<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, 1997
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)
(301) 887-6000
----------------------------------------------------
(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 latest practicable date.
Common Stock, $2.50 par value 30,374,546 shares
----------------------------- -----------------------------
(Title of Class) (Outstanding at May 12, 1997)
<PAGE>
RIGGS NATIONAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three months ended March 31, 1997 and 1996 3
Consolidated Statements of Condition
March 31, 1997 and 1996, and December 31, 1996 4
Consolidated Statements of Changes in Stockholders' Equity
Three months ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996 6
Financial Ratios and Other Financial Data 7
Notes to Consolidated Financial Statements 8-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-25
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 26
Signatures 26
</TABLE>
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<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED) THREE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) MARCH 31,
-----------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $50,204 $51,609
Interest on Securities Available for Sale 18,060 14,241
Interest on Money Market Assets:
Time Deposits with Other Banks 2,018 3,413
Federal Funds Sold and Reverse Repurchase Agreements 6,787 5,307
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Money Market Assets 8,805 8,720
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 77,069 74,570
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 1,719 4,647
Money Market Deposit Accounts 12,258 8,493
Time Deposits in Domestic Offices 8,877 10,271
Time Deposits in Foreign Offices 5,525 4,597
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Deposits 28,379 28,008
- ----------------------------------------------------------------------------------------------------------------------------------
Interest on Short-Term Borrowings and Long-Term Debt:
Federal Funds Purchased and Repurchase Agreements 2,695 2,702
U.S. Treasury Demand Notes and Other Short-Term Borrowings 210 165
Long-Term Debt 4,368 4,763
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Short-Term Borrowings and Long-Term Debt 7,273 7,630
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 35,652 35,638
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 41,417 38,932
Less: Provision for Loan Losses - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income after Provision for Loan Losses 41,417 38,932
NONINTEREST INCOME
Service Charges and Fees 8,688 8,673
Trust Income 8,646 7,874
Other Noninterest Income 2,305 3,075
Securities Gains, Net 2 5,953
- ----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 19,641 25,575
NONINTEREST EXPENSE
Salaries and Wages 15,157 14,621
Pensions and Other Employee Benefits 3,620 3,869
Occupancy, Net 4,416 5,291
Data Processing Services 4,628 4,470
Furniture and Equipment 2,161 1,862
Advertising and Public Relations 1,355 1,371
FDIC Insurance 106 3
Other Real Estate Owned Expense (Income), Net (147) (3)
Other Noninterest Expense 12,516 11,520
- ----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 43,812 43,004
- ----------------------------------------------------------------------------------------------------------------------------------
Income before Taxes and Minority Interest 17,246 21,503
Applicable Income Tax Expense 4,069 52
Minority Interest in Income of Subsidiaries, Net of Taxes 2,711 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 10,466 21,451
Dividends on Preferred Stock (2,688) (2,688)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income Available for Common Stock $ 7,778 $18,763
EARNINGS PER COMMON SHARE $ .25 $ .61
</TABLE>
-3-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(UNAUDITED) MARCH 31, MARCH 31, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 154,128 $ 261,537 $ 211,144
Money Market Assets:
Time Deposits with Other Banks 168,277 234,743 281,126
Federal Funds Sold and Reverse Repurchase Agreements 545,000 355,000 540,000
- --------------------------------------------------------------------------------------------------------------------------------
Total Money Market Assets 713,277 589,743 821,126
Securities Available for Sale (at Market Value) 1,551,597 1,149,332 1,162,503
Loans 2,586,905 2,507,499 2,637,834
Reserve for Loan Losses 63,595 57,227 64,486
- --------------------------------------------------------------------------------------------------------------------------------
Net Loans 2,523,310 2,450,272 2,573,348
Premises and Equipment, Net 165,917 156,324 166,074
Accrued Interest Receivable 26,694 40,028 30,042
Other Real Estate Owned, Net 27,320 32,706 28,121
Other Assets 146,403 131,289 142,742
- --------------------------------------------------------------------------------------------------------------------------------
Total $5,308,646 $4,811,231 $5,135,100
LIABILITIES
Deposits:
Noninterest-Bearing Demand Deposits $ 852,618 $ 814,369 $ 892,594
Interest-Bearing Deposits:
Savings and NOW Accounts 450,461 863,783 472,625
Money Market Deposit Accounts 1,484,866 966,781 1,488,730
Time Deposits in Domestic Offices 813,539 818,308 820,748
Time Deposits in Foreign Offices 435,103 328,901 375,986
- --------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,183,969 2,977,773 3,158,089
- --------------------------------------------------------------------------------------------------------------------------------
Total Deposits 4,036,587 3,792,142 4,050,683
Short-Term Borrowings:
Federal Funds Purchased and Repurchase Agreements 237,129 347,017 237,166
U.S. Treasury Demand Notes and Other Short-Term Borrowings 21,024 17,923 18,068
- --------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Borrowings 258,153 364,940 255,234
Other Liabilities 50,121 46,450 61,882
Long-Term Debt 191,525 217,625 191,525
- --------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,536,386 4,421,157 4,559,324
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES 350,000 - 150,000
- --------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred Stock-$1.00 Par Value
Shares Authorized - 25,000,000 at March 31, 1997 and 1996, and
December 31, 1996; Liquidation Preference - $25 per share
Shares Issued - Noncumulative Perpetual Series B - 4,000,000 shares
at March 31, 1997 and 1996, and December 31, 1996 4,000 4,000 4,000
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at March 31, 1997 and 1996, and
December 31, 1996
Shares Issued - 31,275,294 at March 31, 1997, 31,194,262 at
March 31, 1996 and 31,273,344 at December 31, 1996 78,188 77,986 78,183
Surplus - Preferred Stock 91,192 91,192 91,192
Surplus - Common Stock 157,072 156,463 157,060
Foreign Exchange Translation Adjustments (676) (990) 1,111
Undivided Profits 124,942 86,801 118,682
Unrealized Loss on Securities Available for Sale, Net (8,735) (1,655) (729)
Treasury Stock-900,798 shares at March 31, 1997 and 1996, and
December 31, 1996 (23,723) (23,723) (23,723)
- --------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 422,260 390,074 425,776
- --------------------------------------------------------------------------------------------------------------------------------
Total $5,308,646 $4,811,231 $5,135,100
</TABLE>
-4-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
PREFERRED COMMON FOREIGN LOSS ON
STOCK STOCK EXCHANGE SECURITIES TOTAL
$1.00 $2.50 TRANSLATION UNDIVIDED AVAILABLE TREASURY STOCKHOLDERS'
PAR PAR SURPLUS ADJUSTMENTS PROFITS FOR SALE, NET STOCK EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 $ 4,000 $ 77,938 $247,512 $ (873) $ 68,038 $ 3,777 $ (23,723) $376,669
Net Income - - - - 21,451 - - 21,451
Issuance of
Common Stock for
Stock Option Plans,
19,000 Shares - 48 143 - - - - 191
Cash Dividends--
Series B Preferred
Stock,
$.671875 per Share - - - - (2,688) - - (2,688)
