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 June 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 JUNE 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.............. 7-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 16-30
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 Six Months ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................................ $126,934 $106,185 $248,395 $206,163
Interest and dividends on investment securities held-to-maturity:
Taxable....................................................... 21,401 22,243 41,571 46,004
Interest on investment securities available-for-sale:
Taxable....................................................... 12,262 11,109 24,634 25,038
Tax-exempt.................................................... 3,615 4,151 7,331 8,126
Dividends..................................................... 345 330 635 561
Interest on loans held-for-sale................................... 1,721 1,619 2,742 4,369
Interest on money market investments.............................. 9,611 8,157 17,747 14,264
-------- -------- -------- --------
Total interest and dividend income.......................... 175,889 153,794 343,055 304,525
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits.............................................. 51,389 41,617 98,395 81,974
Interest on Federal funds purchased and
other short-term borrowings..................................... 22,361 13,276 40,212 26,657
Interest on long-term debt........................................ 4,680 4,327 9,368 8,654
-------- -------- -------- --------
Total interest expense...................................... 78,430 59,220 147,975 117,285
-------- -------- -------- --------
NET INTEREST INCOME............................................... 97,459 94,574 195,080 187,240
Provision for credit losses (note 4).............................. 3,961 5,999 7,961 14,998
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............. 93,498 88,575 187,119 172,242
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts............................... 18,005 18,532 35,451 36,785
Trust fees........................................................ 5,156 4,541 10,255 9,679
Servicing income from securitized assets, net..................... 4,631 3,813 8,777 9,289
Bankcard charges and fees......................................... 4,549 4,340 8,795 8,718
Mortgage banking income........................................... 2,952 8,186 6,962 11,499
Securities gains, net............................................. 1,531 1,548 1,845 12,748
Other income...................................................... 10,845 12,522 22,200 22,551
-------- -------- -------- --------
Total noninterest income.................................... 47,669 53,482 94,285 111,269
-------- -------- -------- --------
NONINTEREST EXPENSES
Salaries and wages................................................ 43,466 39,635 84,428 79,991
Other personnel costs............................................. 10,140 12,775 20,710 28,751
Net occupancy costs............................................... 7,858 7,926 15,786 16,073
Equipment costs................................................... 7,026 7,215 15,158 14,175
Other operating expenses.......................................... 27,830 30,708 56,680 60,894
-------- -------- -------- --------
Total noninterest expenses.................................. 96,320 98,259 192,762 199,884
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES........................................ 44,847 43,798 88,642 83,627
Income tax expense................................................ 15,716 15,728 30,975 29,501
-------- -------- -------- --------
NET INCOME........................................................ $29,131 $28,070 $57,667 $54,126
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 4
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks .......................................... $573,434 $554,878 $521,027
Money market investments (note 2)................................. 506,759 374,799 531,432
Investment securities available-for-sale (note 3)................. 1,058,782 1,022,709 1,107,839
Investment securities held-to-maturity (note 3)................... 1,354,013 1,338,267 1,471,771
Loans held-for-sale (at cost which approximates fair value)....... 112,142 75,366 104,666
Loans, net of unearned income of $108,279, $84,809
and $69,728:
Commercial.................................................... 1,758,718 1,633,275 1,601,670
Real estate,construction...................................... 283,846 268,683 249,583
Real estate,mortgage:
Residential................................................ 651,646 593,642 562,033
Commercial................................................. 972,673 978,164 977,409
Retail........................................................ 1,020,587 984,403 911,965
Bankcard...................................................... 534,930 496,608 474,055
Leases receivable............................................. 309,331 259,633 226,595
Foreign....................................................... 319,156 244,483 271,065
--------- --------- ---------
Total loans, net of unearned income...................... 5,850,887 5,458,891 5,274,375
Allowance for credit losses (note 4).......................... (185,436) (191,024) (201,073)
--------- --------- ---------
Loans, net .............................................. 5,665,451 5,267,867 5,073,302
--------- --------- ---------
Premises and equipment............................................ 105,028 102,157 100,158
Due from customers on acceptances................................. 13,699 26,059 14,467
Other assets...................................................... 353,683 343,500 275,311
--------- --------- ---------
Total assets........................................ $9,742,991 $9,105,602 $9,199,973
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits:
