<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] 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 such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X . No .
Indicate 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 30,418,913 SHARES
- ----------------------------- --------------------------------
(Title of Class) (Outstanding at August 11, 1997)
<PAGE>
RIGGS NATIONAL CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three and six months ended June 30, 1997 and 1996 3
Consolidated Statements of Condition
June 30, 1997 and 1996, and December 31, 1996 4
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996 6
Financial Ratios and Other Financial Data 7
Notes to the Consolidated Financial 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 29
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
Signatures 30
-2-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JUNE 30, JUNE 30,
-----------------------------------------------------------
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 51,148 $ 48,925 $101,352 $100,534
Interest on Securities Available for Sale 22,102 17,410 40,162 31,651
Interest on Money Market Assets:
Time Deposits with Other Banks 2,094 2,377 4,112 5,790
Federal Funds Sold and Reverse Repurchase Agreements 7,776 3,028 14,563 8,335
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Money Market Assets 9,870 5,405 18,675 14,125
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 83,120 71,740 160,189 146,310
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 1,625 4,322 3,344 8,969
Money Market Deposit Accounts 12,887 8,377 25,145 16,870
Time Deposits in Domestic Offices 8,662 9,512 17,539 19,783
Time Deposits in Foreign Offices 6,608 4,736 12,133 9,333
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Deposits 29,782 26,947 58,161 54,955
- ----------------------------------------------------------------------------------------------------------------------------------
Interest on Short-Term Borrowings and Long-Term Debt:
Federal Funds Purchased and Repurchase Agreements 3,122 2,324 5,817 5,026
U.S. Treasury Demand Notes and Other Short-Term Borrowings 255 451 465 616
Long-Term Debt 4,368 4,745 8,736 9,508
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Short-Term Borrowings and Long-Term Debt 7,745 7,520 15,018 15,150
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 37,527 34,467 73,179 70,105
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 45,593 37,273 87,010 76,205
Less: Provision for Loan Losses - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income after Provision for Loan Losses 45,593 37,273 87,010 76,205
NONINTEREST INCOME
Service Charges and Fees 9,329 8,823 18,017 17,496
Trust Income 8,788 8,526 17,434 16,400
Interest on Tax Receivables - 5,135 - 5,135
Other Noninterest Income 2,815 2,049 5,120 5,124
Securities Gains, Net 157 1,209 159 7,162
- ----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 21,089 25,742 40,730 51,317
NONINTEREST EXPENSE
Salaries and Wages 15,882 15,146 31,039 29,767
Pensions and Other Employee Benefits 2,791 3,188 6,411 7,057
Occupancy, Net 5,002 5,748 9,418 11,039
Data Processing Services 4,710 4,468 9,338 8,938
Furniture and Equipment 2,328 1,704 4,489 3,566
Advertising and Public Relations 1,505 1,306 2,860 2,677
FDIC Insurance 114 1 220 4
Other Real Estate Owned (Income) Expense, Net 107 186 (40) 183
Other Noninterest Expense 13,221 12,184 25,737 23,704
- ----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 45,660 43,931 89,472 86,935
- ----------------------------------------------------------------------------------------------------------------------------------
Income before Taxes and Minority Interest 21,022 19,084 38,268 40,587
Applicable Income Tax Expense (Benefit) 5,454 (2,370) 9,523 (2,318)
Minority Interest in Income of Subsidiaries, Net of Taxes 4,932 - 7,643 -
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME 10,636 21,454 21,102 42,905
Dividends on Preferred Stock (2,687) (2,687) (5,375) (5,375)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income Available for Common Stock $ 7,949 $ 18,767 $ 15,727 $ 37,530
EARNINGS PER COMMON SHARE $ .25 $ .62 $ .50 $ 1.23
</TABLE>
-3-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(UNAUDITED) JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1997 1996 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 168,989 $ 200,625 $ 211,144
Money Market Assets:
Time Deposits with Other Banks 182,797 160,107 281,126
Federal Funds Sold and Reverse Repurchase Agreements 620,000 180,000 540,000
- --------------------------------------------------------------------------------------------------------------------------------
Total Money Market Assets 802,797 340,107 821,126
- --------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale (at Market Value) 1,439,878 1,336,682 1,162,503
Loans 2,650,965 2,607,184 2,637,834
Reserve for Loan Losses 63,856 58,802 64,486
- --------------------------------------------------------------------------------------------------------------------------------
Net Loans 2,587,109 2,548,382 2,573,348
Premises and Equipment, Net 166,358 160,473 166,074
Accrued Interest Receivable 37,631 41,660 30,042
Other Real Estate Owned, Net 23,504 33,301 28,121
Other Assets 139,744 148,103 142,742
- --------------------------------------------------------------------------------------------------------------------------------
Total $5,366,010 $4,809,333 $5,135,100
LIABILITIES
Deposits:
Noninterest-Bearing Demand Deposits $ 912,304 $ 843,903 $ 892,594
Interest-Bearing Deposits:
Savings and NOW Accounts 391,193 800,764 472,625
Money Market Deposit Accounts 1,471,785 994,272 1,488,730
Time Deposits in Domestic Offices 809,258 837,766 820,748
Time Deposits in Foreign Offices 478,123 330,637 375,986
- --------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,150,359 2,963,439 3,158,089
- --------------------------------------------------------------------------------------------------------------------------------
Total Deposits 4,062,663 3,807,342 4,050,683
Short-Term Borrowings:
Federal Funds Purchased and Repurchase Agreements 253,520 217,236 237,166
U.S. Treasury Demand Notes and Other Short-Term Borrowings 26,522 115,618 18,068
- --------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Borrowings 280,042 332,854 255,234
Other Liabilities 46,136 48,746 61,882
Long-Term Debt 191,525 217,625 191,525
- --------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,580,366 4,406,567 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 June 30, 1997 and 1996, and
December 31, 1996; Liquidation Preference - $25 per share
Shares Issued - Noncumulative Perpetual Series B - 4,000,000 shares
at June 30, 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 June 30, 1997 and 1996, and
December 31, 1996
Shares Issued - 31,316,811 at June 30, 1997, 31,195,262 at
June 30, 1996 and 31,273,344 at December 31, 1996 78,292 77,988 78,183
Surplus - Preferred Stock 91,192 91,192 91,192
Surplus - Common Stock 157,382 156,470 157,060
Foreign Exchange Translation Adjustments (233) (1,172) 1,111
Undivided Profits 131,372 104,053 118,682
Unrealized Loss on Securities Available for Sale, Net (2,638) (6,042) (729)
Treasury Stock - 900,798 shares at June 30, 1997 and 1996, and
December 31, 1996 (23,723) (23,723) (23,723)
- --------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 435,644 402,766 425,776
- --------------------------------------------------------------------------------------------------------------------------------
Total $5,366,010 $4,809,333 $5,135,100
</TABLE>
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<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 - - - - 42,905 - - 42,905
Issuance of
Common Stock for
Stock Option Plans,
20,000 Shares - 50 150 - - - - 200
Cash Dividends --
Series B Preferred Stock,
$1.34375 per Share - - - - (5,375) - - (5,375)
Common Stock,
$.05 per Share - - - - (1,515) - - (1,515)
Unrealized Loss on
Securities Available
for Sale, Net - - - - - (9,819) - (9,819)
Foreign Exchange
Translation Adjustments - - - (299) - - - (299)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
June 30, 1996 $ 4,000 $ 77,988 $247,662 $ (1,172) $104,053 $ (6,042) $ (23,723) $402,766
Balance,
December 31, 1996 $ 4,000 $ 78,183 $248,252 $ 1,111 $118,682 $ (729) $ (23,723) $425,776
Net Income - - - - 21,102 - - 21,102
Issuance of
Common Stock for
Stock Option Plans,
43,467 Shares - 109 322 - - - - 431
Cash Dividends--
Series B Preferred Stock,
$1.34375 per Share - - - - (5,375) - - (5,375)
Common Stock,
$.10 per Share - - - - (3,037) - - (3,037)
Unrealized Loss on
Securities Available
for Sale, Net - - - - - (1,909) - (1,909)
Foreign Exchange
Translation Adjustments - - - (1,344) - - - (1,344)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
June 30, 1997 $ 4,000 $ 78,292 $248,574 $ (233) $131,372 $ (2,638) $ (23,723) $435,644
</TABLE>
-5-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 21,102 $ 42,905
Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:
