overall profitability of its branches, and is also
searching for opportunities to establish new retail banking branches in
strategic locations.
14
<PAGE>
SECURITIES
Schedules detailing securities available for sale and held-to-maturity follow:
<TABLE>
<CAPTION>
MARCH 31, 1995 MARCH 31, 1994
AMORTIZED MARKET/ AMORTIZED MARKET/
AVAILABLE FOR SALE COST BOOK VALUE COST BOOK VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands)
U.S. Treasury Securities $138,863 $137,984 $45,703 $45,438
Government Agencies Securities 26,581 25,329 - -
Obligations of States & Political Subdivisions 8,800 8,200 - -
Mortgage-Backed Securities 426,748 414,499 519,574 512,175
Other Securities 15,234 15,234 13,533 13,533
-------- -------- -------- --------
Total $616,226 $601,246 $578,810 $571,146
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995 MARCH 31, 1994
BOOK MARKET BOOK MARKET
HELD-TO-MATURITY VALUE VALUE VALUE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands)
U.S. Treasury Securities $318,861 $317,943 $563,493 $563,470
Obligations of States & Political Subdivisions 199,947 196,895 - -
Mortgage-Backed Securities - - - -
Other Securities - - 13,941 13,997
-------- -------- -------- --------
Total $518,808 $514,838 $577,434 $577,467
</TABLE>
Total securities held-to-maturity and available for sale increased $78.6 million
(7.5%) during the first quarter of 1995, and decreased $28.5 million (2.5%)
since March 31, 1994. The increase in securities for the first three months of
1995 was due to net purchases during the period from funds available from
increases in deposits and loan repayments during the period. The decrease in
securities during the past year occurred as proceeds from maturities and sales,
combined with proceeds from maturing money market investments, were invested in
longer-term, fixed-rate residential mortgage loans, as part of a strategy to
improve earnings. The weighted-average maturities and yields for securities
held-to-maturity, adjusted for anticipated prepayments, was approximately 1.3
years and 5.78% at March 31, 1995. The weighted-average maturities and yields
for securities available for sale, adjusted for anticipated
prepayments, was approximately 3.1 years and 6.10% at March 31, 1995.
15
<PAGE>
SECURITIES, CONTINUED
The maturity distribution of securities as March 31, 1995, follows:
<TABLE>
<CAPTION>
OBLIGATIONS
U.S. GOVERNMENT OF STATES
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 $123,800 $ - $8,800 $6,285 $138,885
Book/Market 123,425 - 8,200 6,285 137,910
Yield* 5.84% - 6.08% 5.51% 5.84%
After 1 but within 5 years
Amortized Cost 15,063 26,581 - 229,083 270,727
Book/Market 14,559 25,329 - 221,935 261,823
Yield* 4.05% 6.02% - 5.98% 5.88%
After 5 but within 10 years
Amortized Cost - - - 176,764 176,764
Book/Market - - - 171,997 171,997
Yield* - - - 4.55% 4.55%
After 10 years
Amortized Cost - - - 29,850 29,850
Book/Market - - - 29,516 29,516
Yield* - - - 3.70% 3.70%
-------- ------- ------ -------- --------
Total Securities Available for Sale
Amortized Cost $138,863 $26,581 $8,800 $441,982 $616,226
Book/Market 137,984 25,329 8,200 429,733 601,246
Yield* 5.64% 6.02% 6.08% 5.25% 5.38%
SECURITIES HELD-TO-MATURITY
Within 1 year
Book $318,861 $25,000 $ - $ - $343,861
Market 317,943 24,973 - - 342,916
Yield* 5.38% 5.16% - - 5.36%
After 1 but within 5 years
Book - 174,947 - - 174,947
Market - 171,922 - - 171,922
Yield* - 7.01% - - 7.01%
-------- ------- ------ -------- --------
Total Securities Held-to-Maturity
Book $318,861 $199,947 $ - $ - $518,808
Market 317,943 196,895 - - 514,838
Yield* 5.38% 6.78% - - 5.92%
</TABLE>
[FN]
* Weighted average yield to maturity at March 31, 1995. The securities within
the category of "Securities Available for Sale - Obligations of State and
Political Subdivisions" are taxable securities and are on a nonaccrual
basis as March 31, 1995. All contractual payments to date have been
received.
