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 September 30, 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
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1994
<CAPTION>
Part I. Financial Information
Page
<S> <C>
Item 1. Financial Statements:
Consolidated Statements of Income....................... 3
Consolidated Statements of Condition.................... 4
Consolidated Statements of Changes in Stockholders'
Equity.................................................. 5
Consolidated Statements of Cash Flows................... 6
Notes to Consolidated Financial Statements.............. 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 10-31
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 32
</TABLE>
<PAGE>
PAGE 3
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................................ $110,199 $102,910 $316,362 $308,749
Interest and dividends on investment securities:
Taxable....................................................... 21,220 40,562 67,224 120,106
Tax-exempt.................................................... - 3,930 - 12,105
Dividends..................................................... - 311 - 872
Interest on investment securities available-for-sale:
Taxable....................................................... 11,085 - 36,123 5,474
Tax-exempt.................................................... 3,990 - 12,116 -
Dividends..................................................... 332 - 893 -
Interest on loans held-for-sale................................... 1,751 2,994 6,120 7,903
Interest on money market investments.............................. 4,762 3,128 19,026 8,695
-------- -------- -------- --------
Total interest and dividend income.......................... 153,339 153,835 457,864 463,904
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits.............................................. 41,056 41,334 123,030 130,456
Interest on Federal funds purchased and
other short-term borrowings..................................... 13,492 12,340 40,149 33,294
Interest on long-term debt........................................ 4,452 4,328 13,106 12,985
-------- -------- -------- --------
Total interest expense...................................... 59,000 58,002 176,285 176,735
-------- -------- -------- --------
NET INTEREST INCOME............................................... 94,339 95,833 281,579 287,169
Provision for credit losses (note 4).............................. 5,998 13,119 20,996 37,336
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............. 88,341 82,714 260,583 249,833
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts............................... 17,907 18,628 54,692 54,217
Trust fees........................................................ 4,923 4,756 14,602 15,134
Servicing income from securitized assets, net..................... 4,816 6,833 14,105 21,433
Bankcard charges and fees......................................... 4,234 4,985 12,952 14,509
Securities gains, net............................................. 2,696 (44) 15,444 19,804
Mortgage banking income........................................... 2,513 6,085 13,587 17,377
Other income...................................................... 18,594 11,788 41,570 33,738
-------- -------- -------- --------
Total noninterest income.................................... 55,683 53,031 166,952 176,212
-------- -------- -------- --------
NONINTEREST EXPENSES
Salaries and wages................................................ 45,445 42,009 125,436 121,675
Other personnel costs............................................. 10,441 9,952 39,192 31,724
Net occupancy costs............................................... 7,980 7,960 24,053 23,320
Equipment costs................................................... 7,646 7,426 22,579 22,496
Other operating expenses.......................................... 29,165 26,771 89,301 92,021
-------- -------- -------- --------
Total noninterest expenses.................................. 100,677 94,118 300,561 291,236
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES........................................ 43,347 41,627 126,974 134,809
Income tax expense................................................ 14,820 14,968 44,321 48,668
-------- -------- -------- --------
NET INCOME........................................................ $28,527 $26,659 $82,653 $86,141
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 4
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks .......................................... $599,087 $630,731 $705,187
Money market investments (note 2)................................. 410,543 196,573 126,948
Investment securities available-for-sale (note 3)................. 1,056,358 1,306,899 1,049,453
Investment securities (market value of $1,333,655,
$1,731,462 and $1,880,704) (note 3)............................. 1,380,207 1,709,648 1,832,938
Loans held-for-sale (at cost which approximates market)........... 84,144 269,222 188,090
Loans, net of unearned income of $79,190, $71,224
and $123,256:
Commercial.................................................... 1,768,615 1,626,080 1,635,143
Real estate,construction...................................... 269,358 284,008 315,276
Real estate,mortgage:
Residential................................................ 572,461 497,543 459,506
Commercial................................................. 948,835 957,568 899,623
Retail........................................................ 947,170 885,117 974,252
Bankcard...................................................... 479,376 527,657 507,222
Leases receivable............................................. 242,339 211,821 206,746
Foreign....................................................... 242,357 207,927 219,782
--------- --------- ---------
Total loans, net of unearned income...................... 5,470,511 5,197,721 5,217,550
Allowance for credit losses (note 4).......................... (200,995) (200,006) (207,838)
--------- --------- ---------
Loans, net .............................................. 5,269,516 4,997,715 5,009,712
--------- --------- ---------
Premises and equipment............................................ 102,132 100,726 101,991
Due from customers on acceptances................................. 23,626 9,127 6,687
Other assets...................................................... 294,231 307,864 305,707
--------- --------- ---------
Total assets........................................ $9,219,844 $9,528,505 $9,326,713
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits:
Noninterest bearing deposits ................................. $1,759,364 $1,914,452 $1,897,241
Interest bearing deposits..................................... 4,741,078 4,747,825 4,686,227
Interest bearing deposits in foreign banking office............... 88,798 111,880 92,497
--------- --------- ---------
Total deposits........................................... 6,589,240 6,774,157 6,675,965
Federal funds purchased and securities sold under
repurchase agreements........................................... 666,494 748,266 852,325
Other borrowed funds, short-term (note 7)......................... 579,718 645,369 623,346
Bank acceptances outstanding...................................... 23,626 9,127 6,687
Accrued taxes and other liabilities............................... 139,504 185,215 199,570
Long-term debt (note 8)........................................... 214,618 189,577 189,563
--------- --------- ---------
Total liabilities................................... 8,213,200 8,551,711 8,547,456
--------- --------- ---------
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.............................................. 198,176 198,127 83,324
Retained earnings............................................ 709,758 637,128 611,007
Unrealized (losses) gains on investment securities available
-for-sale (net of income tax (benefits) of ($10,610) and
$17,018)................................................... (16,216) 26,613 -
--------- --------- ---------
Total stockholders' equity.......................... 1,006,644 976,794 779,257
--------- --------- ---------
Total liabilities and stockholders' equity.......... $9,219,844 $9,528,505 $9,326,713
========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 5
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Unrealized
gains
(losses) 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>
Nine Months Ended September 30, 1993
------------------------------------
Balance at beginning of year........... $ - $84,926 $83,324 $525,908 $ - $694,158
Net income............................. 86,141 86,141
Net cost not yet recognized as
periodic pension expense............. (1,042) (1,042)
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1993.......... $ - $84,926 $83,324 $611,007 $ - $779,257
========== ========== ========== ========== ========== ==========
Nine Months Ended September 30, 1994
------------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,127 $637,128 $26,613 $976,794
Net income............................. 82,653 82,653
Dividends declared on preferred
stock.................................. (8,865) (8,865)
Net cost not yet recognized as
periodic pension expense............... (1,158) (1,158)
Adjustment of the unrealized losses
on investment securities available-
for-sale, net of income tax benefits... (42,829) (42,829)
Adjustment to preferred stock issuance
costs.................................. 49 49
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1994.......... $30,000 $84,926 $198,176 $709,758 ($16,216) $1,006,644
========== ========== ========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 6
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $82,653 $86,141
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................................................. 20,996 37,336
Provision for other real estate losses.................................................. 44 4,402
Depreciation and amortization........................................................... 23,039 24,911
Deferred income tax expense............................................................. 5,527 2,882
Net gain on the sale of assets.......................................................... (24,232) (22,919)
Net decrease (increase) in loans originated for sale.................................... 172,583 (31,484)
Increase in trading account securities.................................................. (2,209) (1,257)
Decrease (increase) in accrued interest receivable...................................... 962 (1,486)
Decrease in accrued interest payable.................................................... (3,489) (2,011)
Other, net.............................................................................. (12,374) 38,144
--------- ---------
Net cash provided by operating activities............................................ 263,500 134,659
--------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale........................... 1,271,469 -
Proceeds from sales of investment securities held-to-maturity............................. 20,383 709,111
Proceeds from paydowns and maturities of investment securities available-for-sale......... 120,761 -
Proceeds from paydowns and maturities of investment securities held-to-maturity........... 316,695 1,069,023
Purchases of investment securities available-for-sale..................................... (1,189,739) -
Purchases of investment securities held-to-maturity....................................... (19,963) (2,018,398)
Net increase in short-term investments.................................................... (212,035) (85,557)
Proceeds from sale of loans............................................................... 45,782 -
Purchase of loans......................................................................... (255) -
Net disbursements from lending activities of bank subsidiaries............................ (329,611) (68,448)
Principal collected on loans of nonbank subsidiaries...................................... 18,183 17,043
Loans originated by nonbank subsidiaries.................................................. (11,383) (42,816)
Principal payments received under leases.................................................. 3,401 11,373
Purchases of assets to be leased.......................................................... (1,338) (1,095)
Proceeds from other real estate transactions.............................................. 11,023 12,696
Proceeds from sales of premises and equipment............................................. 2,937 221
Purchases of premises and equipment....................................................... (18,349) (17,785)
Proceeds from sale of deposits............................................................ (194,107) (8,712)
Purchase of deposits...................................................................... 96,600 -
