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, 1999
[ ] 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 28,312,197 shares
----------------------------- ---------------------------
(Title of Class) (Outstanding at August 6, 1999)
<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, 1999 and 1998 3
Consolidated Statements of Condition
June 30, 1999 and 1998, and December 31, 1998 4
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998 6
Notes to the Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20-22
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 23
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 24
-2-
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS-UNAUDITED
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,
----------------------------------------------------------
1999 1998 1999 1998
==================================================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $56,404 $57,136 $114,278 $112,396
Interest and Dividends on Securities Available for Sale 17,025 17,926 31,338 38,811
Interest on Time Deposits with Other Banks 6,159 8,648 13,393 14,616
Interest on Federal Funds Sold and Reverse Repurchase Agreements 1,221 3,358 3,327 8,177
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 80,809 87,068 162,336 174,000
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 626 1,361 1,313 2,735
Money Market Deposit Accounts 8,591 10,179 16,947 22,090
Time Deposits in Domestic Offices 9,948 10,213 19,961 19,211
Time Deposits in Foreign Offices 7,620 8,479 15,919 15,982
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Deposits 26,785 30,232 54,140 60,018
- ----------------------------------------------------------------------------------------------------------------------------------
Interest on Short-Term Borrowings and Long-Term Debt:
Repurchase Agreements and Other Short-Term Borrowings 3,818 5,106 7,796 10,199
Long-Term Debt 4,368 4,368 8,736 8,736
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest on Short-Term Borrowings and Long-Term Debt 8,186 9,474 16,532 18,935
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 34,971 39,706 70,672 78,953
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 45,838 47,362 91,664 95,047
Less: Provision for Loan Losses - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income after Provision for Loan Losses 45,838 47,362 91,664 95,047
NONINTEREST INCOME
Trust and Investment Advisory Income 12,685 11,904 25,290 23,024
Service Charges and Fees 9,879 9,663 19,330 18,757
Other Noninterest Income 1,769 2,203 3,957 4,802
Securities Gains, Net 1,018 1,457 1,104 6,781
- ----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 25,351 25,227 49,681 53,364
NONINTEREST EXPENSE
Salaries and Employee Benefits 21,811 21,076 44,069 41,715
Data Processing Services 4,722 3,891 9,283 9,157
Occupancy, Net 4,555 4,361 9,221 8,878
Furniture and Equipment 2,658 2,462 5,223 5,024
Other Real Estate Owned Expense (Income), Net 22 13 38 (38)
Other Noninterest Expense 16,441 15,267 32,530 29,742
- ----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 50,209 47,070 100,364 94,478
- ----------------------------------------------------------------------------------------------------------------------------------
Income before Taxes and Minority Interest 20,980 25,519 40,981 53,933
Applicable Income Tax Expense 6,420 5,987 13,718 13,779
Minority Interest in Income of Subsidiaries, Net of Taxes 4,986 4,986 9,973 9,973
==================================================================================================================================
Net Income 9,574 14,546 17,290 30,181
Dividends on Preferred Stock - (2,687) - (5,375)
==================================================================================================================================
Net Income Available for Common Stock $ 9,574 $11,859 $ 17,290 $ 24,806
EARNINGS PER COMMON SHARE-Basic $ .34 $ .39 $ .60 $ .81
Diluted .33 .37 .59 .78
DIVIDENDS DECLARED AND PAID PER COMMON SHARE $ .05 $ .05 $ .10 $ .10
</TABLE>
-3-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(unaudited)
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1999 1998 1998
==================================================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $ 158,225 $ 151,348 $ 155,003
Federal Funds Sold and Reverse Repurchase Agreements 55,000 265,000 75,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Cash and Cash Equivalents 213,225 416,348 230,003
Time Deposits with Other Banks 511,541 745,385 696,181
Securities Available for Sale (at Market Value) 1,167,418 1,163,627 970,728
Loans 3,186,045 3,149,932 3,258,135
Reserve for Loan Losses (52,174) (52,235) (54,455)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Loans 3,133,871 3,097,697 3,203,680
Premises and Equipment, Net 203,273 183,878 203,071
Other Real Estate Owned, Net 1,678 2,569 1,680
Other Assets 222,874 182,759 196,988
==================================================================================================================================
Total $5,453,880 $5,792,263 $5,502,331
LIABILITIES
Deposits:
Noninterest-Bearing Demand Deposits $ 674,175 $ 943,011 $ 732,099
Interest-Bearing Deposits:
Savings and NOW Accounts 383,054 339,385 434,649
Money Market Deposit Accounts 1,500,861 1,331,041 1,414,278
Time Deposits in Domestic Offices 976,431 1,050,904 917,442
Time Deposits in Foreign Offices 604,943 599,340 646,380
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,465,289 3,320,670 3,412,749
- ----------------------------------------------------------------------------------------------------------------------------------
Total Deposits 4,139,464 4,263,681 4,144,848
Repurchase Agreements and Other Short-Term Borrowings 369,291 450,692 374,380
Other Liabilities 62,908 49,916 48,850
Long-Term Debt 191,525 191,525 191,525
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,763,188 4,955,814 4,759,603
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES 350,000 350,000 350,000
==================================================================================================================================
STOCKHOLDERS' EQUITY
Preferred Stock-$1.00 Par Value
Shares Authorized - None at June 30, 1999 and December 31, 1998,
and 25,000,000 at June 30, 1998:
Liquidation Preference - $25 per share
Shares Issued - Noncumulative Perpetual Series B - None at June 30,
1999 and December 31, 1998, and 4,000,000 at June 30, 1998 -- 4,000 --
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at June 30, 1999 and 1998, and
December 31, 1998
Shares Issued - 31,557,995 at June 30, 1999, 31,523,544 at
June 30, 1998 and 31,555,345 at December 31, 1998 78,895 78,809 78,888
Surplus - Preferred Stock -- 91,192 --
Surplus - Common Stock 160,789 159,956 160,760
Undivided Profits 199,208 174,481 184,794
Accumulated Other Comprehensive Income (26,843) 1,734 (2,548)
Treasury Stock - 3,300,798 shares at June 30, 1999, 900,798 shares at
June 30, 1998, and 1,175,798 shares at December 31, 1998 (71,357) (23,723) (29,166)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 340,692 486,449 392,728
==================================================================================================================================
Total Liabilities and Stockholders' Equity $5,453,880 $5,792,263 $5,502,331
</TABLE>
-4-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED COMMON ACCUMULATED
STOCK STOCK OTHER TOTAL
$1.00 $2.50 UNDIVIDED COMPREHENSIVE TREASURY STOCKHOLDERS'
PAR PAR SURPLUS PROFITS INCOME (LOSS) STOCK EQUITY
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 4,000 $ 78,654 $250,352 $152,732 $ 1,167 $(23,723) $463,182
Comprehensive Income:
Net Income 30,181 $ 30,181
Other Comprehensive Income
(Loss), Net of Tax: (1)
Unrealized Gain (Loss) on
Securities Available for Sale,
Net of Reclassification 581 581
Adjustments
Foreign Exchange
Translation Adjustments (14) (14)
-----------------
Total Other Comprehensive
Income (Loss) 567
=================
Total Comprehensive Income $ 30,748
Issuance of Common Stock for
Stock Option Plans, 61,758 Shares 155 796 951
Cash Dividends -
Series B Preferred Stock,
$1.34375 per Share (5,375) (5,375)
Common Stock, $.10 per Share (3,057) (3,057)
===================================================================================================================================
Balance, June 30, 1998 $ 4,000 $ 78,809 $251,148 $174,481 $ 1,734 $(23,723) $486,449
Balance, December 31, 1998 $ -- $ 78,888 $160,760 $184,794 $ (2,548) $(29,166) $392,728
Comprehensive Income:
Net Income 17,290 $ 17,290
Other Comprehensive Income
(Loss), Net of Tax: (1)
Unrealized Gain (Loss) on
Securities Available for Sale,
Net of Reclassification (22,355) (22,355)
Adjustments
Foreign Exchange
Translation Adjustments (1,940) (1,940)
---------------
Total Other Comprehensive
Income (Loss) (24,295)
===============
Total Comprehensive Income $(7,005)
Issuance of Common Stock for
Stock Option Plans, 2,650 Shares 7 29 36
Cash Dividends -
Common Stock, $.10 per Share (2,876) (2,876)
Common Stock Repurchase-
2,125,000 shares (42,191) (42,191)
===================================================================================================================================
Balance, June 30, 1999 $ -- $ 78,895 $160,789 $199,208 $(26,843) $(71,357) $340,692
</TABLE>
(1) - See Notes to the Financial Statements for gross unrealized gains or
losses arising during each period and the tax effect on each item of
comprehensive income.