Provision for Loan Losses - -
Provision for Other Real Estate Owned Writedowns 282 204
Depreciation Expense and Amortization of Leasehold Improvements 5,751 5,505
Interest on Tax Receivables - (5,135)
Amortization of Purchase Accounting Adjustments 1,728 1,761
Benefit from Deferred Taxes (1,326) (13,694)
Gains on Securities Sales (159) (7,162)
Gains on Other Real Estate Owned Sales (199) (210)
Increase in Accrued Interest Receivable (7,589) (12,082)
Decrease (Increase) in Other Assets 3,640 (17,889)
(Decrease) Increase in Other Liabilities (15,746) 10,855
- -----------------------------------------------------------------------------------------------------------------------------
Total Adjustments (13,618) (37,847)
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 7,484 5,058
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Decrease In Time Deposits with Other Banks 98,329 71,267
Proceeds from Maturities of Securities Available for Sale 3,299,265 41,791
Proceeds from Sale of Securities Available for Sale 99,898 739,640
Purchase of Securities Available for Sale (3,679,332) (1,155,823)
Net Increase in Loans (13,431) (34,311)
Proceeds from Sale and Other Payments of Other Real Estate Owned 4,600 1,250
Net Increase in Premises and Equipment (6,035) (11,208)
Other, Net (396) (6)
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities (197,102) (347,400)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in:
Demand, NOW, Savings and Money Market Deposit Accounts (78,667) (71,307)
Time Deposits 90,647 (6,530)
Federal Funds Purchased and Repurchase Agreements 16,354 31,227
U.S. Treasury Demand Notes and Other Short-Term Borrowings 8,454 100,152
Proceeds From the Issuance of Common Stock 431 200
Minority Interest in Preferred Stock of Subsidiaries 200,000 -
Dividend Payments - Preferred (5,375) (5,375)
- Common (3,037) (1,515)
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 228,807 46,852
- -----------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes (1,344) (299)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 37,845 (295,789)
Cash and Cash Equivalents at Beginning of Period 751,144 676,414
- -----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 788,989 $ 380,625
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
NONCASH ACTIVITIES:
Loans Transferred to Other Real Estate Owned $ 82 $ 1,348
CASH PAID DURING THE YEAR FOR:
Interest Paid (Net of Amount Capitalized) $ 72,517 $ 71,039
Income Tax Payments 3,790 15,015
</TABLE>
-6-
<PAGE>
RIGGS NATIONAL CORPORATION
FINANCIAL RATIOS AND OTHER FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PERFORMANCE:
Net Income to Average Assets .81 % 1.83 % .83 % 1.83 %
Net Income to Average Earning Assets .89 2.05 .91 2.05
Net Income to Average Stockholders' Equity 10.01 22.02 10.01 22.21
Net Income Available to Common Stock
to Average Common Equity 9.64 25.44 9.61 25.73
Net Interest Income to Average Earning Assets 3.90 3.66 3.83 3.73
PER COMMON SHARE:
Net Income $ .25 $ .62 $ .50 $ 1.23
Dividends Paid per Common Share $ .05 $ .05 $ .10 $ .05
Book Value (at period end) $11.19 $10.15 $11.19 $10.15
Common Shares Outstanding (at period end) 30,416,013 30,294,464 30,416,013 30,294,464
Weighted Average Common Shares Outstanding 30,380,559 30,294,343 30,376,884 30,287,379
ASSET QUALITY:
Nonaccrual Loans as a % of Total Loans .24 % .49 %
Nonaccrual Loans as a % of Average Loans .25 .51
Nonaccrual and Renegotiated Loans as a % of
Total Loans .25 .53
Nonperforming Assets as a % of Total Loans and OREO 1.12 1.78
Nonperforming Assets as a % of Total Assets .56 .98
Net Charge-Offs (Recoveries) as a % of Average Loans .01 (.09)
Reserve for Loan Losses as a % of Total Loans 2.41 2.26
Reserve for Loan Losses as a % of Nonaccrual and
Renegotiated Loans 981.95 428.87
Period End Stockholders' Equity to Total Assets 8.12 8.37
CAPITAL RATIOS AT PERIOD END:
Tier I 19.82 % 15.64 %
Combined Tier I and Tier II 34.75 24.31
Leverage 10.96 8.58
</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 and which require the use of management estimates, Riggs
National Corporation's (the "Corporation") consolidated financial position at
June 30, 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 six 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 30,380,559 and 30,376,884 for the
second quarter of 1997 and the six month period ended June 30, 1997,
respectively with 30,294,343 and 30,287,379 for the same periods in 1996. 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
June 30, 1997, options to purchase 1,097,950 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 June 30, 1997, options
to purchase 721,833 shares have been granted and remain outstanding in the 1994
Plan at prices ranging from $9.06 to $19.75 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 June 30, 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 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 included in this report are presented under APB No. 15. Proforma EPS
under SFAS No. 128 for the six months ended June 30, 1997 and 1996, is presented
below.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
---------------------------------- ----------------------------------
BASIC DILUTED BASIC DILUTED
EPS EPS EPS EPS
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net Income $21,102 $21,102 $42,905 $42,905
Less: Preferred Stock Dividends 5,375 5,375 5,375 5,375
----------------- ---------------- ----------------- ----------------
Income Available to Common Shareholders $15,727 $15,727 $37,530 $37,530
Weighted-Average Shares Outstanding 30,376,884 30,376,884 30,287,379 30,287,379
Stock Option Plans n/a 1,080,191 n/a 276,744
----------------- ---------------- ----------------- ----------------
Adjusted Weighted-Average Shares Outstanding 30,376,884 31,457,075 30,287,379 30,564,123
BASIC EPS $.52 $1.24
DILUTED EPS $.50 $1.23
</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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 63,595 $ 57,227 $ 64,486 $ 56,546
Provision for loan losses - - - -
Loans charged-off:
Domestic 883 687 1,638 1,199
Foreign 15 260 95 260
- -------------------------------------------------------- ---------------- ----------------- ----------------- -----------------
Total loans charged-off 898 947 1,733 1,459
Recoveries on charged-off loans:
Domestic 492 1,636 1,196 2,508
Foreign 338 715 319 1,213
- -------------------------------------------------------- ---------------- ----------------- ----------------- -----------------
Total recoveries on charged-off loans 830 2,351 1,515 3,721
Net loan charge-offs (recoveries) 68 (1,404) 218 (2,262)
Foreign exchange translation adjustments 329 171 (412) (6)
- -------------------------------------------------------- ---------------- ----------------- ----------------- -----------------
Balance, end of period $ 63,856 $ 58,802 $ 63,856 $ 58,802
</TABLE>
NOTE 4. OTHER REAL ESTATE OWNED, NET
<TABLE>
<CAPTION>
Changes in other real estate owned, net of reserves, are summarized as follows:
SIX MONTHS ENDED
JUNE 30,
----------------------------------
1997 1996
- -------------------------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C>
Balance, beginning of period $28,121 $33,197
Additions 82 1,348
Deductions:
Sales and repayments 4,401 1,040
Charge-offs 282 204
- -------------------------------------------------------- ----------------- ---------------- -----------------
Total Deductions 4,683 1,244
Foreign exchange translation adjustments (16) -
- -------------------------------------------------------- ----------------- ---------------- -----------------
Balance, end of period $23,504 $33,301
</TABLE>
<TABLE>
<CAPTION>
Other real estate owned income and expense consisted of the following:
SIX MONTHS ENDED
JUNE 30,
----------------------------------
1997 1996
- -------------------------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C>
Other Real Estate Owned Operating Revenue $ 387 $ 528
Net Gain on Sale of Properties 199 210
- -------------------------------------------------------- ----------------- ---------------- -----------------
Net Revenue 586 738
Provision for Other Real Estate Owned Losses 282 204
Selling and Other Real Estate Owned Operating Expense 264 717
- -------------------------------------------------------- ----------------- ---------------- -----------------
Net Expense 546 921
- -------------------------------------------------------- ----------------- ---------------- -----------------
Total Other Real Estate Owned (Income) Expense, Net $ (40) $ 183
-9-
<PAGE>
NOTES TO THE 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
adopted on January 1, 1997, and was applied prospectively. The Corporation did
not experience any material effect 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 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
the dilutive impact to basic EPS. SFAS No. 128 is effective for both interim and
annual periods ending after December 15, 1997 for the Corporation, thus the EPS
in the Statements of Income included in this report are presented under APB No.
