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, 1995
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, 1995
<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.............. 7-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 15-30
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 31
</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,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................................ $129,522 $110,199 $377,917 $316,362
Interest and dividends on investment securities held-to-maturity:
Taxable....................................................... 22,357 21,220 63,928 67,224
Interest on investment securities available-for-sale:
Taxable....................................................... 16,838 11,200 42,210 36,429
Tax-exempt.................................................... 3,634 3,990 10,965 12,116
Dividends..................................................... 315 332 950 893
Interest on loans held-for-sale................................... 2,197 1,751 4,939 6,120
Interest on money market investments.............................. 3,077 4,647 20,086 18,720
-------- -------- -------- --------
Total interest and dividend income.......................... 177,940 153,339 520,995 457,864
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits.............................................. 53,887 41,056 152,282 123,030
Interest on Federal funds purchased and
other short-term borrowings..................................... 21,287 13,492 61,499 40,149
Interest on long-term debt........................................ 4,692 4,452 14,060 13,106
-------- -------- -------- --------
Total interest expense...................................... 79,866 59,000 227,841 176,285
-------- -------- -------- --------
NET INTEREST INCOME............................................... 98,074 94,339 293,154 281,579
Provision for credit losses (note 4).............................. 2,373 5,998 10,334 20,996
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............. 95,701 88,341 282,820 260,583
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts............................... 18,150 17,907 53,601 54,692
Servicing income from securitized assets, net..................... 6,397 4,816 15,174 14,105
Trust fees........................................................ 5,983 4,923 16,238 14,602
Bankcard charges and fees......................................... 4,517 4,234 13,312 12,952
Mortgage banking income........................................... 4,422 2,818 11,384 14,317
Securities gains, net............................................. 342 2,696 2,187 15,444
Other income...................................................... 9,672 18,289 31,872 40,840
-------- -------- -------- --------
Total noninterest income.................................... 49,483 55,683 143,768 166,952
-------- -------- -------- --------
NONINTEREST EXPENSES
Salaries and wages................................................ 43,778 45,445 128,206 125,436
Other personnel costs............................................. 10,692 10,387 31,294 39,025
Net occupancy costs............................................... 8,803 7,916 24,470 23,858
Equipment costs................................................... 7,426 7,167 22,547 21,290
Other operating expenses.......................................... 26,890 29,762 83,834 90,952
-------- -------- -------- --------
Total noninterest expenses.................................. 97,589 100,677 290,351 300,561
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES........................................ 47,595 43,347 136,237 126,974
Income tax expense................................................ 16,563 14,820 47,538 44,321
-------- -------- -------- --------
NET INCOME........................................................ $31,032 $28,527 $88,699 $82,653
======== ======== ======== ========
<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,
1995 1994 1994
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks .......................................... $588,876 $554,878 $599,087
Money market investments (note 2)................................. 55,572 346,194 396,433
Investment securities available-for-sale (note 3)................. 1,672,532 1,051,314 1,070,468
Investment securities held-to-maturity (note 3)................... 1,321,634 1,338,267 1,380,207
Loans held-for-sale (at cost which approximates fair value)....... 128,502 75,366 84,144
Loans, net of unearned income of $111,575, $84,809
and $79,190:
Commercial.................................................... 1,845,352 1,633,275 1,768,615
Real estate,construction...................................... 291,405 268,683 269,358
Real estate,mortgage:
Residential................................................ 647,842 593,642 572,461
Commercial................................................. 985,581 978,164 948,835
Retail........................................................ 1,062,651 984,403 947,170
Bankcard...................................................... 550,496 496,608 479,376
Leases receivable............................................. 314,924 259,633 242,339
Foreign....................................................... 327,546 244,483 242,357
--------- --------- ---------
Total loans, net of unearned income...................... 6,025,797 5,458,891 5,470,511
Allowance for credit losses (note 4).......................... (181,974) (191,024) (200,995)
--------- --------- ---------
Loans, net .............................................. 5,843,823 5,267,867 5,269,516
--------- --------- ---------
Premises and equipment............................................ 104,283 102,157 102,132
Due from customers on acceptances................................. 10,806 26,059 23,626
Other assets...................................................... 332,598 343,500 294,231
--------- --------- ---------
Total assets........................................ $10,058,626 $9,105,602 $9,219,844
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits:
Noninterest bearing deposits ................................. $1,748,714 $1,766,648 $1,759,364
Interest bearing deposits..................................... 4,822,555 4,786,592 4,741,078
Interest bearing deposits in foreign banking office............... 121,468 80,306 88,798
--------- --------- ---------
Total deposits........................................... 6,692,737 6,633,546 6,589,240
Federal funds purchased and securities sold under
repurchase agreements........................................... 766,033 519,772 666,494
Other borrowed funds, short-term (note 8)......................... 955,083 541,507 579,718
Bank acceptances outstanding...................................... 10,806 26,059 23,626
Accrued taxes and other liabilities............................... 306,030 146,062 139,504
Long-term debt (note 9)........................................... 189,673 214,632 214,618
--------- --------- ---------
Total liabilities................................... 8,920,362 8,081,578 8,213,200
--------- --------- ---------
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 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.............................................. 198,176 198,176 198,176
Retained earnings............................................ 817,525 737,891 709,758
Unrealized gains (losses) on investment securities available
-for-sale (net of income (tax) benefits of $(5,003),
$16,024 and $10,610)....................................... 7,637 (26,969) (16,216)
--------- --------- ---------
Total stockholders' equity.......................... 1,138,264 1,024,024 1,006,644
--------- --------- ---------
Total liabilities and stockholders' equity.......... $10,058,626 $9,105,602 $9,219,844
========== ========== ==========
<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, 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)
Change in net cost not yet recognized
as periodic pension expense.......... (1,158) (1,158)
Adjustment of the unrealized gains on
investment securities available-
-for-sale, net of 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
========== ========== ========== ========== ========== ==========
Nine months ended September 30, 1995
------------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,176 $737,891 ($26,969) $1,024,024
Net income............................. 88,699 88,699
Dividends declared on preferred
stock.................................. (8,865) (8,865)
Change in net cost not yet recognized
as periodic pension expense............ (200) (200)
Adjustment of the unrealized losses
on investment securities available-
for-sale, net of income tax.......... 34,606 34,606
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1995.......... $30,000 $84,926 $198,176 $817,525 $7,637 $1,138,264
========== ========== ========== ========== ========== ==========
<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,
--------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $88,699 $82,653
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................................................. 10,334 20,996
Provision for other real estate losses.................................................. 237 44
Depreciation and amortization........................................................... 24,009 23,039
Deferred income tax expense............................................................. 16,206 5,527
Net gain on the sale of assets.......................................................... (3,210) (24,232)
Net (increase) decrease in loans originated for sale.................................... (53,136) 172,583
Decrease (increase) in trading account securities....................................... 17,193 (2,209)
(Increase) decrease in accrued interest receivable...................................... (527) 962
Increase (decrease) in accrued interest payable......................................... 15,231 (3,489)
Other, net.............................................................................. 135,338 (12,374)
--------- ---------
Net cash provided by operating activities............................................ 250,374 263,500
--------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale........................... 570,805 1,271,469
Proceeds from sales of investment securities held-to-maturity............................. - 20,383
Proceeds from paydowns and maturities of investment securities available-for-sale......... 189,423 120,761
Proceeds from paydowns and maturities of investment securities held-to-maturity........... 10,062,118 316,695
Purchases of investment securities available-for-sale..................................... (1,315,241) (1,189,739)
Purchases of investment securities held-to-maturity.......................................(10,047,450) (19,963)
Net decrease (increase) in short-term investments......................................... 158,175 (212,035)
Proceeds from sale of loans............................................................... - 45,782
Purchase of loans......................................................................... (19) (255)
Net disbursements from lending activities of bank subsidiaries............................ (591,076) (329,611)
Principal collected on loans of nonbank subsidiaries...................................... 24,908 18,183
Loans originated by nonbank subsidiaries.................................................. (23,001) (11,383)
Principal payments received under leases.................................................. 3,623 3,401
Purchases of assets to be leased.......................................................... (5,979) (1,338)
Proceeds from other real estate transactions.............................................. 10,057 11,023
Proceeds from sales of premises and equipment............................................. 770 2,937
Purchases of premises and equipment....................................................... (19,887) (18,349)
Proceeds from sale of deposits............................................................ - (194,107)
Purchase of deposits...................................................................... 6,694 96,600
Purchase of mortgage company.............................................................. - (905)
Other, net................................................................................ (25,489) (7,907)
--------- ---------
Net cash used for investing activities............................................... (1,001,569) (78,358)
--------- ---------
FINANCING ACTIVITIES
Net increase (decrease) in deposits ...................................................... 52,360 (87,152)
Net increase (decrease) in short-term borrowings.......................................... 659,837 (147,423)
Issuance of medium-term bank notes........................................................ - 25,000
Repayment of medium-term bank notes....................................................... (25,000) -
Cash dividends paid....................................................................... (8,865) (7,485)
--------- ---------
Net cash provided by (used for) financing activities................................. 678,332 (217,060)
--------- ---------
Decrease in cash and cash equivalents ...................................................... (72,863) (31,918)
Cash and cash equivalents at beginning of year.............................................. 692,123 631,137
--------- ---------
Cash and cash equivalents at September 30,.................................................. $619,260 $599,219
========= =========
SUPPLEMENTAL DISCLOSURES
Interest payments......................................................................... $212,610 $178,648
Income tax payments....................................................................... 42,943 37,398
NONCASH INVESTING AND FINANCING ACTIVITIES
Loan charge-offs.......................................................................... 26,283 30,143
Transfers to other real estate............................................................ 5,254 2,171
<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 1994 consolidated financial statements have been
reclassified to conform with the 1995 presentation.