Purchase of mortgage company.............................................................. (905) -
Other, net................................................................................ (7,907) (10,992)
--------- ---------
Net cash used for investing activities............................................... (78,358) (434,336)
--------- ---------
FINANCING ACTIVITIES
Net decrease in deposits ................................................................. (87,152) (133,874)
Net (decrease) increase in short-term borrowings.......................................... (147,423) 495,482
Principal payment on long-term debt....................................................... - (875)
Issuance of medium-term bank notes........................................................ 25,000 -
Cash dividends paid....................................................................... (7,485) -
--------- ---------
Net cash (used for) provided by financing activities................................. (217,060) 360,733
--------- ---------
(Decrease) increase in cash and cash equivalents ........................................... (31,918) 61,056
Cash and cash equivalents at beginning of year.............................................. 631,137 654,527
--------- ---------
Cash and cash equivalents at September 30,.................................................. $599,219 $715,583
========= =========
SUPPLEMENTAL DISCLOSURES
Interest payments......................................................................... $178,648 $178,746
Income tax payments....................................................................... 37,398 33,509
NONCASH INVESTING AND FINANCING ACTIVITIES
Loan charge-offs.......................................................................... 30,143 42,656
Transfers to other real estate............................................................ 2,171 12,651
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 7
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 September 30, 1994, December 31, 1993
and September 30, 1993 included the following:
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
---------- ------------- ----------
(in thousands)
<S> <C> <C> <C>
Interest bearing deposits in other banks............. $132 $406 $10,396
Trading account securities........................... 55,546 53,337 8,873
Federal funds sold................................... 238,325 121,000 70,250
Securities purchased under agreements
to resell.......................................... 116,540 21,830 37,429
-------- -------- --------
Total money market investments................. $410,543 $196,573 $126,948
======== ======== ========
</TABLE>
3. Investment Securities
<TABLE>
The following is a comparison of the amortized cost and book values of the
available-for-sale securities:
<CAPTION>
September 30, 1994 December 31, 1993 September 30, 1993
--------------------- --------------------- ---------------------
Amortized Amortized Amortized
Cost Book Cost Book Cost (1) Market
----------- ---------- ----------- ---------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $51,769 $49,502 $ - $ - $ - $ -
Mortgage-backed obligations of
Federal agencies.................................. 787,425 748,630 900,549 914,215 780,084 800,717
Collateralized mortgage obligations:
Issued by Federal agencies........................ 15,294 15,328 122,818 126,564 45,041 45,125
Privately issued.................................. 3,787 3,812 12,265 12,362 - -
Obligations of states and political
subdivisions...................................... 191,440 200,507 201,062 220,467 199,215 220,859
Other investment securities.......................... 33,469 38,579 26,574 33,291 25,113 31,139
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $1,083,184 $1,056,358 $1,263,268 $1,306,899 $1,049,453 $1,097,840
========== ========== ========== ========== ========== ==========
<FN>
(1) At September 30, 1993, securities were reclassified to the available-for-sale portfolio at amortized cost.
</TABLE>
<PAGE>
PAGE 8
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
<TABLE>
The following is a comparison of the book and market values of the
held-to-maturity securities:
<CAPTION>
September 30, 1994 December 31, 1993 September 30, 1993
--------------------- --------------------- ---------------------
Book Market Book Market Book Market
-------- ---------- -------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $814,222 $790,027 $970,554 $989,046 $907,667 $938,622
Mortgage-backed obligations of
Federal agencies.................................. 166,825 159,880 211,920 214,765 196,040 200,309
Collateralized mortgage obligations:
Issued by Federal agencies........................ 342,075 330,410 450,385 451,462 623,477 635,796
Privately issued.................................. 55,801 52,054 69,921 69,321 98,918 99,141
Other investment securities.......................... 1,284 1,284 6,868 6,868 6,836 6,836
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $1,380,207 $1,333,655 $1,709,648 $1,731,462 $1,832,938 $1,880,704
========== ========== ========== ========== ========== ==========
</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 all losses inherent in the
portfolio at this time. The following is a summary of the
activity in the allowance for credit losses:
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $200,006 $201,451
Provision for credit losses....................................... 20,996 37,336
Allowance of loans acquired or (sold)............................. - (810)
Less: charge-offs, net of recoveries of $10,136 and $11,707....... (20,007) (30,139)
-------- --------
Balance at September 30........................................... $200,995 $207,838
======== ========
</TABLE>
5. Intangible Assets
<TABLE>
Intangible assets at September 30, 1994, December 31, 1993 and
September 30, 1993 included the following:
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Goodwill............................................. $31,966 $33,373 $34,015
Premium on bankcard receivables...................... 15,499 18,124 19,165
Premium on deposits.................................. 9,084 1,299 1,406
Mortgage servicing rights............................ 1,117 777 901
Other................................................ 853 985 953
------- ------- -------
Total intangible assets........................ $58,519 $54,558 $56,440
======= ======= =======
</TABLE>
<PAGE>
PAGE 9
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
6. Valuation Allowance for Other Real Estate Owned
<TABLE>
A summary of the activity in the valuation allowance for other
real estate owned is provided below:
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $4,412 $9,195
Provision for other real estate losses............................ 44 4,402
Writedowns........................................................ (271) (5,426)
------ ------
Balance at September 30........................................... $4,185 $8,171
====== ======
</TABLE>
7. Other Borrowed Funds, Short-term
<TABLE>
Other borrowed funds, short-term at September 30, 1994, December 31,
1993 and September 30, 1993 included the following:
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Master demand note of the Corporation................ $418,930 $463,645 $417,438
Bank notes........................................... 130,000 177,000 185,000
Federal funds purchased-term......................... 15,000 - -
Commercial paper..................................... - - 14,950
Other................................................ 15,788 4,724 5,958
-------- -------- --------
Total other borrowed funds, short-term......... $579,718 $645,369 $623,346
======== ======== ========
</TABLE>
8. Long-term Debt
<TABLE>
Following is a summary of the long-term debt of the Corporation
at September 30, 1994, December 31, 1993 and September 30, 1993 which
is all unsecured:
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
5.77% Medium term bank notes due September 1, 1995... $25,000 $ - $ -
10.375% Subordinated Capital Notes due August 1,
1999............................................. 59,958 59,951 59,949
9.15% Notes due June 1, 1996......................... 10,000 10,000 10,000
8.68% Notes due January 31, 1997..................... 9,996 9,996 9,995
8.67% Notes due March 20, 1997....................... 9,996 9,995 9,995
8.375% Subordinated Notes due May 15, 2002........... 99,668 99,635 99,624
-------- -------- --------
Total long-term debt........................... $214,618 $189,577 $189,563
======== ======== ========
</TABLE>
<PAGE>
PAGE 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Earnings Summary
The net income of First Maryland Bancorp ("The Corporation") for
the nine months and quarter ended September 30, 1994 was $82.7 million
and $28.5 million, respectively, compared to $86.1 million and $26.7
million for the nine months and quarter ended September 30, 1993.
Return on average assets and return on average total equity were 1.16%
and 11.14%, respectively, for the nine months ended September 30, 1994
compared with 1.23% and 15.51% for the nine months ended September 30,
1993.
<TABLE>
Table 1 Selected Quarterly Financial Information
<CAPTION>
3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
1994 1994 1994 1993 1993
----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Net interest income (fully tax equivalent)........ $96,858 $97,191 $95,293 $98,747 $98,698
Tax equivalent adjustment......................... 2,519 2,617 2,627 2,717 2,865
-------- -------- -------- -------- --------
Net interest income............................... 94,339 94,574 92,666 96,030 95,833
Provision for credit losses....................... 5,998 5,999 8,999 7,955 13,119
-------- -------- -------- -------- --------
Net interest income after provision for credit
losses.......................................... 88,341 88,575 83,667 88,075 82,714
Noninterest income................................ 55,683 53,482 57,787 57,233 53,031
Noninterest expenses.............................. 100,677 98,259 101,625 103,417 94,118
-------- -------- -------- -------- --------
Income before income taxes........................ 43,347 43,798 39,829 41,891 41,627
Income tax expense................................ 14,820 15,728 13,773 14,164 14,968
-------- -------- -------- -------- --------
Net income........................................ $28,527 $28,070 $26,056 $27,727 $26,659
======== ======== ======== ======== ========
Dividends declared on preferred stock............. $2,955 $2,955 $2,955 $1,575 $ -
CONSOLIDATED AVERAGE BALANCES:
Total assets...................................... 9,153,100 9,556,600 9,802,100 9,557,800 9,401,500
Loans, net........................................ 5,127,800 5,042,000 5,004,300 4,944,500 4,912,600
Deposits.......................................... 6,530,900 6,743,800 6,695,500 6,668,900 6,589,300
Long-term debt.................................... 197,800 189,600 189,600 189,600 189,600
Stockholders' equity.............................. 1,010,000 980,300 986,300 826,500 771,600
CONSOLIDATED RATIOS:
Return on average assets.......................... 1.24% 1.18% 1.08% 1.15% 1.13%
Return on average total stockholders' equity...... 11.21 11.49 10.71 13.31 13.71
Return on average common stockholders' equity..... 11.73 12.06 11.13 13.00 13.71
Average stockholders' equity to average total
assets.......................................... 11.04 10.26 10.06 8.65 8.21
Capital to risk-adjusted assets:
Tier 1.......................................... 13.71 13.70 12.95 12.88 10.72
Total........................................... 17.35 17.38 16.59 16.62 14.53
Tier 1 leverage ratio............................. 10.75 10.12 9.60 9.60 7.93
Net interest margin............................... 4.60 4.43 4.32 4.54 4.62
Net charge-offs to average loans, net of average
unearned income (annualized).................... 0.45 0.36 0.72 0.95 0.29
Allowance for credit losses to period end loans,
net of unearned income.......................... 3.67 3.81 3.80 3.85 3.98
Nonperforming assets to period end loans, net of
unearned income plus other foreclosed assets
owned........................................... 1.59 1.88 2.28 2.59 3.26
</TABLE>
<PAGE>
PAGE 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Net Interest Income and Net Interest Margin
Net interest income on a fully tax equivalent basis for the quarter
ended September 30, 1994 of $96.9 million decreased $1.8 million (1.8%)
when compared to net interest income of $98.7 million for the quarter
ended September 30, 1993. This decrease was primarily due to a decline
in the interest rate spread between yields on average earning assets and
interest rates paid on average interest bearing liabilities. Interest
rates paid on average interest bearing liabilities increased 28 basis
points but average earning asset yields increased only 7 basis points.