-5-
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
(in thousands) SIX MONTHS ENDED
JUNE 30,
-----------------------------
1999 1998
==============================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 17,290 $ 30,181
Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:
Provision for Other Real Estate Owned Writedowns -- 500
Depreciation Expense and Amortization of Leasehold Improvements 5,839 5,684
Gains on Sale of Securities Available for Sale (1,104) (6,781)
Gains on Sale of Other Real Estate Owned -- (434)
(Increase) Decrease in Other Assets (13,848) 11,455
Increase (Decrease) in Other Liabilities 14,058 (141,377)
- ------------------------------------------------------------------------------------------------------------------------------
Total Adjustments 4,945 (130,953)
- ------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating Activities 22,235 (100,772)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Decrease (Increase) In Time Deposits with Other Banks 184,640 (503,572)
Principal Collections and Maturities of Securities Available for Sale 2,080,310 2,567,232
Proceeds from Sales of Securities Available for Sale 55,985 937,074
Purchases of Securities Available for Sale (2,366,274) (2,987,708)
Net Decrease (Increase) in Loans 70,260 (265,858)
Proceeds from Sale and Other Payments of Other Real Estate Owned 1 2,442
Net Increase in Premises and Equipment (6,041) (24,185)
Other, Net (450) 152
- ------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities 18,431 (274,423)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Decrease) Increase in:
Demand, NOW, Savings and Money Market Deposit Accounts (22,936) (298,607)
Time Deposits 17,552 264,370
Repurchase Agreements and Other Short-Term Borrowings (5,089) 98,184
Proceeds from the Issuance of Common Stock 36 951
Dividend Payments - Preferred -- (5,375)
- Common (2,876) (3,057)
Repurchase of Common Shares (42,191) --
- ------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided By Financing Activities (55,504) 56,466
- ------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes (1,940) (14)
- ------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (16,778) (318,743)
Cash and Cash Equivalents at Beginning of Period 230,003 735,091
==============================================================================================================================
Cash and Cash Equivalents at End of Period $ 213,225 $ 416,348
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
NONCASH ACTIVITIES:
Loans Transferred to Other Real Estate Owned $ -- $ --
CASH PAID DURING THE YEAR FOR:
Interest Paid (Net of Amount Capitalized) $ 72,168 $ 77,249
Income Tax Payments 1 8,067
</TABLE>
-6-
<PAGE>
RIGGS NATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
contain all normal recurring adjustments necessary for a fair presentation of
the interim period results, in conformity with generally accepted accounting
principles applied on a consistent basis and which require the use of management
estimates. These statements should be read in conjunction with the financial
statements and accompanying notes included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1998. Certain reclassifications have
been made to prior-period amounts to conform with the current period's
presentation. The results of operations for the first six months of 1999 are not
necessarily indicative of the results to be expected for the full 1999 year.
NOTE 2. EARNINGS PER COMMON SHARE
Earnings per share computations are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
================================== ===================================
BASIC DILUTED BASIC DILUTED
EPS EPS EPS EPS
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Income $17,290 $17,290 $30,181 $30,181
Dividends on Preferred Stock -- -- (5,375) (5,375)
----------------- ---------------- ----------------- -----------------
Income Available to Common Shareholders $17,290 $17,290 $24,806 $24,806
Weighted-Average Shares Outstanding 28,623,632 28,623,632 30,581,020 30,581,020
Weighted-Average Dilutive Effect
of Stock Option Plans n/a 587,079 n/a 1,111,997
----------------- ---------------- ----------------- -----------------
Adjusted Weighted-Average Shares Outstanding 28,623,632 29,210,711 30,581,020 31,693,017
Basic EPS $ .60 $ .81
Diluted EPS $ .59 $ .78
</TABLE>
NOTE 3. RESERVE FOR LOAN LOSS
Changes in the reserve for loan losses are summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1999 1998
================================================================================================================================
<S> <C> <C>
Balance, beginning of period $ 54,455 $ 52,381
Provision for loan losses -- --
Loan charge-off activity:
Loans charged-off 2,770 1,379
Recoveries on charged-off loans 940 1,080
- --------------------------------------------------------------------------------------------------------------------------------
Net loan charge-offs (recoveries) 1,830 299
Foreign exchange translation adjustments (451) 153
================================================================================================================================
Balance, end of period $ 52,174 $ 52,235
</TABLE>
-7-
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. OTHER COMPREHENSIVE INCOME
OTHER COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Before -Tax Tax
Amount (Expense) Net-of-Tax
Benefit Amount
=============================================================================================================================
SIX MONTHS ENDED JUNE 30, 1999:
<S> <C> <C> <C>
Foreign Currency Translation Adjustments (1) $ (287) $ (1,653) $ (1,940)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) Arising During Period (33,288) 11,651 (21,637)
Less: Reclassification Adjustment for (Gains) Losses Realized in Net Income (1,104) 386 (718)
- ---------------------------------------------------------------------------------- ------------- ------------- --------------
Net Unrealized Gains (Losses) (34,392) 12,037 (22,355)
=============================================================================================================================
Other Comprehensive Income (Loss) $(34,679) $ 10,384 $(24,295)
SIX MONTHS ENDED JUNE 30, 1998:
Foreign Currency Translation Adjustments (1) $ (583) $ 569 $ (14)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) Arising During Period 7,675 (2,686) 4,989
Less: Reclassification Adjustment for (Gains) Losses Realized in Net Income (6,781) 2,373 (4,408)
- ---------------------------------------------------------------------------------- ------------- ------------- --------------
Net Unrealized Gains (Losses) 894 (313) 581
=============================================================================================================================
Other Comprehensive Income (Loss) $ 311 $ 256 $ 567
</TABLE>
(1) Tax (expense) benefit on foreign currency translation adjustments is
calculated on the hedge contracts only. Before-tax amounts include activity on
hedge contracts and the foreign currency translation adjustment.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BALANCES
<TABLE>
<CAPTION>
Foreign Unrealized Accumulated
Currency Gain(Loss) Other
Translation on Securities Comprehensive
Adjustments Income (Loss)
============================================================================================================================
SIX MONTHS ENDED JUNE 30, 1999:
<S> <C> <C> <C>
Balance, December 31, 1998 $ (1,349) $ (1,199) $ (2,548)
Current-Period Change (1,940) (22,355) (24,295)
============================================================================================================================
Balance, June 30, 1999 $ (3,289) $ (23,554) $ (26,843)
SIX MONTHS ENDED JUNE 30, 1998:
Balance, December 31, 1997 $ (872) $ 2,039 $ 1,167
Current-Period Change (14) 581 567
============================================================================================================================
Balance, June 30, 1998 $ (886) $ 2,620 $ 1,734
</TABLE>
-8-
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 5. SEGMENT PROFITABILITY
<TABLE>
<CAPTION>
===================================================================================================================================
INTERN- RIGGS
SIX MONTHS ENDED ATIONAL RIGGS & RECON- NATIONAL
JUNE 30, 1999 BANKING BANKING COMPANY TREASURY OTHER CILIATION CORPORATION
- ------------------------------- -------------- ----------- ------------ ------------- ------------- -------------- ----------------
NET INTEREST INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 92,500 $ 26,803 $ 5,509 $ 47,220 $ 26,587
Interest Expense 30,170 31,537 7,792 11,897 24,200
Funds Transfer Income 1,370 19,216 8,520 (31,265) 2,158
(Expense)
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss), 63,700 14,482 6,237 4,058 4,545
Tax-Equivalent
Tax Equivalent Adjustment (1,005) -- -- (353) --
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss) $ 62,695 $ 14,482 $ 6,237 $ 3,705 $ 4,545 $ -- $ 91,664
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
NONINTEREST INCOME
Noninterest Income-External $ 19,483 $ 1,400 $ 26,521 $ 885 $ 1,392
Customers
Intersegment Noninterest 259 1,968 343 1 1,799
Income
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
Total Noninterest Income $ 19,742 $ 3,368 $ 26,864 $ 886 $ 3,191 $ (4,370) $ 49,681
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 3,723 $ 326 $ 455 $ 6 $ 3,627
Direct Expense 28,725 9,929 17,373 759 39,811
Overhead and Support 30,279 5,341 5,834 830 (42,284)
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
Total Noninterest Expense $ 62,727 $ 15,596 $ 23,662 $ 1,595 $ 1,154 $ (4,370) $ 100,364
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
Income (Loss) Before Taxes $ 19,710 $ 2,254 $ 9,439 $ 2,996 $ 6,582 $ -- $ 40,981
and Minority Interest
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
-------------- ----------- ------------ ------------- ------------- -------------- ----------------
Total Average Assets $2,726,574 $828,128 $205,918 $1,758,127 $1,129,354 $(1,159,600) $5,488,501
===================================================================================================================================
</TABLE>
The Corporation's reportable segments are strategic business units that provide
diverse products and services within the financial services industry. The
Corporation has five reportable segments: Banking, International Banking, Riggs
& Company, Treasury and Other. The Banking segment provides traditional banking
services such as lending and deposit taking to retail, corporate and commercial
customers. The International Banking segment includes the Corporation's
Washington, D.C. based embassy-banking business and the London-based banking
subsidiary, Riggs Bank Europe Limited. The Riggs and Company segment is a
division of the Corporation providing trust and investment management services
to a broad customer base. The Treasury segment is responsible for asset and
liability management throughout the Corporation. "Other" consists of the
Corporation's unallocated parent company income and expense, net interest income
from unallocated equity and foreclosed real estate activities.
The Corporation evaluates segment performance based on net income before taxes
and minority interest. The accounting policies of the segments are substantially
the same as those described in the summary of significant accounting policies.
The Corporation accounts for intercompany transactions as if the transactions
were to third parties under market conditions. Overhead and support expenses are
allocated to each operating segment based on number of employees, service usage
and other factors relevant to the expense incurred.
Reconciliations are provided from the segment totals to the Corporation's
consolidated financial statements. The reconciliations of noninterest income and
noninterest expense offset as these items result from intercompany transactions.
For years in which the Corporation has either no provision for loan losses or a
reduction to the reserve for loan losses, an allocation of loan loss is not
provided to the segments. The reconciliation of total average assets represents
the elimination of intercompany transactions.