2. Money Market Investments
<TABLE>
Money market investments at September 30, 1995, December 31, 1994
and September 30, 1994 included the following:
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Interest bearing deposits in other banks............. $30,384 $137,245 $132
Trading account securities........................... 2,419 28,005 41,436
Federal funds sold................................... 4,850 154,800 238,325
Securities purchased under agreements
to resell.......................................... 17,919 26,144 116,540
-------- -------- --------
Total money market investments................. $55,572 $346,194 $396,433
======== ======== ==========
</TABLE>
3. Investment Securities
<TABLE>
The following is a comparison of the amortized cost and fair values of the
available-for-sale securities:
<CAPTION>
September 30, 1995 December 31, 1994 September 30, 1994
--------------------- --------------------- ----------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
----------- ---------- ----------- ---------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $357,142 $358,290 $52,084 $48,716 $51,769 $49,502
Mortgage-backed obligations of
Federal agencies.................................. 1,038,229 1,037,001 773,388 723,752 787,425 748,630
Collateralized mortgage obligations:
Issued by Federal agencies........................ 12,223 12,256 14,345 14,507 15,294 15,328
Privately issued.................................. 16,643 16,694 1,344 1,364 3,787 3,812
Obligations of states and political
subdivisions...................................... 134,691 141,410 190,144 195,791 191,440 200,507
Other investment securities.......................... 100,964 106,881 63,002 67,184 47,579 52,689
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $1,659,892 $1,672,532 $1,094,307 $1,051,314 $1,097,294 $1,070,468
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 8
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
3. Investment Securities (cont'd)
<TABLE>
The following is a comparison of the amortized cost and fair values
of the held-to-maturity securities:
<CAPTION>
September 30, 1995 December 31, 1994 September 30, 1994
------------------------ --------------------- ---------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $640,871 $636,056 $793,517 $756,456 $814,222 $790,027
Mortgage-backed obligations of
Federal agencies.................................. 144,794 143,408 160,319 150,353 166,825 159,880
Collateralized mortgage obligations:
Issued by Federal agencies........................ 482,277 481,559 328,427 312,663 342,075 330,410
Privately issued.................................. 52,692 50,734 54,999 50,008 55,801 52,054
Other investment securities.......................... 1,000 1,000 1,005 1,005 1,284 1,284
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $1,321,634 $1,312,757 $1,338,267 $1,270,485 $1,380,207 $1,333,655
========== ========== ========== ========== ========== ==========
</TABLE>
4. Impaired Loans and Allowance for Credit Losses
The Corporation adopted the provisions of Statements of Financial
Accounting Standards (SFAS) No. 114 and 118, "Accounting by Creditors
for Impairment of a Loan" on January 1, 1995. SFAS 114 and 118 apply
to loans for which it is probable that the creditor will not collect
all principal and interest payments according to the loan's contractual
terms. The impairment of a loan is measured at the present value of
expected future cash flows using the loan's effective interest rate,
or as a practical expedient, at the loan's observable market price or
the fair value of the collateral if the loan is collateral dependent.
Interest income on impaired loans is recognized on a cash basis.
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 September 30, 1995. Increases and decreases
in the allowance include changes in the measurement of impaired loans.
<TABLE>
The following is a summary of the activity in the allowance for
credit losses:
<CAPTION>
Nine months ended September 30,
--------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $191,024 $200,006
Provision for credit losses....................................... 10,334 20,996
Less: charge-offs, net of recoveries of $6,899 and $10,136........ (19,384) (20,007)
-------- --------
Balance at September 30........................................... $181,974 $200,995
======== ========
</TABLE>
<PAGE>
PAGE 9
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
4. Impaired Loans and Allowance for Credit Losses (cont'd)
<TABLE>
The following table presents impaired loans by type and any related
valuation allowance if the measure of the impaired loans is less than
the recorded investment at September 30, 1995:
<CAPTION>
Impaired Impaired
Total Loans with Loans with Related
Impaired No Valuation Valuation Valuation
Loans Allowance Allowance Allowance
-------- ------------ ------------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Commercial ........................................ $16,743 $14,964 $1,779 $724
Real estate, construction.......................... 1,254 529 725 250
Real estate mortgage, commercial................... 5,861 4,609 1,252 232
Foreign............................................ 5,903 5,903 - -
-------- -------- -------- --------
Total........................................ 29,761 26,005 3,756 1,206
======== ======== ======== ========
Year-to-date average recorded investment in impaired loans..................... 36,376
Year-to-date interest income recognized during impairment...................... 294
Year-to-date interest income recorded on a cash basis during impairment........ 294
</TABLE>
Impaired loans do not include large groups of smaller balance
homogeneous loans that are evaluated collectively for impairment (e.g.
credit card, residential mortgage and consumer installment loans), leases
and loans measured at fair value or lower of cost or fair value. Reserves
for probable future credit losses related to these loans are included in
the allowance for credit losses applicable to other than impaired loans.
5. Intangible Assets
<TABLE>
Intangible assets at September 30, 1995, December 31, 1994 and
September 30, 1994 included the following:
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Goodwill............................................. $29,350 $31,316 $31,966
Premium on bankcard receivables...................... 12,263 14,627 15,499
Premium on deposits.................................. 8,076 8,799 9,084
Other................................................ 710 842 853
------- ------- -------
Total intangible assets........................ $50,399 $55,584 $57,402
======= ======= =======
</TABLE>
6. Mortgage Servicing Rights
<TABLE>
Mortgage servicing rights at September 30, 1995, December 31, 1994
and September 30, 1994 included the following:
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Purchased mortgage servicing rights.................. $1,149 $1,269 $1,117
Originated mortgage servicing rights................. 3,214 - -
------- ------- -------
Total mortgage servicing rights................ $4,363 $1,269 $1,117
======= ======= =======
</TABLE>
The Corporation adopted FAS 122, "Accounting for Mortgage Servicing
Rights" in the second quarter of 1995 which requires an allocation of
a portion of the total cost of applicable mortgage loans to originated
mortgage servicing rights based upon their relative fair values on the
date of mortgage origination. Market quotes were used to determine the
fair value of the mortgage servicing rights at origination. The
capitalized mortgage servicing rights will be amortized in proportion
to and over the estimated period of net servicing income. As related
loans pay off during the period of amortization, the related unamortized
mortgage servicing rights will be written off.