Noninterest bearing deposits ................................. $1,780,102 $1,766,648 $1,679,222
Interest bearing deposits..................................... 4,885,123 4,786,592 4,860,551
Interest bearing deposits in foreign banking office............... 202,204 80,306 122,884
--------- --------- ---------
Total deposits........................................... 6,867,429 6,633,546 6,662,657
Federal funds purchased and securities sold under
repurchase agreements........................................... 564,661 519,772 526,507
Other borrowed funds, short-term (note 8)......................... 709,183 541,507 669,105
Bank acceptances outstanding...................................... 13,699 26,059 14,467
Accrued taxes and other liabilities............................... 266,313 146,062 151,073
Long-term debt (note 9)........................................... 214,660 214,632 189,604
--------- --------- ---------
Total liabilities................................... 8,635,945 8,081,578 8,213,413
--------- --------- ---------
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............................................ 789,454 737,891 684,186
Unrealized gains (losses) on investment securities available
-for-sale (net of income (tax) benefits of $(2,980),
$16,024 and $7,020)........................................ 4,490 (26,969) (10,728)
--------- --------- ---------
Total stockholders' equity.......................... 1,107,046 1,024,024 986,560
--------- --------- ---------
Total liabilities and stockholders' equity.......... $9,742,991 $9,105,602 $9,199,973
========== ========== ==========
<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>
Six Months ended June 30, 1994
------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,127 $637,128 $26,613 $976,794
Net income............................. 54,126 54,126
Dividends declared on preferred
stock.................................. (5,910) (5,910)
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............................. (37,341) (37,341)
Adjustment to preferred stock issuance
costs................................ 49 49
--------- --------- --------- --------- --------- ---------
Balance at June 30, 1994............... $30,000 $84,926 $198,176 $684,186 ($10,728) $986,560
========== ========== ========== ========== ========== ==========
Six Months ended June 30, 1995
------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,176 $737,891 ($26,969) $1,024,024
Net income............................. 57,667 57,667
Dividends declared on preferred
stock.................................. (5,910) (5,910)
Change in net cost not yet recognized
as periodic pension expense............ (194) (194)
Adjustment of the unrealized losses
on investment securities available-
for-sale, net of income tax.......... 31,459 31,459
--------- --------- --------- --------- --------- ---------
Balance at June 30, 1995............... $30,000 $84,926 $198,176 $789,454 $4,490 $1,107,046
========== ========== ========== ========== ========== ==========
<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>
Six Months ended June 30,
--------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $57,667 $54,126
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................................................. 7,961 14,998
Provision for other real estate losses.................................................. 237 44
Depreciation and amortization........................................................... 15,611 15,401
Deferred income tax expense............................................................. 7,942 2,289
Net gain on the sale of assets.......................................................... (3,102) (15,018)
Net (increase) decrease in loans originated for sale.................................... (36,776) 152,061
Decrease in trading account securities.................................................. 24,332 6,867
Decrease (increase) in accrued interest receivable...................................... 7,412 (2,568)
Increase in accrued interest payable.................................................... 8,054 1,841
Other, net.............................................................................. 67,562 2,323
--------- ---------
Net cash provided by operating activities............................................ 156,900 232,364
--------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale........................... 534,425 1,268,329
Proceeds from paydowns and maturities of investment securities available-for-sale......... 81,066 73,669
Proceeds from paydowns and maturities of investment securities held-to-maturity........... 188,394 243,918
Purchases of investment securities available-for-sale..................................... (599,406) (1,182,886)
Purchases of investment securities held-to-maturity....................................... (205,432) (17,437)
Net increase in short-term investments.................................................... (234,431) (341,983)
Purchase of loans......................................................................... (19) -
Net disbursements from lending activities of bank subsidiaries............................ (411,262) (79,971)
Principal collected on loans of nonbank subsidiaries...................................... 17,220 15,599
Loans originated by nonbank subsidiaries.................................................. (14,977) (9,047)
Principal payments received under leases.................................................. 2,842 2,410
Purchases of assets to be leased.......................................................... (4,841) (1,193)
Proceeds from other real estate transactions.............................................. 9,137 10,098
Proceeds from sales of premises and equipment............................................. 393 965
Purchases of premises and equipment....................................................... (13,882) (9,474)