These negative rate variances were partially offset by positive changes
in the funding mix. Average interest free sources of funds increased
$289.4 million due to an increase in average equity resulting from the
proceeds from the preferred stock issuance in December of 1993 and net
income. In addition, average interest bearing deposits decreased $410.9
million primarily resulting from a decline in average funds purchased.
The net interest margin for the quarter ended September 30, 1994 was
4.60% compared to 4.62% for the quarter ended September 30, 1993.
Net interest income on a fully tax equivalent basis for the nine
months ended September 30, 1994 of $289.3 million decreased $6.0 million
(2.0%) when compared to net interest income of $295.3 million for the
nine months ended September 30, 1993. This decrease was due to narrower
interest rate spreads which were partially offset by positive changes in
the balance sheet mix. Average earning asset yields declined 31 basis
points primarily due to a decrease in the yield on average investment
securities resulting from securities sold in 1993 which were replaced
with lower yielding securities. This negative impact on net interest
income was partially offset by a $243.5 million increase in average
earning assets resulting from an increase in average interest free
sources of funds due to the increase in average equity discussed above.
The net interest margin for the nine months ended September 30, 1994
was 4.45% compared to 4.67% for the nine months ended September 30, 1993.
An analysis of fully tax equivalent net interest income, net interest
spreads and net interest margins for the three months and nine months ended
September 30, 1994 and 1993 is presented in Tables 2 and 3.
<TABLE>
Table 2 Net Interest Income, Interest Rate Spread and Net Interest Margin on Average Earning Assets
(Tax Equivalent Basis)
<CAPTION>
Three Months ended September 30,
-----------------------------------------------------------------------
1994 1993
----------------------------------- -------------------------------
Average Yield/ Average Yield/
balance Interest rate balance Interest rate
-------- -------- -------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Investment securities (1).............. $2,529.6 $38.5 6.04% $2,821.7 $46.9 6.60%
Loans held-for-sale.................... 88.9 1.8 7.81 170.0 3.1 7.17
Loans, net of unearned income.......... 5,326.7 110.8 8.25 5,111.7 103.6 8.04
Other earning assets................... 416.5 4.8 4.54 379.8 3.1 3.27
------- ------ ------- ------
Earning assets......................... $8,361.7 155.9 7.40 $8,483.2 156.7 7.33
======== ------ ======== ------
Interest bearing liabilities........... 6,282.1 59.0 3.73 6,693.0 58.0 3.45
Interest rate spread (2)............... 3.67 3.88
Interest free sources utilized
to fund earning assets............... 2,079.6 1,790.2
------- ------ ------- ------
Total sources of funds................. $8,361.7 59.0 2.80 $8,483.2 58.0 2.71
======== ------ ======== ------
Net interest income.................... $96.9 $98.7
====== ======
Net interest margin (3)................ 4.60% 4.62%
==== ====
<FN>
(1) Includes investment securities available-for-sale at amortized cost and investment securities held-to-maturity.
(2) 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.
(3) 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 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 3 Net Interest Income, Interest Rate Spread and Net Interest Margin on Average Earning Assets
(Tax Equivalent Basis)
<CAPTION>
Nine months ended September 30,
-----------------------------------------------------------------------
1994 1993
----------------------------------- -------------------------------
Average Yield/ Average Yield/
balance Interest rate balance Interest rate
-------- -------- -------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Investment securities (1).............. $2,667.1 $122.2 6.13% $2,733.8 $139.1 6.80%
Loans held-for-sale.................... 113.3 6.2 7.30 272.4 13.6 6.67
Loans, net of unearned income.......... 5,257.4 318.1 8.09 5,081.5 310.6 8.17
Other earning assets................... 654.7 19.1 3.89 361.3 8.7 3.22
------- ------ ------- ------
Earning assets......................... $8,692.5 465.6 7.16 $8,449.0 472.0 7.47
======== ------ ======== ------
Interest bearing liabilities........... 6,603.0 176.3 3.57 6,692.7 176.7 3.53
Interest rate spread (2)............... 3.59 3.94
Interest free sources utilized
to fund earning assets............... 2,089.5 1,756.3
------- ------ ------- ------
Total sources of funds................. $8,692.5 176.3 2.71 $8,449.0 176.7 2.80
======== ------ ======== ------
Net interest income.................... $289.3 $295.3
====== ======
Net interest margin (3)................ 4.45% 4.67%
==== ====
<FN>
(1) Includes investment securities available-for-sale at amortized cost and investment securities held-to-maturity.
(2) 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.
(3) 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>
Provision for Credit Losses
The provision for credit losses for the third quarter of 1994
totaled $6.0 million compared to $13.1 million for the third quarter
of 1993, a decrease of $7.1 million (54.2%). The provision for credit
losses for the nine months ended September 30, 1994 totaled $21.0 million,
a decrease of $16.3 million (43.7%) over the $37.3 million provision
recorded for the nine months ended September 30, 1993. These decreases
in the provision were the result of improved credit loss trends and
declining levels of nonperforming assets.
<PAGE>
PAGE 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Noninterest Income
<TABLE>
The following table presents the components of noninterest income
for the three months and nine months ended September 30, 1994 and 1993.
Table 4 Noninterest Income
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------- ----------------------------------
Percent Percent
Change Change
1994 1993 1994/1993 1994 1993 1994/1993
------- ------- ----------- ------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts.... $17,907 $18,628 (3.9%) $54,692 $54,217 0.9%
Trust fees............................. 4,923 4,756 3.5 14,602 15,134 (3.5)
Servicing income from securitized
assets, net.......................... 4,816 6,833 (29.5) 14,105 21,433 (34.2)
Bankcard charges and fees.............. 4,234 4,985 (15.1) 12,952 14,509 (10.7)
Securities gains, net.................. 2,696 (44) - 15,444 19,804 (22.0)
Mortgage banking income................ 2,513 6,085 (58.7) 13,587 17,377 (21.8)
Other income:
Customer service fees................ 2,383 2,547 (6.4) 7,342 6,843 7.3
Investment banking income............ 1,672 2,087 (19.9) 5,458 6,657 (18.0)
Other................................ 14,539 7,154 103.2 28,770 20,238 42.2
------- ------- ----- ------- ------- -----
Total other income..................... 18,594 11,788 57.7 41,570 33,738 23.2
------- ------- ----- ------- ------- -----
Total noninterest income........ $55,683 $53,031 5.0 $166,952 $176,212 (5.3)
======= ======= ======= ======= ======= =======
</TABLE>
The Corporation's noninterest income for the third quarter of 1994
increased $2.7 million (5.0%) when compared to the third quarter of 1993.
Service charges on deposits decreased $721,000 (3.9%) due to lower service
charges on business checking accounts. Servicing income from securitized
assets decreased $2.0 million (29.5%) as a result of a decision to
outsource the servicing of securitized manufactured housing receivables
beginning in the fourth quarter of 1993 and a reduction in excess servicing
income resulting from a change in credit loss experience. Bankcard charges
and fees decreased $751,000 (15.1%) primarily due to increased competition
and lower customer card usage. Securities gains of $2.7 million were
recorded in the third quarter of 1994 compared to $44,000 in securities
losses in the third quarter of 1993. Securities sales are discussed in
detail under "Changes in Financial Position." Mortgage banking income
decreased $3.6 million (58.7%) primarily due to lower gains on the sale of
servicing and lower origination fees resulting from lower origination
volumes. Other income increased $7.4 million (103.2%) due to the
following: a $6.9 million gain on the sale of six branches at a banking
subsidiary of the Corporation, $2.4 million in gains on the payoff of
loans which were valued at a discount when a banking subsidiary was
acquired, and a $900,000 gain on the exercise of put warrants received as
collateral for a lending arrangement. These gains were partially offset
by a $1.7 million decrease in leasing residual gains and an $838,000
decrease in gains on the disposal of other real estate when the third
quarter of 1994 is compared to the third quarter of 1993.