15. Proforma EPS under SFAS No. 128 for the six months ended June 30, 1997 and
1996, is presented in Note 2--"Earnings per Common Share."
In June 1997, SFAS Nos. 130 and 131 were issued--"Reporting Comprehensive
Income" and "Disclosures about Segments of an Enterprise and Related
Information," respectively. SFAS No. 130 requires that certain financial
activity typically disclosed in stockholders' equity be reported in the
statements of income as an adjustment to net income in determining comprehensive
income. Items applicable to the Corporation would include activity in foreign
exchange translation adjustments and gain/loss on securities available for sale.
Items identified as comprehensive income should be reported also in the
statements of condition and the statements of changes in stockholders' equity,
under separate captions. SFAS No. 130 is effective for the Corporation on
January 1, 1998, including the restatement of prior periods reported consistent
with this pronouncement. The Corporation does not anticipate any financial
impact from the implementation of SFAS No. 130.
SFAS No. 131 requires the reporting of selected segmented information in
quarterly and annual reports. Information from operating segments is derived
from methods used by the Corporation's management to allocate resources and
measure performance. The Corporation is required to disclose profit and losses,
revenues and assets for each segment identified, including reconciliations of
these items to consolidated totals. The Corporation is also required to disclose
the basis for identifying the segments and the type of products and services
within each segment. SFAS No. 131 is effective for the Corporation on January 1,
1998, including the restatement of prior periods reported consistent with this
pronouncement, if practical. The Corporation is assessing the impact of the
implementation of this pronouncement and will disclose its findings in future
reports.
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6. INCOME TAXES
The provision for income taxes is based on income reported for consolidated
financial statement purposes and includes deferred taxes resulting from the
recognition of certain revenues and expenses in different periods for tax
reporting purposes.
Income before income taxes relating to the operations of domestic offices and
foreign offices for the three and six month periods ended June 30, 1997 and
1996, was as follows:
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Domestic Offices $20,068 $18,649 $36,660 $39,515
Foreign Offices 954 435 1,608 1,072
- -------------------------------------------------------- ----------------- ----------------- ---------------- -----------------
Total $21,022 $19,084 $38,268 $40,587
</TABLE>
<TABLE>
<CAPTION>
The provision for income taxes for the three and six month periods ended June 30, 1997 and 1996 consisted of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------ ---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Current Provision:
Federal $ 5,568 $ 6,686 $ 10,221 $ 13,655
State 276 (2,352) 660 (2,235)
Foreign (22) (7) (32) (44)
- --------------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Total Current Provision 5,822 4,327 10,849 11,376
Deferred Benefit:
Federal 904 (6,697) 1,325 (13,694)
State (272) - (651) -
Foreign (1,000) - (2,000) -
- --------------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Total Deferred Benefit (368) (6,697) (1,326) (13,694)
- --------------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Applicable Income Tax Expense (Benefit) $ 5,454 $ (2,370) $ 9,523 $ (2,318)
</TABLE>
-11-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
Outstanding commitments and contingent liabilities that do not appear in the
consolidated financial statements at June 30, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
CONTRACTUAL OR
NOTIONAL VALUE
JUNE 30,
----------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to Extend Credit:
Commercial $462,990 $430,950
Real Estate:
Commercial/Construction 53,113 27,854
Mortgage 9,456 5,227
Home Equity 180,859 181,781
- -----------------------------------------------------------------------------------------------------
Total Real Estate 243,428 214,862
- -----------------------------------------------------------------------------------------------------
Consumer 85,834 85,816
- -----------------------------------------------------------------------------------------------------
Total Commitments to Extend Credit $792,252 $731,628
Letters of Credit:
Commercial $ 80,646 $102,981
Standby-Performance 8,912 8,511
Standby-Financial 33,598 42,112
- -----------------------------------------------------------------------------------------------------
Total Letters of Credit $123,156 $153,604
Derivative Instruments:
Foreign Exchange Contracts:
Commitments to Purchase $ 96,684 $ 89,540
Commitments to Sell 196,844 181,872
Interest-Rate Swap Agreements 326,441 319,009
Interest-Rate Option Contracts:
Corridors -- 300,000
Caps 649 --
</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's interest-rate swap and options contract activity for the
six-month period ended June 30, 1997, is as follows:
<TABLE>
<CAPTION>
BALANCE BALANCE
DECEMBER 31, JUNE 30,
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 -- 50,000 50,000
For Customers 25,137 1,953 -- 27,090
Interest-Rate Option Contracts 100,000 -- 100,000 --
- --------------------------------- ---- --- --- ---- ---------------- ------------- -------------- --------------
Total $425,137 $51,953 $150,000 $327,090
</TABLE>
-12-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES, CONTINUED
Interest-rate agreements, such as interest-rate swap agreements, involve two
parties that have agreed to exchange periodic payments calculated with reference
to fixed or variable interest rates applied to an agreed upon notional principal
amount. Notional amounts are used to determine the amount of payments exchanged
and do not represent an obligation to exchange principal balances. The
Corporation is exposed to certain levels of credit and market risk when entering
into interest-rate agreements. Credit risk is measured as the cost of replacing,
at market rates, the defaulted agreement. The Corporation minimizes credit risk
by adhering to similar underwriting standards as those used in other credit
transactions, as well as by obtaining collateral, if deemed appropriate under
the specific circumstances. In addition, all the Corporation's interest-rate
swap agreements have been transacted with either major investment or commercial
banks. Market risk arises from changes in the market values (replacement cost of
agreements at current prices) of agreements outstanding, the result of changes
in interest rates or security values underlying the interest-rate agreements.
Market risk is minimized primarily because of the Corporation's use of
interest-rate swaps to hedge certain assets and liabilities, and thus
termination of an agreement would be an infrequent event.
<TABLE>
<CAPTION>
INTEREST-RATE SWAP AGREEMENTS
JUNE 30, 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 $ (1,661) 5.38% 5.84% $ 1,913 $ 2,109 $ -- $ (309)
Receive fixed/pay variable,
Maturing January 1999 25,000 22 6.45 5.85 278 252 -- 81
Receive fixed/pay variable,
Maturing February 1999 25,000 (19) 6.29 5.81 183 170 -- 63
Receive variable/pay fixed,
Maturing January 1998 25,000 138 5.83 5.21 271 239 -- 65
Receive variable/pay fixed,
Maturing January 1999 25,000 347 5.83 5.36 271 246 -- 47
For Customers 27,090 (139) -- -- 310 375 -- (157)
Receive variable/pay fixed,
Matured March 1997 -- -- -- -- -- -- -- (80)
Receive variable/pay fixed,
Matured April 1997 -- -- -- -- -- -- -- (88)
Corridor,
Matured April 1997 -- -- -- -- -- -- -- (129)
- -------------------------------------------------------------------------------------------------------------------------
Total Interest-Rate Swap
Agreements $327,090 $ (1,312) $ 3,226 $ 3,391 $ -- $ (507)
</TABLE>
Net receivables or payables under agreements designated as hedges are recorded
as adjustments to interest income or interest expense related to the hedged
asset or liability. Gains and losses on contracts to hedge certain
interest-sensitive assets and liabilities are amortized over the life of the
hedged transaction as an adjustment to yield. Fees received or paid when
entering certain derivative transactions are deferred and amortized over the
lives of the agreements. Unrealized gains and losses will not be reflected in
the accompanying financial statements unless the hedges are terminated.
