SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
_____________________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number 1-7273
_____________________________________
FIRST MARYLAND BANCORP
(Exact name of registrant as specified in its charter)
Maryland 52-0981378
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 South Charles Street, Baltimore, Maryland 21201
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 410-244-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for 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:
All voting stock (16,985,149 shares of Common Stock, $5.00 par
value) is owned by Allied Irish Banks, p.l.c., an Irish
Banking Corporation.
<PAGE >
PAGE 2
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
-------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans..................................... $99,978 $103,546
Interest and dividends on investment securities:
Taxable.................................................... 23,755 41,685
Tax-exempt................................................. 6 4,068
Dividends.................................................. - 47
Interest on investment securities available-for-sale...........
Taxable.................................................... 13,929 -
Tax-exempt................................................. 3,975 -
Dividends.................................................. 231 -
Interest on loans held-for-sale................................ 2,750 1,976
Interest on money market investments........................... 6,107 2,694
-------- --------
Total interest and dividend income....................... 150,731 154,016
-------- --------
INTEREST EXPENSE
Interest on deposits........................................... 40,357 45,258
Interest on Federal funds purchased and
other short-term borrowings.................................. 13,381 9,917
Interest on long-term debt..................................... 4,327 4,330
-------- --------
Total interest expense................................... 58,065 59,505
-------- --------
NET INTEREST INCOME............................................ 92,666 94,511
Provision for credit losses (note 4)........................... 8,999 12,565
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES.......... 83,667 81,946
-------- --------
NONINTEREST INCOME
Service charges on deposit accounts............................ 18,253 17,414
Securities gains, net.......................................... 11,200 12,564
Servicing income from securitized assets, net.................. 5,476 6,938
Trust fees..................................................... 5,138 5,184
Bankcard charges and fees...................................... 4,378 4,350
Mortgage banking income........................................ 3,080 2,785
Other income................................................... 10,262 10,211
-------- --------
Total noninterest income................................. 57,787 59,446
-------- --------
NONINTEREST EXPENSES
Salaries and wages............................................. 38,908 38,880
Other personnel costs.......................................... 17,424 11,122
Net occupancy costs............................................ 8,147 7,656
Equipment costs................................................ 6,935 6,799
Other operating expenses....................................... 30,211 32,179
-------- --------
Total noninterest expenses............................... 101,625 96,636
-------- --------
INCOME BEFORE INCOME TAXES..................................... 39,829 44,756
Income tax expense............................................. 13,773 16,294
-------- --------
NET INCOME..................................................... $26,056 $28,462
======== ========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 3
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks ....................................... $624,204 $630,731 $595,058
Money market investments (note 2).............................. 1,067,111 196,573 288,493
Investment securities available-for-sale (note 3).............. 1,145,338 1,306,899 -
Investment securities (market value of $1,571,799,
$1,731,462 and $2,970,460) (note 3).......................... 1,583,350 1,709,648 2,886,663
Loans held-for-sale (at cost which approximates market)........ 101,063 269,222 120,381
Loans, net of unearned income of $69,649, $71,224
and $111,847:
Commercial................................................. 1,641,157 1,626,080 1,691,004
Real estate,construction................................... 265,320 284,008 315,638
Real estate,mortgage:
Residential............................................. 537,696 497,543 381,428
Commercial.............................................. 981,071 957,568 892,437
Retail..................................................... 875,258 885,117 941,360
Bankcard................................................... 482,302 527,657 451,194
Leases receivable.......................................... 214,101 211,821 198,596
Foreign.................................................... 258,939 207,927 204,532
--------- --------- ---------
Total loans, net of unearned income................... 5,255,844 5,197,721 5,076,189
Allowance for credit losses (note 4)....................... (199,805) (200,006) (202,503)
--------- --------- ---------
Loans, net ........................................... 5,056,039 4,997,715 4,873,686
--------- --------- ---------
Premises and equipment......................................... 100,981 100,726 95,068
Due from customers on acceptances.............................. 13,041 9,127 8,021
Other assets................................................... 370,169 307,864 578,181
--------- --------- ---------
Total assets..................................... $10,061,296 $9,528,505 $9,445,551
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits:
Noninterest bearing deposits .............................. $1,803,723 $1,914,452 $1,629,688
Interest bearing deposits.................................. 4,826,047 4,747,825 4,903,017
Interest bearing deposits in foreign banking office............ 121,317 111,880 56,939
--------- --------- ---------
Total deposits........................................ 6,751,087 6,774,157 6,589,644
Federal funds purchased and securities sold under
repurchase agreements........................................ 1,059,576 748,266 1,035,101
Other borrowed funds, short-term............................... 688,847 645,369 724,694
Bank acceptances outstanding................................... 13,041 9,127 8,021
Accrued taxes and other liabilities............................ 382,300 185,215 176,877
Long-term debt................................................. 189,590 189,577 189,535
--------- --------- ---------
Total liabilities................................ 9,084,441 8,551,711 8,723,872
--------- --------- ---------
Stockholders' equity :