16
<PAGE>
LOANS
The following table reflects loans by type for the periods indicated:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, DECEMBER 31,
LOAN TYPE (IN THOUSANDS) 1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and Financial $ 438,732 $ 466,050 $ 400,660
Real Estate - Commercial/Construction 312,548 358,987 323,835
Residential Mortgage 1,325,928 1,292,496 1,317,169
Home Equity 222,196 219,069 220,910
Consumer 73,315 74,606 75,887
Foreign 152,767 223,065 204,558
--------- --------- ---------
Loans 2,525,486 2,634,273 2,543,019
Less: Unearned Discount (Unamortized
Premium) and Net Deferred Fees (6,000) (6,768) (6,905)
--------- --------- ---------
Total Loans, Net $ 2,531,486 $ 2,641,041 $ 2,549,924
</TABLE>
At March 31, 1995, total loans outstanding (net of premiums/discounts) were
$2.53 billion, compared with $2.55 billion at December 31, 1994, and $2.64
billion at March 31, 1994. The decrease in loans from March 31, 1994 and
December 31, 1994, were mostly attributable to net decreases in real
estate-commercial/construction and foreign loans, partially offset by increases
in residential and home equity loans, the result of local-area residential loan
initiatives.
REAL ESTATE-COMMERCIAL/CONSTRUCTION LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
PROJECT TYPE COLUMBIA VIRGINIA MARYLAND KINGDOM OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land Acquisition and
Construction Development $ 29,524 $ 20,278 $ 20,096 $ -- $ -- $ 69,898
Multifamily Residential 9,048 13,301 7,411 -- 595 30,355
Commercial:
Office Buildings 47,580 41,238 20,306 -- 2,383 111,507
Shopping Centers 11,153 21,947 18,844 -- -- 51,944
Hotels 4,584 5,543 -- -- -- 10,127
Industrial/Warehouse Loans -- 11,220 4,909 -- -- 16,129
Churches 5,407 2,824 6,031 -- -- 14,262
Other 958 5,882 1,420 -- 66 8,326
------- -------- -------- -------- -------- --------
Total Commercial 69,682 88,654 51,510 -- 2,449 212,295
Foreign -- -- -- 101,173 -- 101,173
------- -------- -------- -------- -------- --------
Total Real Estate-Commercial/
Construction Loans $108,254 $122,233 $ 79,017 $101,173 $ 3,044 $413,721
</TABLE>
17
<PAGE>
LOANS, CONTINUED
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. 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 March 31, 1995, the Corporation had no cross-border outstandings exceeding 1%
of its total assets to countries experiencing difficulties in repaying their
external debt. The table below details those countries in which the Corporation
had total outstandings in excess of 1% of its total assets. The Corporation did
not have any cross-border outstandings between .75% and 1% at March 31, 1995,
December 31, 1994 or March 31, 1994.
CROSS-BORDER OUTSTANDINGS THAT EXCEED 1% OF TOTAL ASSETS
(IN MILLIONS)
<TABLE>
<CAPTION>
90 DAYS
% OF OR MORE POTENTIAL
AMOUNT ASSETS NONACCRUAL RENEGOTIATED PAST DUE PROBLEM
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 1995
United Kingdom $153.1 3.4% $7.6 $0.2 $- $4.4
DECEMBER 31, 1994
United Kingdom 149.4 3.4 10.6 0.3 - 4.3
France 61.1 1.4 - - - -
MARCH 31, 1994
United Kingdom 186.1 3.9 29.9 0.8 - 12.4
</TABLE>
18
<PAGE>
ASSET QUALITY
Nonperforming assets, which include nonaccrual loans, renegotiated loans and
other real estate owned (net of reserves), totaled $69.2 million at March 31,
1995, a $6.5 million (9%) decrease from the year-end 1994 total of $75.7 million
and a $104.0 million (60%) decrease from the March 31, 1994 total. The
composition of nonperforming assets and past due loans is detailed below:
NONPERFORMING ASSETS AND PAST-DUE LOANS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, DECEMBER 31,
1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Nonaccrual Loans: (1)
Domestic $14,397 $ 74,576 $11,518
Foreign 8,308 35,392 15,865
------- -------- -------
Total Nonaccrual Loans 22,705 109,968 27,383
------- -------- -------
Renegotiated Loans: (2)
Domestic 162 11,148 288
Foreign 220 755 267
------- -------- -------
Total Renegotiated Loans 382 11,903 555
------- -------- -------
Other Real Estate Owned, Net:
Domestic 42,887 44,414 44,068
Foreign 3,254 6,989 3,695
------- -------- -------
Total Other Real Estate Owned, Net 46,141 51,403 47,763
------- -------- -------
Total Nonperforming Assets $69,228 $173,274 $75,701
PAST-DUE LOANS: (3)
Domestic $2,919 $ 2,184 $6,091
Foreign -- -- 30
------- -------- -------
Total Past-Due Loans $2,919 $ 2,184 $6,121
</TABLE>
[FN]
(1) - Loans (other than consumer) that are in default in either principal
or interest for 90 days or more that are not well-secured and in the
process of collection.