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 for the home equity loan portfolio.
-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 $10.6 million ($.25 per
common share) for the second quarter of 1997 compared with net income of $21.4
million ($0.62 per common share) for the same quarter a year earlier. Net
earnings for the first half of 1997 totaled $21.1 million, or $0.50 per common
share compared with $42.9 million, or $1.23 per common share, for the same
period in 1996. Net income for the second quarter and the first half of 1996
benefited from lower tax expense and several nonrecurring income items, which
included interest from tax settlements totaling $5.1 million and $1.2 million in
net securities gains in the second quarter of 1996, and $6.0 million in net
securities gains in the first quarter of 1996.
Net interest income before the provision for loan losses was $45.6 million for
the second quarter and $87.0 million for the first half of 1997, an increase of
22.3% and 14.2% from the same periods in 1996. The increase from the prior
year's first half was primarily the result of a $481.8 million increase in
average earning assets between the periods. This increase was mostly due to
proceeds received from the issuance and sale of Trust Preferred Securities
(see "Stockholders' Equity and Regulatory Capital")in December 1996 and March
1997 totaling $350 million. The favorable increase in average earning assets
was partially offset by a $131.2 million increase in average interest-bearing
liabilities, the result of increases in the deposit portfolio between the
periods (see "Deposits"). The net interest margins for the second quarter
and first half of 1997 were 3.90% and 3.83%, compared with a margin of 3.66%
for the prior year's second quarter and 3.73% for the first half of 1996.
Noninterest income, excluding securities gains, for the current quarter and
six-month periods of 1997 totaled $20.9 million and $40.6 million, respectively,
compared with $24.5 million and $44.2 million, respectively, from the prior
year's periods. The decrease between the periods is due to the previously
mentioned interest from tax settlements recorded in 1996 totaling $5.1 million,
partially offset by increases in trust income and service charges (see
"Noninterest Income").
Noninterest expense for 1997's second quarter totaled $45.7 million, an increase
of $1.7 million (3.9%) from the prior year's quarter total of $43.9 million.
Likewise, noninterest expense for the first six months of 1997 totaled $89.5
million, an increase of $2.5 million (2.9%), compared with $86.9 million for the
first six months of 1996. The increase in noninterest expense for the second
quarter and year-to-date periods in 1997 in comparison to the same periods in
1996 was mostly due to increases in staffing, data processing, advertising and
other expenses involving the development and implementation of new products and
services in the retail banking group (see "Deposits" and "Noninterest Expense").
Nonperforming assets, including other real estate owned, decreased $17.0
million, or 36.2% to $30.0 million at June 30, 1997, when compared with 1996's
second quarter nonperforming asset total of $47.0 million. At June 30, 1997,
Riggs' reserve for loan losses totaled $63.9 million, resulting in a reserve to
total loans ratio of 2.41%. Nonperforming loans totaled $6.4 million at quarter
end and the reserve (coverage) was nine times greater than the balance of
nonperforming loans at June 30, 1997.
Total assets at June 30, 1997, were $5.37 billion, up $556.7 million, or 11.6%,
over the $4.81 billion level a year earlier. This growth was mostly due to
increases in the money market and securities portfolios, which totaled $565.9
million, funded by proceeds received from the issuance and sale of $350 million
of Trust Preferred Securities and a $255.3 million increase in the deposit
portfolio, partially offset by a $52.8 million decrease in short-term
borrowings.
-14-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
SECURITIES
Schedules detailing securities available for sale follow:
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 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 $ 685,010 $ 681,779 $1,311,183 $1,302,028
Government Agencies Securities 724,408 723,590 - -
Mortgage-Backed Securities 1,891 1,882 - -
Other Securities 32,627 32,627 34,654 34,654
- -----------------------------------------------------------------------------------------------------------------
Total $1,443,936 $1,439,878 $1,345,837 $1,336,682
</TABLE>
Securities available for sale totaled $1.44 billion at June 30, 1997, compared
to $1.16 billion at year-end 1996, and $1.34 billion at June 30, 1996. The
activity for the first six months of 1997 included purchases of securities
available for sale totaling $3.68 billion, partially offset by maturities
totaling $3.30 billion and sales of securities available for sale totaling $99.9
million. The weighted-average maturities and yields for the portfolio, adjusted
for anticipated prepayments, was approximately 2 years and 5.99%, respectively,
at June 30, 1997.
The maturity distribution of securities available for sale at
June 30, 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 $ 209,664 $ 399,302 $ - $ 7,875 $ 616,841
Market/Book 209,837 399,254 - 7,875 616,966
Yield* 5.80% 5.39% - 4.95% 5.52%
After 1 but within 5 years 305,138 325,106 - - 630,244
Amortized Cost 302,892 324,336 - - 627,228
Market/Book 5.82% 6.63% - - 6.24%
Yield*
After 5 but within 10 years
Amortized Cost 170,208 - - - 170,208
Market/Book 169,050 - - - 169,050
Yield* 6.35% - - - 6.35%
After 10 years
Amortized Cost - - 1,891 24,752 26,643
Market/Book - - 1,882 24,752 26,634
Yield* - - 7.28% 6.15% 6.23%
- ----------------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale
Amortized Cost $ 685,010 $ 724,408 $ 1,891 $ 32,627 $1,443,936
Market/Book 681,779 723,590 1,882 32,627 1,439,878
Yield* 5.95% 5.95% 7.28% 5.86% 5.95%
</TABLE>
[FN]
*Weighted-average yield to maturity at June 30, 1997.
-15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
LOANS
The following table reflects loans by type for the periods indicated:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1997 1996 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and Financial $ 423,249 $ 415,788 $ 443,557
Real Estate - Commercial/Construction 353,102 319,255 352,015
Residential Mortgage 1,200,297 1,258,861 1,226,110
Home Equity 301,552 273,445 281,867
Consumer 74,611 75,502 78,617
Foreign 295,800 259,692 251,782
- ----------------------------------------------------------------------------------------------------------------
Loans 2,648,611 2,602,543 2,633,948
Unamortized Premium (Unearned
Discount/Net Deferred Fees) 2,354 4,641 3,886
- ----------------------------------------------------------------------------------------------------------------
Total Net Loans $2,650,965 $2,607,184 $2,637,834
</TABLE>
At June 30, 1997, total loans outstanding (net of premiums/discounts) were $2.65
billion, increasing $43.8 million from the June 30, 1996 total of $2.61 billion.
The increase in loans from June 30, 1996 was primarily attributed to increases
in foreign loans of $36.1 million, real estate - commercial/construction loans
of $33.8 million, home equity loans of $28.1 million and commercial and
financial loans of $7.5 million. These increases were offset in part by a $58.6
million decrease in residential mortgage loans between the periods.