7.875% Noncumulative preferred stock, Series A, $5 par
value per share, $25 liquidation preference per share;
authorized 9,000,000 shares; issued 6,000,000 shares.... 30,000 30,000 -
Common stock, $5 par value per share; authorized
41,000,000 shares; issued 16,985,149 shares............. 84,926 84,926 84,926
Capital surplus........................................... 198,127 198,127 83,324
Retained earnings......................................... 659,071 637,128 553,429
Unrealized gains on investment securities available-for-
sale (net of taxes of $3,092 and $17,018)............... 4,731 26,613 -
--------- --------- ---------
Total stockholders' equity....................... 976,855 976,794 721,679
--------- --------- ---------
Total liabilities and stockholders' equity....... $10,061,296 $9,528,505 $9,445,551
========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 4
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Unrealized
gains on
investment
securities
available-
Preferred Common Capital Retained for-sale,
Stock Stock Surplus Earnings net of tax Total
----------- ----------- ----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended March 31, 1993
---------------------------------
Balances at beginning of year....... $ - $84,926 $83,324 $526,009 $ - $694,259
Net income.......................... 28,462 28,462
Net cost not yet recognized as
periodic pension expense.......... (1,042) (1,042)
--------- --------- --------- --------- --------- ---------
Balances at end of period........... $ - $84,926 $83,324 $553,429 $ - $721,679
========== ========== ========== ========== ========== ==========
Three Months Ended March 31, 1994
---------------------------------
Balances at beginning of year....... $30,000 $84,926 $198,127 $637,128 $26,613 $976,794
Net income.......................... 26,056 26,056
Dividends declared on preferred
stock............................... (2,955) (2,955)
Net cost not yet recognized as
periodic pension expense............ (1,158) (1,158)
Adjustment of the unrealized gains
on investment securities available-
for-sale, net of tax................ (21,882) (21,882)
--------- --------- --------- --------- --------- ---------
Balances at end of period........... $30,000 $84,926 $198,127 $659,071 $4,731 $976,855
========== ========== ========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 5
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31,
--------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................. $26,056 $28,462
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses.......................................................... 8,999 12,565
Provision for other real estate losses............................................... - 2,408
Depreciation and amortization........................................................ 7,992 8,107
Deferred income tax expense.......................................................... 1,689 944
Net gain on the sale of assets....................................................... (11,290) (13,390)
Net decrease in loans originated for sale............................................ 155,664 37,342
Decrease (increase) in trading account securities.................................... 15,194 (53)
Increase in accrued interest receivable.............................................. (1,991) (8,439)
Increase in accrued interest payable................................................. 2,029 686
Other, net........................................................................... 20,831 18,500
--------- ---------
Net cash provided by operating activities......................................... 225,173 87,132
--------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale........................ 1,163,618 -
Proceeds from paydowns and maturities of investment securities available-for-sale...... 32,550 -
Proceeds from paydowns and maturities of investment securities held-to-maturity........ 131,961 232,429
Purchases of investment securities available-for-sale.................................. (944,691) -
Purchases of investment securities held-to-maturity.................................... (7,191) (756,733)
Net increase in short-term investments................................................. (860,989) (258,352)
Proceeds from the sale of loans........................................................ - 2,367
Net (disbursements) receipts from lending activities of bank subsidiaries.............. (50,586) 96,697
Principal collected on loans of nonbank subsidiaries................................... 8,380 6,031
Loans originated by nonbank subsidiaries............................................... (6,020) (16,663)
Principal payments received under leases............................................... 896 2,596
Purchases of assets to be leased....................................................... (80) (528)
Proceeds from other real estate transactions........................................... 1,417 2,529
Proceeds from sales of premises and equipment.......................................... 215 42
Purchases of premises and equipment.................................................... (5,103) (5,750)
Other, net............................................................................. (3,052) (200)
--------- ---------
Net cash used for investing activities............................................ (538,675) (695,535)
--------- ---------
FINANCING ACTIVITIES
Net decrease in deposits .............................................................. (23,070) (229,447)
Net increase in short-term borrowings.................................................. 354,788 779,606
Principal payment on long-term debt.................................................... - (875)
--------- ---------
Net cash provided by financing activities......................................... 331,718 549,284
--------- ---------
Increase (decrease) in cash and cash equivalents ........................................ 18,216 (59,119)
Cash and cash equivalents at beginning of year........................................... 631,137 654,527
--------- ---------
Cash and cash equivalents at March 31,................................................... $649,353 $595,408
========= =========
SUPPLEMENTAL DISCLOSURES
Interest payments...................................................................... $56,036 $58,819
Income tax payments.................................................................... 4,961 2,401
NONCASH INVESTING AND FINANCING ACTIVITIES
Loan charge-offs....................................................................... 11,957 13,601
Transfers to other real estate......................................................... 80 7,148
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 6
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accounting and reporting policies of First Maryland Bancorp
and subsidiaries ("The Corporation") conform to generally accepted
accounting principles.