-9-
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
====================================================================================================================================
INTER- RIGGS
SIX MONTHS ENDED NATIONAL RIGGS & RECON- NATIONAL
JUNE 30, 1998 BANKING BANKING COMPANY TREASURY OTHER CILIATION CORPORATION
- ------------------------------- -------------- ------------ ------------ ------------- ------------- -------------- ----------------
NET INTEREST INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 91,005 $ 24,125 $ 6,297 $ 58,325 $ 31,916
Interest Expense 36,717 31,003 6,329 16,415 24,569
Funds Transfer Income 11,191 21,172 5,924 (41,842) 3,555
(Expense)
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss), 65,479 14,294 5,892 68 10,902
Tax-Equivalent
Tax Equivalent Adjustment (525) -- -- (1,063) --
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss) $ 64,954 $ 14,294 $ 5,892 $ (995) $ 10,902 $ -- $ 95,047
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
NONINTEREST INCOME
Noninterest Income-External $ 19,649 $ 1,832 $ 24,139 $ 7,509 $ 235
Customers
Intersegment Noninterest -- 1,901 221 1 845
Income
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Noninterest Income $ 19,649 $ 3,733 $ 24,360 $ 7,510 $ 1,080 $ (2,968) $ 53,364
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 3,511 $ 310 $ 805 $ 7 $ 3,412
Direct Expense 26,999 9,903 14,314 756 37,429
Overhead and Support 31,390 4,569 5,119 654 (41,732)
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Noninterest Expense $ 61,900 $ 14,782 $ 20,238 $ 1,417 $ (891) $ (2,968) $ 94,478
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Income (Loss) Before Taxes $ 22,703 $ 3,245 $ 10,014 $ 5,098 $ 12,873 $ -- $ 53,933
and Minority Interest
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Average Assets $2,526,922 $647,519 $203,326 $2,013,617 $1,188,627 $(1,083,207) $5,496,804
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
INTER- RIGGS
THREE MONTHS ENDED NATIONAL RIGGS & RECON- NATIONAL
JUNE 30, 1999 BANKING BANKING COMPANY TREASURY OTHER CILIATION CORPORATION
- ------------------------------- -------------- ------------ ------------ ------------- ------------- -------------- ----------------
NET INTEREST INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 46,045 $ 13,069 $ 2,734 $ 24,308 $ 13,256
Interest Expense 15,072 15,488 3,877 6,320 12,293
Funds Transfer Income 358 9,660 4,250 (15,499) 1,231
(Expense)
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss), 31,331 7,241 3,107 2,489 2,194
Tax-Equivalent
Tax Equivalent Adjustment (524) -- -- -- --
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss) $ 30,807 $ 7,241 $ 3,107 $ 2,489 $ 2,194 $ -- $ 45,838
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
NONINTEREST INCOME
Noninterest Income-External $ 9,902 $ 686 $ 13,291 $ 488 $ 984
Customers
Intersegment Noninterest 259 988 172 -- 920
Income
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Noninterest Income $ 10,161 $ 1,674 $ 13,463 $ 488 $ 1,904 $ (2,339) $ 25,351
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 1,857 $ 164 $ 232 $ 3 $ 1,824
Direct Expense 14,686 4,971 8,343 383 20,085
Overhead and Support 14,633 2,635 3,333 367 (20,968)
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Noninterest Expense $ 31,176 $ 7,770 $ 11,908 $ 753 $ 941 $ (2,339) $ 50,209
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Income (Loss) Before Taxes $ 9,792 $ 1,145 $ 4,662 $ 2,224 $ 3,157 $ -- $ 20,980
and Minority Interest
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Average Assets $2,731,290 $833,102 $204,356 $1,799,237 $1,127,371 $(1,216,101) $5,479,255
====================================================================================================================================
</TABLE>
-10-
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
====================================================================================================================================
INTER- RIGGS
THREE MONTHS ENDED NATIONAL RIGGS & RECON- NATIONAL
JUNE 30, 1998 BANKING BANKING COMPANY TREASURY OTHER CILIATION CORPORATION
- ------------------------------- -------------- ------------ ------------ ------------- ------------- -------------- ----------------
NET INTEREST INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 45,971 $ 12,734 $ 3,180 $ 27,051 $ 15,990
Interest Expense 18,445 15,341 3,297 7,449 12,285
Funds Transfer Income 5,216 9,643 3,171 (19,791) 1,761
(Expense)
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss), 32,742 7,036 3,054 (189) 5,466
Tax-Equivalent
Tax Equivalent Adjustment (261) -- -- (486) --
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Net Interest Income (Loss) $ 32,481 $ 7,036 $ 3,054 $ (675) $ 5,466 $ -- $ 47,362
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
NONINTEREST INCOME
Noninterest Income-External $ 10,002 $ 751 $ 12,484 $ 1,497 $ 493
Customers
Intersegment Noninterest -- 920 115 -- 423
Income
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Noninterest Income $ 10,002 $ 1,671 $ 12,599 $ 1,497 $ 916 $ (1,458) $ 25,227
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 1,742 $ 162 $ 404 $ 3 $ 1,706
Direct Expense 13,481 5,118 7,286 381 18,245
Overhead and Support 15,298 2,154 2,594 278 (20,324)
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Noninterest Expense $ 30,521 $ 7,434 $ 10,284 $ 662 $ (373) $ (1,458) $ 47,070
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Income (Loss) Before Taxes $ 11,962 $ 1,273 $ 5,369 $ 160 $ 6,755 $ -- $ 25,519
and Minority Interest
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
-------------- ------------ ------------ ------------- ------------- -------------- ----------------
Total Average Assets $2,567,767 $679,785 $200,474 $1,856,319 $1,202,157 $(1,013,193) $5,493,309
====================================================================================================================================
</TABLE>
NOTE 6. NEW FINANCIAL ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
was issued in June 1998. SFAS No. 133 will require the Corporation to record
derivative instruments, such as interest-rate swap agreements on the
Consolidated Statement of Condition as assets or liabilities, measured at fair
value. Currently the Corporation treats such instruments as off-balance-sheet
items. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the specific use of each derivative
instrument and whether it qualifies for hedge accounting treatment as stated in
the standard. SFAS No. 133 will be effective for the Corporation on January 1,
2001. The Corporation does not anticipate any material impact from the
implementation of SFAS No. 133.
NOTE 7. SUBSEQUENT EVENT
On June 16, 1999, the Corporation filed a registration statement with the
Securities and Exchange Commission to issue $200 million of variable rate Trust
Preferred Securities. On July 22, 1999, because of market volatility, the
Corporation announced its decision to postpone the issuance. On that same date,
the Corporation completed its redemption of $125 million of 8.5% subordinated
notes due in 2006, at the price of 104.25%, using general corporate funds to
retire the debt. Subsequently, the Corporation borrowed $200 million from the
Federal Home Loan Bank of Atlanta, at a rate of 5.01%. $100 million of the
borrowing, callable in one year, has a final maturity of ten years. Another $100
million, also callable in one year, has a final maturity of five years.
-11-
<PAGE>
RIGGS NATIONAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
$9.6 million of net income was earned for the second quarter of 1999 compared to
$14.5 million for the same period a year ago. Earnings per share were $.33
compared to $.37 for the same period in the prior year. For the first half of
1999, the Corporation had net income of $17.3 million, or $.59 per diluted
share, compared with $30.2 million , or $.78 a share, for the first half of
1998. A variety of factors including nonrecurring securities gains and a lower
income tax rate in the second half of 1998, together with a reduction in second
quarter 1999 net interest income due to the Corporation's redemption of
preferred stock and repurchase of common stock, reduced net income for the
second quarter and first half of 1999 as compared with the same periods a year
earlier.
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 $46.4 million in
the second quarter of 1999, decreasing $1.7 million from the second quarter of
1998. Net interest income on a tax-equivalent basis was $93.0 million for the
first half of 1999, compared with $96.6 million for the same period in 1998. The
decreases from the prior year's quarter and year-to-date periods were primarily
due to funds expended in redeeming Preferred Stock in the fourth quarter of 1998
and Common Stock in both the fourth quarter of 1998 and the first quarter of
1999.
NET INTEREST INCOME CHANGES (1)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
JUNE 30, 1999 VS 1998 JUNE 30, 1999 VS 1998
--------------------------------- ----------------------------------
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 $(4,298) $ 3,829 $ (469) $(8,013) $10,375 $ 2,362
Securities Available for Sale (943) (444) (1,387) (2,229) (5,954) (8,183)
Time Deposits with Other Banks (1,167) (1,322) (2,489) (1,898) 675 (1,223)
Federal Funds Sold and Reverse
Repurchase Agreements (406) (1,731) (2,137) (977) (3,873) (4,850)
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Income (6,814) 332 (6,482) (13,117) 1,223 (11,894)
Interest Expense:
Interest-Bearing Deposits (6,420) 2,973 (3,447) (12,664) 6,786 (5,878)
Repurchase Agreements and Other
Short-Term Borrowings (895) (393) (1,288) (1,974) (429) (2,403)
Long-Term Debt -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Interest Expense (7,315) 2,580 (4,735) (14,638) 6,357 (8,281)
=====================================================================================================================
Net Interest Income $ 501 $(2,248) $(1,747) $ 1,521 $(5,134) $(3,613)
</TABLE>
(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.