REAL ESTATE - COMMERCIAL/CONSTRUCTION LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 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 $ 17,084 $ 9,232 $ 7,835 $ - $ - $ 34,151
Multifamily Residential 11,335 11,738 3,729 - 6,494 33,296
Commercial:
Office Buildings 70,888 27,904 31,123 - - 129,915
Retail/Shopping Centers 31,900 11,671 14,075 - - 57,646
Hotels 1,148 - - - - 1,148
Industrial/Warehouse 2,246 14,349 4,464 - - 21,059
Churches 26,522 4,448 15,929 - - 46,899
Other 7,331 15,378 6,213 - 66 28,988
- ----------------------------------------------------------------------------------------------------------------------------
Total Commercial 140,035 73,750 71,804 - 66 285,655
- ----------------------------------------------------------------------------------------------------------------------------
Total Domestic Real Estate -
Commercial/Construction Loans 168,454 94,720 83,368 - 6,560 353,102
Foreign - - - 119,057 - 119,057
- ----------------------------------------------------------------------------------------------------------------------------
Total Real Estate - Commercial/
Construction Loans $168,454 $ 94,720 $ 83,368 $119,057 $ 6,560 $472,159
</TABLE>
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
LOANS, CONTINUED
The Corporation extends credit to borrowers domiciled outside of the United
States through several of its banking subsidiaries. Cross-border outstandings
include loans, acceptances, interest-bearing deposits with other banks,
investments, accrued interest and other monetary assets. These assets may be
impacted by changing economic conditions in their respective countries. In
addition, cross-border outstandings include legally enforceable guarantees
issued on behalf of non-local third parties and local currency outstandings to
the extent they are not funded by local currency borrowings. Cross-border
outstandings are then reduced by tangible liquid collateral and any legally
enforceable guarantees issued by non-local third parties on behalf of the
respective country.
The table below details those countries in which the Corporation had total
outstandings in excess of 1% of its total assets. At June 30, 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
June 30, 1997, December 31, 1996 or June 30, 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>
JUNE 30, 1997
United Kingdom $113.7 2.1% $ - $ - $ - $ -
JUNE 30, 1996
United Kingdom 183.0 3.8 2.5 - - -
DECEMBER 31, 1996
United Kingdom 196.3 3.8 0.3 - - -
</TABLE>
-17-
<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 $30.0 million at June 30,
1997, a $8.1 million (21.3%) decrease from the year-end 1996 total of $38.1
million and a $17.0 million (36.2%) decrease from the June 30, 1996 total.
NONPERFORMING ASSETS AND PAST-DUE LOANS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1997 1996 1996
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Nonaccrual Loans: (1)
Domestic $ 5,932 $10,332 $ 9,133
Foreign 456 2,529 743
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Total Nonaccrual Loans 6,388 12,861 9,876
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Renegotiated Loans: (2)
Domestic 115 850 125
Foreign - - -
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Total Renegotiated Loans 115 850 125
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Other Real Estate Owned, Net:
Domestic 23,421 32,731 27,722
Foreign 83 570 399
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Total Other Real Estate Owned, Net 23,504 33,301 28,121
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Total Nonperforming Assets $30,007 $47,012 $38,122
PAST-DUE LOANS: (3)
Domestic $ 6,355 $ 4,396 $ 3,849
Foreign - - -
- ---------------------------------------------- ----------- -- --- ----------------- ---------------- -----------------
Total Past-Due Loans $ 6,355 $ 4,396 $ 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
Standards No. 15. Renegotiated loans do not include $10.2 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.
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY, CONTINUED
NONACCRUAL AND RENEGOTIATED LOANS
At June 30, 1997, nonaccrual loans, including both domestic and foreign, were
$6.4 million, or 0.2% of total loans, compared with $9.9 million, or 0.4% of
total loans, at year-end 1996 and $12.9 million, or 0.5% of total loans at June
30, 1996. The $6.4 million of nonaccrual loans includes $0.6 million of loans
identified as impaired (see "Impaired Loans"). The decrease in nonaccrual loans
during the first half of 1997 was due to paydowns of $3.4 million, loans
returning to accrual status of $548 thousand, and charge offs of $358 thousand.
These decreases were offset by additions of $866 thousand. Renegotiated loans
totaled $115 thousand at June 30, 1997, a decrease of $10 thousand from December
31, 1996, and $735 thousand from the prior year's period. The decrease in
renegotiated loans from the prior year's balance was the result of paydowns and
payoffs between the years. Nonaccrual and renegotiated real estate -
commercial/construction loans, both foreign and domestic, totaled $2.1 million
at June 30, 1997, or 31.7% of the total nonaccrual and renegotiated loans.
OTHER REAL ESTATE OWNED, NET
Other real estate owned, net of reserves, decreased to $23.5 million at June 30,
1997, compared with $28.1 million at December 31, 1996 and $33.3 million at June
30, 1996. The decrease during the first half of 1997 is the result of paydowns
and sales of $4.4 million and charge-offs of $282 thousand, offset by additions
of $82 thousand. At June 30, 1997, residential and commercial land composed
88.7% of the other real estate owned portfolio.
OTHER REAL ESTATE OWNED - (1)
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 1997
<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION
DISTRICT OF UNITED
(IN THOUSANDS) COLUMBIA VIRGINIA MARYLAND KINGDOM TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land $ - $14,991 $ 5,864 $ - $20,855
Single-Family Residential - - 829 - 829
Office Buildings/Retail - - 1,522 - 1,522
Hotels - - - 83 83
Industrial/Warehouse 215 - - - 215
- -----------------------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net $ 215 $14,991 $ 8,215 $ 83 $23,504
</TABLE>
[FN]
(1) - Balances are net of valuation reserves totaling $1.9 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 $2.5 million during the first half
of 1997 to $6.4 million, while increasing $2.0 million from June 30, 1996. These
increases were predominately residential, single-family past-due loans, which
increased $2.4 million in the first half of 1997 and $2.6 million during the
past year.
At June 30, 1997, the Corporation had identified $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.
-19-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
ASSET QUALITY, CONTINUED
RESERVE FOR LOAN LOSSES
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 $63.9 million, or 2.41% of total
loans (net of premiums/discounts) at June 30, 1997, compared with $64.5 million,
or 2.44% of total loans at December 31, 1996, and $58.8 million, or 2.26% of
total loans, at June 30, 1996. The coverage ratio was 982% at June 30, 1997,
645% at year-end 1996 and 429% at June 30, 1996. The increase in the coverage
ratio from the prior year's periods was the result of a $7.2 million decrease in
nonperforming loans between the periods, combined with the $5.1 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 $621 thousand at June 30, 1997 (see table
below), a $2.3 million decrease from the December 31, 1996 total of $2.9 million
and a $5.3 million decrease from June 30, 1996. Impaired loans at June 30, 1997
and 1996 are solely collateral dependent loans, which are measured at the fair
value of the collateral. All of the Corporation's impaired loans are included
in the totals of the preceding "Nonperforming Assets and Past-Due Loans" table.
TOTAL IMPAIRED LOANS (1)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1997 1996 1996
- ----------------------------------------------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Domestic:
Real Estate - Commercial/Construction $ 621 $4,317 $2,890
Foreign - 1,602 -
- ----------------------------------------------------- ---------------- ----------------- ----------------- ----------------
Total Impaired Loans $ 621 $5,919 $2,890
</TABLE>
[FN]
(1) There were no specific reserves for impaired loans as of June 30, 1997
and 1996, and December 31, 1996.
--------------------------------------------------------
IMPAIRED LOANS
AVERAGE INVESTMENT AND INTEREST RECOGNIZED
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
---------------------------------- ----------------------------------
AVERAGE INTEREST AVERAGE INTEREST
(IN THOUSANDS) INVESTMENT RECOGNIZED INVESTMENT RECOGNIZED
- ----------------------------------------------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Domestic:
Real Estate - Commercial/Construction $1,555 $ - $4,506 $ -
Foreign - - 1,138 25
- ----------------------------------------------------- ---------------- ----------------- ----------------- ----------------
Total $1,555 $ - $5,644 $ 25
</TABLE>
-20-
<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 $4.06 billion at June 30, 1997, increasing $255.3 million
(6.7%) from the June 30, 1996 deposit total. The increase from the year earlier
balance was due to increases in money market accounts of $477.5 million, foreign
time deposits of $147.5 million, and demand deposits of $68.4 million, partially
offset by the decrease in savings and NOW accounts of $409.6 million. The large
variances in the money market and savings and NOW balances is mostly
attributable 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 $347 million at June 30, 1997.