Unrealized Loss on
Securities
Available
for Sale, Net - - - - - (5,432) - (5,432)
Foreign Exchange
Translation Adjustments - - - (117) - - - (117)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
March 31, 1996 $ 4,000 $ 77,986 $247,655 $ (990) $ 86,801 $ (1,655) $ (23,723) $390,074
Balance,
December 31, 1996 $ 4,000 $ 78,183 $248,252 $ 1,111 $118,682 $ (729) $ (23,723) $425,776
Net Income - - - - 10,466 - - 10,466
Issuance of
Common Stock for
Stock Option Plans,
1,950 Shares - 5 12 - - - - 17
Cash Dividends--
Series B Preferred
Stock,
$.671875 per Share - - - - (2,688) - - (2,688)
Common Stock,
$.05 per Share - - - - (1,518) - - (1,518)
Unrealized Loss on
Securities
Available
for Sale, Net - - - - - (8,006) - (8,006)
Foreign Exchange
Translation Adjustments - - - (1,787) - - - (1,787)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
March 31, 1997 $ 4,000 $ 78,188 $248,264 $ (676) $124,942 $ (8,735) $ (23,723) $422,260
</TABLE>
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<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 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 10,466 $ 21,451
Adjustments to Reconcile Net Income to Cash
Provided By (Used In) Operating Activities:
Provision for Loan Losses - -
Provision for Other Real Estate Owned Writedowns - 216
Depreciation Expense and Amortization of Leasehold Improvements 2,843 2,750
Amortization of Purchase Accounting Adjustments 864 880
Benefit from Deferred Taxes (958) (6,996)
Gains on Securities Sales (2) (5,953)
Gains on Other Real Estate Owned Sales (218) (78)
Decrease (Increase) in Accrued Interest Receivable 3,348 (10,450)
Decrease (Increase) in Other Assets 761 (7,589)
(Decrease) Increase in Other Liabilities (11,761) 1,861
- -----------------------------------------------------------------------------------------------------------------------------
Total Adjustments (5,123) (25,359)
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating Activities 5,343 (3,908)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Decrease (Increase) In Time Deposits with Other Banks 112,849 (3,369)
Proceeds from Maturities of Securities Available for Sale 1,590,661 35,155
Proceeds from Sale of Securities Available for Sale - 738,431
Purchase of Securities Available for Sale (1,992,087) (955,190)
Net Decrease in Loans 50,697 65,012
Proceeds from Sale and Other Payments of Other Real Estate Owned 1,081 650
Net Increase in Premises and Equipment (2,686) (4,304)
Other, Net (721) (168)
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities (240,206) (123,783)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Decrease) Increase in:
Demand, NOW, Savings and Money Market Deposit Accounts (66,004) (65,313)
Time Deposits 51,908 (27,724)
Federal Funds Purchased and Repurchase Agreements (37) 161,008
U.S. Treasury Demand Notes and Other Short-Term Borrowings 2,956 2,457
Proceeds From the Issuance of Common Stock 17 191
Minority Interest in Preferred Stock of Subsidiaries 200,000 -
Dividend Payments - Preferred (2,688) (2,688)
- Common (1,518) -
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 184,634 67,931
- -----------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes (1,787) (117)
- -----------------------------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (52,016) (59,877)
Cash and Cash Equivalents at Beginning of Period 751,144 676,414
- -----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 699,128 $ 616,537
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
NONCASH ACTIVITIES:
Loans Transferred to Other Real Estate Owned $ 82 $ 306
CASH PAID DURING THE YEAR FOR:
Interest Paid (Net of Amount Capitalized) $ 36,173 $ 37,612
Income Tax Payments 5 697
</TABLE>
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<PAGE>
RIGGS NATIONAL CORPORATION
FINANCIAL RATIOS AND OTHER FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PERFORMANCE:
Net Income to Average Assets .85 % 1.84 %
Net Income to Average Earning Assets .93 2.05
Net Income to Average Stockholders' Equity 10.00 22.41
Net Income Available to Common Stock
to Average Common Equity 9.58 26.04
Net Interest Income to Average Earning Assets 3.76 3.80
PER COMMON SHARE:
Net Income $ .25 $ .61
Dividends Paid per Common Share $ .05 $ --
Book Value (at period end) $10.77 $9.73
Common Shares Outstanding (at period end) 30,374,496 30,293,464
Weighted Average Common Shares Outstanding 30,373,168 30,280,415
ASSET QUALITY:
Nonaccrual Loans as a % of Total Loans .26 % .49 %
Nonaccrual Loans as a % of Average Loans .26 .49
Nonaccrual and Renegotiated Loans as a % of Total Loans .27 .60
Nonperforming Assets as a % of Total Loans and OREO 1.31 1.88
Nonperforming Assets as a % of Total Assets .64 .99
Net Charge-Offs (Recoveries) as a % of Average Loans .01 (.03)
Reserve for Loan Losses as a % of Total Loans 2.46 2.28
Reserve for Loan Losses as a % of Nonaccrual and
Renegotiated Loans 921.00 380.30
Period End Stockholders' Equity to Total Assets 7.95 8.11
CAPITAL RATIOS AT PERIOD END:
Tier I 19.93 % 15.39 %
Combined Tier I and Tier II 35.50 24.26
Leverage 11.16 8.25
</TABLE>
-7-
<PAGE>
RIGGS NATIONAL CORPORATION
NOTES TO 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 and which require the use of management estimates, Riggs
National Corporation's ("the Corporation") consolidated financial position at
March 31, 1997 and 1996, and December 31, 1996 (audited), and the related
changes in stockholders' equity, the consolidated statements of income and cash
flows for the interim periods presented. These statements should be read in
conjunction with the financial statements and accompanying notes included in the
Corporation's latest annual report. Certain reclassifications have been made to
prior-period amounts to conform with the current year's presentation. The
results of operations for the first three months of 1997 are not necessarily
indicative of the results to be expected for the full 1997 year.
NOTE 2. EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing net income, after deduction
for preferred stock dividends, by the weighted-average number 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 30,373,168 and 30,280,415 for the first
quarter of 1997 and 1996, respectively. Stock options include shares granted
under the 1993 Riggs National Corporation Stock Option Plan (the "1993 Plan"),
the 1994 Riggs National Corporation Stock Option Plan (the "1994 Plan") and the
1996 Riggs National Corporation Stock Option Plan (the "1996 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, 1997, options to
purchase 1,116,500 shares have been granted and remain outstanding in the 1993
Plan at prices ranging from $9.00 to $12.00 per share. 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, 1997, options to purchase
531,800 shares have been granted and remainoutstanding in the 1994 Plan at
prices ranging from $9.06 to $12.38 per share. Under the 1996 Plan, options to
purchase up to 2,000,000 shares may be granted to key employees of the
Corporation. As of March 31, 1997, options to purchase 1,000,000 shares have
been granted and remain outstanding in the 1996 Plan at a price of $12.38
per share.
In March 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS No. 128
supersedes APB No. 15 to conform earnings per share with international standards
as well as to simplify the complexity of the computation under APB No. 15. In
summary, SFAS No. 128 replaces the previous primary earnings per share ("EPS")
calculation with a basic EPS calculation. The basic EPS differs from the primary
EPS calculation in that the basic EPS does not include any potentially dilutive
securities. Fully dilutive EPS is replaced with diluted EPS and should be
disclosed regardless of its dilutive impact to basic EPS. SFAS No. 128 is
effective for both interim and annual periods ending after December 15, 1997,
thus the EPS in the Statements of Income are presented under APB No. 15.