(2) - Loans for which terms have been renegotiated to provide a reduction
of interest or principal as a result of a deterioration in the
financial position of the borrower in accordance with Statement of
Financial Accounting Standard No. 15. Renegotiated loans do not
include $13.5 million in loans renegotiated at market terms that have
performed in accordance with their respective renegotiated terms.
These performing, market rate loans are no longer included in
nonperforming asset totals.
(3) - Loans contractually past due 90 days or more in principal or interest that
are well-secured and in the process of collection.
19
<PAGE>
ASSET QUALITY, CONTINUED
At March 31, 1995, nonaccrual loans, including both domestic and foreign loans,
were $22.7 million, or 0.9% of total loans, compared with $27.4 million, or
1.1% of total loans, at year-end 1994 and $110.0 million, or 4.2% of total
loans, at March 31, 1994. The decrease in nonaccrual loans during the first
quarter of 1995, was due to paydowns and payoffs of $5.0 million, in addition to
loans returning to accrual status of $1.8 million, and charge-offs of $4.7
million. These reductions were partially offset by net additions of $6.8
million. Of the $5.0 million in paydowns and payoffs during the first three
months of 1995, $4.1 million (82.1%) related to foreign nonaccrual loans and
$0.9 million (17.9%) related to domestic nonaccrual loans. During the first
quarter of 1995, domestic nonaccrual loans increased $2.9 million, while foreign
nonaccrual loans decreased by $7.6 million. The domestic nonaccrual increase was
the result of one real estate-commercial/construction loan totaling $4.0 million
placed on nonaccrual status during the quarter, while the foreign decrease was
due to the aforementioned payoffs and charge offs. Renegotiated loans decreased
$173 thousand during the first quarter of 1995, with paydowns and payoffs
totaling $59 thousand, combined with transfers back to accrual status of $114
thousand. Nonaccrual and renegotiated real estate-commercial/construction loans,
both foreign and domestic, totaled $10.8 million at March 31, 1995, or 46.6% of
the total nonaccrual and renegotiated loans at quarter-end 1995.
Other real estate owned, net of reserves, decreased to $46.1 million at March
31, 1995, from $47.8 million at December 31, 1994 and $51.4 million at March 31,
1994. The decrease during the first three months of 1995 is the result of
paydowns and sales of $1.8 million offset by foreign exchange translation
adjustments and decreased selling expense reserves of $100 thousand. At March
31, 1995, residential and commercial land composed 72% of other real estate
owned with office, industrial, retail and other categories accounting for the
remainder of the portfolio.
OTHER REAL ESTATE OWNED - (1)
GEOGRAPHIC DISTRIBUTION BY TYPE
MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
PROJECT TYPE COLUMBIA VIRGINIA MARYLAND KINGDOM OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land $500 $23,721 $8,809 $- $- $33,030
Single-Family Residential 1,032 - 374 - 15 1,421
Office Buildings/Retail - 617 4,901 1,543 2,561 9,622
Multifamily Residential - - - - - -
Warehouse Loans 357 - - 1,058 - 1,415
Shopping Centers - - - 653 - 653
Other - - - - - -
------- ------- ------- ------ ------ -------
Total Other Real Estate Owned, Net $1,889 $24,338 $14,084 $3,254 $2,576 $46,141
</TABLE>
[FN]
(1) - Balances are net of valuation reserves totaling $2.2 million.
Past due loans consist predominantly of residential real estate and consumer
loans that are well-secured and in the process of collection and that are
accruing interest. Past due loans decreased $3.2 million during the first
quarter of 1995 to $2.9 million, while increasing $735 thousand from March 31,
1994.
At March 31, 1995, the Corporation had identified approximately $15.1 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 $10.7 million of domestic
loans, primarily commercial and financial, and $4.4 million of commercial
property and corporate loans originated in the United Kingdom.
20
<PAGE>
ASSET QUALITY, CONTINUED
In addition, the Corporation had $8.2 million in other potential problem assets
at March 31, 1995. 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 quarter-end 1995. 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 estimated 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.
The Corporation's banking subsidiaries maintain reserves for loan losses that
are available to absorb potential losses in the current loan portfolio. The
reserve for loan losses is based on management's assessment of existing
conditions and reflects potential losses determined to be probable and subject
to reasonable estimation. The reserve for loan losses was $94.3 million, or
3.73% of total loans (net of premiums/discounts) at March 31, 1995, compared
with $97.0 million, or 3.81% of total loans at December 31, 1994, and $86.7
million, or 3.28% of total loans, at March 31, 1994. The decrease in the reserve
for loan losses as a percentage of total loans from March 31, 1994 to March 31,
1995, was due to the increase in total loans during the periods, primarily in
residential mortgage type loans. The Corporation's coverage ratio was 408% at
March 31, 1995, 347% at year-end 1994 and 71.2% at March 31, 1994. The increase
in the coverage ratio during the periods was primarily the result of decreases
in total nonperforming assets during the periods.