<PAGE>
PAGE 10
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
6. Mortgage Servicing Rights (cont'd)
The Corporation will analyze the capitalized mortgage servicing
rights for impairment on a quarterly basis using a discounted cash flow
analysis. Impairment losses are determined by stratifying the population
of mortgage servicing rights based upon the following risk characteristics
of the underlying loans: loan type and term. A valuation allowance
will be recorded if the unamortized mortgage servicing rights exceed
their fair value. At September 30, 1995, no valuation allowance had
been recorded.
7. 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,
-------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $4,185 $4,412
Provision for other real estate losses............................ 237 44
Writedowns........................................................ (4,077) (271)
------ ------
Balance at September 30........................................... $345 $4,185
====== ======
</TABLE>
8. Other Borrowed Funds, Short-term
<TABLE>
Other borrowed funds, short-term at September 30, 1995, December
31, 1994 and September 30, 1994 included the following:
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Master demand note of the Corporation................ $361,867 $402,539 $418,930
Bank notes........................................... 300,000 130,000 130,000
Treasury tax and loan purchased...................... 142,200 6,000 6,343
Federal funds purchased-term......................... 135,000 - 15,000
Other................................................ 16,016 2,968 9,445
-------- -------- --------
Total other borrowed funds, short-term......... $955,083 $541,507 $579,718
======== ======== ========
</TABLE>
9. Long-term Debt
<TABLE>
Following is a summary of the long-term debt of the Corporation
at September 30, 1995, December 31, 1994 and September 30, 1994 which
is all unsecured:
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
5.77% Medium term bank notes due September 1, 1995... $ - $25,000 $25,000
10.375% Subordinated Capital Notes due August 1,
1999............................................. 59,966 59,960 59,958
9.15% Notes due June 1, 1996......................... 10,000 10,000 10,000
8.68% Notes due January 31, 1997..................... 9,998 9,997 9,996
8.67% Notes due March 20, 1997....................... 9,998 9,997 9,996
8.375% Subordinated Notes due May 15, 2002........... 99,711 99,678 99,668
-------- -------- --------
Total long-term debt........................... $189,673 $214,632 $214,618
======== ======== ========
</TABLE>
<PAGE>
PAGE 11
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
10. Off-Balance Sheet Derivative Financial Instruments
Trading Instruments
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 risk limits approved
by the Corporation's Board of Directors. 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.
<TABLE>
The following table presents the notional amounts and fair values
of the classes of trading instruments at September 30, 1995 as well as
the average fair values for the three months and nine months ended
September 30, 1995.
<CAPTION>
Fair Values
---------------------------
Average
---------------------------
Notional Three months Nine months
Amounts End-of-period ended ended
------------- ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C>
Interest Rate Contracts
Interest Rate Swaps................. $529,635
In a receivable position.......... $6,225 $6,086 $5,958
In a payable position............. (2,224) (2,373) (2,869)
Interest Rate Caps/Floors........... 329,539
Interest rate caps/floors held.... 377 843 1,521
Interest rate caps/floors written. (377) (842) (1,529)
Futures............................. 84,500
In a favorable position........... 39 - -
In an unfavorable position........ (115) - -
Foreign Exchange Contracts
Options............................. 463,273
Options held...................... 6,553 3,458 1,377
Options written................... (5,253) (3,065) (1,171)
Forwards............................ 493,741
In a favorable position........... 1,525 631 1,062
In an unfavorable position........ (893) (873) (864)
</TABLE>
<PAGE>
PAGE 12
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
10. Off-Balance Sheet Derivative Financial Instruments (cont'd)
Net Trading Income
<TABLE>
The following table summarizes the Corporation's net trading income
by category of instrument. Net trading income is included in the income
statement as a component of other noninterest income.
<CAPTION>
Nine months ended
September 30, 1995
------------------
(in thousands)
<S> <C>
Interest rate contracts:
Interest rate swaps................ $1,678
Futures............................ (2,121)
Interest rate caps & floors........ 50
Options............................ 3
Securities......................... 133
-------
(257)
-------
Foreign exchange contracts:
Spot and forward contracts.............. 831
Futures................................. (101)
Options................................. (646)
Miscellaneous........................... 31
-------
115
-------
Total net trading income.......... ($142)
=======
</TABLE>
Risk Management Instruments
Derivative financial instruments are an integral part of the
Corporation's risk 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.
Derivatives are used to modify the characteristics of assets or liabilities
to which they are designated as well as to provide basis risk protection.
For example, the Corporation utilizes interest rate swaps 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.
Interest rate swaps also are used to convert floating rate liabilities
to fixed rate liabilities or vice versa. Interest rate swaps designated
to certain liabilities 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.
The Corporation also utilizes interest rate swaps to extend the
period over which 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
or liabilities. Basis swaps are sometimes utilized to 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 swaps lock in
the spread between different indexes during the life of the swaps. These
swaps 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 13
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
10. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
The following table presents the notional amounts and fair values
for the risk management instruments entered into by the Corporation at
September 30, 1995 as well as the weighted average maturity and weighted
average receive and pay rates for the instruments.
<CAPTION>
Weighted
Average Weighted Average Rate
Notional Maturity ---------------------------
Amount in Years Receive Pay Fair Value
------------ ------------ ----------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Designated to Assets
--------------------
Interest rate swaps sold
------------------------
Convert floating rate to fixed rate.... $175,000 0.69 6.11% 5.88% $320
--------
Carrying amount (1).................. 8,581
Unrealized gross gains............... 320
Unrealized gross losses.............. (8,581)
Interest rate swaps purchased
-----------------------------
Convert fixed rate to floating rate.... 46,778 4.74 5.87 6.28 (575)
--------
Unrealized gross gains............... 425
Unrealized gross losses.............. (1,000)
Designated to Liabilities
-------------------------
Interest rate swaps sold
------------------------
Convert fixed rate to floating rate.... 189,000 2.53 6.72 5.42 3,215
--------
Unrealized gross gains............... 3,348
Unrealized gross losses.............. (133)
Interest rate swaps purchased
-----------------------------
Convert floating rate to fixed rate.... 25,000 0.32 5.94 5.11 62
--------
Carrying amount (1).................. (279)
Unrealized gross gains............... 341
Unrealized gross losses.............. -
Interest rate caps purchased
----------------------------
Cap floating rate at strike level...... 217,900 2.98 Cap - 13.50% (2) -
--------
Carrying amount (1).................. 53
Unrealized gross gains............... -
Unrealized gross losses.............. (53)
Call options purchased................. 12,536 1.57 - - -
--------------------- --------
Carrying amount (1).................. 771
Unrealized gross gains............... -
Unrealized gross losses.............. (771)
Basis swap
----------
Convert floating rate to different
index.................................. 30,000 3.44 4.83% 5.68% (176)
--------
Unrealized gross gains............... -
Unrealized gross losses.............. (176)
<FN>
(1) Carrying amounts represent deferred losses on the early termination of interest rate
swaps sold, $8,581,000; deferred gain on the early termination of an interest rate
swap purchased, ($279,000); deferred premiums on interest rate caps purchased,
$53,000; and deferred premiums on call options purchased, $771,000.
(2) Pays interest if interest rates exceed 13.50%.
</TABLE>
<PAGE>
PAGE 14
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
10. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
The following table summarizes the estimated maturities of the risk
management instruments entered into by the Corporation at September 30,
1995.
<CAPTION>
1 Year 1-5 5-10
or Less Years Years Total
------------ ------------ ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Designated to Assets
--------------------
Notional amount..................... $175,000 $21,328 $25,450 $221,778
Weighted average receive rate....... 6.11% 5.94% 5.81% 6.06%
Estimated fair value................ 320 424 (999) (255)
Designated to Liabilities
-------------------------
Notional amount..................... $112,344 $332,092 $ - $444,436
Weighted average receive rate....... 6.20% 6.78% - % 6.63%
Estimated fair value................ 108 3,169 - 3,277
Basis Swap
-----------
Notional amount..................... $ - $30,000 $ - $30,000
Weighted average receive rate....... - % 4.83% - % 4.83%
Estimated fair value................ - (176) - (176)
</TABLE>
<TABLE>
The following table summarizes the activity of the risk management
instruments entered into by the Corporation, by notional amounts, for
the nine months ended September 30, 1995.