Proforma EPS under SFAS No. 128 for the three months ended March 31, 1997 and
1996, is presented below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
---------------------------------- ----------------------------------
BASIC DILUTED BASIC DILUTED
EPS EPS EPS EPS
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net Income $10,466 $10,466 $21,451 $21,451
Less: Preferred Stock Dividends 2,688 2,688 2,688 2,688
----------------- ---------------- ----------------- ----------------
Income Available to Common Shareholders $ 7,778 $ 7,778 $18,763 $18,763
Weighted-Average Shares Outstanding 30,373,168 30,373,168 30,280,415 30,280,415
Stock Option Plans n/a 1,097,119 n/a 283,090
----------------- ---------------- ----------------- ----------------
Adjusted Weighted-Average Shares Outstanding 30,373,168 31,470,287 30,280,415 30,563,505
Basic EPS $.26 $.62
Diluted EPS $.25 $.61
</TABLE>
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 3. RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Changes in the reserve for loan losses are summarized as follows:
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, Beginning of Period $64,486 $56,546
Provision for Loan Losses - -
Loans Charged Off:
Domestic 755 512
Foreign 80 -
- -------------------------------------------------------------------------------------------------------------------------------
Total Loans Charged Off 835 512
Recoveries on Charged-Off Loans:
Domestic 704 872
Foreign (19) 498
- -------------------------------------------------------------------------------------------------------------------------------
Total Recoveries on Charged-Off Loans 685 1,370
Net Charge-Offs (Recoveries) 150 (858)
Foreign Exchange Translation Adjustments (741) (177)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, End of Period $63,595 $57,227
</TABLE>
NOTE 4. OTHER REAL ESTATE OWNED, NET
<TABLE>
<CAPTION>
Changes in other real estate owned, net of reserves, are summarized as follows:
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $28,121 $33,197
Additions 82 306
Deductions:
Sales and repayments 863 572
Charge-offs - 216
- -------------------------------------------------------------------------------------------------------------
Total Deductions 863 788
Foreign exchange translation adjustments (20) (9)
- -------------------------------------------------------------------------------------------------------------
Balance, end of period $27,320 $32,706
</TABLE>
Other real estate owned income and expense consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Other Real Estate Owned Operating Revenues $ 186 $483
Net Gain on Sale of Properties 218 78
- -------------------------------------------------------------------------------------------------------------
Net Revenues 404 561
Provision for Other Real Estate Owned Losses - 216
Selling and Other Real Estate Owned Operating Expenses 257 342
- -------------------------------------------------------------------------------------------------------------
Net Expenses 257 558
- -------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned Expense (Income), Net $(147) $ (3)
</TABLE>
-9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 5. NEW FINANCIAL ACCOUNTING STANDARDS
In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued. SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities, based on a financial-components
approach that focuses on control. Under this approach, after a transfer of
financial assets, financial and servicing assets are recognized if controlled or
liabilities are recognized if incurred. Financial and servicing assets are
removed from the statement of condition when control has been surrendered and
liabilities are removed when extinguished. SFAS No. 125 was effective and
adoptive on January 1, 1997 and will be applied prospectively. The Corporation
did not experience any material affect on its financial position from this
implementation.
In March 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS No. 128
supersedes APB No. 15 to conform earnings per share with international standards
as well as to simplify the complexity of the computation under APB No. 15. In
summary, SFAS No. 128 replaces the previous primary earnings per share ("EPS")
calculation with a basic EPS calculation. The basic EPS differs from the primary
EPS calculation in that the basic EPS does not include any potentially dilutive
securities. Fully dilutive EPS is replaced with diluted EPS and should be
disclosed regardless of dilutive impact to basic EPS. SFAS No. 128 is effective
for both interim and annual periods ending after December 31, 1997, thus the EPS
in the Statements of Income are presented under APB No. 15. Proforma EPS under
SFAS No. 128 for the three months ended March 31, 1997 and 1996, is presented in
Note 2--"Earnings per Common Share".
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 month periods ended March 31, 1997 and 1996, was
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic Offices $16,593 $20,866
Foreign Offices 653 637
- ------------------------------------------------------------------------------------------------------------------------------
Total $17,246 $21,503
</TABLE>
The provision for income taxes for the three month periods ended March 31, 1997
and 1996, consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Provision :
Federal $ 4,653 $ 6,969
State 384 117
Foreign (10) (38)
- -------------------------------------------------------------------------------------------------------------------------------
Total Current Provision 5,027 7,048
Deferred Benefit:
Federal 421 (6,996)
State (379) -
Foreign (1,000) -
- -------------------------------------------------------------------------------------------------------------------------------
Total Deferred Benefit (958) (6,996)
- -------------------------------------------------------------------------------------------------------------------------------
Applicable Income Tax Expense $ 4,069 $ 52
</TABLE>
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
<TABLE>
<CAPTION>
Outstanding commitments and contingent liabilities that do not appear in the
consolidated financial statements at March 31, 1997 and 1996, are as follows:
CONTRACTUAL OR
NOTIONAL VALUE
MARCH 31,
----------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to Extend Credit:
Commercial $534,885 $378,864
Real Estate:
Commercial/Construction 57,894 19,163
Mortgage 8,358 4,196
Home Equity 181,024 185,003
- -----------------------------------------------------------------------------------------------------
Total Real Estate 247,276 208,362
- -----------------------------------------------------------------------------------------------------
Consumer 87,848 84,731
- -----------------------------------------------------------------------------------------------------
Total Commitments to Extend Credit $870,009 $671,957
Letters of Credit:
Commercial $ 94,938 $102,275
Standby-Performance 9,190 6,897
Standby-Financial 34,679 44,389
- -----------------------------------------------------------------------------------------------------
Total Letters of Credit $138,807 $153,561
Derivative Instruments:
Foreign Exchange Contracts:
Commitments to Purchase $ 78,426 $119,292
Commitments to Sell 177,414 110,000
Interest-Rate Swap Agreements 350,511 338,390
Interest-Rate Option Contracts--
Corridors 100,000 300,000
Caps 635 --
</TABLE>
In the normal course of business, the Corporation enters into various
transactions that, in accordance with generally accepted accounting principles,
are not included on the consolidated statements of condition. These transactions
are referred to as "off-balance-sheet" commitments and differ from the
Corporation's balance sheet activities in that they do not give rise to funded
assets or liabilities. The Corporation enters into derivative transactions to
manage its own risks arising from movements in interest and currency rates. The
Corporation also offers such derivative products to its customers to meet their
financing objectives and to manage their interest and currency rate risk. The
balance sheet activities involve varying degrees of credit, interest-rate or
liquidity risk in excess of amounts recognized on the Consolidated Statements of
Condition. The Corporation's management believes that financial derivatives,
such as interest-rate agreements, can be an important element of prudent balance
sheet and interest-rate risk management. The Corporation seeks to minimize its
exposure to loss under these commitments by subjecting them to credit approval
and monitoring procedures.
The Corporation's interest-rate swap and options contract activity for the
quarter ended March 31, 1997, is as follows:
<TABLE>
<CAPTION>
BALANCE BALANCE
DECEMBER 31, MARCH 31,
1996 ADDITIONS MATURITIES 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest-Rate Swaps:
Receive fixed/pay variable $200,000 $50,000 $ -- $250,000
Receive variable/pay fixed 100,000 -- 25,000 75,000
For Customers 25,137 1,009 -- 26,146
Interest-Rate Option Contracts 100,000 -- -- 100,000
- ----------------------------------------------------------------------------------------------------------------
Total $425,137 $51,009 $25,000 $451,146
</TABLE>
-11-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED
<TABLE>
<CAPTION>
INTEREST-RATE SWAP AGREEMENTS
MARCH 31, 1997 1997
WEIGHTED ACCRUED ACCRUED UNAMORTIZED YTD NET
NOTIONAL UNREALIZED AVERAGE RATE INTEREST INTEREST FEES & INTEREST
---------------------
AMOUNT GAIN(LOSS) RECEIVE PAY RECEIVABLE PAYABLE PREMIUMS INC./(EXP.)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay variable,
Maturing July 1998 $200,000 $ (2,466) 5.38% 5.56% $ 1,913 $ 1,978 $ -- $ (87)
Receive fixed/pay variable,
Maturing January 1999 25,000 (132) 6.45 5.56 269 232 -- 37
Receive fixed/pay variable,
Maturing February 1999 25,000 (98) 6.29 5.50 183 161 -- 23
Receive variable/pay fixed,
Maturing April 1997 25,000 (65) 5.56 6.70 270 326 -- (72)
Receive variable/pay fixed,
Maturing January 1998 25,000 203 5.56 5.21 247 228 -- 26
Receive variable/pay fixed,
Maturing January 1999 25,000 516 5.56 5.36 247 235 -- 17
Corridor,
Maturing April 1997 100,000 -- -- -- -- -- -- (129)
For Customers 26,146 (263) -- -- 334 397 -- (81)
Receive variable/pay fixed,
Matured March 1997 -- -- -- -- -- -- -- (80)
- -------------------------------------------------------------------------------------------------------------------------
Total Interest-Rate Swap
Agreements $451,146 $ (2,305) $ 3,463 $ 3,557 $ -- $ (346)
</TABLE>
During the first quarter of 1997, 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 floating-rate home equity loan
portfolio, which entail the receipt of fixed rates of 6.45% and 6.29%, and
payments of floating rates equal to the three-month London Interbank Offered
Rate ("LIBOR"), reset quarterly. These agreements mature in January 1999 and
February 1999, respectively (see table above). Payments for these swap
agreements are netted on a quarterly basis, with the aggregate net interest
income/expense from these swap agreements being included in interest income as
an adjustment to interest income recognized from the home equity loan portfolio.