Purchase of deposits...................................................................... 6,694 -
Other, net................................................................................ (6,111) (1,269)
--------- ---------
Net cash used for investing activities............................................... (650,190) (28,272)
--------- ---------
FINANCING ACTIVITIES
Net increase (decrease) in deposits ...................................................... 227,052 (111,500)
Net increase (decrease) in short-term borrowings.......................................... 212,565 (198,023)
Cash dividends paid....................................................................... (5,910) (4,530)
--------- ---------
Net cash provided by (used for) financing activities................................. 433,707 (314,053)
--------- ---------
Decrease in cash and cash equivalents ...................................................... (59,583) (109,961)
Cash and cash equivalents at beginning of year.............................................. 692,123 631,137
--------- ---------
Cash and cash equivalents at June 30,....................................................... $632,540 $521,176
========= =========
SUPPLEMENTAL DISCLOSURES
Interest payments......................................................................... $139,921 $115,444
Income tax payments....................................................................... 10,642 30,614
NONCASH INVESTING AND FINANCING ACTIVITIES
Loan charge-offs.......................................................................... 18,479 21,636
Transfers to other real estate............................................................ 5,492 1,610
<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 June 30, 1995, December 31, 1994
and June 30, 1994 included the following:
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
---------- ------------- ----------
(in thousands)
<S> <C> <C> <C>
Interest bearing deposits in other banks............. $59,106 $137,245 $149
Trading account securities........................... 32,278 56,610 46,470
Federal funds sold................................... 330,000 154,800 321,700
Securities purchased under agreements
to resell.......................................... 85,375 26,144 163,113
-------- -------- --------
Total money market investments................. $506,759 $374,799 $531,432
======== ======== ==========
</TABLE>
3. Investment Securities
<TABLE>
The following is a comparison of the amortized cost and fair values of the
available-for-sale securities:
<CAPTION>
June 30, 1995 December 31, 1994 June 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........... $140,326 $142,159 $52,084 $48,716 $51,714 $49,879
Mortgage-backed obligations of
Federal agencies.................................. 664,536 658,883 773,388 723,752 813,566 781,198
Collateralized mortgage obligations:
Issued by Federal agencies........................ 12,924 12,840 14,345 14,507 16,944 16,981
Privately issued.................................. 19,876 19,936 1,344 1,364 5,598 5,634
Obligations of states and political
subdivisions...................................... 179,764 187,266 190,144 195,791 203,783 214,696
Other investment securities.......................... 33,886 37,698 34,397 38,579 33,982 39,451
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $1,051,312 $1,058,782 $1,065,702 $1,022,709 $1,125,587 $1,107,839
========== ========== ========== ========== ========== ==========
</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>
June 30, 1995 December 31, 1994 June 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........... $642,489 $637,349 $793,517 $756,456 $881,151 $861,914
Mortgage-backed obligations of
Federal agencies.................................. 152,538 151,415 160,319 150,353 174,206 168,070
Collateralized mortgage obligations:
Issued by Federal agencies........................ 504,269 503,468 328,427 312,663 358,116 348,550
Privately issued.................................. 53,717 51,867 54,999 50,008 57,031 53,430
Other investment securities.......................... 1,000 1,000 1,005 1,005 1,267 1,267
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $1,354,013 $1,345,099 $1,338,267 $1,270,485 $1,471,771 $1,433,231
========== ========== ========== ========== ========== ==========
</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 June 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>
Six Months ended June 30,
------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $191,024 $200,006
Provision for credit losses....................................... 7,961 14,998
Less: charge-offs, net of recoveries of $4,930 and $7,705......... (13,549) (13,931)
-------- --------
Balance at June 30................................................ $185,436 $201,073
======== ========
</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 June 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 ........................................ $9,782 $8,075 $1,707 $676
Real estate, construction.......................... 1,898 1,024 873 285
Real estate mortgage, commercial................... 17,882 6,061 11,822 5,198
Foreign............................................ 1,500 1,500 - -
-------- -------- -------- --------
Total........................................ 31,062 16,660 14,402 6,159
======== ======== ======== ========
Year-to-date average recorded investment in impaired loans..................... 38,115
Year-to-date interest income recognized during impairment...................... 182
Year-to-date interest income recorded on a cash basis during impairment........ 182
</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 June 30, 1995, December 31, 1994 and
June 30, 1994 included the following:
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Goodwill............................................. $30,007 $31,316 $32,089