DEPOSITS
<TABLE>
<CAPTION>
JUNE 30, CHANGE
--------------------------- ----------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT
- -------------------------------------------------------- ------------- ------------- ------- ------------- -------------
<S> <C> <C> <C> <C>
Demand Deposits $ 912,304 $ 843,903 $ 68,401 8.1 %
Interest-Bearing Deposits:
Savings and NOW Accounts 391,193 800,764 (409,571) (51.1)
Money Market Deposit Accounts 1,471,785 994,272 477,513 48.0
Time Deposits in Domestic Offices 809,258 837,766 (28,508) (3.4)
Time Deposits in Foreign Offices 478,123 330,637 147,486 44.6
- -------------------------------------------------------- -------------- ------------- ------ ------------- -------------
Total Interest-Bearing Deposits 3,150,359 2,963,439 186,920 6.3
- -------------------------------------------------------- -------------- ------------- ------ ------------- -------------
Total Deposits $4,062,663 $3,807,342 $ 255,321 6.7 %
</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 seven 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. Enhancements include
improving the computer network system and the redesigning of 20 retail branches
to provide better access to traditional banking services as well as trust and
investment advisory services. In April 1997, the Corporation introduced its home
banking and imaging services products and anticipates the completion of its
Internet home page later in 1997.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings increased by $24.8 million during the first six months of
1997, while decreasing $52.8 million (15.9%) 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.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
<TABLE>
<CAPTION>
JUNE 30, CHANGE
--------------------------- ---------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT
- ------------------------------------------------------------ ------------- ------------- ------ ------------- -------------
<S> <C> <C> <C> <C>
Federal Funds Purchased and Repurchase Agreements $253,520 $217,236 $ 36,284 16.7 %
U.S. Treasury Notes and Other Borrowed Funds 26,522 115,618 (89,096) (77.1)
- ------------------------------------------------------------ ------------- ------------- ------ ------------- -------------
Total Short-Term Borrowings 280,042 332,854 (52,812) (15.9)
Floating-Rate Subordinated Capital Notes due 1996 - 26,100 (26,100) n/a
Subordinated Debentures due 2009 66,525 66,525 - -
Subordinated Notes due 2006 125,000 125,000 - -
- ------------------------------------------------------------ ------------- ------------- ------ ------------- -------------
Total Long-Term Debt 191,525 217,625 (26,100) (12.0)
- ------------------------------------------------------------ ------------- ------------- ------ ------------- -------------
Total Short-Term Borrowings and Long-Term Debt $471,567 $550,479 $(78,912) (14.3)%
</TABLE>
-21-
<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 June 30, 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 (44.9% of
total assets). This compares with $2.2 billion (42.7%) at December 31, 1996, and
$1.9 billion (39.0%) at June 30, 1996. The increase in total liquid assets and
the percentage of liquid assets to total assets from the prior year's balance
was primarily the result of cash inflows from the issuance and sale of Trust
Preferred Securities in December 1996 and March 1997. The Corporation expects
liquid assets to remain at approximately the June 30, 1997 level for the
foreseeable future. The liquidity position of the Corporation is enhanced by the
stable source of funds maintained through its core deposit relationships and 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 June 30, 1997. In both
instances the Corporation was well-insulated against interest rates moving
significantly in either direction. At June 30, 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,
although 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.
-22-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
Total stockholders' equity at June 30, 1997 was $435.6 million, an increase of
$9.9 million from the year-end 1996 total and up $32.9 million from June 30,
1996. The increase from year-end 1996 was the result of an increase in net
earnings of $21.1 million, partially offset by dividends on preferred and common
stock of $8.4 million, unrealized losses in the Corporation's securities
available for sale portfolio of $1.9 million and foreign exchange translation
adjustments of $1.3 million. The increase in stockholders' equity over the
preceding year was mostly attributed to earnings during the period combined with
net unrealized gains from the securities available for sale portfolio, partially
offset by 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 with the first dividend payments paid on June 30, 1997.
The Trust Preferred Securities, Series A cannot be redeemed until December 2006,
and the Trust Preferred Securities, 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 34.75% and 19.82%, respectively, at June 30, 1997, compared with
28.47% and 20.04% at December 31, 1996, and 24.31% and 15.64% at June 30, 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 10.96% at June 30, 1997, compared with
leverage ratios of 11.84% and 8.58% at December 31, 1996 and June 30, 1996,
respectively. Regulatory capital ratios do not include the impact of net
unrealized losses on the securities available for sale portfolio totaling $2.6
million for the period-ended June 30, 1997. The Corporation's equity to assets
ratio, which includes these unrealized losses, was 8.12% at June 30, 1997,
compared to 8.29% and 8.37% at December 31, 1996, and June 30, 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:
CAPITAL RATIOS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31, REQUIRED
1997 1996 1996 MINIMUMS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RIGGS NATIONAL CORPORATION:
Tier I 19.82% 15.64% 20.04% 4.00%
Combined Tier I and Tier II 34.75 24.31 28.47 8.00
Leverage* 10.96 8.58 11.84 4.00
RIGGS BANK N.A.:
Tier I 15.08 19.14 18.66 4.00
Combined Tier I and Tier II 16.34 20.40 19.92 8.00
Leverage* 8.30 10.44 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 June 30, 1997.
-23-
<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 $46.6 million in
the second quarter of 1997, increasing $8.3 million from the second quarter of
1996. Net interest income on a tax-equivalent basis was $88.9 million for the
first half of 1997, compared with $77.9 million for the same period in 1996. The
increases from the prior year's quarter and the year-to-date period were
primarily the result of favorable increases in average earning assets over
increases in average interest-bearing liabilities between the periods, stemming
from $350 million in proceeds received from Trust Preferred Securities issued
and sold in December 1996 and March 1997 (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 second quarter of 1997 was 3.90% (see
schedule on the following page), an increase of 24 basis points from 3.66% for
the second quarter of 1996. The net interest margin for the six-month periods
ended June 30, 1997 and 1996 were 3.83% and 3.73%, respectively. The
loan-to-deposit ratio stood at 65.3% at June 30, 1997, up slightly from the
year-end 1996 ratio of 65.1%, but down from 68.5% at June 30, 1996, the result
of stronger increases in deposits than loans between the periods. The ratio of
average loans to average earning assets was 54.1% for the second quarter of
1997, compared with a ratio of 60.1% for the year earlier quarter, reflecting
the increase in earning assets from the proceeds received from the issuance and
sale of the Trust Preferred Securities. Interest income earned on nonaccrual and
restructured loans totaled $138 thousand and $127 thousand for the six months
ended June 30, 1997 and 1996, respectively. Interest income that would have been
earned under the original terms of these loans was $435 thousand and $662
thousand, respectively, which reduced the net interest margin by approximately
one basis point in 1997 and approximately three basis points in 1996.