NOTE 8. RECENT DEVELOPMENTS
On March 12, 1997, Riggs Capital II, a wholly-owned subsidiary of the
Corporation sold at par, 200,000 shares of redeemable trust preferred
securities, liquidation amount of $1,000 (the "Trust Preferred Securities"), for
a total of $200 million. These securities have an annual dividend rate of 8.875
percent, payable semi-annually, beginning June 30, 1997. The Trust Preferred
Securities are accounted for as a minority interest and are presented
as a separate line item in the Consolidated Statements of Condition under the
caption "Guaranteed Preferred Beneficial Interests in Junior Subordinated
Deferrable Interest Debentures" with dividends reflected as a deduction from
income before taxes and minority interest under the caption "Minority Interest
in Income of Subsidiaries, Net of Taxes."
-12-
<PAGE>
RIGGS NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
The Corporation reported consolidated net income of $10.5 million, or $.25 per
common share, for the quarter ended March 31, 1997, compared with net earnings
of $21.5 million, or $.61 per common share, for the same quarter in 1996. The
decrease in net earnings between the quarters resulted primarily from $6.0
million of nonrecurring securities gains in the first quarter of 1996 combined
with $4.0 million from increased income tax expense for the first quarter
of 1997.
Net interest income for the first quarter was $41.4 million, compared with $38.9
million for the first quarter of 1996, an increase of $2.5 million, or 6.4%. The
increase from the prior year's quarter was primarily the result of a $368.7
million increase in average earning assets between the quarters. This increase
was mostly due to proceeds received from Trust Preferred Securities sold in
December 1996 and March 1997 totaling $350 million. The favorable increase in
average earning assets was partially offset by a $103.2 million increase in
average interest-bearing liabilities, the result of increases in the deposit
portfolio between the periods. The net interest margin for the first quarter of
1997 was 3.76% compared with a margin of 3.80% for the prior year's first
quarter.
Noninterest income, excluding securities gains, for the first quarter of
1997 totaled $19.6 million, an amount level with the prior year's first-quarter
total. Increases in service charges and trust income totaling $787 thousand were
offset by decreases in other noninterest income. Noninterest expense for 1997's
first quarter totaled $43.8 million, an increase of $808 thousand, or 1.9%, from
the prior year's first-quarter total. This increase was the result of increases
in staff expense, furniture and equipment and other noninterest expenses,
partially offset by decreases in occupancy and other real estate owned expenses.
Total assets at March 31, 1997, were $5.31 billion, up $497.4 million, or
10.3%, over the $4.81 billion level a year earlier. This growth was mostly due
to increases in the securities portfolio, which totaled $402.3 million, funded
by the sale of $350.0 million of Trust Preferred Securities and a $244.4 million
increase in the deposit portfolio partially offset by a $106.8 million decrease
in short-term borrowings.
Nonperforming assets, including other real estate owned, decreased $13.5
million, or 28.3%, to $34.2 million at March 31, 1997, when compared with 1996's
first-quarter nonperforming asset total of $47.8 million. At March 31, 1997,
the reserve for loan losses was $63.6 million, and the reserve to total loans
ratio stood at 2.46%. Nonperforming loans totaled $6.9 million at the end of
1997's first quarter.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
SECURITIES
Schedules detailing securities available for sale and held-to-maturity follow:
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------------------------- -------------------------------
AMORTIZED MARKET/ AMORTIZED MARKET/
AVAILABLE FOR SALE COST BOOK VALUE COST BOOK VALUE
- -----------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 962,302 $ 951,296 $1,114,295 $1,110,649
Government Agencies Securities 571,512 569,086 - -
Obligations of States & Political Subdivisions - - 3,800 4,938
Mortgage-Backed Securities 1,907 1,900 - -
Other Securities 29,315 29,315 33,745 33,745
- -----------------------------------------------------------------------------------------------------------------
Total $1,565,036 $1,551,597 $1,151,840 $1,149,332
</TABLE>
Securities available for sale totaled $1.55 billion at March 31, 1997 compared
to $1.16 billion at year-end 1996 and $1.15 billion at March 31, 1996. The
current quarter's activity included purchases of securities available for sale
totaling $1.99 billion, partially offset by proceeds from maturities and
curtailments of $1.59 billion. The increase from the prior year was mainly
attributable to fund inflows from the sale of Trust Preferred Securities in
December 1996 and March 1997 totaling $350.0 million, combined with increases in
the deposit portfolio. The weighted-average maturities and yields for securities
available for sale, adjusted for anticipated prepayments, was approximately 1.9
years and 5.73%, respectively, at March 31, 1997.
The maturity distribution of securities available for sale at March 31, 1997,
follows:
<TABLE>
<CAPTION>
GOVERNMENT MORTGAGE-
U.S. TREASURY AGENCIES BACKED OTHER
(IN THOUSANDS) SECURITIES SECURITIES SECURITIES SECURITIES TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Within 1 year
Amortized Cost $ 387,396 $ 371,530 $ $ 4,563 $ 763,489
Market/Book 386,833 371,481 - 4,563 762,877
Yield* 5.31% 5.22% - 5.02% 5.26%
After 1 but within 5 years
Amortized Cost 404,813 199,982 - - 604,795
Market/Book 399,366 197,605 - - 596,971
Yield* 5.91% 6.17% - - 6.00%
After 5 but within 10 years
Amortized Cost 170,093 - - - 170,093
Market/Book 165,097 - - - 165,097
Yield* 6.35% - - - 6.35%
After 10 years
Amortized Cost - - 1,907 24,752 26,659
Market/Book - - 1,900 24,752 26,652
Yield* - - 7.28% 6.15% 6.23%
- ------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale
Amortized Cost $ 962,302 $ 571,512 $ 1,907 $ 29,315 $1,565,036
Market/Book 951,296 569,086 1,900 29,315 1,551,597
Yield* 5.75% 5.55% 7.28% 5.97% 5.68%
</TABLE>
[FN]
*Weighted-average yield to maturity at March 31, 1997.