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
------------------------------- ----------------------------------
(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, Including Fees (2) $3,173,289 $56,928 7.20 % $2,972,175 $57,397 7.75 %
Securities Available for Sale (3) 1,178,835 17,025 5.79 1,208,352 18,412 6.11
Time Deposits with Other Banks 518,610 6,159 4.76 621,730 8,648 5.58
Federal Funds Sold and Reverse Repurchase Agreements 101,179 1,221 4.84 240,512 3,358 5.60
- -------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,971,913 81,333 6.56 5,042,769 87,815 6.98
Reserve for Loan Losses (52,750) (52,295)
Cash and Due from Banks 148,266 148,046
Other Assets 411,826 354,789
===============================================================================================================================
Total Assets $5,479,255 $5,493,309
LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY
Interest-Bearing Deposits $3,554,151 $26,785 3.02 % $3,151,605 $30,232 3.85 %
Repurchase Agreements and Other Short-Term Borrowings 382,782 3,818 4.00 416,472 5,106 4.92
Long-Term Debt 191,525 4,368 9.15 191,525 4,368 9.15
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 4,128,458 34,971 3.40 3,759,602 39,706 4.24
Demand Deposits 587,393 835,962
Other Liabilities 67,974 71,328
Minority Interest in Preferred Stock of Subsidiaries 350,000 350,000
Stockholders' Equity 345,430 476,417
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities, Minority Interest and
Stockholders' Equity $5,479,255 $5,493,309
==============================================================================================================================
NET INTEREST INCOME AND SPREAD $46,362 3.16 % $48,109 2.74 %
==============================================================================================================================
NET INTEREST MARGIN ON EARNING ASSETS 3.74 % 3.83 %
</TABLE>
(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.
NONINTEREST INCOME
Noninterest income for the three months ended June 30, 1999, excluding
securities gains, totaled $24.3 million, an increase of $563 thousand from the
same period a year ago. This increase was mostly due to increases in trust and
investment advisory income of Riggs & Company, Riggs' private client services
division, partially offset by a decrease in other noninterest income. For the
first six months of 1999, noninterest income excluding securities gains totaled
$48.6 million, an increase of $2.0 million from the first six months of 1998.
The increase in noninterest income for the six month period was mostly due to a
10% increase in trust and investment advisory income of Riggs & Company,
partially offset by a decrease of $845 thousand in other noninterest income.
This decrease was partly the result of lower fee income from ATM and deposit
account fees.
-13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
------------------------------- ----------------------------------
(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, Including Fees (2) $3,185,659 $115,283 7.30 % $2,904,744 $112,921 7.84 %
Securities Available for Sale (3) 1,098,346 31,691 5.82 1,301,705 39,874 6.18
Time Deposits with Other Banks 566,836 13,393 4.76 541,023 14,616 5.45
Federal Funds Sold and Reverse Repurchase Agreements 138,552 3,327 4.84 294,819 8,177 5.59
- ------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,989,393 163,694 6.62 5,042,291 175,588 7.02
Reserve for Loan Losses (53,478) (52,370)
Cash and Due from Banks 146,542 151,817
Other Assets 406,044 355,066
==============================================================================================================================
Total Assets $5,488,501 $5,496,804
LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY
Interest-Bearing Deposits $3,535,864 $ 54,140 3.09 % $3,163,472 $ 60,018 3.83 %
Repurchase Agreements and Other Short-Term Borrowings 391,819 7,796 4.01 409,623 10,199 5.02
Long-Term Debt 191,525 8,736 9.20 191,525 8,736 9.20
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 4,119,208 70,672 3.46 3,764,620 78,953 4.23
Demand Deposits 604,404 843,254
Other Liabilities 60,589 67,362
Minority Interest in Preferred Stock of Subsidiaries 350,000 350,000
Stockholders' Equity 354,300 471,568
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities, Minority Interest and
Stockholders' Equity $5,488,501 $5,496,804
==============================================================================================================================
NET INTEREST INCOME AND SPREAD $ 93,022 3.16 % $ 96,635 2.79 %
==============================================================================================================================
NET INTEREST MARGIN ON EARNING ASSETS 3.76 % 3.86 %
</TABLE>
(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.
NONINTEREST EXPENSE
Noninterest expense for the three months ended June 30, 1999 was $50.2 million,
up 7% from the $47.1 million reported for the three months ended June 30, 1998.
For the six months ended June 30, 1999, noninterest expense was $100.4 million,
an increase of $5.9 million from the same period a year ago. The increases were
due to added personnel costs during the year, primarily related to new business
initiatives, and increases in other noninterest expense, such as a $500 thousand
charitable contribution and increased advertising costs in 1999.
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
FINANCIAL CONDITION
SECURITIES
Securities available for sale totaled $1.17 billion at June 30, 1999, compared
to $970.7 million at year-end 1998, and $1.16 billion at June 30, 1998. The
activity for the first six months included purchases of securities available for
sale totaling $2.37 billion, which were partially offset by maturities of
securities available for sale totaling $2.08 billion. The weighted-average
durations and yields for the portfolio, adjusted for anticipated prepayments,
were approximately 4.2 years and 5.80%, respectively, at June 30, 1999.
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998 DECEMBER 31, 1998
------------------------------- ------------------------------ -------------------------------
AMORTIZED MARKET/ AMORTIZED MARKET/ AMORTIZED MARKET/
AVAILABLE FOR SALE COST BOOK VALUE COST BOOK VALUE COST BOOK VALUE
================================================================================================================================
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $ 213,476 $ 200,348 $ 403,306 $ 404,736 $ 113,677 $ 111,750
Government Agencies Securities 418,326 416,098 705,483 705,454 391,165 391,344
Mortgage-Backed Securities 530,233 509,352 7,514 7,566 424,152 423,503
Other Securities 41,620 41,620 43,294 45,871 43,577 44,131
================================================================================================================================
Total $1,203,655 $1,167,418 $1,159,597 $1,163,627 $ 972,571 $ 970,728
</TABLE>
LOANS
At June 30, 1999, total loans outstanding amounted to $3.19 billion, decreasing
$72.1 million from the December 31, 1998 total of $3.26 billion. The decrease in
loans from December 31, 1998, was primarily attributed to decreases in
residential mortgage loans of $52.0 million and foreign loans of $24.5 million,
partially offset by an increase of $8.0 million in commercial and financial
loans.
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1999 1998 1998
================================================================================================================
<S> <C> <C> <C>
Commercial and Financial $ 676,769 $ 593,024 $ 668,778
Real Estate - Commercial/Construction 409,707 412,141 409,586
Residential Mortgage 1,224,250 1,316,741 1,276,257
Home Equity 312,681 324,973 314,347
Consumer 69,101 67,114 69,419
Foreign 497,540 436,941 522,032
- ----------------------------------------------------------------------------------------------------------------
Total Loans 3,190,048 3,150,934 3,260,419
Net Deferred Loan Fees,
Premiums and Discounts (4,003) (1,002) (2,284)
================================================================================================================
Loans $3,186,045 $3,149,932 $3,258,135
</TABLE>
-15-
<PAGE>
ITEM 2. 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 $29.5 million at June 30,
1999, a $1.9 million (6%) decrease from the year-end 1998 total of $31.4 million
and a $14.4 million (95%) increase from the June 30, 1998 total. The increase in
nonaccrual loans from June 1998 was mainly due to a $25.0 million commercial
loan placed on nonaccrual during the fourth quarter of 1998 partially offset by
repayment of another large nonperforming loan.
PAST-DUE AND POTENTIAL PROBLEM LOANS
Past-due loans consist of residential real estate loans, commercial and
industrial loans, and consumer loans that are in the process of collection and
are accruing interest. Past-due loans decreased $16.7 million during the first
six months of 1999 to $8.6 million, mostly due to repayment of a foreign
government overdraft of $15.8 million.
At June 30, 1999, the Corporation had identified $15.9 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. The increase in problem loans from December 31, 1998 was
primarily a result of a $13.5 million commercial loan classified as a problem
loan during the second quarter. There were no potential problem loans at
December 31, 1998.
NONPERFORMING ASSETS AND PAST-DUE LOANS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1999 1998 1998
=======================================================================================================================
NONPERFORMING ASSETS:
<S> <C> <C> <C>
Nonaccrual Loans (1) $26,389 $12,477 $26,831
Renegotiated Loans (2) 1,452 90 2,920
Other Real Estate Owned, Net 1,678 2,569 1,680
=======================================================================================================================
Total Nonperforming Assets $29,519 $15,136 $31,431
PAST-DUE LOANS (3) $ 8,574 $19,166 $25,269
</TABLE>
(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. Renegotiated loans do not include $6.4 million
in loans renegotiated at market terms that have performed in accordance
with their respective renegotiated terms.
(3) - Loans contractually past due 90 days or more in principal or interest that
are well-secured and in the process of collection.
DEPOSITS
Deposits are the primary and most stable source of funds for the Corporation.
Deposits totaled $4.14 billion at June 30, 1999, decreasing $5.4 million from
the December 31, 1998 deposit total, and $124.2 million from June 30, 1998. The
decreases from the year-end and prior year balances were due primarily to
decreases in demand deposit accounts, partially offset by overall increases in
interest bearing deposit accounts, particularly money market accounts. Decreases
in demand deposit accounts from June 30, 1998 and December 31, 1998, totaled
$268.8 and $57.9 million, respectively, while money market deposit account
balances increased by $169.8 and $86.6 million for the same periods,
respectively. The decrease in demand deposits and increase in money market
accounts from June 1998 was partly due to a program introduced in July 1998 in
which certain noninterest-bearing accounts are transferred to the money market
classification, thereby reducing the level of required reserves.