DEPOSITS
Deposits, which are offered through several banking subsidiaries of the
Corporation, are the primary and most stable source of funds for the
Corporation. Deposits totaled $3.8 billion at March 31, 1995, increasing $221.0
million (6.1%) from the year-end 1994's deposit total and $38.4 million (1.0%)
from the March 31, 1994 deposit total. The increase from the year earlier
balance was due to increases in domestic time deposits ($287.8 million),
partially offset by declines in savings and NOW accounts and money market
deposits ($201.6 million). The increase in domestic time deposits was mainly due
a $160.9 million increase in the balance of time deposits with the U.S. Treasury
at quarter-end. The remainder of the increase was due to several deposit
initiatives begun in the latter half of 1994, primarily targeting demand deposit
and time deposit products.
DEPOSITS
<TABLE>
<CAPTION>
MARCH 31, CHANGE
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
_____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Demand Deposits $836,660 $940,180 $(103,520) (11.0)%
Interest-Bearing Deposits:
Savings and NOW Accounts 856,555 943,249 (86,694) (9.2)
Money Market Deposit Accounts 957,234 1,072,172 (114,938) (10.7)
Time Deposits in Domestic Offices 886,509 598,755 287,754 48.1
Time Deposits in Foreign Offices 286,866 231,045 55,821 24.2
--------- --------- --------- -----
Total Interest-Bearing Deposits 2,987,164 2,845,221 141,943 5.0
--------- --------- --------- -----
Total Deposits $3,823,824 $3,785,401 $ 38,423 1.0%
</TABLE>
21
<PAGE>
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings decreased $151.4 million (51.6%) during the first quarter
of 1995 and $296.3 million (67.6%) since the end of the first quarter of 1994.
Short-term borrowings are an additional source of funds that the Corporation has
established to meet certain asset/liability and daily cash management
objectives. Rising short-term borrowing rates, which steadily increased during
1994, combined with the overall flattening of the yield curve, has resulted in
reduced margins from this source of funds. The decreases in short-term
borrowings during the periods were funded by increases in deposits, and to a
lesser extent, decreases in loans and other asset categories.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
<TABLE>
<CAPTION>
MARCH 31, CHANGE
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Federal Funds Purchased and Repurchase Agreements $102,346 $287,921 $(185,575) (64.5)%
U.S. Treasury Notes and Other Borrowed Funds 39,700 150,441 (110,741) (73.6)
-------- -------- ---------- -------
Total Short-Term Borrowings 142,046 438,362 (296,316) (67.6)
Long-Term Debt 217,625 217,625 - -
-------- -------- ---------- -------
Total Short-Term Borrowings and Long-Term Debt $359,671 $655,987 $(296,316) (45.2)%
</TABLE>
LIQUIDITY
The Corporation seeks to maintain sufficient liquidity to meet the needs of
depositors, borrowers and creditors, at a reasonable cost and without undue
stress on the operations of the Corporation and its banking subsidiaries. The
Corporation's Asset-Liability Committee actively analyzes and manages liquidity
in coordination with other areas of the organization (see "Interest Rate Risk
Management"). At March 31, 1995, the Corporation's liquid assets, on a
consolidated basis, which include cash and due from banks, U.S. Treasury
securities and Government obligations, federal funds sold, reverse repurchase
agreements and time deposits at other banks, totaled $1.7 billion (38.4% of
total assets). This compares with $1.6 billion (36.5%) at December 31, 1994, and
$1.8 billion (38.6%) at March 31, 1994. The increase in total liquid assets and
the percentage of liquid assets to total assets from March 31, 1994, were the
result of cash inflows from the Corporation's deposit initiatives combined with
maturities of securities and loans. The Corporation expects liquid assets to
remain at approximately the March 31, 1995 level for the foreseeable future.
The liquidity position of the Corporation is enhanced by the stable source of
funds maintained through the Corporation's core deposit relationships, in
addition to its ability to attract new deposits and other sources of funds, such
as short-term borrowings and assets available for securitization.
22
<PAGE>
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 March 31, 1995, the
Corporation maintained a relatively balanced interest-rate risk position. This
position would serve to insulate the Corporation against interest rates moving
significantly in either direction.
In managing the Corporation's interest-rate risk, ALCO also utilizes financial
derivatives in the normal course of business. These products might include
interest-rate swaps, caps, collars, floors, futures, and options, among others.