Premium on bankcard receivables...................... 13,051 14,627 16,370
Premium on deposits.................................. 8,364 8,799 1,125
Other................................................ 722 842 865
------- ------- -------
Total intangible assets........................ $52,144 $55,584 $50,449
======= ======= =======
</TABLE>
6. Mortgage Servicing Rights
<TABLE>
Mortgage servicing rights at June 30, 1995, December 31, 1994 and
June 30, 1994 included the following:
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Purchased mortgage servicing rights.................. $1,242 $1,269 $999
Originated mortgage servicing rights................. 1,098 - -
------- ------- -------
Total mortgage servicing rights................ $2,340 $1,269 $999
======= ======= =======
</TABLE>
The Corporation adopted FAS 122, "Accounting for Mortgage Servicing
Rights" in the second quarter of 1995 which resulted in the allocation
of $1.2 million 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 June 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>
Six Months ended June 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 June 30................................................ $345 $4,185
====== ======
</TABLE>
8. Other Borrowed Funds, Short-term
<TABLE>
Other borrowed funds, short-term at June 30, 1995, December 31,
1994 and June 30, 1994 included the following:
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Master demand note of the Corporation................ $368,020 $402,539 $421,357
Bank notes........................................... 180,000 130,000 190,000
Federal funds purchased-term......................... 125,000 - 40,000
Other................................................ 36,163 8,968 17,748
-------- -------- --------
Total other borrowed funds, short-term......... $709,183 $541,507 $669,105
======== ======== ========
</TABLE>
9. Long-term Debt
<TABLE>
Following is a summary of the long-term debt of the Corporation
at June 30, 1995, December 31, 1994 and June 30, 1994 which
is all unsecured:
<CAPTION>
June 30, December 31, June 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............................................. 59,964 59,960 59,955
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........... 99,700 99,678 99,657
-------- -------- --------
Total long-term debt........................... $214,660 $214,632 $189,604
======== ======== ========
</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 June 30, 1995 as well as the
average fair values for the three months and six months ended June 30,
1995.
<CAPTION>
Fair Values
---------------------------
Average
---------------------------
Notional Three Months Six Months
Amounts End-of-Period ended ended
------------- ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C>
Interest Rate Contracts
Interest Rate Swaps $502,785
In a receivable position $6,490 $5,536 $5,893
In a payable position (2,592) (2,539) (3,121)
Interest Rate Caps/Floors 341,739
Interest rate caps/floors held 1,177 1,449 1,866
Interest rate caps/floors written (1,177) (1,453) (1,878)
Futures 86,000
In a favorable position 233 - -
In an unfavorable position (122) - -
Foreign Exchange Contracts
Options 213,810
Options held 660 379 319
Options written (1,322) (251) (207)
Forwards 526,164
In a favorable position 1,333 1,378 1,281
In an unfavorable position (866) (866) (859)
</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>
Six Months
ended
June 30, 1995
--------------
(in thousands)
<S> <C>
Interest rate contracts:
Interest rate swaps................ $1,424
Futures............................ (1,647)
Interest rate caps & floors........ 91
Securities......................... 81
-------
(51)
-------
Foreign exchange contracts:
Spot and forward contracts.............. $3,225
Futures................................. (102)
Options................................. (3,134)
Miscellaneous........................... 25
-------
14
-------
Total net trading income.......... ($37)
=======
</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
June 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 0.94 6.11% 6.06% $503
--------
Carrying amount (2) 9,439
Unrealized gross gains 503
Unrealized gross losses (9,439)
Interest rate swaps purchased
-----------------------------
Convert fixed rate to floating rate 46,779 4.96 6.23 6.27 (569)
--------
Carrying amount (2) (28)
Unrealized gross gains 497
Unrealized gross losses (1,038)
Interest rate swaps purchased forward
-------------------------------------
Convert fixed rate to floating rate 6,328 5.01 - 6.03 (1) 17
--------
Unrealized gross gains 17
Unrealized gross losses -
Designated to Liabilities
-------------------------
Interest rate swaps sold
------------------------
Convert fixed rate to floating rate 159,000 2.73 7.06 6.06 3,660
--------
Unrealized gross gains 3,735
Unrealized gross losses (75)
Interest rate swaps purchased
-----------------------------
Convert floating rate to fixed rate 435,500 0.81 6.16 5.73 672
--------
Unrealized gross gains 689
Unrealized gross losses (17)
Interest rate caps purchased
----------------------------
Cap floating rate at strike level 235,600 3.06 Cap - 13.50% (3) -
--------
Carrying amount (2) 59
Unrealized gross gains -
Unrealized gross losses (59)
Call options purchased 12,536 1.82 - - -
--------------------- --------
Carrying amount (2) 873
Unrealized gross gains -
Unrealized gross losses (873)
</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>
<CAPTION>
Weighted
Average Weighted Average Rate
Notional Maturity ---------------------------
Amount in Years Receive Pay Fair Value
------------ ------------ ----------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Basis swap
----------
Convert floating rate to different
index $30,000 3.69 5.83% 5.74% ($503)
--------
Unrealized gross gains -
Unrealized gross losses (503)
<FN>
(1) Represents a forward pay rate.