The accompanying consolidated financial statements are unaudited.
In the opinion of management, all adjustments necessary for a fair
presentation of the results of operations for the periods presented have
been made, and all such adjustments are of a normal recurring nature.
Certain amounts in the 1993 consolidated financial statements have been
reclassified to conform with the 1994 presentation.
2. Money Market Investments
<TABLE>
Money market investments at March 31, 1994, December 31, 1993
and March 31, 1993 included the following:
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
------------ ---------------------------
(in thousands)
<S> <C> <C> <C>
Interest bearing deposits in other banks.......... $25,149 $406 $350
Trading account securities........................ 38,143 53,337 7,669
Federal funds sold................................ 550,000 121,000 245,000
Securities purchased under agreements
to resell....................................... 453,819 21,830 35,474
-------- -------- --------
Total money market investments.............. $1,067,111 $196,573 $288,493
========== ======== ========
</TABLE>
3. Investment Securities
<TABLE>
The following is a comparison of the book value and market value of
held-to-maturity securities in the consolidated investment portfolio:
<CAPTION>
March 31, 1994 December 31, 1993 March 31, 1993 (1)
--------------------- --------------------- ---------------------
Book Market Book Market Book Market
-------- ---------- -------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........ $940,176 $936,491 $970,554 $989,046 $1,164,226 $1,189,994
Mortgage-backed obligations of
Federal agencies............................... 187,055 184,511 211,920 214,765 831,440 851,850
Collateralized mortgage obligations:
Issued by Federal agencies..................... 388,829 385,511 450,385 451,462 567,902 577,279
Privately issued............................... 60,396 58,392 69,921 69,321 87,948 88,696
Obligations of states and political
subdivisions................................... - - - - 206,126 228,579
Other investment securities....................... 6,894 6,894 6,868 6,868 29,021 34,062
--------- --------- --------- --------- --------- ---------
Total....................................... $1,583,350 $1,571,799 $1,709,648 $1,731,462 $2,886,663 $2,970,460
========== ========== ========== ========== ========= ==========
<FN>
(1) At March 31, 1993, the held-to-maturity portfolio includes securities
held-for-possible-sale with a book value of $333,818 and a market value
of $335,389.
</TABLE>
<PAGE>
PAGE 7
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
<TABLE>
The following is a comparison of the amortized cost and book value of
available-for-sale securities in the consolidated investment portfolio:
<CAPTION>
March 31, 1994 December 31, 1993
--------------------- ---------------------
Amortized Amortized
Cost Book Cost Book
----------- ---------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........ $49,052 $48,499 $ - $ -
Mortgage-backed obligations of
Federal agencies............................... 825,588 811,549 900,549 914,215
Collateralized mortgage obligations:
Issued by Federal agencies..................... 19,969 20,011 122,818 126,564
Privately issued............................... 8,423 8,478 12,265 12,362
Obligations of states and political
subdivisions................................... 207,801 221,947 201,062 220,467
Other investment securities....................... 26,682 34,854 26,574 33,291
--------- --------- --------- ---------
Total....................................... $1,137,515 $1,145,338 $1,263,268 $1,306,899
========== ========== ========== ==========
</TABLE>
4. Allowance for Credit Losses
<TABLE>
The provision for credit losses is determined by analyzing
the status of individual loans, reviewing historical loss
experience and reviewing the delinquency of principal and
interest payments where pertinent. Management believes that
all uncollectible amounts have been charged off and that the
allowance is adequate to cover possible future charge-offs.
A summary of the activity in the allowance follows:
<CAPTION>
Three Months Ended March 31,
-------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Balance, beginning of period................................... $200,006 $201,451
Provision for credit losses.................................... 8,999 12,565
Less: charge-offs, net of recoveries of $2,757 and $2,089...... (9,200) (11,513)
-------- --------
Balance, end of period......................................... $199,805 $202,503
======== ========
</TABLE>
<PAGE>
PAGE 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Summary
The net income of First Maryland Bancorp ("The Corporation") for
the three months ended March 31, 1994 was $26.1 million compared to
$28.5 million for the three months ended March 31, 1993. Return on
average assets and return on average total equity were 1.08% and 10.71%,
respectively, for the three months ended March 31, 1994 compared with
1.27% and 16.20% for the three months ended March 31, 1993. During
the first three months of 1994, the Corporation realized securities
gains of $11.2 million compared to securities gains of $12.6 million
for the first three months of 1993.