-16-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings decreased by $5.1 million, or 1%, from the year-end 1998
balance, and $81.4 million (18%) from the June 30, 1998 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, and are
used to help the Corporation generate cash and maintain adequate levels of
liquidity.
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1999 1998 1998
======================================================================================================================
<S> <C> <C> <C>
Repurchase Agreements and Other Short-Term Borrowings $369,291 $450,692 $374,380
Subordinated Debentures due 2009 66,525 66,525 66,525
Subordinated Notes due 2006 125,000 125,000 125,000
- ----------------------------------------------------------- ---------------- -- ---------------- --- -----------------
Total Long-Term Debt 191,525 191,525 191,525
======================================================================================================================
Total Short-Term Borrowings and Long-Term Debt $560,816 $642,217 $565,905
</TABLE>
LIQUIDITY
The Corporation seeks to maintain sufficient liquidity to meet the needs of
depositors, borrowers and creditors at a reasonable cost and without undue
stress on the operations of the Corporation and its banking subsidiaries. The
Corporation's Asset/Liability Committee actively analyzes and manages liquidity
in coordination with other areas of the organization (see "Sensitivity to Market
Risk"). At June 30, 1999, the Corporation's liquid assets, on a consolidated
basis, which include cash and due from banks, Government obligations and other
securities, federal funds sold, reverse repurchase agreements and time deposits
at other banks, totaled $1.89 billion (35% of total assets). This compares with
$1.90 billion (34%) at December 31, 1998, and $2.33 billion (40%) at June 30,
1998. At June 30, 1999, $824.5 million of the Corporation's assets were pledged
to secure deposits and other borrowings. This compares with pledged assets of
$727.4 million at December 31, 1998, and $811.7 million at June 30, 1998.
The Corporation's liquidity position is maintained by a stable source of funds
from the Corporation's core deposit relationships. The Corporation has other
sources of funds, such as short-term credit lines available from several Federal
Home Loan Banks and other financial institutions. In addition, the Corporation
had a line of credit available through its membership in the Federal Home Loan
Bank of Atlanta (FHLB Atlanta). At June 30, 1999, December 31, 1998, and June
30, 1998, short-term credit lines and the FHLB Atlanta line of credit available
totaled approximately $1.69 billion, $1.50 billion, and $690 million,
respectively. Of this availability, $31.6 million, $31.7 million, and $34.3
million were outstanding at June 30, 1999, December 31, 1998, and June 30, 1998.
STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
Total stockholders' equity at June 30, 1999 was $340.7 million, a decrease of
$52.0 million from the year-end 1998 total and down $145.8 million from June 30,
1998. The decreases from both prior periods were primarily the result of the
redemption of Riggs' $100 million 10.75% Noncumulative Perpetual Preferred Stock
on October 1, 1998, and repurchases of Common Stock in the fourth quarter of
1998 and first quarter of 1999. These Common Stock repurchases aggregated
2,400,000 shares for a cost of $47.6 million. Book value per common share was
$12.06 as of June 30, 1999 compared to $12.93 at year-end 1998 and $12.78 at
June 30, 1998. On the following page are the capital ratios of the Corporation
and its banking subsidiary, Riggs Bank National Association (Riggs Bank N.A.) at
June 30, 1999 and 1998, and December 31, 1998.
-17-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31, REQUIRED
1999 1998 1998 MINIMUMS
================================================================================================================
<S> <C> <C> <C> <C>
RIGGS NATIONAL CORPORATION:
Tier I 13.47% 17.82% 14.63% 4.00%
Combined Tier I and Tier II 26.59 29.73 27.51 8.00
Leverage 8.70 11.60 9.33 4.00
RIGGS BANK N.A.:
Tier I 12.89 12.50 12.17 4.00
Combined Tier I and Tier II 14.14 13.76 13.43 8.00
Leverage 8.78 8.78 8.26 4.00
</TABLE>
YEAR 2000 READINESS DISCLOSURE
GENERAL
Advances and changes in technology can have a significant impact on the
Corporation's business. Financial institutions are dependent on information
systems and also have many external interdependencies with other companies. Many
computer programs were designed to recognize calendar years by their last two
digits. Calculations performed using these digits may not work properly with
dates beginning in the Year 2000 and beyond. The Year 2000 issue creates risk
for the Corporation from unforeseen problems in its computer systems and from
Year 2000 issues with the Corporation's vendors, service providers and
customers.
APPROACH AND RISKS
The Corporation began to identify the risks associated with the Year 2000 in
1995. Management established a corporate oversight structure to ensure timely
risk assessments, remediation plans, systems testing, conversions, and
centralized management of the project. The structure of the effort entails a
number of groups, each addressing a different aspect of the project, and
reporting to the Year 2000 Program Manager. Oversight of the entire project is
performed by the Year 2000 Advisory Group. This is a management committee
appointed by the Board of Directors that reports to the Board on a quarterly
basis.
Management determined that an enterprise-wide business risk-assessment approach
is most appropriate for addressing and remediating Year 2000 problems. This
included an assessment of the information technology resources of each of the
functional areas in the Corporation, as well as separate assessments of
information technology vendors and suppliers, mainframe applications, third
party suppliers, alternative platforms, and non-information technology and
facilities risks.
In addition to systems-related risks, the Corporation undertook a review of
risks created by potential business interruptions suffered by the Corporation's
major business counterparties, both domestic and foreign. The Corporation
divided its business counterparties into three broad categories: Funds Takers
(primarily borrowers), Funds Providers (depositors and other funding sources)
and Capital Markets partners (trading counterparties and fiduciary
relationships). For those business partners that would have a significant impact
on the Corporation's liquidity, income, or capital markets activities, should
they encounter significant business interruption due to the Year 2000,
management has worked through the functional areas involved to assess readiness
and contingency plans for recovering from an abrupt interruption.
After the assessment phase, Year 2000 efforts focused on remediation and
verification. The Corporation developed detailed action plans to address
mainframe systems, third party servicers, embedded technology and facilities and
non-information technology issues. For purchased systems and software and third
party servicers, the Year 2000 efforts involved contacting the vendors or
suppliers and determining the Year 2000 status of the various systems and of the
plans to bring the systems into compliance. For in-house systems, the Year 2000
efforts included correction of the programs to ensure proper data processing.
The Corporation's action plans also included testing mission-critical systems to
verify the remediation efforts. Riggs records and tracks information to keep
management aware of the status of the Corporation's information technology
systems. The Program Manager worked with the functional areas of the Corporation
to develop contingency plans for a variety of situations, such as the failure of
a vendor to remediate Year 2000 issues by a particular date or a system not
being available for processing.
-18-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Inherent in the Year 2000, the failure to correct a material problem could
result in an interruption in or failure of certain business operations. Year
2000 risks and uncertainties include increased credit losses, service delays,
funding delays, counterparty failures, inaccurate information processing, ATM
failures, and problems with international accounts. There can be no assurance
that the Year 2000 issue will not have a material adverse impact on the
Corporation's financial position, results of operations, or relationships with
customers, vendors, or others.
STATE OF READINESS
While there is general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the readiness of third party vendors and
customers, the Corporation's progress toward completing the enterprise-wide risk
assessment and remediating Year 2000 problems is on target. The Corporation
completed remediation and verification of all mission critical internal systems
by December 31, 1998. Mission-critical third party service providers completed
their remediations by December 31, 1998, and Riggs substantially completed its
verification of these systems at March 31, 1999. As of June 30, 1999, all
mission-critical systems have been assessed, remediated, and tested, and are now
in use serving our clients. This is in accordance with guidelines established by
Bank regulatory authorities. Verification of non-mission critical system
changes, including non-information technology issues, will be performed
throughout 1999. The Corporation presently believes that the Year 2000 issue
will not cause significant operational problems.
COSTS
The Corporation estimates the total cost of the Year 2000 project will be
approximately $7.7 million, with $5.2 million expended to date as of June 30,
1999. The future cost of completing the Year 2000 project is estimated to be
$2.5 million. The total amount expended for the first six months of 1999 was
$1.6 million. The most significant components of the $7.7 million total
estimated cost consist of 65% for personnel costs, including consultants and
special Year 2000 incentives, and 26% for data processing services. The
Corporation does not separately track all internal costs incurred for the Year
2000 project. Internal costs are principally the payroll-related costs for the
information systems group.
The Year 2000 expense represents approximately 11% of the Corporation's total
actual information technology expenditures for the first six months of 1999.
Other significant or critical non-Year 2000 information technology efforts have
not been materially delayed or impacted by Year 2000 initiatives.
CONTINGENCY PLANS
To prepare for the possibility that certain information systems or third party
vendors and servicers will not be Year 2000 compliant, the Corporation developed
detailed contingency plans. The Corporation has two types of contingency plans,
remediation plans and business resumption plans.
The remediation plans addressed those information systems the Corporation had
determined were not Year 2000 compliant through our testing. These plans
described and scheduled alternative provisions, including, if necessary, the
replacement of vendors or third party servicers to ensure compliance. The
remediation plans are complete; however, implementation of these plans is not
expected to be necessary because of the Corporation's state of readiness.