NET INTEREST INCOME CHANGES (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 VS 1996 JUNE 30, 1997 VS 1996
---------------------------------- ----------------------------------
DUE TO DUE TO TOTAL DUE TO DUE TO TOTAL
(IN THOUSANDS) RATE VOLUME CHANGE RATE VOLUME CHANGE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans, Including Fees $ 619 $ 1,668 $ 2,287 $(2,917) $ 3,768 $ 851
Securities Available for Sale 1,201 3,450 4,651 1,743 6,915 8,658
Time Deposits with Other Banks 85 (368) (283) (56) (1,622) (1,678)
Federal Funds Sold and Reverse
Repurchase Agreements 130 4,618 4,748 86 6,142 6,228
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Income 2,035 9,368 11,403 (1,144) 15,203 14,059
Interest Expense:
Savings and NOW Accounts 301 (2,998) (2,697) 363 (5,988) (5,625)
Money Market Deposit Accounts (667) 5,177 4,510 (1,603) 9,878 8,275
Time Deposits in Domestic Offices (656) (194) (850) (1,640) (604) (2,244)
Time Deposits in Foreign Offices 216 1,656 1,872 159 2,641 2,800
Federal Funds Purchased and
Repurchase Agreements 670 128 798 430 361 791
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 100 (296) (196) 155 (306) (151)
Long-Term Debt 202 (579) (377) 419 (1,191) (772)
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Expense 166 2,894 3,060 (1,717) 4,791 3,074
- ---------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 1,869 $ 6,474 $ 8,343 $ 573 $10,412 $10,985
</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.
-24-
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 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 $ 363,691 $ 7,128 7.86 % $ 339,357 $ 6,468 7.67 %
Commercial - Tax-Exempt 49,038 1,043 8.53 25,900 623 9.67
Real Estate - Commercial/Construction 327,845 7,323 8.96 317,142 7,006 8.88
Residential Mortgage 1,207,673 21,768 7.23 1,268,299 22,681 7.19
Home Equity 298,208 6,345 8.53 268,811 5,496 8.22
Consumer 73,963 2,255 12.23 74,296 2,262 12.25
Foreign 275,209 5,569 8.12 233,704 4,608 7.93
- ------------------------------------------------------------------------------------------------------------------------------
Total Loans, Including Fees 2,595,627 51,431 7.95 2,527,509 49,144 7.82
- ------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale (3) 1,480,941 22,867 6.19 1,256,102 18,216 5.83
Time Deposits with Other Banks 167,154 2,094 5.02 197,265 2,377 4.85
Federal Funds Sold and Resale Agreements 557,822 7,776 5.59 226,991 3,028 5.37
- ------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,801,544 84,168 7.03 4,207,867 72,765 6.96
- ------------------------------------------------------------------------------------------------------------------------------
Less: Reserve for Loan Losses 63,675 58,557
Cash and Due from Banks 158,559 201,644
Premises and Equipment, Net 166,180 158,341
Other Assets 196,116 200,288
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $5,258,724 $4,709,583
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts $ 287,682 $ 1,625 2.27 % $ 825,594 $ 4,322 2.11 %
Money Market Deposit Accounts 1,605,203 12,887 3.22 969,258 8,377 3.48
Time Deposits in Domestic Offices 802,945 8,662 4.33 820,318 9,512 4.66
Time Deposits in Foreign Offices 466,813 6,608 5.68 349,853 4,736 5.44
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,162,643 29,782 3.78 2,965,023 26,947 3.66
- ------------------------------------------------------------------------------------------------------------------------------
Borrowed Funds:
Federal Funds Purchased and
Repurchase Agreements 246,040 3,122 5.09 233,944 2,324 4.00
U.S. Treasury Notes and Other Borrowed Funds 19,826 255 5.16 44,660 451 4.06
Long-Term Debt 191,525 4,368 9.15 217,625 4,745 8.77
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 3,620,034 37,527 4.16 3,461,252 34,467 4.01
- ------------------------------------------------------------------------------------------------------------------------------
Demand Deposits 807,381 806,648
Other Liabilities 55,339 49,743
Minority Interest in Preferred Stock of Subsidiaries 350,000 -
Stockholders' Equity 425,970 391,940
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities, Minority Interest and
Stockholders' Equity $5,258,724 $4,709,583
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND SPREAD $46,641 2.87 % $38,298 2.95 %
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN ON EARNING ASSETS 3.90 % 3.66 %
</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.
-25-
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 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 $ 376,739 $ 14,714 7.88 % $ 331,820 $ 15,567 9.43 %
Commercial - Tax-Exempt 48,167 2,029 8.49 27,571 1,340 9.77
Real Estate - Commercial/Construction 329,594 14,413 8.82 318,156 14,192 8.97
Residential Mortgage 1,213,989 43,476 7.22 1,275,447 45,477 7.17
Home Equity 293,276 12,089 8.31 264,150 11,001 8.38
Consumer 74,341 4,567 12.39 75,139 4,558 12.20
Foreign 266,817 10,617 8.02 224,081 8,919 8.00
- ------------------------------------------------------------------------------------------------------------------------------
Total Loans, Including Fees 2,602,923 101,905 7.89 2,516,364 101,054 8.08
- ------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale (3) 1,375,174 41,518 6.09 1,141,761 32,860 5.79
Time Deposits with Other Banks 167,455 4,112 4.95 232,846 5,790 5.00
Federal Funds Sold and Resale Agreements 536,306 14,563 5.48 309,047 8,335 5.42
- ------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,681,858 162,098 6.98 4,200,018 148,039 7.09
- ------------------------------------------------------------------------------------------------------------------------------
Less: Reserve for Loan Losses 63,679 57,758
Cash and Due from Banks 161,242 209,576
Premises and Equipment, Net 166,111 156,903
Other Assets 195,581 195,298
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $5,141,113 $4,704,037
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts $ 299,498 $ 3,344 2.25 % $ 835,529 $ 8,969 2.16 %
Money Market Deposit Accounts 1,593,363 25,145 3.18 972,329 16,870 3.49
Time Deposits in Domestic Offices 810,207 17,539 4.37 835,709 19,783 4.76
Time Deposits in Foreign Offices 435,867 12,133 5.61 339,947 9,333 5.52
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,138,935 58,161 3.74 2,983,514 54,955 3.70
- ------------------------------------------------------------------------------------------------------------------------------
Borrowed Funds:
Federal Funds Purchased and
Repurchase Agreements 232,289 5,817 5.05 217,012 5,026 4.66
U.S. Treasury Notes and Other Borrowed Funds 18,357 465 5.11 31,754 616 3.90
Long-Term Debt 191,525 8,736 9.20 217,625 9,508 8.79
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 3,581,106 73,179 4.12 3,449,905 70,105 4.09
- ------------------------------------------------------------------------------------------------------------------------------
Demand Deposits 809,355 815,734
Other Liabilities 52,768 49,903
Minority Interest in Preferred Stock of Subsidiaries 272,652 -
Stockholders' Equity 425,232 388,495
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities, Minority Interest and
Stockholders' Equity $5,141,113 $4,704,037
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND SPREAD $ 88,919 2.86 % $ 77,934 3.00 %
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN ON EARNING ASSETS 3.83 % 3.73 %
</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.
-26-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NONINTEREST INCOME
Noninterest income for the second quarter of 1997 was $21.1 million, compared
with $25.7 million for the second quarter of 1996. The $4.7 million decrease in
noninterest income between the quarters was the result of $5.1 million in
interest from tax settlements combined with $1.2 million in net securities gains
recognized in the prior year. These decreases were partially offset by increases
in service charges and trust income of $768 thousand, and a $753 thousand
residual gain realized in other noninterest income during the current quarter
from the sale of a portion of the Corporation's corporate trust business in the
fourth quarter of 1996. Noninterest income for the first six months of 1997
decreased $10.6 million compared to the same period in 1996. This decrease was
attributed to the previously mentioned interest from tax settlements and net
securities gains recognized in the prior year's period, offset by increases in
trust and service fees of $1.6 million (see table below).