The Corporation's noninterest income for the nine months ended
September 30, 1994 decreased $9.3 million (5.3%) when compared to the nine
months ended September 30, 1993. Servicing income from securitized assets
decreased $7.3 million (34.2%) due to a decision to outsource the
servicing of securitized manufactured housing receivables beginning in the
fourth quarter of 1993 and a reduction in excess servicing income resulting
from a change in credit loss experience. Bankcard charges and fees
decreased $1.6 million (10.7%) primarily as a result of increased
competition and lower customer card usage. Securities gains of $15.4
million were recorded in the nine months ended September 30, 1994 compared
to $19.8 million in securities gains in the nine months ended September 30,
1993. Mortgage banking income decreased $3.8 million (21.8%) primarily
due to lower gains on the sale of servicing and lower origination fees
resulting from lower origination volumes. Investment banking income
decreased $1.2 million (18.0%) as a result of lower fixed income sales and
mutual fund sales during 1994. Other income increased $8.5 million (42.2%)
as a result of the following: a $6.9 million gain on the sale of six
branches, $2.9 million in gains on the payoff of loans which were valued
at a discount when a banking subsidiary was acquired, and a $900,000 gain
on the exercise of put warrants. These gains were partially offset by a
$1.7 million decrease in leasing residual gains and a $624,000 decrease
in gains on the disposal of other real estate when the nine months ended
September 30, 1994 is compared to the nine months ended September 30, 1993.
<PAGE>
PAGE 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Noninterest Expenses
<TABLE>
The following table presents the components of noninterest expense
for the three months and nine months ended September 30, 1994 and 1993.
Table 5 Noninterest Expenses
<CAPTION>
Three months ended September 30, Nine months ended September 30,
--------------------------------- ---------------------------------
Percent Percent
Change Change
1994 1993 1994/1993 1994 1993 1994/1993
------- ------- ------------ ------- ------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Salaries and wages..................... $45,445 $42,009 8.2% $125,436 $121,675 3.1%
Other personnel costs.................. 10,441 9,952 4.9 39,192 31,724 23.5
Net occupancy costs.................... 7,980 7,960 0.3 24,053 23,320 3.1
Equipment costs........................ 7,646 7,426 3.0 22,579 22,496 0.4
Other operating expenses:
Professional fees.................... 4,230 2,655 59.3 12,643 8,304 52.3
Examinations and assessments......... 3,986 3,979 0.2 12,170 12,035 1.1
Postage and communications........... 3,507 3,491 0.5 10,163 10,102 0.6
Advertising and public relations..... 3,393 2,754 23.2 10,045 9,719 3.4
Lending and collection............... 2,777 2,846 (2.4) 9,114 9,299 (2.0)
Other real estate expense............ 160 1,595 (90.0) 235 5,928 (96.0)
Other................................ 11,112 9,451 17.6 34,931 36,634 (4.6)
------ ------ ----- ------ ------ -----
Total other operating expenses..... 29,165 26,771 8.9 89,301 92,021 (3.0)
------ ------ ----- ------ ------ -----
Total noninterest expenses..... $100,677 $94,118 7.0 $300,561 $291,236 3.2
======= ======= ======= ======= ======= =======
</TABLE>
The Corporation's noninterest expenses for the third quarter of 1994
increased $6.6 million (7.0%) when compared to the third quarter of 1993.
Salaries and wages increased $3.4 million (8.2%). Other personnel costs
increased $489,000 (4.9%) primarily due to an increase in employee
retirement expenses. Professional fees increased $1.6 million (59.3%)
primarily as a result of $1.4 million in consulting fees related to a
corporate reengineering project. Advertising and public relations expense
increased $639,000 (23.2%). Other real estate expense decreased $1.4
million (90.0%) due to a $1.1 million decrease in provisions for other
real estate. Other expenses increased $1.7 million (17.6%) due to a $2.0
million accrual for the discontinuation of operations at a subsidiary
which was recorded in the first six months of 1993. In the third quarter
of 1993, $1.4 million of this $2.0 million accrual was reversed.
The Corporation's noninterest expenses for the nine months ended
September 30, 1994 increased $9.3 million (3.2%) when compared to the
nine months ended September 30, 1993. Salaries and wages increased $3.7
million (3.1%). Other personnel costs increased $7.5 million (23.5%)
primarily as a result of an increase in employee retirement expenses of
$6.1 million and increased medical benefits expense of $907,000. Net
occupancy expenses increased $733,000 (3.1%) primarily due to an increase
in property rental expense. Professional fees increased $4.3 million
(52.3%) as a result of consulting fees associated with a corporate
reengineering project and a trust system conversion project of $3.9
million and $1.9 million, respectively, in 1994. These fees were
partially offset by $1.9 million in fees paid in 1993 for systems
conversions and other projects. Other real estate expense decreased $5.7
million (96.0%) due to a $4.4 million decrease in provisions for other
real estate and a $1.3 million decrease in other real estate expenses.
Other expenses decreased $1.7 million (4.6%) primarily as a result of
accruals recorded in 1993 of $1.0 million for a defalcation and account
reconciliation problem and $600,000 for the cost of discontinuing
operations at a subsidiary of the Corporation. In addition, bankcard
premium amortization expense was $1.0 million higher in 1993 due to
acceleration of the premium amortization on purchased credit card
portfolios due to higher than expected runoff of the portfolios. These
increases in other expenses in 1993 were partially offset by a $1.2
million increase in office supplies and forms expense in 1994 primarily
due to expense related to systems conversions.
<PAGE>
PAGE 15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Off-Balance Sheet Derivative Financial Instruments
Trading
The Corporation maintains active trading positions in a variety of
financial derivatives including foreign exchange and interest rate futures,
interest rate swaps, interest rate caps and floors, forward rate
agreements, and interest rate and foreign exchange options. Many of these
positions are a result of activity generated by corporate customers. The
balance of the positions represent strategic trading decisions of the
Corporation's derivative and foreign exchange traders. The managers and
traders involved in financial derivatives have the technical expertise to
trade these products. The active involvement of the Corporation's traders
in these markets allows the Corporation to offer competitive pricing to
customers and the expertise necessary to advise the Corporation's asset/
liability managers on the proper timing and execution of hedging strategies
for the Corporation's balance sheet.
All trading activity is conducted within the Corporation's Board of
Directors approved risk limits. Trading systems are in place which
measure risks and profitability associated with derivative trading
positions as market movements occur. An independent risk control unit
monitors these risks. The results are reported daily and reviewed by the
Corporation's Asset/Liability Committee and the Executive Committee of the
Board of Directors on a monthly basis.
<PAGE>
PAGE 16
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The following table discloses the end-of-period fair values and the
year-to-date and quarterly average fair values during the year of the
derivative financial instruments held or issued for trading purposes.
Table 6 Fair Value of Off-Balance Sheet Derivative Financial Instruments
Held for Trading Purposes
September 30, 1994
<CAPTION>
Fair Values
---------------------------------------
Average
--------------------------
Notional Nine Months Three Months
Amounts End-of-Period Ended Ended
------------- ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C>
Interest Rate Contracts
Interest Rate Swaps $548,694
In a receivable position $6,099 $2,027 $5,945
In a payable position (3,703) (1,200) (3,516)
Interest Rate Caps/Floors 143,495
Interest rate caps/floors held 1,249 266 783
Interest rate caps/floors written (1,262) (277) (814)
Futures 45,300
In a favorable position 254 - -
In an unfavorable position (39) - -
Foreign Exchange Contracts
Options 849,984
Options held 4,177 827 2,446
Options written (3,218) (608) (1,802)
Forwards 670,610
In a favorable position 2,188 447 1,282
In an unfavorable position (114) (18) (52)
Futures 7,990
In a favorable position 1 - -
In an unfavorable position (8) - -
</TABLE>
Wholesale Trading
<TABLE>
The Corporation is party to a variety of interest rate swap, cap and
floor, future, and option contracts in its wholesale trading activities.
In addition, the Corporation trades debt securities. Interest rate
contracts and debt securities used in trading activities are carried at
fair value. Realized and unrealized gains or losses on interest rate
contracts are included in other noninterest income as wholesale trading
income. As of September 30, 1994, net wholesale trading income recognized
in earnings totaled $831,000 as detailed below:
<CAPTION>
(in thousands)
<S> <C>
Interest rate swaps $1,782
Futures 181
Interest rate caps & floors 32
Swaptions 13
Options 11
Securities (1,188)
-------
$831
=======
</TABLE>
Foreign Exchange Trading
<TABLE>
The Corporation is party to a variety of foreign exchange spot,
forward, future, and option contracts in its trading activities. Trading
positions in foreign exchange contracts are carried at fair value.