Financial derivatives are employed to assist in the management and/or reduction
of interest-rate risk for the Corporation and can effectively alter the interest
sensitivity of segments of the statement of condition for specified periods of
time. All of these vehicles are considered "off-balance sheet" as they do not
impact the actual levels of assets or liabilities of the Corporation.
Management finds that all of the methodologies discussed above provide a
meaningful representation of the Corporation's interest-rate sensitivity, though
factors other than changes in the interest-rate environment, such as levels of
nonearning assets, and changes in the composition of earning assets, may impact
net interest income. Management believes its current rate sensitivity level is
appropriate, considering the Corporation's economic outlook and the conservative
approach taken in the review and monitoring of the Corporation's interest-rate
risk position.
23
<PAGE>
STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
Total stockholders' equity at March 31, 1995 was $287.1 million, up $19.4
million from the year-end 1994 total and down $1.6 million from March 31, 1994.
The increase from year-end 1994 was the result of earnings totaling $8.8 million
combined with a reduction in unrealized losses in the Corporation's securities
available for sale portfolio of $13.2 million, partially offset by dividends on
preferred stock of $2.7 million. The decrease in stockholders' equity over the
preceding year is attributable to a $7.3 million increase in unrealized losses
in the Corporation's securities available for sale portfolio, which was offset
by an increase from earnings during the period.
The Corporation's total (combined Tier I and Tier II) and core (Tier I) capital
ratios were 18.72% and 11.63%, respectively, at March 31, 1995, compared with
18.50% and 11.48% at December 31, 1994 and 17.53% and 10.84% at March 31, 1994,
respectively. The Federal Reserve Board's risk-based capital guidelines require
bank holding companies to meet a minimum ratio of qualifying total (combined
Tier I and Tier II) capital to risk-weighted assets of 8.00%, at least half of
which must be composed of core (Tier I) capital elements. The Federal Reserve
Board has established an additional capital adequacy guideline-the leverage
ratio, which measures the ratio of Tier I capital to quarterly average assets.
The most highly rated bank holding companies are required to maintain a minimum
leverage ratio of 3.00%. Those that are not in the most highly rated category,
including the Corporation, are expected to maintain minimum ratios of at least
4.00%, or higher, if determined appropriate by the Federal Reserve Board through
its assessment of the Corporation's asset quality, earnings performance,
interest-rate risk and liquidity. The Federal Reserve Board has not advised the
Corporation of a specific leverage ratio requirement above the 4.00% minimum.
The Corporation's leverage ratio was 6.48% at March 31, 1995, compared with
leverage ratios of 6.42% and 6.15% at December 31, 1994 and March 31, 1994,
respectively. Regulatory capital ratios do not include the impact of
unrealized losses on the securities available for sale portfolio totaling
$15.0 million at March 31, 1995. The Corporation's equity to assets ratio,
which does include these unrealized losses, remains solid, with a ratio of
6.33% at March 31, 1995 compared to 6.05% and 6.04% at December 31, 1994,
and March 31, 1994, respectively.
The Corporation ensures that its operating subsidiaries are capitalized in
accordance with regulatory guidelines. The three national bank subsidiaries of
the Corporation are subject to minimum capital ratios prescribed by the Office
of the Comptroller of the Currency, which are generally the same as those of the
Federal Reserve Board. The following table details the actual and required
minimum ratios for the Corporation and its insured bank subsidiaries:
CAPITAL RATIOS
<TABLE>
<CAPTION>
REQUIRED
MAR. 31, 1995 DEC. 31, 1994 MAR. 31, 1994 MINIMUMS
___________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
RIGGS NATIONAL CORPORATION:
Tier I 11.63% 11.48% 10.84% 4.00%
Combined Tier I and Tier II 18.72 18.50 17.53 8.00
Leverage* 6.48 6.42 6.15 4.00
THE RIGGS NATIONAL BANK OF WASHINGTON, D.C.:
Tier I 13.84 13.35 11.17 4.00
Combined Tier I and Tier II 15.12 14.64 12.45 8.00
Leverage* 7.67 7.39 6.34 4.00
THE RIGGS NATIONAL BANK OF VIRGINIA:
Tier I 17.87 18.18 17.01 4.00
Combined Tier I and Tier II 19.00 19.43 18.26 8.00
Leverage* 9.10 9.74 9.25 4.00
THE RIGGS NATIONAL BANK OF MARYLAND:
Tier I 12.88 13.21 12.16 4.00
Combined Tier I and Tier II 14.13 14.46 13.41 8.00
Leverage* 6.93 7.33 6.62 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 March 31, 1995.