The business resumption plans address how the Corporation will continue
operations in the event a Year 2000 related interruption occurs. The
business-resumption plans for its mission-critical systems and third-party
servicers were substantially completed as of June 30, 1999. While implementation
of the business resumption plans is not expected to be necessary, it will ensure
the Corporation has the ability to process transactions and serve its customers
under circumstances where a Year 2000 problem actually occurs.
The discussion of the Corporation's efforts and expectations related to Year
2000 compliance are forward-looking statements which should be read in
conjunction with the Corporation's disclosures under the "Safe Harbor"
provisions as discussed in this Form 10-Q following Item 3. The Corporation's
ability to achieve Year 2000 compliance and the associated costs could be
adversely impacted by, among other things, the availability of programming and
verification resources, vendors' ability to modify proprietary software, and
problems identified in the ongoing project plan.
-19-
<PAGE>
RIGGS NATIONAL CORPORATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SENSITIVITY TO MARKET RISK
The Corporation is exposed to various market risks. It has determined that
interest-rate risk has a material impact on the Corporation's financial
performance, and as such has established the Asset/Liability Committee ("ALCO")
to manage interest-rate risk. The role of this committee is to prudently manage
the asset/liability mix of the Corporation to provide a stable net interest
margin while maintaining liquidity and capital. This entails the management of
the overall risk of the Corporation in conjunction with the acquisition and
deployment of funds based upon the Committee's view of both current and
prospective market and economic conditions.
The Corporation manages its interest-rate risk through the use of an income
simulation model, which forecasts the impact on net interest income of a variety
of different interest rate scenarios. A "most likely" interest rate scenario is
forecasted based upon an analysis of current market conditions and expectations.
The model then evaluates the impact on net interest income of rates moving
significantly higher or lower than the "most likely" scenario. The results are
compared to risk tolerance limits set by corporate policy. The model's results
as of June 30, 1999 and 1998 are shown in the tables below. Current policy
establishes limits for possible changes in net interest income for 12 and 36
month horizons. The interest rate scenarios monitored by ALCO are based upon a
100 basis point (1%) gradual increase or decrease in rates over a 12-month time
period and a 300 basis point (3%) gradual increase or decrease in rates over a
36-month time period.
INTEREST-RATE SENSITIVITY ANALYSIS (1)
<TABLE>
<CAPTION>
MOVEMENTS IN INTEREST RATES FROM JUNE 30, 1999
============================================================================================================================
SIMULATED IMPACT OVER NEXT SIMULATED IMPACT OVER NEXT
TWELVE MONTHS THIRTY-SIX MONTHS
- ----------------------------------------------------- ---------------------------------- -----------------------------------
(In Thousands) +100BP -100BP +300BP -300BP
- ----------------------------------------------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Simulated Impact Compared With a
"Most Likely" Scenario:
Net Interest Income Increase/(Decrease) (.9)% 2.2 % (2.3)% 2.2 %
Net Interest Income Increase/(Decrease) $(1,785) $ 4,098 $(13,636) $13,140
</TABLE>
<TABLE>
<CAPTION>
MOVEMENTS IN INTEREST RATES FROM JUNE 30, 1998
- ----------------------------------------------------- ----------------------------------------------------------------------
SIMULATED IMPACT OVER NEXT SIMULATED IMPACT OVER NEXT
TWELVE MONTHS THIRTY-SIX MONTHS
- ----------------------------------------------------- ---------------------------------- -----------------------------------
(In Thousands) +100BP -100BP +300BP -300BP
- ----------------------------------------------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Simulated Impact Compared With a
"Most Likely" Scenario:
Net Interest Income Increase/(Decrease) 1.3 % (0.4)% 4.3 % 0.5 %
Net Interest Income Increase/(Decrease) $ 2,425 $(763) $24,835 $2,799
</TABLE>
(1)-Key Assumptions:
Assumptions with respect to the model's projections of the effect of changes in
interest rates on Net Interest Income include:
1. Target balances for various asset and liability classes, which are
solicited from the management of the various units of the Corporation.
2. Interest rate scenarios which are generated by ALCO for the "most likely"
scenario and are dictated by policy for the alternative scenarios.
3. Spread relationships between various interest rate indices, which are
generated by the analysis of historical relationships and ALCO consensus.
4. Assumptions about the effect of embedded options and prepayment speeds:
instruments that are callable are assumed to be called at the first
opportunity if an interest rate scenario makes it advantageous for the
owner of the call to do so. Prepayment assumptions for mortgage products are
derived from accepted industry sources.
5. Reinvestment rates for funds replacing assets or liabilities that are assumed
(through early withdrawal, prepayment, calls, etc.) to run off the balance
sheet, which are generated by the spread relationships.
6. Maturity strategies with respect to assets and liabilities, which are
solicited from the management of the various units of the Corporation.
-20-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK,
CONTINUED
At June 30, 1999, the forecasted impact of rates rising or falling 100 basis
points versus the "most likely" scenario over a 12-month time period was a
change in net interest income not exceeding 3%. For a 300 basis point movement
in rates versus the "most likely" scenario over a 36-month period, the impact on
net interest income also did not exceed 3%. The results of the simulation for
June 30, 1999 indicated that the Corporation was liability sensitive over the 12
and 36-month time horizons. The Corporation was within guidelines for interest
rates moving significantly in either direction.
In managing the Corporation's interest-rate risk, ALCO uses financial derivative
instruments, such as interest-rate swaps. Financial derivatives are employed to
assist in the management and/or reduction of the interest-rate risk of the
Corporation, and can effectively alter the sensitivity of segments of the
statement of condition for specified periods of time. All of these derivative
instruments are considered off-balance-sheet, as they do not materially affect
the level of assets or liabilities of the Corporation. Along with financial
derivative instruments, the income simulation model includes short-term
financial instruments, investment securities, loans, deposits, and other
borrowings. Interest-rate risk management strategies are discussed and approved
by ALCO prior to implementation.
Management finds that the methodologies discussed on the previous page provide a
meaningful representation of the Corporation's interest-rate and market risk
sensitivity, though factors other than changes in the interest rate environment,
such as levels of non-earning assets, and changes in the composition of earning
assets, may affect net interest income. Management believes its current
interest-rate sensitivity level is appropriate, considering the Corporation's
economic outlook and conservative approach taken in the review and monitoring of
the Corporation's sensitivity position. No material changes have taken place
since December 31, 1998.
COMMITMENTS AND CONTINGENT LIABILITIES
Outstanding commitments and contingent liabilities that do not appear in the
consolidated financial statements at June 30, 1999 and 1998, and December 31,
1998 are detailed in the table below. At December 31, 1998, the Corporation's
financial derivative instruments included a $25 million (notional amount)
interest rate swap, which converted a portion of the fixed rate real estate
mortgage loan portfolio into a floating rate asset. This swap matured in January
1999.
<TABLE>
<CAPTION>
CONTRACTUAL OR NOTIONAL VALUE
-----------------------------------------------
JUNE 30, JUNE 30, DECEMBER 31,
1999 1998 1998
===========================================================================================================
<S> <C> <C> <C>
Commitments to Extend Credit $1,093,187 $1,152,470 $1,169,670
Letters of Credit 145,382 142,776 116,734
Derivative Instruments:
Foreign Exchange Contracts:
Commitments to Purchase $ 109,009 $ 88,117 $ 138,727
Commitments to Sell 193,770 170,150 225,846
Interest-Rate Swap Agreements 100,250 90,260 115,343
</TABLE>
-21-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK,
CONTINUED
The Corporation's interest-rate swap activity for the six months ended June 30,
1999, is as follows:
<TABLE>
<CAPTION>
BALANCE BALANCE
DECEMBER 31, JUNE 30,
1998 ADDITIONS MATURITIES TERMINATIONS 1999
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Interest-Rate Swaps:
Receive fixed/pay variable $ -- $ -- $ -- $ -- $ --
Receive variable/pay fixed 25,000 -- 25,000 -- --
Riggs Bank Europe Limited 90,343 9,907 -- -- 100,250
============================================================================================================================
Total $115,343 $ 9,907 $25,000 $ -- $100,250
</TABLE>
--------------------------------------------------------
This Quarterly Report on Form 10-Q, including the Management's Discussion and
Analysis of Financial Condition and Results of Operations, and the Quantitative
and Qualitative Disclosures About Market Risk, contains forward-looking
statements, as defined in section 21E of the Securities Exchange Act of 1934,
that involve risk and uncertainty. In order to comply with the terms of the safe
harbor, the Corporation notes that a variety of factors could cause the
Corporation's actual results and experiences to differ materially from the
anticipated results or other expectations expressed in the Corporation's
forward-looking statements. These factors include, but are not limited to,
certain risks and uncertainties that may affect the operations, performance,
development, growth projections and results of the Corporation's business such
as, the growth of the economy, interest rate movements, timely development by
the Corporation of technology enhancements for its products and operating
systems, the impact of competitive products, services and pricing, customer
business requirements, Congressional legislation and similar matters. Readers of
this report are cautioned not to place undue reliance on forward-looking
statements which are subject to influence by the named risk factors and
unanticipated future events. Actual results, accordingly, may differ materially
from management expectations.