-14-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
LOANS
The following table reflects loans by type for the periods indicated:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1997 1996 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and Financial $ 410,955 $ 346,792 $ 443,557
Real Estate - Commercial/Construction 327,775 331,102 352,015
Residential Mortgage 1,213,237 1,271,609 1,226,110
Home Equity 286,239 259,178 281,867
Consumer 73,815 74,097 78,617
Foreign 271,460 220,814 251,782
- -----------------------------------------------------------------------------------------------------------
Loans 2,583,481 2,503,592 2,633,948
Unamortized Premium (Unearned
Discount/Net Deferred Fees) 3,424 3,907 3,886
- -----------------------------------------------------------------------------------------------------------
Total Loans, Net $2,586,905 $2,507,499 $2,637,834
</TABLE>
At March 31, 1997, total loans outstanding (net of premiums/discounts) were
$2.59 billion, compared with $2.51 billion at March 31, 1996. The increase in
loans from March 31, 1996 was primarily attributable to increases in commercial
and financial loans of $64.2 million, foreign loans of $50.6 million and home
equity loans of $27.1 million. These increases were offset in part by the $58.4
million decrease in residential mortgage loans and the $3.3 million decrease in
real estate-commercial construction loans.
REAL ESTATE - COMMERCIAL/CONSTRUCTION LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
MARCH 31, 1997
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
(IN THOUSANDS) COLUMBIA VIRGINIA MARYLAND KINGDOM OTHER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land Acquisition and
Construction Development $ 22,470 $ 9,366 $ 9,496 $ - $ - $ 41,332
Multifamily Residential 11,086 10,647 3,684 - 6,405 31,822
Commercial:
Office Buildings 52,122 27,724 25,638 - - 105,484
Retail/Shopping Centers 31,013 11,734 13,291 - - 56,038
Hotels 1,150 - - - - 1,150
Industrial/Warehouse 2,252 11,633 7,825 - - 21,710
Churches 26,899 4,462 15,577 - - 46,938
Other 6,062 13,226 3,947 - 66 23,301
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial 119,498 68,779 66,278 - 66 254,621
- ------------------------------------------------------------------------------------------------------------------------------
Total Domestic Real Estate - Commercial/
Construction Loans 153,054 88,792 79,458 - 6,471 327,775
Foreign - - - 106,843 - 106,843
- ------------------------------------------------------------------------------------------------------------------------------
Total Real Estate - Commercial/
Construction Loans $153,054 $88,792 $ 79,458 $106,843 $ 6,471 $434,618
</TABLE>
-15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
LOANS, CONTINUED
The Corporation extends credit to borrowers domiciled outside of the United
States through several of its banking subsidiaries. Cross-border outstandings
include loans, acceptances, interest-bearing deposits with other banks,
investments, accrued interest and other monetary assets. These assets may be
impacted by changing economic conditions in their respective countries. In
addition, cross-border outstandings include legally enforceable guarantees
issued on behalf of non-local third parties and local currency outstandings to
the extent they are not funded by local currency borrowings. Cross-border
outstandings are then reduced by tangible liquid collateral and any legally
enforceable guarantees issued by non-local third parties on behalf of the
respective country.
The table below details those countries in which the Corporation had total
outstandings in excess of 1% of its total assets. At March 31, 1997, the
Corporation had no cross-border outstandings exceeding 1% of its total assets to
countries experiencing difficulties in repaying their external debt. The
Corporation did not have any cross-border outstandings between .75% and 1% at
March 31, 1997, December 31, 1996 or March 31, 1996.
CROSS-BORDER OUTSTANDINGS THAT EXCEED 1% OF TOTAL ASSETS
<TABLE>
<CAPTION>
90 DAYS
% OF OR MORE POTENTIAL
(IN MILLIONS) AMOUNT ASSETS NONACCRUAL RENEGOTIATED PAST DUE PROBLEM
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 1997
United Kingdom $185.5 3.5% $ - $ - $ - $ -
MARCH 31, 1996
United Kingdom 184.1 3.8 3.0 - - -
DECEMBER 31, 1996
United Kingdom 196.3 3.8 0.3 - - -
</TABLE>
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY
NONPERFORMING ASSETS
Nonperforming assets, which include nonaccrual loans, renegotiated loans and
other real estate owned (net of reserves), totaled $34.2 million at March 31,
1997, a $3.9 million (10.2%) decrease from the year-end 1996 total of $38.1
million and a $13.5 million (28.3%) decrease from the March 31, 1996 total.
<TABLE>
<CAPTION>
NONPERFORMING ASSETS AND PAST-DUE LOANS
MARCH 31, MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1997 1996 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Nonaccrual Loans: (1)
Domestic $ 6,319 $ 9,141 $ 9,133
Foreign 466 3,117 743
- ----------------------------------------------------------------------------------------------------------------------
Total Nonaccrual Loans 6,785 12,258 9,876
- ----------------------------------------------------------------------------------------------------------------------
Renegotiated Loans: (2)
Domestic 120 2,790 125
Foreign - - -
- ----------------------------------------------------------------------------------------------------------------------
Total Renegotiated Loans 120 2,790 125
- ----------------------------------------------------------------------------------------------------------------------
Other Real Estate Owned, Net:
Domestic 26,859 32,145 27,722
Foreign 461 561 399
- ----------------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net 27,320 32,706 28,121
- ----------------------------------------------------------------------------------------------------------------------
Total Nonperforming Assets $34,225 $47,754 $38,122
PAST-DUE LOANS: (3)
Domestic $ 4,437 $ 5,720 $ 3,849
Foreign - - -
- ----------------------------------------------------------------------------------------------------------------------
Total Past-Due Loans $ 4,437 $ 5,720 $ 3,849
</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, or that are, in management's opinion, doubtful as to the
collectibility of either interest or principal.
(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 $10.4
million in loans renegotiated at market terms that have performed in
accordance with their respective renegotiated terms. These performing,
market rate loans are no longer included in nonperforming asset totals.
(3) - Loans contractually past due 90 days or more in principal or interest that
are well-secured and in the process of collection.
-17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY, CONTINUED
NONACCRUAL AND RENEGOTIATED LOANS
At March 31, 1997, nonaccrual loans, including both domestic and foreign, were
$6.8 million, or 0.3% of total loans, compared with $9.9 million, or 0.4% of
total loans, at year-end 1996 and $12.3 million, or 0.5% of total loans at March
31, 1996. The $6.8 million of nonaccrual loans includes $1.2 million of loans
identified as impaired (see "Impaired Loans"). The decrease in nonaccrual loans
during the first three months of 1997 was due to paydowns of $2.9 million and
charge offs of $277 thousand. These decreases were offset by additions of $123
thousand. Renegotiated loans totaled $120 thousand at March 31, 1997, a decrease
of $5 thousand from December 31, 1996, and $2.7 million from the prior year's
quarter end. The decrease in renegotiated loans from the prior year's balance
was the result of paydowns and payoffs totaling $2.4 million and charge-offs
totaling $300 thousand. Nonaccrual and renegotiated real estate -
commercial/construction loans, both foreign and domestic, totaled $2.1 million
at March 31, 1997, or 30.4% of the total nonaccrual and renegotiated loans.
OTHER REAL ESTATE OWNED, NET
Other real estate owned, net of reserves, decreased to $27.3 million at March
31, 1997, compared with $28.1 million at December 31, 1996 and $32.7 million at
March 31, 1996. The decrease during the first three months of 1997 is the result
of paydowns and sales of $863 thousand offset by additions of $82 thousand. At
March 31, 1997, residential and commercial land composed 86.7% of other real
estate owned portfolio.
OTHER REAL ESTATE OWNED - (1)
GEOGRAPHIC DISTRIBUTION BY TYPE
MARCH 31, 1997
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
(IN THOUSANDS) COLUMBIA VIRGINIA MARYLAND KINGDOM TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land $ - $17,436 $ 6,239 $ - $23,675
Single-Family Residential - 619 829 - 1,448
Office Buildings/Retail - - 1,521 379 1,900
Hotels - - - 82 82
Industrial/Warehouse 215 - - - 215
- -----------------------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net $ 215 $18,055 $ 8,589 $ 461 $27,320
</TABLE>
[FN]
(1) - Balances are net of valuation reserves totaling $2.1 million.