Net Interest Income
Net interest income on a fully tax equivalent basis for the three
months ended March 31, 1994 of $95.3 million decreased $1.8 million
(1.9%) when compared to net interest income of $97.1 million for the
first three months of 1993. Average earning assets increased $682.9
million when the first three months of 1994 is compared to the first
three months of 1993. The net interest margin was 4.32% for the first
three months of 1994 compared to 4.76% for the first three months of
1993. This decrease is primarily the result of a 73 basis point decline
in the earning assets yield resulting from shortening the duration of the
investment securities portfolio in order to reduce the Corporation's
short-term liability sensitive position and promotional rates offered on
certain retail loan products during the first three months of 1994.
The decline in the earning assets yield was partially offset by a 29
basis point decrease in the Corporation's cost of funds. An analysis of
fully tax equivalent net interest income, net interest spreads, and net
interest margins for the three months ended March 31, 1994 and 1993 is
presented in the following table.
<TABLE>
Net Interest Income, Interest Rate Spread and Net Interest Margin on Average Earning Assets
(Tax Equivalent Basis)
<CAPTION>
Three months ended March 31,
-----------------------------------------------------------------------
1994 1993
----------------------------------- -------------------------------
Average Yield/ Average Yield/
balance Interest rate balance Interest rate
-------- -------- -------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Loans held-for-sale................. $152.6 $2.8 7.49% $108.7 $2.0 7.62%
Loans, net of unearned income....... 5,203.2 100.5 7.84 5,069.4 104.3 8.33
Investment securities............... 2,865.4 44.0 6.23 2,749.5 47.7 7.04
Other earning assets................ 731.8 6.1 3.38 342.5 2.6 3.08
------- ------ ------- ------
Earning assets...................... $8,953.0 153.4 6.95 $8,270.1 156.6 7.68
======== ------ ======== ------
Interest bearing liabilities........ 6,848.5 58.1 3.44 6,584.2 59.5 3.67
Interest rate spread (1)............ 3.51 4.01
Interest free sources utilized
to fund earning assets............ 2,104.5 1,685.9
------- ------ ------- ------
Total sources of funds.............. $8,953.0 58.1 2.63 $8,270.1 59.5 2.92
======== ------ ======== ------
Net interest income................. $95.3 $97.1
====== ======
Net interest margin (2)............. 4.32% 4.76%
==== ====
<FN>
(1) Interest rate spread is the difference between the ratio of interest income to average earning assets and the
ratio of interest expense to average interest bearing liabilities.
(2) Net interest margin is the difference between the ratio of interest income to average earning assets and the
ratio of interest expense to average earning assets.
</TABLE>
<PAGE>
PAGE 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Provision for Credit Losses
The provision for credit losses for the first three months of 1994
totaled $9.0 million, a decrease of $3.6 million (28.4%) over the
$12.6 million provision recorded for the first three months of 1993.
The reduction in provision is primarily the result of a $3.9 million
decline in provisions at one of the Corporation's banking subsidiaries
due to an overall improvement in credit quality.
Noninterest Income
<TABLE>
The following table presents the components of noninterest income
for the three months ended March 31, 1994 and 1993.
Noninterest Income
<CAPTION>
Three months ended March 31,
----------------------------------
Percent
Change
1994 1993 1994/1993
------- ------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Service charges on deposit accounts............... $18,253 $17,414 4.8%
Securities gains, net............................. 11,200 12,564 (10.9)
Servicing income from securitized assets, net..... 5,476 6,938 (21.1)
Trust fees........................................ 5,138 5,184 (0.9)
Bankcard charges and fees......................... 4,378 4,350 0.6
Mortgage banking income........................... 3,080 2,785 10.6
Other income:
Customer service fees........................... 2,676 1,700 57.4
Investment banking income....................... 1,611 2,258 (28.7)
Other........................................... 5,975 6,253 (4.4)
------- -------
Total other income................................ 10,262 10,211 0.5
------- -------
Total noninterest income................... $57,787 $59,446 (2.8)
======= ======= =======
</TABLE>
The Corporation's noninterest income for the first three months of
1994 decreased $1.7 million (2.8%) when compared to the first three
months of 1993. Securities gains of $11.2 million were recorded in
the first three months of 1994 compared to $12.6 million in securities
gains in the first three months of 1993. Investment securities sales
are discussed in detail under "Changes in Financial Position." Service
charges on deposit accounts increased $839,000 (4.8%) due to higher
balances in commercial demand deposit accounts. Servicing income from
securitized assets decreased $1.5 million (21.1%) due to increased credit
losses on securitized receivables which resulted in lower levels of excess
servicing income and a decrease in servicing income as a result of
outsourcing the servicing of the securitized receivables portfolio of a
nonbanking subsidiary of the Corporation. Customer service fees increased
$976,000 (57.4%) as a result of a higher level of loan placement fees,
appraisal fees, and prepayment fee income as well as an increase in retail
check order fees. The $278,000 (4.4%) decrease in other noninterest income
included a decrease in gains on the sale of other real estate owned of
$770,000 when compared to the first three months of 1993.