-22-
<PAGE>
RIGGS NATIONAL CORPORATION
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the shareholders of the Corporation was
held on April 14, 1999, in Washington D.C. Chairman of the Board
Joe L. Allbritton presided and 26,409,549 of the 28,328,247
shares outstanding as of the record date of February 26, 1999,
were represented 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 24,796,819 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Robert L. Allbritton 24,786,406 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Timothy C. Coughlin 24,833,368 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
John M. Fahey, Jr. 24,829,843 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Lawrence I. Hebert 24,827,992 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Steven B. Pfeiffer 24,837,998 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
John E.V. Rose 24,828,163 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Robert L. Sloan 24,836,041 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Jack Valenti 24,802,564 1,259,455
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Eddie N. Williams 24,704,060 1,259,455
----------------------------------------------------------------------------------
</TABLE>
2-Amendment to the 1996 Stock Option Plan
-----------------------------------------
By a vote of 15,079,499 For, to 6,628,370 Against, with 216,285
Abstaining, the Corporation's shareholders approved a proposal to
amend the 1996 Stock Option Plan to increase the number of shares
of the Corporation's common stock available for stock option
awards from four million to nine million shares.
3-Amendment to the 1997 Non-Employee Directors Stock Option Plan
----------------------------------------------------------------
By a vote of 15,657,118 For, to 6,037,450 Against, with 229,586
Abstaining, the Corporation's shareholders approved a proposal to
amend the 1997 Non-Employee Directors Stock Option Plan to
increase the number of shares of the Corporation's common stock
available for stock option awards from 350,000 shares to 600,000
shares.
4-Proposal to Elect the Corporation's Independent Accountants
Each Year
-------------------------------------------------------------
By a vote of 5,106,784 For, to 16,493,890 Against, with 323,481
Abstaining, the Corporation's shareholders rejected a proposal to
implement procedures to have the shareholders elect the
Corporation's independent accountants each year.
-23-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
The exhibits listed on pages 25 through 26 are incorporated by
reference or filed herewith in response to this item.
(b) Reports on Form 8-K
-------------------
On July 14, 1999, the Corporation filed a Form 8-K regarding
its second quarter 1999 press release dated July 8, 1999. This
press release updated financial information filed in the June
16, 1999 Form S-3, which was in anticipation of the
Corporation's issuance of $200 million in variable rate Trust
Preferred Securities.
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 10, 1999 /s/ TIMOTHY C. COUGHLIN
--------------------------- --------------------------------
Timothy C. Coughlin
President
Date: August 10, 1999 /s/ JOHN L. DAVIS
--------------------------- --------------------------------
John L. Davis
Chief Financial Officer
(Principal Financial Officer)
Date: August 10, 1999 /s/ ELEANOR L. RUTLAND
--------------------------- --------------------------------
Eleanor L. Rutland
Comptroller
(Principal Accounting Officer)
-24-
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGES
============================================================================================================
<S> <C> <C>
(3.1) Restated Certificate of Incorporation of Riggs National Corporation, Exhibit 3.1
dated April 19, 1999.
(3.2) By-laws of the Registrant with amendments through April 10,
1996 (Incorporated by reference to the Registrant's Form 10-K
for the year ended December 31, 1998, SEC File No. 09756.)
(4.1) Indenture dated June 1, 1989 with respect to $100 million 9.65%
Subordinated Debentures due 2009 (Incorporated by reference to
the Registrant's Form 8-K dated June 20, 1989, SEC File No.
09756.)
(4.2) Indenture dated January 1, 1994 with respect to $125 million,
8.5% Subordinated Debentures due 2006 (Incorporated by
reference to the Registrant's Form 10-Q for the quarter ended
March 31, 1994. SEC File No.
09756.)
(4.3) Indenture dated December 13, 1996 with respect to $150 million,
8.625% Trust Preferred Securities, Series A due 2026
(Incorporated by reference to the Registrant's S-3 dated
February 6, 1997, SEC File No. 333-21297.)
(4.4) Indenture dated March 12, 1997, with respect to $200 million,
8.875% Trust Preferred Securities, Series C due 2027
(Incorporated by reference to the Registrant's S-3 dated May 2,
1997, SEC File No. 333-26447.)
(10.1) Split Dollar Life Insurance Plan Agreements (Incorporated by
reference to the Registrant's Form 10-K for the year ended
December 31, 1998, SEC File No.
09756.)
(10.2) The 1993 Stock Option Plan and the 1994 Stock Option Plan, as
amended April 15, 1998 (Incorporated by reference to the
Registrant's Annual Meeting Proxy Statement filed March 18,
1998), and the 1996 Stock Option Plan and the 1997 Non-Employee
Directors Stock Option Plan, as amended April 14, 1999
(Incorporated by reference to the Registrant's Annual Meeting
Proxy Statement filed March 17, 1999.)
(10.3) Deferred Compensation Plan for Directors (Incorporated by
reference to the Registrant's Form 10-K for the year ended
December 31, 1998, SEC File No.
09756.)
(10.4) Description of the 1998 General Incentive Plan (Incorporated by
reference to the Registrant's Form 10-K for the year ended
December 31, 1998, SEC File No.
09756.)
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS, CONTINUED
EXHIBIT NO. DESCRIPTION PAGES
============================================================================================================
<S> <C> <C>
(10.5) Description of the 1999 General Incentive Plan (Incorporated by
reference to the Registrant's Form 10-K for the year ended
December 31, 1998, SEC File No.
09756.)
(10.6) Supplemental Executive Retirement Plan, as amended and restated
July 12, 1995 (Incorporated by reference to the Registrant's
Form 10-K for the year ended December 31, 1998, SEC File No.
09756.)
(10.7) Trust Agreement, dated July 12, 1995, for the Supplemental
Executive Retirement Plan and the Split Dollar Life Insurance
and Supplemental Death Benefit Plans (Incorporated by reference
to the Registrant's Form 10-K for the year ended December 31,
1998, SEC File No. 09756.)
(27) Financial Data Schedule Exhibit 27
</TABLE>
(Exhibits omitted are not required or not applicable.)
-26-
RESTATED CERTIFICATE OF INCORPORATION
OF
RIGGS NATIONAL CORPORATION
Riggs National Corporation, a Delaware corporation, hereby
certifies as follows:
FIRST. The name of the Corporation is Riggs National
Corporation. The date of filing of its original Certificate of Incorporation
with the Secretary of State was October 27, 1980.
SECOND. This Restated Certificate of Incorporation only
restates and integrates and does not further amend the provisions of the
Certificate of Incorporation of said Corporation as heretofore amended or
supplemented, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation. This Restated
Certificate of Incorporation has been duly adopted in accordance with the
provisions of Section 245 of the General Corporation Law of the State of
Delaware.
THIRD. The text of the Certificate of Incorporation is hereby
restated to read herein as set forth in full:
"FIRST: The name of the Corporation is:
RIGGS NATIONAL CORPORATION
SECOND: The address of its registered office in the State of
Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The nature of the business or purposes to be
conducted or promoted by the Corporation is:
<PAGE>
(a) To act as a holding company and to acquire and own shares
and other interests in, and securities of, other corporations, associations,
partnerships or individuals; and as such shareholder or as owner of such other
interests and securities, to exercise all rights incident thereto.
(b) To acquire by purchase, subscription, contract or
otherwise, and to receive, hold, own, guarantee, sell, assign, exchange,
transfer, mortgage, pledge or otherwise dispose of or deal in and with any of
the shares of the capital stock, or any voting trust certificates in respect of
the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes,
trust receipts, and other securities, obligations, choses in action and
evidences of indebtedness or interest issued or created by any corporations,
joint stock companies, syndicates, associations, firms, trusts or persons,
public or private, or by the government of the United States of America, or by
any foreign government, or by any state, territory, province, municipality or
other political subdivision or by any governmental agency, and as owner thereof
to possess and exercise all the rights, powers and privileges of ownership,
including the right to execute consents and vote thereon, and to do any and all
acts and things necessary or advisable for the preservation, protection,
improvement and enhancement in value thereof.
(c) To acquire, and pay for in cash, stock or bonds of this
Corporation or otherwise, the good will, rights, assets and property, and to
undertake or assume the whole or any part of the obligations or liabilities of
any person, firm, association or corporation.
(d) To borrow or raise monies for any of the purposes of the
Corporation and, from time to time without limit as to amount, to draw, make,
accept, endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness, and to secure the payment of any thereof and of
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the Corporation, whether at
the time owned or thereafter acquired, and to sell, pledge or otherwise dispose
of such bonds or other obligations of the Corporation for its corporate
purposes.
-2-
<PAGE>
(e) To purchase, receive, lease, or otherwise acquire, own,
hold, improve, employ, use and otherwise deal in and with real or personal
property, or any interest therein, wherever situated, and to sell, convey,
lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or
any of the Corporation's property and assets, or any interest therein, wherever
situated.
(f) To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
(g) In general, to possess and exercise all the powers and
privileges granted by the General Corporation Law of Delaware or by any other
law of Delaware or by this Certificate of Incorporation together with any powers
incidental thereto, so far as such powers and privileges are necessary or
convenient to the conduct, promotion or attainment of the business or purposes
of the Corporation.
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is Ninety-five Million
(95,000,000) shares, of which Fifty Million (50,000,000) shares shall be shares
of Common Stock of the par value of Two Dollars and Fifty Cents ($2.50) per
share (the `Common Stock'); Twenty Million (20,000,000) shares shall be shares
of Class B Common Stock of the par value of Two Dollars and Fifty Cents ($2.50)
per share (the `Class B Common Stock'); and Twenty-five Million (25,000,000)
shares shall be shares of Preferred Stock of the par value of One Dollar ($1.00)
per share (the `Preferred Stock').