<CAPTION>
Designated to Designated to Basis
Assets Liabilities Swap Total
------------- ------------ -------- -----
(in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of year........... $228,107 $857,761 $30,000 $1,115,868
Additions.............................. - 190,275 - 190,275
Maturities/amortizations............... - (503,600) - (503,600)
Terminations........................... (6,329) (100,000) - (106,329)
-------- -------- -------- ----------
Balance at September 30................ $221,778 $444,436 $30,000 $696,214
======== ======== ======== ==========
</TABLE>
Deferred losses on the early termination of interest rate swaps with
notional balances of $200.0 million designated to the Corporation's prime
based commercial loans were $8.6 million as of September 30, 1995. These
losses are scheduled to be amortized into income in the following periods:
$858,000 for the remainder of 1995, $3.4 million in 1996, $3.4 million in
1997 and $858,000 in 1998.
The deferred gain on the early termination of an interest rate swap
with a notional balance of $100.0 million designated to the Corporation's
federal funds purchased was $279,000 as of September 30, 1995. This
gain is scheduled to be amortized into income in the following periods:
$25,000 for the remainder of 1995, $98,000 in 1996, $98,000 in 1997 and
$58,000 in 1998.
As of September 30, 1995, the off-balance sheet derivative financial
instruments entered into for risk management purposes by the Corporation
had the following impact on the components of net interest income: gross
interest income decreased $2.7 million and gross interest expense decreased
$3.0 million which resulted in a $296,000 increase in net interest income.
<PAGE>
PAGE 15
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, 1995 was $88.7 million
and $31.0 million, respectively compared to $82.7 million and $28.5
million for the first nine months and quarter ended September 30, 1994.
Return on average assets and return on average total equity were 1.23%
and 10.88%, respectively, for the nine months ended September 30, 1995
compared with 1.16% and 11.14% for the nine months ended September 30,
1994.
<TABLE>
Table 1 Selected Quarterly Financial Information
<CAPTION>
3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
1995 1995 1995 1994 1994
----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Net interest income (fully tax equivalent)........ $100,291 $99,651 $99,954 $99,461 $96,858
Tax equivalent adjustment......................... 2,217 2,192 2,333 2,393 2,519
-------- -------- -------- -------- --------
Net interest income............................... 98,074 97,459 97,621 97,068 94,339
Provision for credit losses....................... 2,373 3,961 4,000 2,000 5,998
-------- -------- -------- -------- --------
Net interest income after provision for credit
losses.......................................... 95,701 93,498 93,621 95,068 88,341
Noninterest income................................ 49,483 47,669 46,616 44,026 55,683
Noninterest expenses.............................. 97,589 96,320 96,442 95,640 100,677
-------- -------- -------- -------- --------
Income before income taxes........................ 47,595 44,847 43,795 43,454 43,347
Income tax expense................................ 16,563 15,716 15,259 14,967 14,820
-------- -------- -------- -------- --------
Net income........................................ $31,032 $29,131 $28,536 $28,487 $28,527
======== ======== ======== ======== ========
Dividends declared on preferred stock............. $2,955 $2,955 $2,955 $2,955 $2,955
CONSOLIDATED AVERAGE BALANCES:
Total assets...................................... 9,791,300 9,705,800 9,313,200 9,143,600 9,153,100
Loans, net of unearned income..................... 5,858,100 5,768,400 5,519,700 5,391,700 5,326,700
Deposits.......................................... 6,835,300 6,742,200 6,600,900 6,573,500 6,530,900
Long-term debt.................................... 206,500 214,700 214,600 214,600 197,800
Common stockholder's equity....................... 982,300 947,300 905,000 883,800 865,200
Stockholders' equity.............................. 1,127,100 1,092,100 1,049,800 1,028,600 1,010,000
CONSOLIDATED RATIOS:
Return on average assets.......................... 1.26% 1.20% 1.24% 1.24% 1.24%
Return on average total stockholders' equity...... 10.92 10.70 11.02 10.99 11.21
Return on average common stockholder's equity..... 11.34 11.08 11.46 11.46 11.73
Average stockholders' equity to average total
assets.......................................... 11.51 11.25 11.27 11.25 11.04
Capital to risk-adjusted assets:
Tier 1.......................................... 13.64 13.64 14.03 14.05 13.71
Total........................................... 16.94 17.00 17.53 17.68 17.35
Tier 1 leverage ratio............................. 11.21 11.00 11.15 11.05 10.75
Net interest margin............................... 4.45 4.50 4.74 4.70 4.60
Net charge-offs to average loans, net of average
unearned income (annualized).................... 0.40 0.55 0.41 0.70 0.45
Allowance for credit losses to period end loans,
net of unearned income.......................... 3.02 3.17 3.35 3.50 3.67
Nonperforming assets to period end loans, net of
unearned income plus other foreclosed assets
owned........................................... 0.84 0.88 1.10 1.35 1.59
</TABLE>
<PAGE>
PAGE 16
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, 1995 of $100.3 million increased $3.4 million
(3.5%) when compared to net interest income of $96.9 million for the
quarter ended September 30, 1994. This increase was primarily due to
higher interest rates in the current quarter. In addition, net interest
income benefited from a $574.4 million increase in earning assets, a
more favorable asset mix and a $154.3 million increase in interest free
sources of funds. The net interest margin for the quarter ended
September 30, 1995 was 4.45%, compared to 4.60% for the quarter ended
ended September 30, 1994.
Net interest income on a fully tax equivalent basis for the nine
months ended September 30, 1995 of $299.9 million increased $10.6 million
(3.7%) when compared to net interest income of $289.3 million for the
nine months ended September 30, 1994. This increase was primarily due
to an increase in interest rates in the current period. In addition,
the increase in net interest income resulted from a higher volume of
earning assets and a more favorable asset mix which resulted from a
shift from lower yielding investment securities and money market
investments to higher yielding loans. Interest free sources of funds
increased $97.3 million. The net interest margin for the nine months
ended September 30, 1995 was 4.56%, compared to 4.45% for the nine
months ended September 30, 1994.
An analysis of fully tax equivalent net interest income, interest rate
spreads and net interest margins for the three months and nine months ended
September 30, 1995 and 1994 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,
-----------------------------------------------------------------------
1995 1994
----------------------------------- -------------------------------
Average Yield/ Average Yield/
balance Interest rate balance Interest rate
-------- -------- -------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Investment securities (1).............. $2,757.8 $44.8 6.44% $2,529.6 $38.5 6.04%
Loans held-for-sale.................... 112.8 2.2 7.72 88.9 1.8 7.81
Loans, net of unearned income.......... 5,858.1 130.1 8.81 5,326.7 110.8 8.25
Other earning assets................... 207.4 3.1 5.89 416.5 4.8 4.54
------- ------ ------- ------
Earning assets......................... $8,936.1 180.2 8.00 $8,361.7 155.9 7.40
======== ------ ======== ------
Interest bearing liabilities........... 6,702.2 79.9 4.73 6,282.1 59.0 3.73
Interest rate spread (2)............... 3.27 3.67
Interest free sources utilized
to fund earning assets............... 2,233.9 2,079.6
------- ------ ------- ------
Total sources of funds................. $8,936.1 79.9 3.55 $8,361.7 59.0 2.80
======== ------ ======== ------
Net interest income.................... $100.3 $96.9
====== ======
Net interest margin (3)................ 4.45% 4.60%
==== ====
<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 yield on average earning assets (tax equivalent basis)
and the rate paid on 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 17
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,
-----------------------------------------------------------------------
1995 1994
----------------------------------- -------------------------------
Average Yield/ Average Yield/
balance Interest rate balance Interest rate
-------- -------- -------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Investment securities (1).............. $2,555.1 $123.1 6.44% $2,667.1 $122.2 6.13%
Loans held-for-sale.................... 79.7 4.9 8.29 113.3 6.2 7.30
Loans, net of unearned income.......... 5,716.6 379.6 8.88 5,257.4 318.1 8.09
Other earning assets................... 450.1 20.1 5.97 654.7 19.1 3.89
------- ------ ------- ------
Earning assets......................... $8,801.5 527.7 8.02 $8,692.5 465.6 7.16
======== ------ ======== ------
Interest bearing liabilities........... 6,614.7 227.8 4.61 6,603.0 176.3 3.57
Interest rate spread (2)............... 3.41 3.59
Interest free sources utilized
to fund earning assets............... 2,186.8 2,089.5
------- ------ ------- ------
Total sources of funds................. $8,801.5 227.8 3.46 $8,692.5 176.3 2.71
======== ------ ======== ------
Net interest income.................... $299.9 $289.3
====== ======
Net interest margin (3)................ 4.56% 4.45%
==== ====
<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 yield on average earning assets (tax equivalent basis)
and the rate paid on 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 1995
totaled $2.4 million compared to $6.0 million for the third quarter
of 1994, a decrease of $3.6 million (60.4%). The provision for credit
losses for the nine months ended September 30, 1995 totaled $10.3 million,
a decrease of $10.7 million (50.8%) over the $21.0 million provision
recorded for the first nine months of 1994. These decreases were
primarily due to improved credit loss trends.