<PAGE>
PAGE 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Noninterest Expense
<TABLE>
The following table presents the components of noninterest expense
for the three months ended March 31, 1994 and 1993.
Noninterest Expenses
<CAPTION>
Three months ended March 31,
---------------------------------
Percent
Change
1994 1993 1994/1993
------- ------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Salaries and wages.................. $38,908 $38,880 0.1%
Other personnel costs............... 17,424 11,122 56.7
Net occupancy costs................. 8,147 7,656 6.4
Equipment costs..................... 6,935 6,799 2.0
Other operating expenses:
Examinations and assessments...... 4,109 4,029 2.0
Lending and collection............ 3,116 2,710 15.0
Postage and communications........ 3,426 3,369 1.7
Professional service fees......... 3,555 2,387 48.9
Advertising and public relations.. 3,351 3,223 4.0
Other real estate expense......... (17) 2,769 (100.6)
Other............................. 12,671 13,692 (7.5)
------ ------
Total other operating expenses.. 30,211 32,179 (6.1)
------ ------
Total noninterest expenses.. $101,625 $96,636 5.2
======= ======= =======
</TABLE>
The Corporation's noninterest expenses for the first three months of
1994 increased $5.0 million (5.2%) when compared to the first three
months of 1993 primarily due to the following. Other personnel costs
increased $6.3 million (56.7%) primarily as a result of an increase in
employee retirement expenses of $5.3 million and an increase in medical
benefits expense of $792,000. Lending and collection expenses increased
$406,000 (15.0%) primarily due to the payment of performance incentives
to the subservicer of one of the Corporation's nonbanking subsidiary's
loan portfolio. Professional service fees increased $1.2 million (48.9%)
due to consulting fees associated with a trust system conversion and a
corporate reengineering project of $658,000 and $353,000, respectively.
Other real estate expense decreased $2.8 million (100.6%). There were
no provisions for other real estate losses recorded in the first three
months of 1994 compared to $2.4 million in provisions for other real
estate losses recorded in the first three months of 1993. Other
noninterest expenses decreased $1.0 million (7.5%) due to accruals
recorded in the first three months of 1993 of $1.0 million for the cost
of discontinuing operations at one of the Corporation's nonbanking
subsidiaries and $1.0 million for potential operational losses resulting
from a defalcation and account reconciliation problem. These accruals
were partially offset by an increase in office supplies and forms expense
of $571,000 due to printed forms costs related to various systems
conversions.
<PAGE>
PAGE 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Asset Quality
Nonperforming assets totalled $120.5 million at March 31, 1994,
a decrease of $14.9 million when compared to nonperforming assets of
$135.4 million at December 31, 1993. The most significant changes in
nonperforming assets in the first three months of 1994 were paydowns of
$9.3 million, loans reclassified to accrual status of $8.7 million,
charge-offs of $2.9 million, and other real estate owned sales of $1.2
million. These decreases were partially offset by $7.3 million in
additions to nonperforming assets due to the transfer of loans to
nonaccrual status. The most significant paydowns were on a variety of
commercial and real estate transactions in which cash payments were
received on nonaccrual loans. Loans reclassified to accrual status
included $4.5 million in real estate loans which were upgraded from
troubled debt restructuring status and returned to accrual and $4.2
million in commercial and real estate loans which met the regulatory
tests for return to accrual status. The most significant charge-off
was a $1.0 million charge-off on a nonaccrual real estate loan.
The following table sets forth nonperforming assets and accruing
loans which are 90 days past due as to principal or interest on the
dates indicated. Nonperforming assets at March 31, 1993 have been
restated to reflect the reclassification of loans previously classified
as in-substance foreclosures consistent with a policy change adopted
by the federal regulatory agencies.
<TABLE>
3/31/94 12/31/93 3/31/93
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Nonaccrual loans
Domestic:
Commercial...................................... $43,148 $47,521 $68,179
Real estate, construction....................... 4,419 5,787 9,084
Real estate mortgage, commercial ............... 41,001 44,853 64,164
Real estate mortgage, residential............... 6,148 5,381 6,283
Leases receivable............................... 846 863 2,017
Foreign........................................... 3,800 3,800 8,413
-------- -------- --------
Total nonaccrual loans...................... 99,362 108,205 158,140
Restructured loans................................ 172 4,692 187
Other assets owned:
Other real estate............................... 25,033 26,427 37,838
Valuation reserves.............................. (4,325) (4,412) (10,364)
Other assets.................................... 272 510 968
-------- -------- --------
Total other assets owned.................... 20,980 22,525 28,442
-------- -------- --------
Total nonperforming assets...................... $120,514 $135,422 $186,769
======== ======== ========
Percent of total loans, net of unearned income plus
other real estate and assets owned............. 2.28% 2.59% 3.66%
==== ==== ====
Accruing loans contractually past due
90 days or more as to principal or interest....... $13,196 $17,172 $16,093
======= ======= =======
</TABLE>
<PAGE>
PAGE 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Changes in Financial Position
At March 31, 1994, the Corporation's total assets were $10.1
billion compared to $9.5 billion at December 31, 1993. The most
significant change in the Corporation's financial position from
December 31, 1993 to March 31, 1994 was an increase in money market
investments of $870.5 million which resulted from an increase in
federal funds sold and securities purchased under agreements to resell.