Realized and unrealized gains and losses on foreign exchange contracts
are included in other noninterest income as foreign exchange trading
income. As of September 30, 1994, net foreign exchange trading income
recognized in earnings totaled $764,000 as detailed below:
<CAPTION>
(in thousands)
<S> <C>
Spot and forward contracts $4,474
Futures 879
Options (4,600)
Miscellaneous 11
-------
$764
=======
</TABLE>
<PAGE>
PAGE 17
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Off-Balance Sheet Derivative Financial Instruments
Asset/Liability Management
Derivative financial instruments are an integral part of the
Corporation's asset/liability management process. Derivatives allow the
Corporation to modify the repricing or maturity characteristics of assets
and liabilities in a cost-efficient manner. This flexibility helps the
Corporation to achieve liquidity, capital, and interest rate risk
objectives.
Derivatives fluctuate in value as interest rates rise or fall just
as on-balance sheet assets and liabilities fluctuate in value. If the
derivatives are purchased or sold as hedges of specific balance sheet
items, the appreciation or depreciation of the derivatives, as interest
rates change, will generally be offset by the unrealized appreciation
or depreciation of the hedged items. Derivatives are used to hedge
assets and liabilities as well as to provide basis risk protection.
Asset Hedges
Asset hedges are used to convert fixed rate assets to floating rate
assets or vice versa. When the Corporation uses swaps to match/fund
fixed rate term loans to customers, the Corporation is converting the
fixed rate loans to floating rate loans that better match the floating
rate deposits received from core customers.
Asset hedges are also used to extend the period over which the
Corporation's floating rate loans reprice. When the Corporation sells
interest rate swaps, the Corporation receives a fixed rate for a specified
term and pays a floating rate. This allows the Corporation to extend the
period over which the floating rate assets (e.g. prime rate loans) reprice
thus locking in a fixed rate. This strategy is used to reduce the asset
sensitivity of the balance sheet or to better match maturities of assets
and liabilities. The appropriateness of buying or selling asset hedges
is a function of the current or desired interest rate sensitivity of the
Corporation and is limited by interest rate risk policies approved by the
Board of Directors.
Liability Hedges
Liability hedges are used to convert floating rate liabilities to
fixed rate liabilities or vice versa. Interest rate swaps purchased as
liability hedges are used to extend the period over which the Corporation's
short-term deposits reprice thus locking in fixed rates. This offers
protection against liabilities repricing faster than assets during
periods of rising interest rates. Interest rate swaps sold as liability
hedges are used to adjust fixed rate long-term deposits to floating rate
deposits. The Corporation receives a fixed rate on this type of swap
that offsets the fixed rate paid on the term deposits thus converting the
deposits to a floating rate. By issuing long-term deposits, the
Corporation increases its overall liquidity. Customer demand for long
term deposits is primarily fixed rate. Interest rate swaps allow the
Corporation to swap fixed rate liabilities for floating rate liabilities
when appropriate for interest rate sensitivity purposes.
Basis Hedges
Basis risk hedges protect the interest rate spread between assets
and liabilities that are repriced based on different indexes. Prime
rate loans are often funded by liabilities that reset off of a CD index,
treasury index, or LIBOR. Basis hedges lock-in the spread between
different indices during the life of the hedges. These hedges transfer
the basis risk to third parties willing to assume the risk and allow the
Corporation to lock-in interest rate spreads between certain assets and
liabilities.
<PAGE>
PAGE 18
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The following table presents the off-balance sheet derivative financial
instruments entered into for asset/liability management purposes by the
Corporation.
Table 7 Off-Balance Sheet Derivative Financial Instruments
Held for Asset/Liability Management Purposes
September 30, 1994
<CAPTION>
Weighted
Average Weighted Average Rate
Notional Maturity ---------------------------
Amount in Years Receive Pay Fair Value
------------ ------------ ----------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Asset Hedges
------------
Interest rate swaps sold
------------------------
Convert floating rate to fixed rate $375,000 2.64 6.07% 5.11% ($8,510)
--------
Unrealized gross gains -
Unrealized gross losses (8,510)
Interest rate swaps purchased
-----------------------------
Convert fixed rate to floating rate 50,950 4.72 4.95 6.77 1,675
--------
Carrying amount (278)
Unrealized gross gains 1,953
Unrealized gross losses -
Interest rate swaps purchased forward
-------------------------------------
Convert fixed rate to floating rate 12,657 5.01 - 5.98 749
--------
Unrealized gross gains 749
Unrealized gross losses -
Liability Hedges
----------------
Interest rate swaps sold
------------------------
Convert fixed rate to floating rate 114,000 2.57 7.68 4.95 607
--------
Unrealized gross gains 1,748
Unrealized gross losses (1,141)
Interest rate swaps purchased
-----------------------------
Convert floating rate to fixed rate 475,000 0.68 4.86 5.31 1,917
--------
Unrealized gross gains 1,932
Unrealized gross losses (15)
Interest rate caps purchased
----------------------------
Cap floating rate at strike level 288,700 2.83 Cap - 13.50% (1) -
--------
Carrying amount 84
Unrealized gross gains -
Unrealized gross losses (84)
Call options purchased 12,354 2.74 - - -
--------------------- --------
Carrying amount 842
Unrealized gross gains -
Unrealized gross losses (842)
</TABLE>
<PAGE>
PAGE 19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 7 Off-Balance Sheet Derivative Financial Instruments
Held for Asset/Liability Management Purposes
September 30, 1994
(Continued)
<CAPTION>
Weighted
Average Weighted Average Rate
Notional Maturity ---------------------------
Amount in Years Receive Pay Fair Value
------------ ------------ ----------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Basis Hedges
------------
Interest rate swap
------------------
Convert floating rate to different
index $30,000 4.44 5.18% 4.80% ($1,986)
--------
Unrealized gross gains -
Unrealized gross losses (1,986)
<FN>
(1) Pays interest if interest rates exceed 13.50%.
</TABLE>
Accounting Treatment of Off-Balance Sheet Derivative Financial Instruments
Held for Asset/Liability Management Purposes
Interest rate swaps entered into for asset/liability management
purposes are accounted for on the accrual basis with recognition of net
interest income or expense on the swaps as an adjustment to the interest
income or expense of the hedged asset or liability.
The fair values of the interest rate swaps entered into for asset/
liability management purposes are derived from the present value of the
difference of the remaining cash flows between the original interest rate
swap fix rate and the current market interest rate swap fix rate.
Unrealized gains and losses on interest rate swaps, interest rate caps and
floors, and options are accounted for based upon the accounting applicable
to the hedged asset or liability. If the hedged asset or liability is
accounted for at amortized cost, the unrealized gains or losses of interest
rate swaps are not recognized and the unrealized gains or losses of caps
and floors and options are recorded as a deferred asset or liability and
amortized. If the hedged asset or liability is accounted for at fair
value with changes reported as a component of stockholders' equity, the
unrealized gains or losses of the derivative financial instruments are
recognized as a component of stockholders' equity. If the hedged asset
or liability is accounted for at fair value with changes reported in
current period earnings, the unrealized gains or losses are recognized
in current period earnings.
Early termination of an interest rate swap or liquidation of an
interest rate cap or floor or option is accounted for as follows. If
the hedged asset or liability continues to exist, the recognition of the
realized gain or loss is deferred and amortized on a straight-line basis
as an adjustment to the income or expense of the hedged asset or liability.
If the hedged asset or liability no longer exists, the realized gain or
loss is recognized in current earnings as a component of the earnings
or loss of the hedged asset or liability.
<PAGE>
PAGE 20
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The following table summarizes the estimated maturities of the off-
balance sheet derivative financial instruments entered into for asset/
liability management purposes by the Corporation.
Table 8 Off-Balance Sheet Derivative Financial Instruments
Held for Asset/Liability Management Purposes
Estimated Maturities
September 30, 1994
<CAPTION>
1 Year 1-5 5-10
or Less Years Years Total
------------ ------------ ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Asset Hedges
------------
Notional amount $10,500 $390,000 $38,107 $438,607
Weighted average receive rate 5.15% 6.02% 3.30% 5.76%
Estimated fair value (208) (7,336) 1,458 (6,086)
Liability Hedges
----------------
Notional amount $490,000 $400,054 $ - $890,054
Weighted average receive rate 5.19% 1.59% - % 3.58%
Estimated fair value 2,425 99 - 2,524
Basis Hedges
------------
Notional amount $ - $30,000 $ - $30,000
Weighted average receive rate - % 5.18% - % 5.18%
Estimated fair value - (1,986) - (1,986)
</TABLE>
<TABLE>
The following table summarizes the activity of the off-balance sheet
derivative financial instruments entered into for asset/liability
management purposes by the Corporation by notional amounts.