PAST-DUE AND POTENTIAL PROBLEM LOANS
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 increased $588 thousand during the first three
months of 1997 to $4.4 million, while decreasing $1.3 million from March 31,
1996.
At March 31, 1997, the Corporation had identified approximately $9.9 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 entirely of domestic loans,
primarily commercial and financial.
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY, CONTINUED
The Corporation's 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 $63.6 million, or 2.46% of total
loans (net of premiums/discounts) at March 31, 1997, compared with $64.5
million, or 2.44% of total loans at December 31, 1996, and $57.2 million, or
2.28% of total loans, at March 31, 1996. The coverage ratio was 921% at March
31, 1997, 645% at year-end 1996 and 380% at March 31, 1996. The increase in the
coverage ratio from the prior year's periods was the result of a $8.1 million
decrease in nonperforming loans between the periods, combined with the $6.4
million increase in the reserve for loan losses.
IMPAIRED LOANS
Impaired loans are measured and reported based on the present value of expected
cash flows discounted at the loan's effective interest rate, or at the fair
value of the loan's collateral if the loan is deemed "collateral dependent."
Impaired loans are generally defined as nonaccrual loans, excluding large groups
of smaller-balance loans (with similar collateral characteristics), which are
collectively evaluated for impairment. Specific reserves are required to the
extent that the fair value of the impaired loans is less than the recorded
investment. Impaired loans totaled $1.2 million at March 31, 1997, a $1.7
million decrease from the December 31, 1996 total of $2.9 million and a $5.1
million decrease from March 31, 1996. Collateral dependent loans, which are
measured at the fair value of the collateral, constitute all of the impaired
loans at March 31, 1997. All of the Corporation's impaired loans are included in
the totals of the preceding "Nonperforming Assets and Past-Due Loans" table.
The following tables present impaired loans:
<TABLE>
<CAPTION>
TOTAL IMPAIRED LOANS (1)
MARCH 31, MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic:
Real Estate - Commercial/Construction $1,155 $4,081 $2,890
Foreign - 2,151 -
- -------------------------------------------------------------------------------------------------------------------------------
Total Impaired Loans $1,155 $6,232 $2,890
</TABLE>
[FN]
(1) There were no specific reserves for impaired loans as of March 31, 1997
and 1996, and December 31, 1996.
----------------------------------------------------------
IMPAIRED LOANS
AVERAGE INVESTMENT AND INTEREST RECOGNIZED
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
------------------------------------------------------------------
AVERAGE INTEREST AVERAGE INTEREST
(IN THOUSANDS) INVESTMENT RECOGNIZED INVESTMENT RECOGNIZED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic:
Real Estate - Commercial/Construction $2,023 $ - $4,388 $ -
Foreign - - 1,413 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total $2,023 $ - $5,801 $ -
</TABLE>
-19-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
DEPOSITS
Deposits are the primary and most stable source of funds for the
Corporation. Deposits totaled $4.04 billion at March 31, 1997, increasing $244.4
million (6.5%) from the March 31, 1996 deposit total. The increase from the year
earlier balance was due to increases in money market accounts of $518.1 million,
foreign time deposits of $106.2 million, and demand deposits of $38.2 million,
partially offset by the decrease in savings and NOW accounts of $413.3 million.
The large variances in the money market and savings and NOW balances is
partially attributed to a new program started during the third quarter of 1996.
Deposit balances in certain NOW and noninterest checking accounts are
transferred to the money market classification, thereby reducing the level of
deposit reserves required by the Federal Reserve. Total accounts transferred
equaled approximately $353 million at March 31, 1997.
<TABLE>
<CAPTION>
DEPOSITS
MARCH 31, CHANGE
--------------------------- ----------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand Deposits $ 852,618 $ 814,369 $ 38,249 4.7 %
Interest-Bearing Deposits:
Savings and NOW Accounts 450,461 863,783 (413,322) (47.9)
Money Market Deposit Accounts 1,484,866 966,781 518,085 53.6
Time Deposits in Domestic Offices 813,539 818,308 (4,769) (.6)
Time Deposits in Foreign Offices 435,103 328,901 106,202 32.3
- ------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,183,969 2,977,773 206,196 6.9
- ------------------------------------------------------------------------------------------------------------------------
Total Deposits $4,036,587 $3,792,142 $ 244,445 6.5 %
</TABLE>
Since 1994, the Corporation has been conducting 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 five retail branches to date. The Corporation is actively seeking
enhancements to existing branches to attract new customers, improve service
quality and the overall profitability of its branches. The Corporation is also
searching for opportunities to establish new retail banking branches in
strategic locations. In 1995, the retail banking group formed a marketing team
to explore the current and future prospects of electronic banking for retail
banking customers. Retail banking advertising and product information have been
established on a local-area, on-line service, and completion of the Internet
Home Page is anticipated in 1997. Additionally, the Corporation will launch its
home banking product in April 1997.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings were level during the first three months of 1997, while
decreasing $106.8 million (29.3%) from the year earlier balance. Short-term
borrowings are an additional source of funds that the Corporation has utilized
to meet certain asset/liability and daily cash management objectives. The
decrease in short-term borrowings from the year-earlier balances was the result
of increased fund inflows from the deposit portfolio between the periods. The
decrease in long-term debt from the prior year was the result of $26.1 million
of floating-rate subordinated notes maturing in September 1996.
<TABLE>
<CAPTION>
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
MARCH 31, CHANGE
--------------------------- ---------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Funds Purchased and Repurchase Agreements $237,129 $347,017 $(109,888) (31.7)%
U.S. Treasury Notes and Other Borrowed Funds 21,024 17,923 3,101 17.3
- ---------------------------------------------------------------------------------------------------------------------------
Total Short-Term Borrowings 258,153 364,940 (106,787) (29.3)
Floating-Rate Subordinated Capital Notes due 1996 - 26,100 (26,100) (100.0)
Subordinated Debentures due 2009 66,525 66,525 - n/a
Subordinated Notes due 2006 125,000 125,000 - n/a
- ---------------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt 191,525 217,625 (26,100) (12.0)
- ---------------------------------------------------------------------------------------------------------------------------
Total Short-Term Borrowings and Long-Term Debt $449,678 $582,565 $(132,887) (22.8)%
</TABLE>
-20-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
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, 1997, the Corporation's liquid assets, on a
consolidated basis, which include cash and due from banks, U.S. Treasury
securities and Government obligations, federal funds sold, reverse repurchase
agreements and time deposits at other banks, totaled $2.4 billion (45.6% of
total assets). This compares with $2.2 billion (42.7%) at December 31, 1996, and
$2.0 billion (41.6%) at March 31, 1996. The increase in total liquid assets and
the percentage of liquid assets to total assets from March 31, 1996, was the
primarily the result of cash inflows from the issuance of Trust Preferred
Securities in December 1996 and March 1997. The Corporation expects liquid
assets to remain at approximately the March 31, 1997 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. Additionally, the
Corporation has other sources of funds, such as short-term borrowings and
advances available through its membership in the Federal Home Loan Bank of
Atlanta.
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 manage prudently 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, which portrays a
snapshot of the statement of condition at one point in time. However, this
methodology does not adequately measure the Corporation's exposure to
interest-rate risk. The statement of condition must be viewed within a dynamic
framework in which relationships may vary over time in virtually every segment
of the financial statement.