Investment securities decreased $287.9 million from December 31, 1993
to March 31, 1994. Mortgage-backed obligations of Federal agencies
("MBS's") totalling $722.5 million were purchased in the first three
months of 1994 for the available-for-sale portfolio. In addition, $222.5
million of U.S. Treasury securities were purchased, $215.4 million for
the available-for-sale portfolio and $7.1 million for the held-to-maturity
portfolio. In March 1994, $186.8 million and $3.1 million in MBS's and
obligations of states and political subdivisions, respectively, were
purchased for the available-for-sale portfolio. These purchases had trade
dates in March 1994 and settlement dates in April 1994, resulting in
payables of $189.9 million at March 31, 1994. These payables were the
primary reason for the $197.1 million increase in accrued taxes and
other liabilities from December 31, 1993 to March 31, 1994. Sales in
the available-for-sale portfolio included $984.6 million of MBS's
resulting in gains of $15.1 million and $166.3 million in U.S. Treasury
securities resulting in losses of $3.9 million. In addition, $77.5
million in MBS's in the available-for-sale portfolio were sold in
March 1994 resulting in losses of $2.2 million. These sales had trade
dates in March 1994 and settlement dates in April 1994 resulting in
receivables of $75.3 million at March 31, 1994. These receivables were
the primary reason for the $62.3 million increase in other assets from
December 31, 1993 to March 31, 1994. The market value of the held-to-
maturity portfolio was $11.6 million below the book value of the portfolio
at March 31, 1994. Gross unrealized losses on debt securities were $21.9
million exceeding gross unrealized gains of $10.3 million. The book
value of the available-for-sale portfolio was $7.8 million above the
amortized cost of the portfolio at March 31, 1994. Gross unrealized
losses on debt securities of $19.7 million exceeded gross unrealized
gains of $19.3 million. Gross unrealized gains on equity securities
in the available-for-sale portfolio were $8.2 million at March 31, 1994.
Loans held-for-sale, which are primarily residential mortgages originated
by the Corporation's mortgage banking subsidiary, decreased $168.2 million
from December 31, 1993 to March 31, 1994 due to a slow down in residential
mortgage refinancing activity in response to rising interest rates.
Loans, net of unearned income increased $58.1 million from December 31,
1993 to March 31, 1994. Residential mortgages increased $40.2 million
resulting from the continuation of an adjustable rate mortgage program.
Bankcard loans decreased $45.4 million due to typical seasonal declines
and foreign loans increased $51.0 million. Total deposits decreased $23.1
million from December 31, 1993 to March 31, 1994. This decrease was
comprised of a $32.0 million decrease in core deposits partially offset by
an $8.9 million increase in purchased deposits. The decrease in core
deposits primarily resulted from a $108.0 million decrease in commercial
noninterest bearing demand deposits combined with an increase in money
market and savings deposits of $89.2 million. Federal funds purchased and
securities sold under repurchase agreements increased $311.3 million from
December 31, 1993 to March 31, 1994.
Total assets increased $615.7 million from March 31, 1993 to March 31,
1994 primarily as a result of a $778.6 million increase in money market
investments due to an increase in federal funds sold and securities
purchased under agreements to resell. Investment securities decreased
$158.0 million. Loans, net of unearned income increased $179.6 million
due to a $156.3 million increase in residential mortgages as a result of
an increase in adjustable rate mortgage originations from March 31, 1993
to March 31, 1994. Retail loans decreased $66.1 million as a result of
the sale of $57.3 million in loans at a nonbanking subsidiary of the
Corporation in December of 1993. Other assets decreased $208.0 million as
a result of $275.4 million in receivables recorded in March 1993 for MBS's
sold with a trade date of March 1993 and a settlement date of April 1993.
Total deposits increased $161.4 million primarily due to an increase in
core deposits of $214.6 million which was partially offset by a decrease
in purchased deposits of $53.2 million. The most significant changes in
core deposits was a $174.0 million increase in noninterest bearing demand
deposits. Accrued taxes and other liabilities increased $205.4 million
due to the $189.9 million payable at March 31, 1994 resulting from the
purchase of MBS's with a trade date of March 1994 and a settlement date
of April 1994.
<PAGE>
PAGE 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Capital Resources
<TABLE>
The following table details the Corporation's capital components
and ratios at March 31, 1994, December 31, 1993 and March 31,
1993, based upon the capital requirements of the Federal Reserve Board.