24
<PAGE>
NET INTEREST INCOME
Net interest income on a tax-equivalent basis (net interest income plus an
amount equal to the tax savings on tax-exempt interest) totaled $38.9 million in
the first quarter of 1995, down $514 thousand from the fourth quarter of 1994,
and up $863 thousand from the first quarter of 1994. The net interest margin
(net interest income on a tax-equivalent basis divided by average earning
assets) for the first quarter of 1995 was 3.91% (see schedule of the following
page), a decrease of one basis point from 3.92% for the fourth quarter of 1994
and an increase of 21 basis points from 3.70% for the first quarter of 1994. The
interest rate increases of 1994 abated during the first three months of 1995.
With the rising rates in 1994, the Corporation's assets generally repriced
faster than liabilities. During the first quarter of 1995, the asset repricing
has leveled, as the interest rate increases have abated, which resulted in a
leveling of the Corporation's net interest margin. The Corporation anticipates
the net interest margin will remain level, or decrease slightly, as repricing
liabilities and certain deposit initiatives unfold in future periods. The
loan-to-deposit ratio stood at 66.2% at March 31, 1995, down slightly from the
year-end 1994 ratio of 70.8%, the result of the aforementioned deposit
increases. The ratio of loans to average earning assets was 62.6% for the first
quarter of 1995, compared with ratios of 64.5% and 62.4% for the fourth quarter
of 1994 and the first quarter of 1994, respectively.
Interest income earned on nonaccrual and restructured loans totaled $117
thousand and $1.1 million for the three months ended March 31, 1995 and 1994,
respectively. Interest income that would have been earned under the original
terms of these loans was $869 thousand and $3.2 million, respectively, which
reduced the net interest margin by approximately 7 basis points in 1995 and 21
basis points in 1994.
INTEREST INCOME ON NONACCRUAL AND RENEGOTIATED LOANS (1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
______________________________________________________________________________________________________________
<S> <C>
Interest Income at Original Terms:
Nonaccrual Loans:
Domestic Loans $440
Foreign Loans 404
Renegotiated Loans 25
----
Total $869
Actual Interest Income Recognized:
Nonaccrual Loans:
Domestic Loans $32
Foreign Loans 85
Renegotiated Loans -
----
Total $117
</TABLE>
[FN]
(1)- For loans on nonaccrual and a renegotiated status at March 31, 1995, the
table shows total interest income at original terms and actual income
recognized for the three months ended March 31, 1995.
25
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
(TAX-EQUIVALENT BASIS) (1) AVERAGE INCOME/ AVERAGE INCOME/
(IN THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans: (2)
Commercial - Taxable $389,119 $7,710 8.04 % $358,892 $5,850 6.61 %
Commercial - Tax-Exempt 36,398 918 10.23 76,017 1,474 7.86
Real Estate - Commercial/Construction 316,274 7,516 9.64 385,028 7,801 8.22
Residential Mortgage 1,326,838 23,544 7.20 1,254,138 22,116 7.15
Home Equity 224,722 4,901 8.84 228,842 3,891 6.90
Consumer 73,915 2,168 11.90 77,737 2,257 11.77
Foreign 161,958 3,488 8.73 217,873 4,582 8.53
--------- ------ ----- --------- ------ -----
Total Loans (Including Fees) 2,529,224 50,245 8.06 2,598,527 47,971 7.49
--------- ------ ----- --------- ------ -----
Securities Available for Sale (3) 598,156 9,315 6.32 638,849 6,461 4.10
Securities Held-to-Maturity 448,205 6,439 5.83 598,297 6,731 4.56
Time Deposits with Other Banks 216,031 3,483 6.54 184,599 2,630 5.78
Federal Funds Sold and Resale Agreements 246,224 3,604 5.94 147,188 1,196 3.30
--------- ------ ---- --------- ------ ----
Total Earning Assets and Average Rate Earned 4,037,840 73,086 7.34 4,167,460 64,989 6.32
--------- ------ ---- --------- ------ ----
Less: Reserve for Loan Losses 97,658 86,944
Cash and Due from Banks 202,617 240,987
Premises and Equipment, Net 150,953 160,295
Other Assets 183,222 186,007
---------- ----------
Total Assets $4,476,974 $4,667,805
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts $848,026 $4,904 2.35 % $939,044 $4,758 2.05 %
Money Market Deposit Accounts 972,617 7,921 3.30 1,061,281 6,290 2.40
Time Deposits in Domestic Offices 806,490 9,255 4.65 843,596 6,019 2.89
Time Deposits in Foreign Offices 286,311 4,408 6.24 218,690 2,809 5.21
--------- ------ ----- --------- ------ -----
Total Interest-Bearing Deposits 2,913,444 26,488 3.69 3,062,611 19,876 2.63
--------- ------ ----- --------- ------ -----
Borrowed Funds:
Federal Funds Purchased and
Repurchase Agreements 149,401 2,216 6.02 80,439 594 2.99
U.S. Treasury Notes and Other Borrowed Funds 48,515 662 5.53 86,459 628 2.95
Long-Term Debt 217,625 4,807 8.96 279,128 5,841 8.49
--------- ------ ----- --------- ------ -----
Total Interest-Bearing Funds and Average Rate Paid 3,328,985 34,173 4.16 3,508,637 26,939 3.11
--------- ------ ----- --------- ------ -----
Demand Deposits 828,149 817,792
Other Liabilities 45,354 47,233
Stockholders' Equity 274,486 294,143
---------- ----------
Total Liabilities and Stockholders' Equity $4,476,974 $4,667,805
NET INTEREST INCOME AND SPREAD $38,913 3.18 % $38,050 3.21 %
----- -----
NET INTEREST MARGIN ON EARNING ASSETS 3.91 % 3.70 %
</TABLE>
[FN]
(1) - Income and rates are computed on a tax-equivalent basis using a Federal
income tax rate of 35% and local tax rates as applicable.