Table 9 Off-Balance Sheet Derivative Financial Instruments
Held for Asset/Liability Management Purposes
Activity
<CAPTION>
Asset Liability Basis
Hedges Hedges Hedges Total
------ --------- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of year........... $10,500 $493,000 $ - $503,500
Additions.............................. 428,107 627,354 30,000 1,085,461
Maturities/amortizations............... - (230,300) - (230,300)
-------- -------- -------- ----------
Balance at September 30................ $438,607 $890,054 $30,000 $1,358,661
======== ======== ======== ==========
</TABLE>
<TABLE>
As of September 30, 1994, the off-balance sheet derivative financial
instruments entered into for asset/liability management purposes by the
Corporation had the following impact on income:
<S> <C>
Total interest income $492,420
Total interest expense (1,736,924)
-----------
Net interest income $2,229,344
===========
</TABLE>
<PAGE>
PAGE 21
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Changes in Financial Position
Investment Securities
Available-for-Sale Portfolio
Investment securities available-for-sale decreased $250.5 million
from December 31, 1993 to September 30, 1994. In the first quarter of
1994, $1.1 billion in mortgage-backed obligations of Federal agencies
("MBS's") were sold, resulting in gains of $15.1 million and $166.3
million in U.S. Treasury and agency securities were sold, resulting in
losses of $3.9 million. In the second quarter of 1994, $23.5 million in
U.S. Treasury and agency securities and $2.4 million in equity securities
were sold, resulting in gains of $91,000 and $1.4 million, respectively.
In the third quarter of 1994, $656,000 in equity securities were sold
resulting in gains of $2.5 million. Paydowns, maturities and/or calls on
the available-for-sale securities totaled $120.8 million for the first
nine months of 1994. These decreases in the portfolio were partially
offset by significant purchases which included $912.6 million in MBS's,
$242.2 million in U.S. Treasury and agency securities, and $24.0 million
in equity securities. The book value of the available-for-sale portfolio
at September 30, 1994 was $26.8 million below the amortized cost compared
to a book value at December 31, 1993 which was $43.6 million above the
amortized cost. This change in the book value resulted in a $42.8 million
adjustment (net of income tax benefits) to the unrealized gains (losses)
on available-for-sale securities which is included as a component of
stockholders' equity. Table 10 provides information on the gross
unrealized gains and losses of the available-for-sale portfolio.
Investment securities available-for-sale increased $6.9 million from
September 30, 1993 to September 30, 1994. At September 30, 1993, the
Corporation reclassified $1.0 billion in securities at amortized cost
from the held-to-maturity portfolio in anticipation of the adoption of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" on December 31, 1993.
In addition, $216.3 million in securities were transferred to available-
for-sale in the fourth quarter of 1993 and a $43.6 million revaluation
adjustment was recorded to adjust the available-for-sale portfolio to
market. These transactions were partially offset by the $250.5 million
decrease discussed above.
Held-to-Maturity Portfolio
Investment securities held-to-maturity decreased $329.4 million from
December 31, 1993 to September 30, 1994. This decrease is the result of
$316.7 million in paydowns and maturities partially offset by the purchase
of $19.8 million in U.S. Treasury and agency securities in 1994. In the
third quarter of 1994, $20.4 million in U.S. Treasury and agency securities
were sold resulting in gains of $28,000. These sales occurred as a result
of the dissolution of a nonbanking subsidiary of the Corporation. The
market value of the held-to-maturity portfolio is $46.6 million below the
book value. Table 11 provides information on the gross unrealized gains
and losses of the held-to-maturity portfolio.
Investment securities held-to-maturity decreased $452.7 million from
September 30, 1993 to September 30, 1994 primarily as a result of $216.3
million in securities which were transferred to available-for-sale in the
fourth quarter of 1993 and the $329.4 million decrease discussed above.
<PAGE>
PAGE 22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The amortized cost and book values of the available-for-sale securities at
September 30, 1994 are shown in the following table.
Table 10 Available-for-Sale Portfolio
<CAPTION>
September 30, 1994
-------------------------------------------------
Gross Gross
Amortized unrealized unrealized
Cost gains losses Book
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $51,769 $ - ($2,267) $49,502
Mortgage-backed obligations of
Federal agencies.................................. 787,425 355 (39,150) 748,630
Collateralized mortgage obligations:
Issued by Federal agencies........................ 15,294 35 (1) 15,328
Privately issued.................................. 3,787 25 - 3,812
Obligations of states and political
subdivisions...................................... 191,440 10,849 (1,782) 200,507
Other debt securities................................ 9,707 - - 9,707
Equity securities.................................... 23,762 5,114 (4) 28,872
--------- --------- --------- ---------
Total.......................................... $1,083,184 $16,378 ($43,204) $1,056,358
========== ========== ========== ==========
</TABLE>
<TABLE>
The book and market values of the held-to-maturity securities at September
30, 1994 are shown in the following table.
Table 11 Held-to-Maturity Portfolio
<CAPTION>
September 30, 1994
-------------------------------------------------
Gross Gross
unrealized unrealized
Book gains losses Market
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $814,222 $984 ($25,179) $790,027
Mortgage-backed obligations of
Federal agencies.................................. 166,825 84 (7,029) 159,880
Collateralized mortgage obligations:
Issued by Federal agencies........................ 342,075 36 (11,701) 330,410
Privately issued.................................. 55,801 - (3,747) 52,054
Other debt securities................................ 1,284 - - 1,284
--------- --------- --------- ---------
Total.......................................... $1,380,207 $1,104 ($47,656) $1,333,655
========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 23
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Loan Portfolio
Total loans, net of unearned income increased $272.8 million from
December 31, 1993 to September 30, 1994. This moderate increase of 5.2%
is reflective of accelerating trends in consumer lending as well as a
recovery in the business sector. While the Corporation continues to
believe there are areas of growth in residential mortgages and retail
loans, competition remains strong in all areas.
The economy on the national level in the first nine months of 1994
continued to rebound with the Federal Reserve's positioning of interest
rates remaining an ongoing concern. The increase in short-term interest
rates experienced in the first nine months of 1994 had the most impact
on the Corporation's retail lending products. During this period, the
consumer opted for the Corporation's fixed rate products versus the
variable rate products. The perception that rates could increase more
and the consumer's desire to lock in rate and terms has resulted in strong
performance for the Corporation's second mortgage product. This product,
along with a moderate growth in other consumer related lending, resulted
in an increase in the Corporation's retail loans of 7.0% for the nine
months ended September 30, 1994. The growth experienced in the
Corporation's residential mortgage portfolio of 15.1% is attributed to a
continuation of strong marketing efforts. In addition, the Corporation's
mortgage banking subsidiary purchased a mortgage company in the third
quarter of 1994 resulting in $400,000 of goodwill.
The Corporation's commercial loans experienced a recovery in the
third quarter of 1994, expanding $166.9 million during this period and
$142.5 million or 8.8% for the nine months ended September 30, 1994.
Most of this growth was a result of seasonal borrowing of large corporate
customers, increased credit line usage, and advances in the specialized
industry groups. Growth in the middle market and small business market
sector was modest. While demand in this sector is showing some modest
improvement, it continues to produce only modest increases in outstanding
loan balances. The dominant influence in the commercial market continues
to be interest rates and the concern of where the Federal Reserve is likely
to go in its desire to restrict inflation. In addition, the level of
competition continues to be fierce.
The Corporation's commercial real estate loans, comprising 22.3% of
total loans, decreased 1.9% during the first nine months of 1994. Most
of the decrease is attributable to declines in the construction mortgage
portfolio which decreased 5.2%. This decline continues to reflect the
conversion from the construction phase to the permanent phase. Commercial
mortgages also declined during the first nine months of 1994, reflecting
the slow recovery of the real estate market as well as the Corporation's
selective response to the recovery. The commercial real estate portfolio
continues to be well-balanced by property type and geographically centered
in the Corporation's regional marketplace as reflected in Tables 13 and 14.
The Corporation monitors exposure based on industry classifications
and establishes exposure limits that are reviewed by the Board of
Directors. Significant exposures by industry classification in the loan
portfolio are presented in the following table.
<TABLE>
Table 12 Significant Exposures by Industry Classification
<CAPTION>
September 30, 1994
--------------------------------------
Outstanding Unfunded Total
Balance Commitments Exposure
----------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
Communications Industries:
Cable............................................. $115,438 $41,307 $156,745
Wireless.......................................... 60,364 17,065 77,429
Publishing & Newspapers........................... 63,775 12,141 75,916
Broadcast......................................... 18,788 7,399 26,187
-------- -------- --------
$258,365 $77,912 $336,277
-------- -------- --------
Healthcare (1)....................................... $307,822 $67,525 $375,347
Transportation (2)................................... $324,505 $22,380 $346,885
<FN>
----------------
(1) Includes exposure to hospitals and nursing care facilities, both commercial loans and
real estate loans.
(2) Includes loans and leases for vessel, commercial aircraft and railroad equipment financing.