<TABLE>
<CAPTION>
NONINTEREST INCOME THREE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, CHANGE JUNE 30, CHANGE
--------------------- ---------------------- ------------------- ------------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT 1997 1996 AMOUNT PERCENT
- ------------------------------------- ---------- --------- ---------- ------------ -- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Service Charges $ 9,329 $ 8,823 $ 506 5.7 % $18,017 $17,496 $ 521 3.0 %
Trust Income 8,788 8,526 262 3.1 17,434 16,400 1,034 6.3
Interest on Tax Receivables - 5,135 (5,135) n/a - 5,135 (5,135) n/a
Other Noninterest Income 2,815 2,049 766 37.4 5,120 5,124 (4) (0.1)
- ------------------------------------- ---------- --------- ---------- ------------ - ---------- ---------- ----------- -----------
Noninterest Income Excluding
Securities Gains, Net 20,932 24,533 (3,601) (14.7) 40,571 44,155 (3,584) (8.1)
Securities Gains, Net 157 1,209 (1,052) (87.0) 159 7,162 (7,003) (97.8)
- ------------------------------------- ---------- --------- ---------- ------------ - ---------- ---------- ----------- -----------
Total Noninterest Income $21,089 $25,742 $(4,653) (18.1)% $40,730 $51,317 $(10,587) (20.6)%
</TABLE>
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1997 was $45.7 million, an
increase of $1.7 million when compared with the second quarter of 1996. The
increase from the prior year's quarter was largely attributable to the increase
in other noninterest expense of $1.0 million, the result of increases in
consulting and other expenses related to the development and implementation of
several retail banking strategies in 1997 (see "Deposits"). Additionally,
increases in salaries and wages of $736 thousand, the result of staff additions
between the periods, was partially offset by lower benefits costs attributable
to reductions in medical and life insurance expenses.
Noninterest expense for the first half of 1997 increased $2.5 million compared
with the same period in 1996. Increases in salaries and wages, data processing,
furniture and equipment and other noninterest expenses resulted from the
previously described development and implementation of retail banking related
strategies in the current year (see "Deposits"). These increases were partially
offset by decreases in employee benefits costs and other real estate owned
expense between the periods, with the largest decrease stemming from benefits,
which was attributed to decreases in medical and life insurance expenses for
active and retired employees.
-27-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
NONINTEREST EXPENSE, CONTINUED
<TABLE>
<CAPTION>
NONINTEREST EXPENSE THREE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, CHANGE JUNE 30, CHANGE
--------------------- ---------------------- ----------------------- -----------------------
(IN THOUSANDS) 1997 1996 AMOUNT PERCENT 1997 1996 AMOUNT PERCENT
- ------------------------------------- ---------- --------- ---------- ------------ - ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and Wages $15,882 $15,146 $ 736 4.9 % $31,039 $29,767 $ 1,272 4.3 %
Pensions and Other Employee
Benefits 2,791 3,188 (397) (12.5) 6,411 7,057 (646) (9.2)
- ------------------------------------- ---------- --------- ---------- ------------ - ----------- ----------- ----------- -----------
Total Staff Expense 18,673 18,334 339 1.8 37,450 36,824 626 1.7
- ------------------------------------- ---------- --------- ---------- ------------ - ----------- ----------- ----------- -----------
Occupancy, Net 5,002 5,748 (746) (13.0) 9,418 11,039 (1,621) (14.7)
Data Processing Services 4,710 4,468 242 5.4 9,338 8,938 400 4.5
Furniture and Equipment 2,328 1,704 624 36.6 4,489 3,566 923 25.9
Advertising and Public Relations 1,505 1,306 199 15.2 2,860 2,677 183 6.8
FDIC Insurance 114 1 113 n/a 220 4 216 n/a
Other Real Estate Owned
(Income) Expense, Net 107 186 (79) (42.5) (40) 183 (223) n/a
Other Noninterest Expense 13,221 12,184 1,037 8.5 25,737 23,704 2,033 8.6
- ------------------------------------- ---------- --------- ---------- ------------ - ----------- ----------- ----------- -----------
Total Noninterest Expense $45,660 $43,931 $ 1,729 3.9 % $89,472 $86,935 $ 2,537 2.9 %
</TABLE>
TAXES
The Corporation's provision for income taxes includes Federal, state and foreign
income taxes. Income tax expense totaling $5.4 million was recognized for the
quarter ended June 30, 1997, compared with a tax benefit of $2.4 million for the
quarter ended June 30, 1996, the result of a local tax refund received in the
prior year's quarter. Income tax expense totaling $9.5 million was recognized
for the six month period ended June 30, 1997, compared with a benefit of $2.3
million recognized for the same period in 1996 stemming from the previously
mentioned tax refund received in 1996. The 1997 tax provision was less than the
statutory rate because of the Corporation's ability to reduce the previously
established valuation allowance.
-28-
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the shareholders of the Corporation was held on
May 14, 1997, in Washington, D.C. Chairman of the Board Joe L.
Allbritton presided and 26,726,419 of the 30,374,496 shares
outstanding as of the record date of March 31, 1997, were represented
at the meeting in person or by proxy.
1-Elections of Directors
Nominees for membership on the Board of Directors of the Corporation,
listed below, were elected by the shareholders. The following
schedule lists the number of shares cast for each nominee:
<TABLE>
<CAPTION>
Total Total
Votes For Votes Withheld
------------------------ -----------------------
<S> <C> <C>
Joe L. Allbritton 26,168,394 422,533
Robert L. Allbritton 26,165,928 422,533
Timothy C. Coughlin 26,202,817 422,533
Lawrence I. Hebert 26,200,746 422,533
Steven B. Pfeiffer 26,203,912 422,533
Robert L. Sloan 26,202,746 422,533
Jack Valenti 26,140,545 422,533
Eddie N. Williams 26,198,956 422,533
</TABLE>
2-Proposal to Change the Annual Meeting Date
By a vote of 2,205,279 For, to 21,327,510 Against, with 447,873
Abstaining, the Corporation's shareholders rejected a proposal to
change the annual meeting date of Riggs National Corporation.
-29-
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES, CONTINUED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
None
(B) REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
RIGGS NATIONAL CORPORATION
Date: August 12, 1997 /s/ TIMOTHY C. COUGHLIN
--------------------------- --------------------------------
Timothy C. Coughlin
President
Date: August 12, 1997 /s/ JOHN L. DAVIS
--------------------------- --------------------------------
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-30-
<TABLE> <S> <C>
<ARTICLE>9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q DATED JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 168,989
<INT-BEARING-DEPOSITS> 182,797
<FED-FUNDS-SOLD> 620,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,439,878
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,650,965
<ALLOWANCE> 63,856
<TOTAL-ASSETS> 5,366,010
<DEPOSITS> 4,062,663
<SHORT-TERM> 280,042
<LIABILITIES-OTHER> 46,136
<LONG-TERM> 191,525
<COMMON> 78,292
0
4,000
<OTHER-SE> 353,352
<TOTAL-LIABILITIES-AND-EQUITY> 5,366,010
<INTEREST-LOAN> 101,352
<INTEREST-INVEST> 40,162
<INTEREST-OTHER> 18,675
<INTEREST-TOTAL> 160,189
<INTEREST-DEPOSIT> 58,161
<INTEREST-EXPENSE> 73,179
<INTEREST-INCOME-NET> 87,010
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 159
<EXPENSE-OTHER> 89,472
<INCOME-PRETAX> 38,268
<INCOME-PRE-EXTRAORDINARY> 38,268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,102
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<YIELD-ACTUAL> 3.83
<LOANS-NON> 6,388
<LOANS-PAST> 6,355
<LOANS-TROUBLED> 115
<LOANS-PROBLEM> 9,848
<ALLOWANCE-OPEN> 64,486
<CHARGE-OFFS> 1,733
<RECOVERIES> 1,515
<ALLOWANCE-CLOSE> 63,856
<ALLOWANCE-DOMESTIC> 48,588
<ALLOWANCE-FOREIGN> 15,268
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