<PAGE>
PAGE 18
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, 1995 and 1994.
Table 4 Noninterest Income
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------- ----------------------------------
Percent Percent
Change Change
1995 1994 1995/1994 1995 1994 1995/1994
------- ------- ----------- ------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts.... $18,150 $17,907 1.4% $53,601 $54,692 (2.0%)
Servicing income from securitized
assets, net.......................... 6,397 4,816 32.8 15,174 14,105 7.6
Trust fees............................. 5,983 4,923 21.5 16,238 14,602 11.2
Bankcard charges and fees.............. 4,517 4,234 6.7 13,312 12,952 2.8
Mortgage banking income................ 4,422 2,818 56.9 11,384 14,317 (20.5)
Securities gains, net.................. 342 2,696 (87.3) 2,187 15,444 (85.8)
Other income:
Security sales and fees.............. 2,187 1,672 30.8 6,039 5,458 10.6
Customer service fees................ 1,988 2,078 (4.3) 5,655 6,612 (14.5)
Other................................ 5,497 14,539 (62.2) 20,178 28,770 (29.9)
------- ------- ----- ------- ------- -----
Total other income..................... 9,672 18,289 (47.1) 31,872 40,840 (22.0)
------- ------- ----- ------- ------- -----
Total noninterest income........ $49,483 $55,683 (11.1) $143,768 $166,952 (13.9)
======= ======= ======= ======= ======= =======
</TABLE>
The Corporation's noninterest income for the third quarter of
1995 decreased $6.2 million (11.1%) when compared to the third quarter
of 1994. Servicing income on securitized assets increased $1.6 million
(32.8%) due to a decrease in the amount of servicing income reserved
for credit losses resulting from improved credit experience on the
securitized portfolios which was partially offset by lower yields on
the Corporation's securitized bankcard receivables portfolio. Trust
fees increased $1.1 million (21.5%). Mortgage banking income increased
$1.6 million (56.9%) as a result of a $2.3 million increase in
capitalized originated mortgage servicing rights income resulting from
the adoption of Statement of Financial Accounting Standards (SFAS) No.
122, "Accounting for Mortgage Servicing Rights" in the second quarter
of 1995. This increase is partially offset by a $1.3 million decrease
in gains on the sale of servicing. Securities gains of $342,000 were
recorded in the third quarter of 1995 compared to $2.7 million in gains
in the third quarter of 1994. Securities sales are discussed in detail
under "Changes in Financial Position." Total other income decreased
$8.6 million (47.1%) primarily due to the following gains which were
recorded in the third quarter of 1994: $6.9 million on the sale of
six branches, $2.4 million on the payoff of loans which were valued
at a discount when a banking subsidiary was acquired and $900,000 on
the exercise of put warrants received as collateral in a lending
arrangement. These declines were partially offset by $1.0 million in
income recognized in the third quarter of 1995 from the receipt of
loan funds in excess of book value and a leasing gain on the sale
of an airplane.
<PAGE>
PAGE 19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Noninterest Income (cont'd)
The Corporation's noninterest income for the first nine months of
1995 decreased $23.2 million (13.9%) when compared to the first nine
months of 1994. Service charges on deposits decreased $1.1 million
(2.0%) due to lower corporate service charges. Servicing income from
securitized assets increased $1.1 million (7.6%) due to a decrease in
the amount of servicing income reserved for credit losses resulting
from improved credit experience on the securitized portfolios which
was partially offset by lower yields on the Corporation's securitized
bankcard receivables portfolio. Trust fees increased $1.6 million
(11.2%) as a result of increases in mutual fund management fees and
custody fees. Mortgage banking income decreased $2.9 million (20.5%)
primarily due to a $6.0 million decline in gains on the sale of
servicing. This decline was partially offset by a $3.5 million increase
in capitalized originated mortgage servicing rights income resulting
from the adoption of SFAS No. 122, "Accounting for Mortgage Servicing
Rights" in the second quarter of 1995. Securities gains of $2.2 million
were recorded in the first nine months of 1995 compared to $15.4 million
in securities gains in the first nine months of 1994. Total other
income decreased $9.0 million (22.0%) primarily as a result of $10.7
million in gains recorded in 1994 which included $6.9 million on the
sale of six branches, $2.9 million on the payoff of loans which were
valued at a discount when a banking subsidiary was acquired and
$900,000 on the exercise of put warrants received as collateral in
a lending arrangement. In addition, trading income decreased $1.7
million and gains on the disposal of other real estate owned decreased
$821,000. These declines were partially offset by $3.5 million in
income recognized in 1995 which included $2.3 million on various loan
settlement transactions, $675,000 from an other real estate owned
property and a $494,000 leasing gain on the sale of an airplane.
<PAGE>
PAGE 20
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, 1995 and 1994.
Table 5 Noninterest Expenses
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------- ----------------------------------
Percent Percent
Change Change
1995 1994 1995/1994 1995 1994 1995/1994
------- ------- ----------- ------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Salaries and wages..................... $43,778 $45,445 (3.7%) $128,206 $125,436 2.2%
Other personnel costs.................. 10,692 10,387 2.9 31,294 39,025 (19.8)
Net occupancy costs.................... 8,803 7,916 11.2 24,470 23,858 2.6
Equipment costs........................ 7,426 7,167 3.6 22,547 21,290 5.9
Other operating expenses:
External processing fees............. 5,107 3,980 28.3 14,636 11,497 27.3
Regulatory fees and insurance........ 1,710 3,986 (57.1) 9,555 12,170 (21.5)
Advertising and public relations..... 2,978 3,638 (18.1) 11,642 10,791 7.9
Postage and communications........... 3,855 3,507 9.9 10,939 10,163 7.6
Professional fees.................... 1,590 4,144 (61.6) 4,974 12,366 (59.8)
Lending and collection............... 2,035 2,220 (8.3) 4,783 7,331 (34.8)
Other................................ 9,615 8,287 16.0 27,305 26,634 2.5
------ ------ ----- ------ ------ -----
Total other operating expenses..... 26,890 29,762 (9.6) 83,834 90,952 (7.8)
------ ------ ----- ------ ------ -----
Total noninterest expenses..... $97,589 $100,677 (3.1) $290,351 $300,561 (3.4)
======= ======= ======= ======= ======= =======
</TABLE>
The Corporation's noninterest expenses for the third quarter of
1995 decreased $3.1 million (3.1%) when compared to the third quarter
of 1994. Salaries and wages decreased $1.7 million (3.7%) primarily
due to a $5.0 million decline in severance expense partially offset
by a $3.2 million increase in employee incentives and commissions.
Other personnel costs increased $305,000 (2.9%) primarily due to a $1.8
million increase in healthcare expenses partially offset by a $1.2
million decline in pension expense. External processing fees increased
$1.1 million (28.3%). Regulatory fees and insurance decreased $2.3
million (57.1%) primarily as a result of a reduction in the Federal
Deposit Insurance Corporation ("FDIC") assessment rate. Professional
fees decreased $2.6 million (61.6%) primarily due to lower consulting
expenses in the third quarter of 1995.