</TABLE>
<PAGE>
PAGE 24
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 13 Loans Secured by Real Estate and Other Real Estate Owned by Property Type
<CAPTION>
September 30, 1994
-------------------------------------------------
Total loans
------------------------ Other
Real estate Real estate Nonperforming real estate
Construction Mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Office buildings..................................... $104,503 $262,433 $4,103 $ -
Industrial warehouse and other commercial
properties......................................... 34,436 184,090 3,490 -
Retail............................................... 53,762 114,443 9,662 -
Hospitals/nursing home medical centers............... - 78,076 - -
Hotels/motels........................................ - 68,800 70 5,000
Commercial land...................................... 46,084 - 957 5,774
Churches, restaurants and other special purpose
properties........................................ 5,715 62,318 303 -
Apartments........................................... 1,590 63,348 10,175 -
Mixed use............................................ 32 44,701 118 -
Residential land..................................... 10,994 - 1,861 1,793
Other land-farm recreational facilities.............. - 10,342 1,191 -
Residential properties held for resale............... 8,616 770 210 -
Miscellaneous........................................ 3,626 59,514 523 320
--------- --------- --------- ---------
Total.......................................... $269,358 $948,835 $32,663 $12,887
========== ========== ========== ==========
</TABLE>
<TABLE>
Table 14 Loans Secured by Real Estate and Other Real Estate Owned by Geographic Region
<CAPTION>
September 30, 1994
-------------------------------------------------
Total loans
----------------------- Other
Real estate Real estate Nonperforming real estate
Construction Mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Maryland............................................. $196,057 $625,960 $10,890 $8,701
Pennsylvania......................................... 8,961 175,688 11,067 2,467
Virginia............................................. 31,877 39,122 837 1,219
Washington, D.C...................................... 22,664 28,942 274 -
Florida.............................................. 9,755 19,725 9,588 500
New Jersey........................................... - 9,930 - -
Delaware............................................. - 9,084 7 -
All other............................................ 44 40,384 - -
--------- --------- --------- ---------
Total.......................................... $269,358 $948,835 $32,663 $12,887
========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 25
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Asset Quality
Economic Environment
Domestic economic activity remained strong during the third quarter
of 1994 as evidenced by an appreciable decline in unemployment and higher
capacity utilization rates. Realization of more robust economic growth
potential was held in check by further increases in interest rates by the
Federal Reserve. The forecast for 1995 reflects slowing domestic demand
offset by rising exports to Europe and Asia with inflationary expectation
dampened by improved productivity, moderate wage increases, and a vigilant
Federal Reserve.
Maryland's economy continued to show signs of improvement, although
at a slower pace than the national economy. With the exception of
construction, manufacturing, and federal civilian government, all remaining
sectors of the economy are experiencing growth. Overall, generally
improving economic and market conditions have contributed to a reduction
in the financial difficulties faced by some of the Corporation's borrowers.
The Corporation anticipates moderate near term improvement in general
economic conditions, and expects that these trends, and their effect on
asset quality, will continue to be positive.
Nonperforming Assets
Nonperforming assets totaled $87.0 million at September 30, 1994,
a decrease of $48.4 million when compared to nonperforming assets of
$135.4 million at December 31, 1993. The most significant changes in
nonperforming assets in the nine months ended September 30, 1994 were
paydowns of $34.5 million, loans reclassified to accrual status of
$18.2 million, other real estate owned sales of $8.4 million, and
charge-offs of $4.1 million. These decreases were partially offset by
$16.8 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 $13.7 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.
Table 15 presents nonperforming assets and accruing loans which
are 90 days past due as to principal or interest on the dates indicated.
Nonperforming assets at September 30, 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.
<PAGE>
PAGE 26
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 15 Nonperforming Assets
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
---------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans
Domestic:
Commercial ........................................ $29,229 $47,521 $64,447
Real estate, construction.......................... 3,061 5,787 14,877
Real estate mortgage, commercial................... 29,602 44,853 49,322
Real estate mortgage, residential.................. 5,420 5,381 5,351
Leases receivable.................................. 524 863 891
Foreign.............................................. 3,800 3,800 3,800
-------- -------- --------
Total nonaccrual loans......................... 71,636 108,205 138,688
-------- -------- --------
Restructured loans................................... 164 4,692 180
Other assets owned:
Other real estate.................................. 19,237 26,427 39,907
Valuation reserves................................. (4,185) (4,412) (8,171)
Other assets....................................... 127 510 410
-------- -------- --------
Total other assets owned....................... 15,179 22,525 32,146
-------- -------- --------
Total nonperforming assets......................... $86,979 $135,422 $171,014
======== ======== ========
Nonperforming assets as a percentage of total
loans, net of unearned income plus other
foreclosed assets owned........................... 1.59% 2.59% 3.26%
==== ==== ====
Accruing loans contractually past due
90 days or more as to principal or interest:
Domestic.......................................... $13,449 $17,172 $20,422
======== ======== ========
</TABLE>
<PAGE>
PAGE 27
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The following table details certain information relating to the allowance
for credit losses of the Corporation for the nine months ended September 30, 1994
and September 30, 1993, respectively.
Table 16 Analysis of the Allowance for Credit Losses
<CAPTION>
Nine Months ended September 30,
-------------------------------
1994 1993
---------- ----------
(dollars in thousands)
<S> <C> <C>
Allowance at beginning of year....................... $200,006 $201,451
Provision for credit losses.......................... 20,996 37,336
Losses charged off:
Commercial loans................................. (1,748) (6,414)
Real estate loans, construction.................. (1,333) (1,048)
Real estate loans, mortgage:
Residential.................................... (265) (550)
Commercial..................................... (2,533) (6,957)
Retail........................................... (3,929) (4,749)
Bankcard receivables............................. (20,097) (19,308)
Leases receivable................................ (238) (259)
Foreign loans.................................... - (2,561)
-------- --------
Total losses charged off....................... (30,143) (41,846)
Recoveries of losses previously charged off:
Commercial loans................................. 3,188 935
Real estate loans, construction.................. 16 29
Real estate loans, mortgage:
Residential.................................... 24 8
Commercial..................................... 418 76
Retail........................................... 2,249 1,948
Bankcard receivables............................. 3,890 3,531
Leases receivable................................ 351 256
Foreign loans.................................... 0 4,924
-------- --------
Total recoveries............................... 10,136 11,707
Net losses charged off............................... (20,007) (30,139)
Allowance of loans acquired or (sold)................ - (810)
-------- --------
Total allowance at September 30...................... $200,995 $207,838
======== ========
Average loans, net of average unearned income........ $5,257,384 $5,081,376
========== ==========
Period end loans, net of unearned income............. $5,470,511 $5,217,550
========== ==========
Net charge-offs to average loans, net of average
unearned income (annualized)...................... 0.51% 0.79%
Allowance as a percentage of period end loans, net
of unearned income................................ 3.67 3.98
Allowance as a percentage of nonperforming loans..... 279.94 149.67
</TABLE>
<PAGE>
PAGE 28
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Deposits
Total deposits decreased $184.9 million from December 31, 1993 to
September 30, 1994. Core deposits totaled $6.1 billion at September 30,
1994 compared to $6.4 billion at December 31, 1993, reflecting a decrease
of $289.0 million. This decrease is primarily the result of a $140.3
million decrease in commercial noninterest bearing demand deposits
partially due to an increase in the earnings credit rate on commercial
deposits which lowers the compensating balance requirement of the
Corporation's commercial customers. In the third quarter of 1994, $194.1
million in deposits were sold as a result of the sale of six branches of
a banking subsidiary of the Corporation. In addition, five branches
were purchased from the Resolution Trust Corporation resulting in an
increase in deposits of $103.5 million and $8.1 million in premium paid
on deposits which will be amortized over a 10 year period. Purchased
deposits, which include large denomination time and foreign time deposits,
increased $104.1 million from December 31, 1993 to September 30, 1994
primarily due to a $127.1 million increase in large denomination time
deposits.
Total deposits decreased $86.7 million from September 30, 1993 to
September 30, 1994. Core deposits decreased $206.9 million primarily due
to a $166.5 million decrease in commercial noninterest bearing demand
deposits. Purchased deposits increased $120.2 million as a result of a
$123.9 million increase in large denomination time deposits.
<PAGE>
PAGE 29
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 September 30, 1994, December 31, 1993 and September 30,
1993, based upon the capital requirements of the Federal Reserve Board.
Table 17 Capital Components
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
---------- ------------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Preferred stockholders' equity.................................... $144,852 $144,803 $ -
Common stockholder's equity....................................... 861,792 831,991 779,257
Disallowed intangibles............................................ (41,902) (35,657) (36,373)
Unrealized losses (gains) on investment securities available-
for-sale (1)................................................... 16,216 (26,613) -
-------- -------- --------
Tier 1 capital.................................................... 980,958 914,524 742,884
-------- -------- --------
Qualifying long-term debt......................................... 109,665 115,629 115,618
Allowance for credit losses (2)................................... 90,808 90,153 88,081
Mandatory convertible securities.................................. 59,958 59,951 59,949
-------- -------- --------
Tier 2 capital.................................................... 260,431 265,733 263,648
-------- -------- --------
Total capital..................................................... $1,241,389 $1,180,257 $1,006,532
========== ========== ========
Risk-adjusted assets.............................................. $7,154,431 $7,102,379 $6,927,870
========== ========== ==========
Average quarterly assets (regulatory guidelines).................. $9,168,913 $9,557,793 $9,401,463
========== ========== ==========
Risk-based capital ratios:
Tier 1 to risk adjusted assets.................................. 13.71% 12.88% 10.72%
Regulatory minimum.............................................. 4.00 4.00 4.00
Total capital to risk-adjusted assets........................... 17.35 16.62 14.53
Regulatory minimum.............................................. 8.00 8.00 8.00
Leverage ratio.................................................... 10.75 9.60 7.93
<FN>
(1) Not included as Tier 1 capital under current regulatory capital guidelines.