(2) - Nonperforming loans are included in average balances used to determine
rates.
(3) - Securities available for sale are presented net of valuation allowances;
if presented gross of valuation allowances, the Corporation's adjusted
net interest spread and margin would total 3.14% and 3.89%,
respectively, at March 31, 1995, with no effect to the prior year
period.
26
<PAGE>
NONINTEREST INCOME
Noninterest income for the first quarter of 1995 was $18.0 million, compared
with $17.4 million for the fourth quarter of 1994 and $26.8 million for the
first quarter of 1994. The $8.8 million decrease when comparing quarters on a
year-to-year basis was attributable primarily to the recognition of gain on
settlement of mortgage insurance claims of $4.7 million in 1994 and decreases of
$1.7 million of international noncredit commissions and fees and $0.8 million of
trust income. The reduction in international commissions and fees was the result
of the sale of three foreign subsidiaries in the third quarter of 1994. Also
contributing to the decrease from March 31, 1994 was a $1.3 million decrease in
net securities gains. The $600 thousand increase in noninterest income from the
fourth quarter of 1994 to the first quarter of 1995 was due to a $1.2 million
securities loss in the fourth quarter of 1994, partially offset by a $382
thousand decrease in trust income and a $246 thousand decrease in other
noninterest income.
NONINTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, CHANGE
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
_____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Service Charges $8,543 $8,830 $(287) ( 3.3)%
Trust Income 6,642 7,457 (815) (10.9)
International Noncredit Commissions and Fees 220 1,937 (1,717) (88.6)
Gain on Settlement of Mortgage Insurance Claims - 4,739 (4,739) -
Foreign Exchange Income 610 546 64 11.7
Other Noninterest Income 1,937 1,906 31 1.6
------ ------ ------- ------
Noninterest Income Excluding Securities Gains, Net 17,952 25,415 (7,463) (29.4)
Securities Gains, Net 46 1,356 (1,310) (96.6)
------ ------ ------- ------
Total Noninterest Income $17,998 $26,771 $(8,773) (32.8)%
</TABLE>
27
<PAGE>
NONINTEREST EXPENSE
Noninterest expense for the first quarter of 1995 was $47.2 million, a decrease
of $951 thousand when compared with the fourth quarter of 1994 and a decrease of
$6.4 million when compared with the first quarter of 1994. The decrease from
December 31, 1994 was primarily due to an increase in other real estate owned
income of $1.3 million and a decrease in occupancy expense of $362 thousand
offset by an increase in full-time salaries and bonuses of $1.3 million. The
decrease from the first quarter of 1994 was primarily attributable to an
increase in other real estate owned income of $2.4 million and decreases in
staff, occupancy, and consulting expenses of $757 thousand, $743 thousand and
$620 thousand, respectively. Furniture and equipment expense decreased $608
thousand and FDIC Insurance expense decreased $443 thousand from March 31, 1994.
The sale of three foreign subsidiaries in the third quarter of 1994 accounted
for reductions in salaries, occupancy, and furniture and equipment expenses
totaling approximately $2.0 million when comparing 1995 results to the prior
year.