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
---------- ------------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Preferred stockholders' equity................................. $144,803 $144,803 $ -
Common stockholder's equity.................................... 832,052 831,991 721,679
Disallowed intangibles......................................... (34,820) (35,657) (37,939)
Unrealized gains on investment securities available-for-sale... (4,731) (26,613) -
-------- -------- --------
Tier 1 capital................................................. 937,304 914,524 683,740
-------- -------- --------
Qualifying long-term debt...................................... 111,642 115,629 117,595
Allowance for credit losses.................................... 91,836 90,153 83,615
Mandatory convertible securities............................... 59,953 59,951 59,945
-------- -------- --------
Tier 2 capital................................................. 263,431 265,733 261,155
-------- -------- --------
Total capital.................................................. $1,200,735 $1,180,257 $944,895
======== ======== ========
Risk-adjusted assets........................................... $7,238,880 $7,102,379 $6,571,454
========== ========== ==========
Average quarterly assets....................................... $9,802,098 $9,557,793 $9,124,496
========== ========== ==========
Risk-based capital ratios:
Tier 1 to risk adjusted assets............................... 12.95% 12.88% 10.40%
Regulatory minimum........................................... 4.00 4.00 4.00
Total capital to risk-adjusted assets........................ 16.59 16.62 14.38
Regulatory minimum........................................... 8.00 8.00 8.00
Leverage ratio................................................. 9.60 9.60 7.52
</TABLE>
Tier 1 and total capital increased $22.8 million and $20.5 million,
respectively, when March 31, 1994 is compared to December 31, 1993
primarily due to $26.1 million in net income partially offset by a $3.0
million dividend declared on preferred stock in the first three months
of 1994. Tier 1 and total capital increased $253.6 million and $255.8
million, respectively, when March 31, 1994 is compared to March 31, 1993
as a result of $111.5 million in net income during this period and $144.8
million in proceeds from the issuance of preferred stock in December of
1993.
Additional information regarding the Corporation's capital is
presented in the Consolidated Statements of Changes in Stockholders'
Equity.
<PAGE>
PAGE 14
<TABLE>
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Three Months ended March 31, 1994
------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks........................... $644.0 $ - - %
Money market investments:
Interest bearing deposits in other banks........ 21.0 0.2 3.50
Trading account securities...................... 55.2 0.6 4.55
Funds sold...................................... 655.6 5.3 3.28
Investment securities:
Taxable securities.............................. 1,640.4 23.7 5.85
Equity investments.............................. 5.6 0.1 6.27
--------- ---------
Total securities............................. 1,646.0 23.8 5.86
Investment securities available-for-sale:
Taxable securities.............................. 983.0 13.9 5.75
Tax-exempt securities(1)........................ 220.4 6.0 10.98
Equity investments.............................. 16.0 0.3 6.12
--------- ---------
Total securities available-for-sale (7)...... 1,219.4 20.2 6.70
Loans held-for-sale............................... 152.6 2.8 7.49
Loans, net of unearned income (1,2):
Commercial...................................... 1,629.4 27.1 6.75
Real estate, construction...................... 274.8 4.5 6.67
Real estate mortgage, commercial............... 961.4 18.2 7.67
Real estate mortgage, residential.............. 518.5 8.6 6.76
Retail......................................... 873.2 16.8 7.79
Bankcard....................................... 501.3 19.1 15.41
Leases receivable.............................. 209.6 3.0 5.88
Foreign........................................ 235.0 3.2 5.50
--------- ---------
Total loans, net of unearned income........ 5,203.2 100.5 7.84
Allowance for credit losses.................... (198.9) - -
---------
Loans, net................................... 5,004.3 - -
Other assets (3).................................. 404.0 - -
--------- ---------
Total assets/interest income................. $9,802.1 $153.4
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand..................... $1,786.4 $ - - %
---------
Interest bearing demand........................ 563.8 3.2 2.30
Money market accounts.......................... 1,356.2 9.4 2.81
Savings........................................ 1,150.3 7.9 2.77
Other consumer time............................ 1,415.8 14.2 4.08
Large denomination time........................ 290.2 4.3 5.98
Deposits in foreign banking offices............... 132.8 1.4 4.28
--------- ---------
Total interest bearing deposits.............. 4,909.1 40.4 3.33
--------- ---------
Total deposits............................... 6,695.5 - -
Funds purchased................................... 816.2 6.0 2.99
Other borrowed funds, short-term.................. 933.6 7.4 3.20
Other liabilities................................. 180.9 - -
Long-term debt (4)................................ 189.6 4.3 9.26
Stockholders' equity.............................. 986.3 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense................... $9,802.1 $58.1
======== ========
Earning assets/interest income.................... $8,953.0 $153.4 6.95%
Interest bearing liabilities/interest expense..... 6,848.5 58.1 3.44
Earning assets/interest expense................... $8,953.0 58.1 2.63
Net interest spread (5)........................... 3.51%
=====
Net interest margin (6)........................... 4.32%
=====
<FN>
----------------
(1) Interest on loans to and obligations of public entities is not subject to Federal income tax.