(2) The amount of the allowance for credit losses which is includable as Tier 2 capital is limited
to 1.25% of the risk-adjusted assets less disallowed intangibles.
</TABLE>
Tier 1 and total capital increased $66.4 million and $61.1 million,
respectively, when September 30, 1994 is compared to December 31, 1993
primarily due to $82.7 million in net income partially offset by $8.9
million in dividends declared on preferred stock in the first nine months
of 1994. Tier 1 and total capital increased $238.1 million and $234.9
million, respectively, when September 30, 1994 is compared to September
30, 1993 as a result of $110.4 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 30
<TABLE>
Table 18
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Three Months ended September 30, 1994
-------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $581.3 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 0.6 - -
Trading account securities......................... 42.8 0.5 4.75
Funds sold......................................... 373.1 4.3 4.52
Investment securities available-for-sale:
Taxable securities................................. 885.3 11.1 4.97
Tax-exempt securities(1)........................... 195.0 5.9 11.98
Equity investments................................. 24.1 0.3 5.66
--------- ---------
Total securities available-for-sale (2)......... 1,104.4 17.3 6.22
Investment securities:
Taxable securities................................. 1,425.2 21.2 5.91
Equity investments................................. - - -
--------- ---------
Total securities................................ 1,425.2 21.2 5.91
Loans held-for-sale.................................. 88.9 1.8 7.81
Loans, net of unearned income (1,3):
Commercial......................................... 1,642.9 31.5 7.61
Real estate, construction.......................... 255.2 5.0 7.77
Real estate mortgage, commercial................... 970.9 19.9 8.15
Real estate mortgage, residential.................. 566.2 9.5 6.63
Retail............................................. 913.4 18.7 8.14
Bankcard........................................... 473.8 18.3 15.30
Leases receivable.................................. 236.2 3.4 5.72
Foreign............................................ 268.1 4.5 6.62
--------- ---------
Total loans, net of unearned income........... 5,326.7 110.8 8.25
Allowance for credit losses....................... (198.9) - -
---------
Loans, net...................................... 5,127.8 - -
Other assets (4)..................................... 409.0 - -
--------- ---------
Total assets/interest income.................... $9,153.1 $155.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,721.5 $ - - %
---------
Interest bearing demand............................ 540.3 3.1 2.31
Money market accounts.............................. 1,282.2 9.8 3.02
Savings........................................... 1,130.5 7.7 2.71
Other consumer time................................ 1,384.5 14.6 4.18
Large denomination time............................ 365.9 4.2 4.58
Deposits in foreign banking offices.................. 106.0 1.6 6.07
--------- ---------
Total interest bearing deposits................. 4,809.4 41.0 3.39
--------- ---------
Total deposits.................................. 6,530.9 - -
Funds purchased...................................... 623.1 5.4 3.44
Other borrowed funds, short-term..................... 651.8 8.1 4.92
Other liabilities.................................... 139.5 - -
Long-term debt (5)................................... 197.8 4.5 8.93
Stockholders' equity................................. 1,010.0 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $9,153.1 $59.0
======== ========
Earning assets/interest income....................... $8,361.7 $155.9 7.40%
Interest bearing liabilities/interest expense........ 6,282.1 59.0 3.73
Earning assets/interest expense...................... 8,361.7 59.0 2.80
Net interest spread (6).............................. 3.67%
=====
Net interest margin (7).............................. 4.60%
=====
<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) Yields on investment securities available-for-sale are calculated based upon average amortized cost.
(3) Nonaccrual loans are included under the appropriate loan categories as earning assets.
(4) Includes overdrafts excluded from average loan balances for yield purposes.
(5) Includes current portion of long-term debt.
(6) 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.
(7) 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 31
<TABLE>
Table 19
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Nine Months ended September 30, 1994
------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $598.9 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 18.5 0.5 3.68
Trading account securities......................... 46.8 1.7 4.77
Funds sold......................................... 589.4 16.9 3.82
Investment securities available-for-sale:
Taxable securities................................. 920.9 36.1 5.24
Tax-exempt securities(1)........................... 200.6 18.0 11.99
Equity investments................................. 18.2 0.9 6.85
--------- ---------
Total securities available-for-sale (2)......... 1,139.7 55.0 6.46
Investment securities:
Taxable securities................................. 1,524.8 67.2 5.89
Equity investments................................. 2.6 - -
--------- ---------
Total securities................................ 1,527.4 67.2 5.88
Loans held-for-sale.................................. 113.3 6.2 7.30
Loans, net of unearned income (1,3):
Commercial......................................... 1,630.2 89.1 7.31
Real estate, construction.......................... 260.9 14.1 7.24
Real estate mortgage, commercial................... 972.2 57.4 7.90
Real estate mortgage, residential.................. 544.5 27.3 6.70
Retail............................................. 891.7 53.2 7.98
Bankcard........................................... 483.6 55.8 15.43
Leases receivable.................................. 220.6 9.5 5.80
Foreign............................................ 253.7 11.7 6.14
--------- ---------
Total loans, net of unearned income........... 5,257.4 318.1 8.09
Allowance for credit losses....................... (198.9) - -
---------
Loans, net...................................... 5,058.5 - -
Other assets (4)..................................... 409.1 - -
--------- ---------
Total assets/interest income.................... $9,501.6 $465.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,744.4 $ - - %
---------
Interest bearing demand............................ 555.5 9.6 2.32
Money market accounts.............................. 1,332.4 29.0 2.91
Savings........................................... 1,159.1 23.6 2.73
Other consumer time................................ 1,404.0 43.2 4.11
Large denomination time............................ 337.0 12.7 5.04
Deposits in foreign banking offices.................. 123.8 4.9 5.24
--------- ---------
Total interest bearing deposits................. 4,911.8 123.0 3.35
--------- ---------
Total deposits.................................. 6,656.2 - -
Funds purchased...................................... 727.3 18.1 3.32
Other borrowed funds, short-term..................... 771.6 22.1 3.83
Other liabilities.................................... 161.9 - -
Long-term debt (5)................................... 192.3 13.1 9.11
Stockholders' equity................................. 992.3 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $9,501.6 $176.3
======== ========
Earning assets/interest income....................... $8,692.5 $465.6 7.16%
Interest bearing liabilities/interest expense........ 6,603.0 176.3 3.57
Earning assets/interest expense...................... 8,692.5 176.3 2.71
Net interest spread (6).............................. 3.59%
=====
Net interest margin (7).............................. 4.45%
=====
<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) Yields on investment securities available-for-sale are calculated based upon average amortized cost.
(3) Nonaccrual loans are included under the appropriate loan categories as earning assets.
(4) Includes overdrafts excluded from average loan balances for yield purposes.
(5) Includes current portion of long-term debt.
(6) 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.
(7) 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 32
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 September 30, 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
November 10, 1994 BY /s/ Robert W. Schaefer
----------------------------
Robert W. Schaefer
Executive Vice President and
Chief Financial Officer
November 10, 1994 BY /s/ James A. Smith
----------------------------
James A. Smith
Senior Vice President and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST MARYLAND BANCORP SEPTEMBER 30, 1994 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 599,087
<INT-BEARING-DEPOSITS> 132
<FED-FUNDS-SOLD> 354,865
<TRADING-ASSETS> 55,546
<INVESTMENTS-HELD-FOR-SALE> 1,056,358
<INVESTMENTS-CARRYING> 1,380,207
<INVESTMENTS-MARKET> 1,333,655
<LOANS> 5,470,511
<ALLOWANCE> 200,995
<TOTAL-ASSETS> 9,219,844
<DEPOSITS> 6,589,240
<SHORT-TERM> 1,246,212
<LIABILITIES-OTHER> 139,504
<LONG-TERM> 214,618
<COMMON> 84,926
0
30,000
<OTHER-SE> 891,718
<TOTAL-LIABILITIES-AND-EQUITY> 9,219,844
<INTEREST-LOAN> 316,362
<INTEREST-INVEST> 116,356
<INTEREST-OTHER> 25,146
<INTEREST-TOTAL> 457,864
<INTEREST-DEPOSIT> 123,030
<INTEREST-EXPENSE> 176,285
<INTEREST-INCOME-NET> 281,579
<LOAN-LOSSES> 20,996
<SECURITIES-GAINS> 15,444
<EXPENSE-OTHER> 300,561
<INCOME-PRETAX> 126,974
<INCOME-PRE-EXTRAORDINARY> 82,653
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,653
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.45
<LOANS-NON> 71,636
<LOANS-PAST> 13,449
<LOANS-TROUBLED> 164
<LOANS-PROBLEM> 27,700
<ALLOWANCE-OPEN> 200,006
<CHARGE-OFFS> 30,143
<RECOVERIES> 10,136
<ALLOWANCE-CLOSE> 200,995
<ALLOWANCE-DOMESTIC> 113,376
<ALLOWANCE-FOREIGN> 9,641
<ALLOWANCE-UNALLOCATED> 77,978
</TABLE>