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, CHANGE
(IN THOUSANDS) 1995 1994 AMOUNT PERCENT
_____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Salaries and Wages $16,157 $16,645 $(488) ( 2.9)%
Pensions and Other Employee Benefits 4,628 4,897 (269) ( 5.5)
------- ------- ------ -------
Total Staff Expense 20,785 21,542 (757) ( 3.5)
------- ------- ------ -------
Occupancy, Net 5,272 6,015 (743) (12.4)
Data Processing Services 4,358 4,423 (65) ( 1.5)
Furniture and Equipment 2,006 2,614 (608) (23.3)
FDIC Insurance 1,989 2,432 (443) (18.2)
Advertising and Public Relations 1,254 1,391 (137) ( 9.8)
Other Real Estate Owned Expense (Income), Net (1,084) 1,286 (2,370) -
Other Noninterest Expense 12,571 13,884 (1,313) ( 9.5)
------- ------- ------- ------
Total Noninterest Expense $47,151 $53,587 $(6,436) (12.0)%
</TABLE>
TAXES
The Corporation's provision for income taxes includes both federal, state and
foreign income taxes. Income tax expense totaling $104 thousand was recognized
for the quarter ended March 31, 1995, compared with income tax benefit of $141
thousand for the quarter ended December 31, 1994, and income tax expense of $130
thousand for the quarter ended March 31, 1994. The 1995 tax provision was less
than the statutory rate because of the Corporation's ability to carryforward net
operating losses.
28
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
--------
10.13 - 1995 Incentive Plan.
(B) REPORTS ON FORM 8-K
-------------------
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: May 15, 1995 /s/ Joe L. Allbritton
------------ -------------------------
Joe L. Allbritton
Chairman of the Board and
Chief Executive Officer
Date: May 15, 1995 /s/ John L. Davis
------------ --------------------------
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
29
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q DATED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 198,636
<INT-BEARING-DEPOSITS> 255,037
<FED-FUNDS-SOLD> 192,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 601,246
<INVESTMENTS-CARRYING> 518,808
<INVESTMENTS-MARKET> 514,838
<LOANS> 2,531,486
<ALLOWANCE> 94,299
<TOTAL-ASSETS> 4,538,524
<DEPOSITS> 3,823,824
<SHORT-TERM> 142,046
<LIABILITIES-OTHER> 67,942
<LONG-TERM> 217,625
<COMMON> 77,863
0
4,000
<OTHER-SE> 205,224
<TOTAL-LIABILITIES-AND-EQUITY> 4,538,524
<INTEREST-LOAN> 49,678
<INTEREST-INVEST> 15,460
<INTEREST-OTHER> 7,087
<INTEREST-TOTAL> 72,225
<INTEREST-DEPOSIT> 26,488
<INTEREST-EXPENSE> 34,173
<INTEREST-INCOME-NET> 38,052
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 46
<EXPENSE-OTHER> 47,151
<INCOME-PRETAX> 8,899
<INCOME-PRE-EXTRAORDINARY> 8,899
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,795
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 3.91
<LOANS-NON> 22,705
<LOANS-PAST> 2,919
<LOANS-TROUBLED> 382
<LOANS-PROBLEM> 15,056
<ALLOWANCE-OPEN> 97,039
<CHARGE-OFFS> 5,442
<RECOVERIES> 2,056
<ALLOWANCE-CLOSE> 94,299
<ALLOWANCE-DOMESTIC> 86,864
<ALLOWANCE-FOREIGN> 7,435
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
Exhibit 10.13
1995 INCENTIVE PLAN
In March 1995, the Joint Compensation Committee (the "Joint Committee") of the
Boards of Directors of Riggs National Corporation and The Riggs National Bank
of Washington, D.C. ("Riggs-Washington") recommended, and the Board of Directors
approved, an incentive component (the "1995 Incentive"), developed in
conjunction with the implementation of a market based compensation system
for Riggs-Washington. The 1995 Incentive will be based on the Corporation's
achievement of targeted levels of return on average assets for 1995 and the
executive's individual performance.
All executive officers except Messrs. Allbritton, Bollerer and Coughlin will
be eligible to receive cash bonus payments of up to 36% of the
market value of their respective positions, depending on the Corporation's
achievement of targeted levels of return on average assets and
their achievement of individual performance appraisal scores. As part of
the 1995 Incentive, selected executive officers excluding Messrs. Allbritton,
Bollerer and Coughlin also are eligible to receive stock options (to be
granted under the Corporation's 1993 or 1994 Stock Option Plan,
each approved by shareholders) in amounts equal to 40% of the market value
of their respective positions.
Messrs. Allbritton, Bollerer and Coughlin also are eligible to receive
incentives on the same basis as the other executive officers, except
that the maximum amount which may be awarded to such officers is 150%, 100%
and 50% of their 1995 base salary, respectively. There is no stock option
component part of the incentive plan applicable to Messrs. Allbritton,
Bollerer and Coughlin.
If targeted profitability levels are met, bonus payments under the 1995
Incentive would be made in 1996; eligible officers must be employed by
the Corporation or Riggs-Washington on the date the bonus payment is made in
1996 to receive the 1995 bonus.