The Corporation's noninterest expenses for the first nine months
of 1995 decreased $10.2 million (3.4%) when compared to the first nine
months of 1994. Salaries and wages increased $2.8 million (2.2%)
primarily due to a $7.2 million increase in employee incentives and
commissions and a $3.1 million increase in other salary and wages
expense partially offset by a $6.9 million decline in severance expense
and executive retirement expense. Other personnel costs decreased
$7.7 million (19.8%) primarily due to $4.4 million in pension settlements
stemming from executive retirements in 1994 and a $3.8 million decrease
in pension expense partially offset by a $1.6 million increase in
healthcare expenses. Equipment costs increased $1.3 million (5.9%)
primarily as a result of an increase in depreciation expense and
computer hardware and software maintenance. External processing fees
increased $3.1 million (27.3%). Regulatory fees and insurance
decreased $2.6 million (21.5%) primarily as a result of a reduction
in the FDIC assessment rate. Professional fees decreased $7.4 million
(59.8%) due to lower consulting expenses and legal fees in 1995.
Lending and collection expenses decreased $2.5 million (34.8%).
<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 increased $621.2 million
from December 31, 1994 to September 30, 1995. In the first quarter of
1995, $35.0 million in U. S. Treasury securities were sold, resulting
in a gain of $312,000. In the second quarter of 1995, $141.1 million
in U.S. Treasury securities were sold, resulting in gains of $213,000,
$355.9 million in mortgage-backed obligations of Federal agencies
("MBS's") were sold, resulting in losses of $697,000 and $554,000 in
equity securities were sold, resulting in gains of $2.0 million. In
the third quarter of 1995, $35.6 million in U.S. Treasury securities
were sold, resulting in gains of $207,000. Paydowns, maturities and/or
calls on the available-for-sale securities totaled $189.4 million in
the first nine months of 1995. These decreases in the portfolio were
partially offset by $1.3 billion in purchases which included the
following: $529.2 million in U.S. Treasury and U.S. Government agency
securities, $693.0 million in MBS's, $20.0 million in collateralized
mortgage obligations ("CMO's"), $5.2 million in obligations of state
and political subdivisions, $55.5 million in other debt securities
and $12.3 million in equity securities. The fair value of the
available-for-sale portfolio at September 30, 1995 was $12.6 million
above the amortized cost compared to a fair value at December 31, 1994
which was $43.0 million below the amortized cost. This change in the
fair value resulted in a $34.6 million adjustment (net of income tax)
to the unrealized gains (losses) on available-for-sale securities
which is included as a component of stockholders' equity. Table 6
provides information on the gross unrealized gains and losses of the
available-for-sale portfolio at September 30, 1995.
Held-to-Maturity Portfolio
Investment securities held-to-maturity decreased $16.6 million
from December 31, 1994 to September 30, 1995. There were $10.1 billion
in paydowns and/or maturities in the first nine months of 1995 which
were offset by $10.0 billion in purchases. These purchases included
$9.8 billion in U.S. Treasury and U.S. Government agency securities
and $200.6 million in CMO's. Purchases and maturities of investment
securities held-to-maturity increased substantially in the third quarter
of 1995. These increases resulted from a change in the Corporation's
investment strategy from investing in overnight repurchase agreements
to investing in short-term U.S. Government agency securities. The
fair value of the held-to-maturity portfolio at September 30, 1995
was $8.9 million below the amortized cost. Table 7 provides
information on the gross unrealized gains and losses of the held-to-
maturity portfolio at September 30, 1995.
<PAGE>
PAGE 22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The amortized cost and fair values of the available-for-sale securities
at September 30, 1995 are shown in the following table.
Table 6 Available-for-Sale Portfolio
<CAPTION>
September 30, 1995
-------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
Cost gains losses Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $357,142 $1,252 ($104) $358,290
Mortgage-backed obligations of
Federal agencies.................................. 1,038,229 4,148 (5,376) 1,037,001
Collateralized mortgage obligations:
Issued by Federal agencies........................ 12,223 35 (2) 12,256
Privately issued.................................. 16,643 51 - 16,694
Obligations of states and political
subdivisions...................................... 134,691 7,423 (704) 141,410
Other debt securities................................ 68,195 - - 68,195
Equity securities.................................... 32,769 5,934 (17) 38,686
--------- --------- --------- ---------
Total.......................................... $1,659,892 $18,843 ($6,203) $1,672,532
========== ========== ========== ==========
</TABLE>
<TABLE>
The amortized cost and fair values of the held-to-maturity securities
at September 30, 1995 are shown in the following table.
Table 7 Held-to-Maturity Portfolio
<CAPTION>
September 30, 1995
-------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
Cost gains losses Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies........... $640,871 $1,950 ($6,765) $636,056
Mortgage-backed obligations of
Federal agencies.................................. 144,794 791 (2,177) 143,408
Collateralized mortgage obligations:
Issued by Federal agencies........................ 482,277 4,366 (5,084) 481,559
Privately issued.................................. 52,692 - (1,958) 50,734
Other debt securities................................ 1,000 - - 1,000
--------- --------- --------- ---------
Total.......................................... $1,321,634 $7,107 ($15,984) $1,312,757
========== ========== ========== ==========
</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 to $6.0 billion at
September 30, 1995 from $5.5 billion at December 31, 1994. This $566.9
million (10.4%) increase is due to both commercial and retail loan growth.
Commercial loans grew $212.1 million (13.0%) from December 31, 1994
to September 30, 1995, thereby contributing 37% of the total loan growth
for the Corporation. The majority of the commercial loan growth was from
large corporate borrowers within the multi-national sector.
Commercial real estate loans, which include both construction and
commercial mortgages, increased $30.1 million (2.4%) from December 31,
1994 to September 30, 1995. Approximately 75% of the growth was from
fundings under existing construction loan commitments. Commercial
mortgages grew due to new fundings more than offsetting payouts.
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 9 and 10.
Residential mortgages have increased $54.2 million (9.1%) since
December 31, 1994. The Corporation originates residential mortgages
primarily for sale in the secondary market. New originations for the
Corporation's permanent portfolio are principally low income housing and
adjustable rate products. Growth in the residential mortgage portfolio
has slowed during 1995 as consumer interest in adjustable rate mortgage
products has diminished in the low interest rate environment.
Retail loans grew $78.2 million (7.9%) from December 31, 1994 to
September 30, 1995. The majority of retail loan growth during 1995
occurred in the third quarter due to a summer loan promotion of retail
lending products. Growth was experienced for both direct installment
and second mortgage products.
Bankcard outstandings grew $53.9 million (10.8%) from December 31,
1994 to September 30, 1995. Approximately 71% of the outstanding growth
occurred in the first half of 1995 due to a first quarter 1995 marketing
program.
Leases receivable increased $55.3 million (21.3%) since December 31,
1994. The increase in this portfolio was the result of several large
transportation equipment transactions in the first and second quarters
of 1995.
Foreign loans increased $83.1 million (34.0%) from December 31,
1994 to September 30, 1995. The majority of growth has been in loans
to customers within the shipping industry.
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 Table 8.