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 internal as well as consensus views 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 the
ensuing 12-month period under the "most likely" scenario described above. As of
year-end 1996, the Corporation's interest sensitivity position was liability
sensitive and continued to be liability sensitive at March 31, 1997. In both
instances the Corporation was well-insulated against interest rates moving
significantly in either direction. At March 31, 1997, the forecasted impact of
interest rates either steadily rising or falling 300 basis points versus a "most
likely" scenario would reflect a change in net interest income of less than 2%
over an initial 12-month period and less than 4% for the entire 36-month
horizon--well below the established tolerance levels set by the Corporation.
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.
-21-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
Total stockholders' equity at March 31, 1997 was $422.3 million, down $3.5
million from the year-end 1996 total and up $32.2 million from March 31, 1996.
The decrease from year-end 1996 was the result of an increase in net unrealized
losses in the Corporation's securities available for sale portfolio of $8.0
million, dividends on preferred and common stock of $4.2 million and a foreign
exchange translation adjustments of $1.8 million, partially offset by earnings
totaling $10.5 million. The increase in stockholders' equity over the preceding
year is mostly attributable to earnings during the period, offset in part by net
unrealized losses from the securities available for sale portfolio and dividend
payments.
In December 1996 and March 1997, Riggs Capital and Riggs Capital II,
respectively, issued Trust Preferred Securities, Series A and C, at 8.625% and
8.875%, respectively. These securities mature in December 2026 for Riggs Capital
and March 2027 for Riggs Capital II. Riggs Capital and Riggs Capital II are new
trust entities formed in order to issue the preferred securities and each are
wholly-owned subsidiaries of the Corporation. Dividends for both issues are
payable semi-annually, beginning June 30, 1997. The Trust Preferred Securities,
Series A cannot be redeemed until December 2006, and the Series C cannot be
redeemed until March 2007, except under certain limited circumstances. These
securities enhance certain regulatory capital ratios (see below), and the
proceeds of these offerings are available for general corporate purposes.
The Corporation's total (combined Tier I and Tier II) and core (Tier I) capital
ratios were 35.50% and 19.93%, respectively, at March 31, 1997, compared with
28.47% and 20.04% at December 31, 1996, and 24.26% and 15.39% at March 31, 1996,
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 11.16% at March 31, 1997, compared with
leverage ratios of 11.84% and 8.25% at December 31, 1996 and March 31, 1996,
respectively. Regulatory capital ratios do not include the impact of net
unrealized losses on the securities available for sale portfolio totaling $8.7
million at March 31, 1997. The Corporation's equity to assets ratio, which does
include these unrealized losses, was 7.95% at March 31, 1997, compared to 8.29%
and 8.11% at December 31, 1996, and March 31, 1996, respectively.
The Corporation ensures that its operating subsidiaries are capitalized in
accordance with regulatory guidelines. The Corporation's national bank
subsidiary--Riggs Bank National Association ("Riggs Bank N.A.") is 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 subsidiary:
<TABLE>
<CAPTION>
CAPITAL RATIOS MARCH 31, MARCH 31, DECEMBER 31, REQUIRED
1997 1996 1996 MINIMUMS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RIGGS NATIONAL CORPORATION:
Tier I 19.93% 15.39% 20.04% 4.00%
Combined Tier I and Tier II 35.50 24.26 28.47 8.00
Leverage* 11.16 8.25 11.84 4.00
RIGGS BANK N.A.:
Tier I 15.05 18.75 18.66 4.00
Combined Tier I and Tier II 16.32 20.01 19.92 8.00
Leverage* 8.39 10.00 10.96 4.00
</TABLE>
[FN]
* Most bank holding companies and national banks, including the
Corporation and the Corporation's national bank subsidiary, are
expected to maintain at least a 4.00% minimum leverage ratio, or higher,
if determined appropriate by the Federal Reserve Board and other
regulators. The Federal Reserve Board has not indicated a requirement
higher than 4.00% at March 31, 1997.
-22-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NET INTEREST INCOME
Net interest income on a tax-equivalent basis (net interest income plus an
amount equal to the tax savings on tax-exempt interest) totaled $42.3 million in
the first quarter of 1997, increasing $2.0 million from the fourth quarter of
1996 and $2.7 million from the first quarter of 1996. The increase from the
prior year's quarter was primarily the result of favorable increases in average
earning assets over increases in average interest-bearing liabilities between
the periods. This favorable increase is mostly due to proceeds received from
Trust Preferred Securities sold in December 1996 and March 1997 totaling $350
million (see "Stockholders' Equity and Regulatory Capital").
The net interest margin (net interest income on a tax-equivalent basis divided
by average earning assets) for the first quarter of 1997 was 3.76% (see schedule
on the following page), an increase of two basis points from 3.74% for the
fourth quarter of 1996, and a decrease of four basis points from 3.80% for the
first quarter of 1996. The interest income recognized from the prepayment of
commercial loans increased the net interest margin by approximately 25 basis
points during the first quarter of 1996. The loan-to-deposit ratio stood at
64.1% at March 31, 1997, down slightly from the year-end 1996 ratio of 65.1%,
the result of the $50.9 million decrease in loans. The ratio of average loans to
average earning assets was 57.2% for the first quarter of 1997, compared with
ratios of 61.1% and 59.8% for the fourth quarter of 1996 and the first quarter
of 1996, respectively. Interest income earned on nonaccrual and restructured
loans totaled $45 thousand and $33 thousand for the three months ended March 31,
1997 and 1996, respectively. Interest income that would have been earned under
the original terms of these loans was $227 thousand and $238 thousand,
respectively, which reduced the net interest margin by approximately 2 basis
points in both the 1997 and 1996 periods.
<TABLE>
<CAPTION>
NET INTEREST INCOME CHANGES (1)
THREE MONTHS ENDED
MARCH 31, 1997 VS. 1996
----------------------------------
DUE TO DUE TO TOTAL
(IN THOUSANDS) RATE VOLUME CHANGE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income:
Loans, Including Fees $(3,704) $ 2,272 $(1,432)
Securities Available for Sale 617 3,417 4,034
Time Deposits with Other Banks (150) (1,245) (1,395)
Federal Funds Sold and Reverse
Repurchase Agreements (112) 1,592 1,480
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Income (3,349) 6,036 2,687
Interest Expense:
Savings and NOW Accounts 57 (2,985) (2,928)
Money Market Deposit Accounts (943) 4,708 3,765
Time Deposits in Domestic Offices (976) (418) (1,394)
Time Deposits in Foreign Offices (52) 980 928
Federal Funds Purchased and
Repurchase Agreements (229) 222 (7)
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 64 (19) 45
Long-Term Debt 220 (615) (395)
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Expense (1,859) 1,873 14
- ---------------------------------------------------------------------------------------------------------------------
Net Interest Income $(1,490) $ 4,163 $ 2,673
</TABLE>
[FN]
(1) - The dollar amount of changes in interest income and interest expense
attributable to changes in rate/volume (change in rate multiplied by
change in volume) has been allocated between rate and volume variances
based on the percentage relationship of such variances to each
other. Income and rates are computed on a tax-equivalent basis using
a Federal income tax rate of 35% and local tax rates as applicable.