In order to make pre-tax yields comparable to taxable loans and investments, a tax equivalent
adjustment is used based on a 35% Federal tax rate.
(2) Nonaccrual loans are included under the appropriate loan categories as earning assets.
(3) Includes overdrafts excluded from average loan balances for yield purposes.
(4) Includes current portion of long-term debt.
(5) Net interest spread is the difference between the ratio of interest income to average earning assets and the
ratio of interest expense to average interest bearing liabilities.
(6) Net interest margin is the difference between the ratio of interest income to average earning assets and the
ratio of interest expense to average earning assets.
(7) Yields on investment securities available-for-sale are calculated based upon average book value (fair value).
</TABLE>
<PAGE>
PAGE 15
<TABLE>
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Three Months ended December 31, 1993
-------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks........................... $708.2 $ - - %
Money market investments:
Interest bearing deposits in other banks........ 0.4 - 8.52
Trading account securities...................... 36.1 0.4 4.03
Funds sold...................................... 312.5 2.5 3.14
Investment securities:
Taxable securities.............................. 1,779.9 25.7 5.72
Equity investments.............................. 6.0 0.1 6.34
--------- ---------
Total securities............................. 1,785.9 25.8 5.72
Investment securities available-for-sale:
Taxable securities.............................. 901.2 14.6 6.44
Tax-exempt securities(1)........................ 200.6 6.1 12.01
Equity investments.............................. 18.3 0.1 2.86
--------- ---------
Total securities available-for-sale (7)...... 1,120.1 20.8 7.38
Loans held-for-sale............................... 216.3 3.7 6.87
Loans, net of unearned income (1,2):
Commercial...................................... 1,580.9 27.0 6.78
Real estate, construction...................... 291.8 4.9 6.73
Real estate mortgage, commercial............... 923.1 18.2 7.84
Real estate mortgage, residential.............. 479.0 8.5 7.02
Retail......................................... 959.7 19.1 7.90
Bankcard....................................... 510.8 19.3 14.95
Leases receivable.............................. 203.1 3.2 6.18
Foreign........................................ 204.1 2.7 5.19
--------- ---------
Total loans, net of unearned income........ 5,152.5 102.9 7.92
Allowance for credit losses.................... (208.0) - -
---------
Loans, net................................... 4,944.5 - -
Other assets (3).................................. 433.8 - -
--------- ---------
Total assets/interest income................. $9,557.8 $156.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand..................... $1,838.5 $ - - %
---------
Interest bearing demand........................ 558.5 3.3 2.30
Money market accounts.......................... 1,360.9 9.7 2.83
Savings........................................ 1,101.0 8.2 2.96
Other consumer time............................ 1,424.3 14.8 4.12
Large denomination time........................ 288.2 3.8 5.24
Deposits in foreign banking offices............... 97.5 0.9 3.64
--------- ---------
Total interest bearing deposits.............. 4,830.4 40.7 3.34
--------- ---------
Total deposits............................... 6,668.9 - -
Funds purchased................................... 961.7 6.7 2.78
Other borrowed funds, short-term.................. 737.7 5.6 2.99
Other liabilities................................. 173.4 - -
Long-term debt (4)................................ 189.6 4.3 9.06
Stockholders' equity.............................. 826.5 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense................... $9,557.8 $57.3
======== ========
Earning assets/interest income.................... $8,623.8 $156.1 7.18%
Interest bearing liabilities/interest expense..... 6,719.4 57.3 3.38
Earning assets/interest expense................... 8,623.8 57.3 2.64
Net interest spread (5)........................... 3.80%
=====
Net interest margin (6)........................... 4.54%
=====
<FN>
----------------
(1) Interest on loans to and obligations of public entities is not subject to Federal income tax.
In order to make pre-tax yields comparable to taxable loans and investments, a tax equivalent
adjustment is used based on a 35% Federal tax rate.
(2) Nonaccrual loans are included under the appropriate loan categories as earning assets.
(3) Includes overdrafts excluded from average loan balances for yield purposes.
(4) Includes current portion of long-term debt.
(5) Net interest spread is the difference between the ratio of interest income to average earning assets and the
ratio of interest expense to average interest bearing liabilities.
(6) Net interest margin is the difference between the ratio of interest income to average earning assets and the
ratio of interest expense to average earning assets.
(7) Yields on investment securities available-for-sale are calculated based upon average book value (fair value).
</TABLE>
<PAGE>
PAGE 16
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
There are no exhibits furnished to this Form 10-Q.
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the
quarter ended March 31, 1994
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.
First Maryland Bancorp
May 11, 1994 BY /s/ Robert W. Schaefer
----------------------------
Robert W. Schaefer
Executive Vice President and
Chief Financial Officer
May 11, 1994 BY /s/ James A. Smith
----------------------------
James A. Smith
Senior Vice President and
Chief Accounting Officer