-3-
<PAGE>
The Board of Directors may, at any time and from time to time,
subject to the provisions of Article NINTH herein, if all of the capital stock
which the Corporation is authorized to issue has not been issued, subscribed
for, or otherwise committed to be issued, issue or take subscription for
additional shares of its capital stock up to the amount authorized in this
Article.
Any amendment to the Certificate of Incorporation which shall
increase or decrease the authorized capital stock of the Corporation may be
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of the voting stock of the Corporation entitled to vote thereon.
Class B Common Stock. Except with regard to voting powers and
to the extent that the Board of Directors provides otherwise in the resolution
or resolutions providing for the issuance of Class B Common Stock, shares of
Class B Common Stock shall have the same designations, rights, qualifications,
limitations and restrictions as shares of Common Stock; provided, however, that
holders of Class B Common Stock shall not have the preemptive rights set forth
in Article NINTH herein.
The voting powers, designations, rights and qualifications,
limitations or restrictions of the authorized but unissued shares of the Class B
Common Stock shall be as follows:
(a) The Board of Directors is authorized, at any time and from
time to time, subject to the provisions of Article NINTH herein, to provide for
the issuance of shares of Class B Common Stock in one or more series, with such
voting powers (provided that such voting powers must be more limited on a per
share basis than those relating to the Common Stock), or without voting powers,
and with such designations, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors (except as otherwise provided in this
Certificate of Incorporation or any amendment thereto), including without
limitation the following:
-4-
<PAGE>
(i) The designation and number of shares of such series.
(ii) The dividend rate or policy relating to such series,
the conditions and dates upon which dividends shall
be payable, the relation which such dividends shall
bear to the dividends payable on any other class or
classes or of any other series of capital stock.
(iii) Whether or not the shares of such series
shall be convertible into or exchangeable for shares
of any other class or classes or of any other series
of any class or classes of the capital stock of the
Corporation, and, if provision is made for conversion
or exchange, the times, prices, rates, adjustments,
and other terms and conditions of such conversion or
exchange.
(iv) The voting powers of the series, provided that each
share of Class B Common Stock must have more limited
voting rights than each share of Common Stock, and
further, that except as required by law, the holders
of Common Stock and Class B Common Stock shall vote
together as a single class.
-5-
<PAGE>
(v) Any other powers, participating or other special
rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series
that the Board of Directors may deem advisable.
(b) Notwithstanding Article TENTH of the Corporation's
Certificate of Incorporation, the holders of any such series of Class B Common
Stock shall have no voting power except as otherwise required by law and except
for any voting powers as may be stated in the resolutions of the Board of
Directors providing for the issuance of such shares.
Preferred Stock. The designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions of the
authorized but unissued shares of Preferred Stock shall be as follows:
(a) The Board of Directors is authorized, at any time and from
time to time, subject to the provisions of Article NINTH herein, to provide for
the issuance of shares of Preferred Stock in one or more series, with such
voting powers, full or limited, or without voting powers, and with such
designations, preferences, and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing for the
issue thereof adopted by the Board of Directors, except as otherwise provided in
this Certificate of Incorporation, or any amendment hereto, including without
limitation the following:
(i) The designation and number of shares of such series.
(ii) The dividend rate of such series, the conditions and
dates upon which such dividends shall be payable, the
preference or relation which such dividends shall
bear to the dividends payable on any other class or
classes or of any other series of capital stock, and
whether such dividends shall be cumulative or
noncumulative.
-6-
<PAGE>
(iii) Whether the shares of such series shall be subject to
redemption by the Corporation, and, if made subject
to such redemption, the times, prices and other terms
and conditions of such redemption.
(iv) The terms and amount of any sinking fund provided
for the purchase or redemption of the shares of
such series.
(v) Whether or not the shares of such series shall be
convertible into or exchangeable for shares of any
other class or classes or of any other series of any
class or classes of the capital stock of the
Corporation and, if provision is made for conversion
or exchange, the times, prices, rates, adjustments,
and other terms and conditions of such conversion or
exchange.
(vi) The extent, if any, to which the holders of the
shares of such series shall be entitled to vote as a
class or otherwise with respect to the election of
the directors or otherwise.
(vii) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock.
(viii) The rights of the holders of the shares of such
series upon the dissolution of, or upon the
distribution of assets of, the Corporation.
(ix) Any other powers, preferences and relative,
participating or other special rights, and the
qualifications, limitations or restrictions thereof,
of the shares of such series, that the Board of
Directors may deem advisable.
-7-
<PAGE>
(b) Notwithstanding Article TENTH of the Corporation's
Certificate of Incorporation, the holders of any such series of Preferred Stock
shall have no voting power except as otherwise required by law and except for
any voting powers with respect to the election of directors or other matters as
may be stated in the resolutions of the Board of Directors providing for the
issuance of such shares.
FIFTH: Deleted
SIXTH: The number of directors of the Corporation shall be
fixed by, or in the manner provided in, the By-laws and may be increased or
decreased from time to time as therein provided, but the number thereof shall
not be less than five.
SEVENTH: Deleted
EIGHTH: The following provisions are adopted for the
management of the business and for the conduct of the affairs of the
Corporation, and for creating, defining, limiting and regulating the powers of
the Corporation, the directors, and the stockholders:
(a) The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent
whatever.
(b) The directors shall have power to adopt By-laws, and, from
time to time, to amend or repeal any By-law. (c) The Directors
may from time to time declare such dividends as they shall
deem advisable and proper, subject to such restrictions as may
be imposed by law, and pay the same to the stockholders at
such times as they shall fix.
(d) The Board of Directors shall have power to issue bonds,
debentures, or other obligations, either nonconvertible or convertible into the
Corporation's stock, upon such terms, in such manner and under such conditions
in conformity with law, as may be fixed by the Board of Directors prior to the
issue of such bonds, debentures or other obligations.
-8-
<PAGE>
(e) The stockholders and directors shall have power to hold
their meetings and keep the books, documents and papers of the Corporation
outside of the state of Delaware, at such places as may be from time to time
designated by the By-laws or by resolution of the stockholders or directors,
except as otherwise required by the laws of Delaware.
(f) It is the intention that the objects, purposes and powers
specified in Article THIRD hereof shall, except where otherwise specified in
said Article, be nowise limited or restricted by reference to or inference from
the terms of any other article or paragraph in this Certificate of
Incorporation, but that the objects, purposes and powers specified in Article
THIRD and in each of the clauses or paragraphs of this charter shall be regarded
as independent objects, purposes and powers.
NINTH: Each holder of the Common Stock of the Corporation
shall have a preemptive right, to the extent permitted by law, to purchase or
subscribe for any stock of any class of the Corporation, whether now or
hereafter authorized, or to purchase or subscribe for any security or obligation
convertible into or exchangeable for or evidencing the right to purchase stock
of any class, which the Corporation may from time to time issue, unless in
approving the issuance, or any transaction resulting in the issuance, of any
stock of any class of the Corporation, or any securities or obligations
convertible into or exchangeable for or evidencing the right to purchase stock
of any class, the Board of Directors of the Corporation unanimously, with at
least a majority of the Directors voting, votes to eliminate such preemptive
rights. No holder of any other class of stock of the Corporation, including the
Class B Common Stock and the Preferred Stock, shall have any preemptive rights.
-9-
<PAGE>
TENTH: At all meetings of stockholders held for the election
of directors or for any other corporate purpose, each holder of capital stock of
the Corporation, whether now or hereafter authorized, shall be entitled to one
vote, in person or by proxy, for each share of stock held by him. Cumulative
voting for the election of directors shall not be permitted. Shares of its own
capital stock belonging to the Corporation or belonging to another corporation,
a majority of the voting stock of which is held directly or indirectly by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Nothing in this Article TENTH shall be construed as limiting the right
of any corporation to vote stock, including but not limited to its own stock,
held by it in a fiduciary capacity.
ELEVENTH: (a) The Corporation shall indemnify its officers,
directors, employees, and agents and former officers, directors, employees and
agents, and any person serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with any pending
or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, with respect to which such officer, director,
employees, agent or other person is a party, or is threatened to be made a
party, to the full extent authorized or permitted by the General Corporation Law
of the State of Delaware. The indemnification provided herein shall not be
deemed exclusive of any other rights to which any person seeking indemnification
may be entitled under any By-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity, while holding any such office, and shall
inure to the benefit of the heirs, executors and administrators of any such
person. The Corporation shall have the power to purchase and maintain insurance
on behalf of any persons enumerated above against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article ELEVENTH.
-10-
<PAGE>
(b) No director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided that the foregoing shall not eliminate or
limit liability of a director (i) for any breach of such director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which such director derives an
improper personal benefit. Any repeal or modification of this paragraph (b) by
the stockholders of the Corporation shall not adversely affect any right or
protection of any director of the Corporation existing at the time of, or for or
with respect to any acts or omissions occurring prior to, such repeal or
modification.
TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereinafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
THIRTEENTH: The Corporation is to have perpetual existence."
IN WITNESS WHEREOF, Riggs National Corporation has caused this
certificate to be signed by Timothy C. Coughlin its President, on the 19th day
of April, 1999.
RIGGS NATIONAL CORPORATION
By: /s/ TIMOTHY C. COUGHLIN
------------------------
Timothy C. Coughlin
President
-11-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q DATED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000350847
<NAME> RIGGS NATIONAL CORPORATION
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