-23-
<PAGE>
<TABLE>
<CAPTION>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
---------------------------------- -----------------------------------
(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 $ 389,930 $ 7,586 7.89% $ 324,286 $ 9,099 11.29%
Commercial - Tax-Exempt 47,286 990 8.49 29,242 717 9.86
Real Estate - Commercial/Construction 331,361 7,090 8.68 319,170 7,186 9.06
Residential Mortgage 1,220,372 21,708 7.21 1,282,592 22,796 7.15
Home Equity 288,289 5,744 8.08 259,489 5,505 8.53
Consumer 74,723 2,312 12.55 75,981 2,296 12.15
Foreign 258,339 5,048 7.92 214,460 4,311 8.08
- ------------------------------------------------------------------------------------------------------------------------------
Total Loans, Including Fees 2,610,300 50,478 7.84 2,505,220 51,910 8.33
- ------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale(3) 1,268,231 18,678 5.97 1,027,384 14,644 5.73
Time Deposits with Other Banks 167,760 2,018 4.88 268,426 3,413 5.11
Federal Funds Sold and Resale Agreements 514,552 6,787 5.35 391,103 5,307 5.46
- ------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,560,843 77,961 6.93 4,192,133 75,274 7.22
- ------------------------------------------------------------------------------------------------------------------------------
Less: Reserve for Loan Losses 63,683 56,959
Cash and Due from Banks 163,955 217,508
Premises and Equipment, Net 166,041 155,464
Other Assets 195,039 190,310
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $5,022,195 $4,698,456
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts $ 311,446 $ 1,719 2.24% $ 845,465 $ 4,647 2.21%
Money Market Deposit Accounts 1,581,390 12,258 3.14 975,399 8,493 3.50
Time Deposits in Domestic Offices 817,551 8,877 4.40 851,100 10,271 4.85
Time Deposits in Foreign Offices 404,577 5,525 5.54 330,041 4,597 5.60
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,114,964 28,379 3.69 3,002,005 28,008 3.75
- ------------------------------------------------------------------------------------------------------------------------------
Borrowed Funds:
Federal Funds Purchased and
Repurchase Agreements 218,385 2,695 5.00 200,081 2,702 5.43
U.S. Treasury Notes and Other Borrowed Funds 16,873 210 5.05 18,848 165 3.52
Long-Term Debt 191,525 4,368 9.25 217,625 4,763 8.80
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 3,541,747 35,652 4.08 3,438,559 35,638 4.17
- ------------------------------------------------------------------------------------------------------------------------------
Demand Deposits 811,351 824,820
Other Liabilities 50,168 50,063
Minority Interest in Preferred Stock of Subsidiaries 194,444 -
Stockholders' Equity 424,485 385,014
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $5,022,195 $4,698,456
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND SPREAD $42,309 2.85% $39,636 3.05%
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN ON EARNING ASSETS 3.76% 3.80%
</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) - The averages and rates for the securities available for sale portfolio are
based on amortized cost.
-24-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NONINTEREST INCOME
Noninterest income for the first quarter of 1997 was $19.6 million, down $4.0
million (17.1%) from the fourth quarter total of 1996 and $5.9 million (23.2%)
from the first quarter of 1996. The decrease from the fourth quarter of 1996 was
primarily due to the sale of a portion of the Corporation's corporate trust
business in the fourth quarter of 1996 for a pre-tax gain of $3.2 million. The
decrease from 1996's first quarter was the result of the securities gains
realized in the first quarter of 1996 (see table below).
<TABLE>
<CAPTION>
NONINTEREST INCOME
THREE
MONTHS ENDED
MARCH 31, CHANGE
------------------------------------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service Charges $ 8,688 $ 8,673 $ 15 0.2 %
Trust Income 8,646 7,874 772 9.8
Other Noninterest Income 2,305 3,075 (770) (25.0)
- -----------------------------------------------------------------------------------------------------------------------
Noninterest Income Excluding Securities Gains, 19,639 19,622 17 0.1
Net
Securities Gains, Net 2 5,953 (5,951) (100.0)
- -----------------------------------------------------------------------------------------------------------------------
Total Noninterest Income $19,641 $25,575 $(5,934) (23.2)%
</TABLE>
NONINTEREST EXPENSE
Noninterest expense for the first quarter of 1997 was $43.8 million, a decrease
of $2.2 million (4.7%) compared with the last quarter of 1996 and an increase of
$808 thousand (1.9%) when compared with the first quarter of 1996. The decrease
from the fourth quarter of 1996 was mostly due to decreases in salaries and
wages, legal fees and other real estate owned expenses. The increase from the
prior year's first quarter was the result of increases in staff expense,
furniture and equipment and other noninterest expenses, partially offset by
decreases in occupancy and other real estate owned expenses (see table below).
<TABLE>
<CAPTION>
NONINTEREST EXPENSE
THREE
MONTHS ENDED
MARCH 31, CHANGE
--------------------------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and Wages $15,157 $14,621 $ 536 3.7 %
Pensions and Other Employee Benefits 3,620 3,869 (249) (6.4)
- -----------------------------------------------------------------------------------------------------------------------------
Total Staff Expense 18,777 18,490 287 1.6
Occupancy, Net 4,416 5,291 (875) (16.5)
Data Processing Services 4,628 4,470 158 3.5
Furniture and Equipment 2,161 1,862 299 16.1
Advertising and Public Relations 1,355 1,371 (16) (1.2)
FDIC Insurance 106 3 103 n/a
Other Real Estate Owned (Income) Expense, Net (147) (3) (144) n/a
Other Noninterest Expense 12,516 11,520 996 8.6
- -----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense $43,812 $43,004 $ 808 1.9 %
</TABLE>
TAXES
The Corporation's provision for income taxes includes Federal, state and foreign
income taxes. Income tax expense totaling $4.1 million was recognized for
the quarter ended March 31, 1997, compared with $52 thousand for the quarter
ended March 31, 1996. The 1997 tax provision was less than the statutory rate
because of the Corporation's ability to reduce the previously established
valuation allowance.
-25-
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
On March 6, 1997, the Corporation filed a Form 8-K regarding its
fourth quarter and full year 1996 earnings release, dated
January 15, 1997, as amended March 6, 1997.
On March 12, 1997, the Corporation filed a Form 8-K announcing
that Riggs Capital II, a wholly owned subsidiary of Riggs
National Corporation, had sold, at par, 200,000 shares of
redeemable trust preferred securities, for a total of $200
million.
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 13, 1997 /s/ Timothy C. Coughlin
------------------------- --------------------------------
Timothy C. Coughlin
President
Date: May 13, 1997 /s/ John L. Davis
------------------------- --------------------------------
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-26-
<TABLE> <S> <C>
<ARTICLE>9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000350847
<NAME> RIGGS NATIONAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 154,128
<INT-BEARING-DEPOSITS> 168,277
<FED-FUNDS-SOLD> 545,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,551,597
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,586,905
<ALLOWANCE> 63,595
<TOTAL-ASSETS> 5,308,646
<DEPOSITS> 4,036,587
<SHORT-TERM> 258,153
<LIABILITIES-OTHER> 50,121
<LONG-TERM> 191,525
<COMMON> 78,188
0
4,000
<OTHER-SE> 340,072
<TOTAL-LIABILITIES-AND-EQUITY> 5,308,646
<INTEREST-LOAN> 50,204
<INTEREST-INVEST> 18,060
<INTEREST-OTHER> 8,805
<INTEREST-TOTAL> 77,069
<INTEREST-DEPOSIT> 28,379
<INTEREST-EXPENSE> 35,652
<INTEREST-INCOME-NET> 41,417
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 43,812
<INCOME-PRETAX> 17,246
<INCOME-PRE-EXTRAORDINARY> 17,246
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,466
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
<YIELD-ACTUAL> 3.76
<LOANS-NON> 6,875
<LOANS-PAST> 4,437
<LOANS-TROUBLED> 120
<LOANS-PROBLEM> 9,902
<ALLOWANCE-OPEN> 64,486
<CHARGE-OFFS> 835
<RECOVERIES> 685
<ALLOWANCE-CLOSE> 63,595
<ALLOWANCE-DOMESTIC> 48,606
<ALLOWANCE-FOREIGN> 14,989
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