<PAGE>
PAGE 24
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 8 Significant Exposures by Industry Classification
<CAPTION>
September 30, 1995
----------------------------------------------------
Outstanding Unfunded Total Nonperforming
Balance Commitments Exposure Loans
----------- ----------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Communications Industries:
Cable............................................. $175,534 $34,086 $209,620 $2,419
Publishing & Newspapers........................... 63,618 14,700 78,318 -
Wireless.......................................... 50,944 23,329 74,273 -
Broadcast......................................... 18,415 10,559 28,974 -
-------- -------- -------- --------
$308,511 $82,674 $391,185 $2,419
-------- -------- -------- --------
Healthcare (1)....................................... $317,343 $82,936 $400,279 $176
Transportation (2)................................... $419,904 $21,369 $441,273 $5,088
<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>
<TABLE>
Table 9 Loans Secured by Real Estate and Other Real Estate Owned by Property Type
<CAPTION>
September 30, 1995
-------------------------------------------------
Total loans
------------------------ Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Office buildings..................................... $83,321 $252,552 $958 $274
Industrial warehouse and other commercial
properties......................................... 28,322 178,981 836 -
Retail............................................... 77,103 135,604 2,266 2,921
Hospitals/nursing home medical centers............... 6,605 79,766 - -
Hotels/motels........................................ - 57,252 - -
Commercial land...................................... 42,464 - 462 5,423
Churches, restaurants and other special purpose
properties........................................ 10,357 61,802 839 -
Apartments........................................... 16,971 55,471 145 128
Mixed use............................................ - 49,783 5 -
Residential land..................................... 8,216 - 787 1,343
Other land-farm recreational facilities.............. - 7,941 586 -
Residential properties held for resale............... 3,893 5 - -
Miscellaneous........................................ 14,153 106,424 231 -
--------- --------- --------- ---------
Total.......................................... $291,405 $985,581 $7,115 $10,089
========== ========== ========== ==========
</TABLE>
<TABLE>
Table 10 Loans Secured by Real Estate and Other Real Estate Owned by Geographic Region
<CAPTION>
September 30, 1995
-------------------------------------------------
Total loans
----------------------- Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Maryland............................................. $207,639 $650,886 $3,429 $6,160
Pennsylvania......................................... 23,653 177,983 3,679 1,059
Virginia............................................. 24,043 36,795 - 2,096
Washington, D.C...................................... 19,080 30,479 - 274
Florida.............................................. 9,722 18,934 - 500
New Jersey........................................... 3,234 19,524 - -
Delaware............................................. - 8,907 7 -
All other............................................ 4,034 42,073 - -
--------- --------- --------- ---------
Total.......................................... $291,405 $985,581 $7,115 $10,089
========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 25
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Asset Quality
Nonperforming Assets
Nonperforming assets totaled $50.5 million at September 30, 1995,
a decrease of $23.6 million when compared to nonperforming assets of
$74.1 million at December 31, 1994. The most significant changes in
nonperforming assets in the nine months ended September 30, 1995 were
paydowns of $28.7 million, loans reclassified to accrual status of
$10.7 million, other real estate owned sales of $8.8 million and
charge-offs of $1.5 million. These decreases were partially offset by
$26.1 million in additions to nonperforming assets primarily 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 a $4.5 million real estate loan which was
upgraded from troubled debt restructuring status and returned to
accrual and $6.2 million in commercial and real estate loans which
met the regulatory tests for return to accrual status. The most
significant charge-offs were on nonaccrual real estate loans.
The following table presents nonperforming assets and accruing
loans which are 90 days past due as to principal or interest on the
dates indicated.
<TABLE>
Table 11 Nonperforming Assets
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans
Domestic:
Commercial......................................... $16,743 $13,326 $29,229
Real estate, construction.......................... 1,254 2,709 3,061
Real estate mortgage, commercial................... 5,861 27,633 29,602
Real estate mortgage, residential.................. 5,364 5,250 5,420
Leases receivable.................................. - 85 524
Foreign.............................................. 9,703 5,300 3,800
-------- -------- --------
Total nonaccrual loans......................... 38,925 54,303 71,636
-------- -------- --------
Restructured loans................................... 437 4,974 164
Other assets owned:
Other real estate.................................. 11,153 18,920 19,237
Valuation reserves................................. (345) (4,185) (4,185)
Other assets....................................... 300 118 127
-------- -------- --------
Total other assets owned....................... 11,108 14,853 15,179
-------- -------- --------
Total nonperforming assets......................... $50,470 $74,130 $86,979
======== ======== ========
Nonperforming assets as a percentage of total
loans, net of unearned income plus other
foreclosed assets owned........................... 0.84% 1.35% 1.59%
==== ==== ====
Accruing loans contractually past due
90 days or more as to principal or interest:
Domestic.......................................... $12,932 $13,338 $13,449
======== ======== ========
</TABLE>
<PAGE>
PAGE 26
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
The following table details certain information relating to the
allowance for credit losses of the Corporation for the nine months
ended September 30, 1995 and September 30, 1994, respectively.
<TABLE>
Table 12 Analysis of the Allowance for Credit Losses
<CAPTION>
Nine months ended September 30,
-------------------------------
1995 1994
---------- ----------
(dollars in thousands)
<S> <C> <C>
Allowance at beginning of year....................... $191,024 $200,006
Provision for credit losses.......................... 10,334 20,996
Losses charged off:
Commercial loans................................. (284) (1,748)
Real estate loans, construction.................. (635) (1,333)
Real estate loans, mortgage:
Residential.................................... (110) (265)
Commercial..................................... (582) (2,533)
Retail........................................... (2,160) (3,929)
Bankcard receivables............................. (20,721) (20,097)
Leases receivable................................ (28) (238)
Foreign.......................................... (1,763) -
-------- --------
Total losses charged off....................... (26,283) (30,143)
Recoveries of losses previously charged off:
Commercial loans................................. 665 3,188
Real estate loans, construction.................. 103 16
Real estate loans, mortgage:
Residential.................................... 26 24
Commercial..................................... 337 418
Retail........................................... 1,754 2,249
Bankcard receivables............................. 3,844 3,890
Leases receivable................................ 170 351
-------- --------
Total recoveries............................... 6,899 10,136
Net losses charged off............................... (19,384) (20,007)
-------- --------
Total allowance at September 30...................... $181,974 $200,995
======== ========
Average loans, net of average unearned income........ $5,716,645 $5,257,384
========== ==========
Period end loans, net of unearned income............. $6,025,797 $5,470,511
========== ==========
Net charge-offs to average loans, net of average
unearned income (annualized)...................... 0.45% 0.51%
Allowance as a percentage of period end loans, net
of unearned income................................ 3.02 3.67
Allowance as a percentage of nonperforming loans..... 462.31 279.94
</TABLE>
<PAGE>
PAGE 27
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Deposits
Total deposits increased $59.2 million from December 31, 1994 to
September 30, 1995. Core deposits totaled $6.0 billion at September 30,
1995 and at December 31, 1994. Money market deposits declined $127.2
million offset by a $204.7 million increase in other consumer time
deposits. In the second quarter of 1995, a banking subsidiary of the
Corporation purchased a branch which resulted in an increase in deposits
of $6.8 million. Purchased deposits, which include large denomination
time and foreign time deposits, increased $120.0 million.
Total deposits increased $103.5 million from September 30, 1994 to
September 30, 1995. Core deposits decreased $99.8 million primarily due
to declines in money market deposits of $150.0 million and other savings
deposits of $99.5 million partially offset by an increase in other
consumer time deposits of $177.1 million. Purchased deposits increased
$203.3 million primarily as a result of a $170.7 million increase in
large denomination time deposits.
<PAGE>
PAGE 28
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Capital Resources
The following table details the Corporation's capital components
and ratios at September 30, 1995, December 31, 1994 and September 30,
1994, based upon the capital requirements of the Federal Reserve Board.
<TABLE>
Table 13 Capital Components
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------ ------------- -------------
(dollars in thousands)
<S> <C> <C> <C>
Preferred stockholders' equity.................................... $144,852 $144,852 $144,852
Common stockholder's equity....................................... 993,412 879,172 861,792
Disallowed intangibles............................................ (38,136) (40,956) (41,902)
Unrealized losses (gains) on investment securities available-
for-sale (1)................................................... (7,637) 26,969 16,216
-------- -------- --------
Tier 1 capital.................................................... 1,092,491 1,010,037 980,958
-------- -------- --------
Qualifying long-term debt......................................... 103,710 109,676 109,665
Allowance for credit losses (2)................................... 101,146 91,105 90,808
Mandatory convertible securities.................................. 59,966 59,960 59,958
-------- -------- 0
Tier 2 capital.................................................... 264,822 260,741 260,431
-------- -------- --------
Total capital..................................................... $1,357,313 $1,270,778 $1,241,389
========== ========== ==========
Risk-adjusted assets.............................................. $8,010,869 $7,188,442 $7,154,431
========== ========== ==========
Average quarterly assets (regulatory guidelines).................. $9,783,313 $9,180,622 $9,168,913
========== ========== ==========
Risk-based capital ratios:
Tier 1 to risk adjusted assets.................................. 13.64% 14.05% 13.71%
Regulatory minimum.............................................. 4.00 4.00 4.00
Total capital to risk-adjusted assets........................... 16.94 17.68 17.35
Regulatory minimum.............................................. 8.00 8.00 8.00
Leverage ratio.................................................... 11.21 11.05 10.75
<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 $82.5 million and $86.5 million,
respectively, when September 30, 1995 is compared to December 31, 1994
primarily due to $88.7 million in net income partially offset by $8.9
million in dividends declared on preferred stock in the first nine months
of 1995. Tier 1 and total capital increased $111.5 million and $115.9
million, respectively, when September 30, 1995 is compared to September
30, 1994 primarily as a result of $117.2 million in net income during
this period partially offset by $11.8 million in dividends declared on
preferred stock. Additional information regarding the Corporation's
capital is presented in the Consolidated Statements of Changes in
Stockholders' Equity.
<PAGE>
PAGE 29
<TABLE>
Table 14
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Three months ended September 30, 1995
-------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $614.4 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 45.6 0.7 5.95
Trading account securities......................... 2.9 - 5.82
Funds sold......................................... 158.9 2.4 5.87
Investment securities available-for-sale:
Taxable securities................................. 1,087.4 17.0 6.20
Tax-exempt securities(1)........................... 146.9 4.9 13.26
Equity investments................................. 32.5 0.3 3.85
--------- ---------
Total securities available-for-sale (2)......... 1,266.8 22.2 6.96
Investment securities held-to-maturity:
Taxable securities................................. 1,491.0 22.6 6.00
Loans held-for-sale.................................. 112.8 2.2 7.72
Loans, net of unearned income (1,3):
Commercial......................................... 1,748.9 36.2 8.21
Real estate, construction.......................... 284.2 6.6 9.20
Real estate mortgage, commercial................... 973.7 21.8 8.89
Real estate mortgage, residential.................. 645.6 11.7 7.16
Retail............................................. 1,037.4 22.6 8.66
Bankcard........................................... 542.3 20.8 15.23
Leases receivable.................................. 304.6 4.3 5.62
Foreign............................................ 321.4 6.1 7.52
--------- ---------
Total loans, net of unearned income........... 5,858.1 130.1 8.81
Allowance for credit losses....................... (184.2) - -
---------
Loans, net...................................... 5,673.9 - -
Other assets (4)..................................... 425.0 - -
--------- ---------
Total assets/interest income.................... $9,791.3 $180.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,802.8 $ - - %
---------
Interest bearing demand............................ 512.5 3.0 2.33
Money market accounts.............................. 1,106.9 9.9 3.55
Savings........................................... 1,034.1 7.1 2.72
Other consumer time................................ 1,602.0 22.1 5.46
Large denomination time............................ 610.3 9.2 6.00
Deposits in foreign banking offices.................. 166.7 2.6 6.21
--------- ---------
Total interest bearing deposits................. 5,032.5 53.9 4.25
--------- ---------
Total deposits.................................. 6,835.3 - -
Funds purchased...................................... 666.9 9.4 5.56
Other borrowed funds, short-term..................... 796.3 11.9 5.95
Other liabilities.................................... 159.2 - -
Long-term debt (5)................................... 206.5 4.7 9.01
Stockholders' equity................................. 1,127.1 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $9,791.3 $79.9
======== ========
Earning assets/interest income....................... $8,936.1 $180.2 8.00%
Interest bearing liabilities/interest expense........ 6,702.2 79.9 4.73
Earning assets/interest expense...................... 8,936.1 79.9 3.55
Interest rate spread (6)............................. 3.27%
=====
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) Interest rate spread is the difference between the yield on average earning assets (tax equivalent
basis) and the rate paid on 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 30
<TABLE>
Table 15
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Nine months ended September 30, 1995
------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $580.3 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 33.1 1.6 6.23
Trading account securities......................... 16.6 0.8 6.63
Funds sold......................................... 400.4 17.7 5.92
Investment securities available-for-sale:
Taxable securities................................. 929.3 42.4 6.10
Tax-exempt securities(1)........................... 172.6 15.7 12.14
Equity investments................................. 30.6 0.9 4.15
--------- ---------
Total securities available-for-sale (2)......... 1,132.5 59.0 6.96
Investment securities held-to-maturity:
Taxable securities................................. 1,422.6 64.1 6.03
Loans held-for-sale.................................. 79.7 4.9 8.29
Loans, net of unearned income (1,3):
Commercial......................................... 1,716.4 107.5 8.38
Real estate, construction.......................... 276.6 19.0 9.18
Real estate mortgage, commercial................... 978.6 64.5 8.81
Real estate mortgage, residential.................. 639.6 34.3 7.18
Retail............................................. 1,014.2 66.1 8.71
Bankcard........................................... 516.4 59.3 15.36
Leases receivable.................................. 286.2 12.3 5.75
Foreign............................................ 288.6 16.6 7.67
--------- ---------
Total loans, net of unearned income........... 5,716.6 379.6 8.88
Allowance for credit losses....................... (187.3) - -
---------
Loans, net...................................... 5,529.3 - -
Other assets (4)..................................... 410.7 - -
--------- ---------
Total assets/interest income.................... $9,605.2 $527.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,748.3 $ - - %
---------
Interest bearing demand............................ 519.3 9.1 2.34
Money market accounts.............................. 1,161.2 30.5 3.51
Savings........................................... 1,061.0 21.5 2.72
Other consumer time................................ 1,499.9 58.0 5.17
Large denomination time............................ 584.5 26.3 6.01
Deposits in foreign banking offices.................. 152.8 6.9 6.01
--------- ---------
Total interest bearing deposits................. 4,978.7 152.3 4.09
--------- ---------
Total deposits.................................. 6,727.0 - -
Funds purchased...................................... 726.8 30.6 5.64
Other borrowed funds, short-term..................... 697.3 30.8 5.92
Other liabilities.................................... 152.2 - -
Long-term debt (5)................................... 211.9 14.1 8.87
Stockholders' equity................................. 1,090.0 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $9,605.2 $227.8
======== ========
Earning assets/interest income....................... $8,801.5 $527.7 8.02%
Interest bearing liabilities/interest expense........ 6,614.7 227.8 4.61
Earning assets/interest expense...................... 8,801.5 227.8 3.46
Interest rate spread (6)............................. 3.41%
=====
Net interest margin (7).............................. 4.56%
=====
<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) Interest rate spread is the difference between the yield on average earning assets (tax equivalent
basis) and the rate paid on 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
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is furnished to this Form 10-Q:
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the
quarter ended September 30, 1995.
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 13, 1995 BY /s/ Robert W. Schaefer
----------------------------
Robert W. Schaefer
Executive Vice President and
Chief Financial Officer
November 13, 1995 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, 1995 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-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 588,876
<INT-BEARING-DEPOSITS> 30,384
<FED-FUNDS-SOLD> 22,769
<TRADING-ASSETS> 2,419
<INVESTMENTS-HELD-FOR-SALE> 1,672,532
<INVESTMENTS-CARRYING> 1,321,634
<INVESTMENTS-MARKET> 1,312,757
<LOANS> 6,025,797
<ALLOWANCE> 181,974
<TOTAL-ASSETS> 10,058,626
<DEPOSITS> 6,692,737
<SHORT-TERM> 1,721,116
<LIABILITIES-OTHER> 306,030
<LONG-TERM> 189,673
<COMMON> 84,926
0
30,000
<OTHER-SE> 1,023,338
<TOTAL-LIABILITIES-AND-EQUITY> 10,058,626
<INTEREST-LOAN> 377,917
<INTEREST-INVEST> 118,053
<INTEREST-OTHER> 25,025
<INTEREST-TOTAL> 520,995
<INTEREST-DEPOSIT> 152,282
<INTEREST-EXPENSE> 227,841
<INTEREST-INCOME-NET> 293,154
<LOAN-LOSSES> 10,334
<SECURITIES-GAINS> 2,187
<EXPENSE-OTHER> 290,351
<INCOME-PRETAX> 136,237
<INCOME-PRE-EXTRAORDINARY> 136,237
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,699
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.56
<LOANS-NON> 38,925
<LOANS-PAST> 12,932
<LOANS-TROUBLED> 437
<LOANS-PROBLEM> 26,002
<ALLOWANCE-OPEN> 191,024
<CHARGE-OFFS> 26,283
<RECOVERIES> 6,899
<ALLOWANCE-CLOSE> 181,974
<ALLOWANCE-DOMESTIC> 85,825
<ALLOWANCE-FOREIGN> 9,996
<ALLOWANCE-UNALLOCATED> 86,153
</TABLE>