(2) Carrying amounts represent deferred losses on the early termination
of interest rate swaps sold, $9,439,000; deferred fees on the
redesignation of an interest rate swap purchased, ($28,000);
deferred premiums on interest rate caps purchased, $59,000; and
deferred premiums on call options purchased, $873,000.
(3) Pays interest if interest rates exceed 13.50%.
</TABLE>
<PAGE>
PAGE 15
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 June 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 $21,329 $31,778 $228,107
Weighted average receive rate 6.11% 6.21% 6.25% 6.13%
Estimated fair value 503 469 (1,021) (49)
Designated to Liabilities
-------------------------
Notional amount $443,544 $399,092 $ - $842,636
Weighted average receive rate 6.28% 6.97% - % 6.45%
Estimated fair value 416 3,916 - 4,332
Basis Swap
-----------
Notional amount $ - $30,000 $ - $30,000
Weighted average receive rate - % 5.83% - % 5.83%
Estimated fair value - (503) - (503)
</TABLE>
<TABLE>
The following table summarizes the activity of the risk management
instruments entered into by the Corporation, by notional amounts, for
the six months ended June 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.............................. - 150,275 - 150,275
Maturities/amortizations............... - (165,400) - (165,400)
-------- -------- -------- ----------
Balance at June 30..................... $228,107 $842,636 $30,000 $1,100,743
======== ======== ======== ==========
</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 $9.4 million as of June 30, 1995. These
losses are scheduled to be amortized into income in the following periods:
$1.7 million for the remainder of 1995, $3.4 million in 1996, $3.4 million
in 1997 and $858,000 in 1998.
As of June 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 $1.9 million and gross interest expense decreased
$2.2 million which resulted in a $298,000 increase in net interest income.
<PAGE>
PAGE 16
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 six months and quarter ended June 30, 1995 was $57.7 million and
$29.1 million, respectively compared to $54.1 million and $28.1 million
for the first six months and quarter ended June 30, 1994. Return on
average assets and return on average total equity were 1.22% and
10.86%, respectively, for the six months ended June 30, 1995 compared
with 1.13% and 11.10% for the six months ended June 30, 1994
<TABLE>
Table 1 Selected Quarterly Financial Information
<CAPTION>
2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
1995 1995 1994 1994 1994
----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Net interest income (fully tax equivalent)........ $99,651 $99,954 $99,461 $96,858 $97,191
Tax equivalent adjustment......................... 2,192 2,333 2,393 2,519 2,617
-------- -------- -------- -------- --------
Net interest income............................... 97,459 97,621 97,068 94,339 94,574
Provision for credit losses....................... 3,961 4,000 2,000 5,998 5,999
-------- -------- -------- -------- --------
Net interest income after provision for credit
losses.......................................... 93,498 93,621 95,068 88,341 88,575
Noninterest income................................ 47,669 46,616 44,026 55,683 53,482
Noninterest expenses.............................. 96,320 96,442 95,640 100,677 98,259
-------- -------- -------- -------- --------
Income before income taxes........................ 44,847 43,795 43,454 43,347 43,798
Income tax expense................................ 15,716 15,259 14,967 14,820 15,728
-------- -------- -------- -------- --------
Net income........................................ $29,131 $28,536 $28,487 $28,527 $28,070
======== ======== ======== ======== ========
Dividends declared on preferred stock............. $2,955 $2,955 $2,955 $2,955 $2,955
CONSOLIDATED AVERAGE BALANCES:
Total assets...................................... 9,705,800 9,313,200 9,143,600 9,153,100 9,556,600
Loans, net of unearned income..................... 5,768,400 5,519,700 5,391,700 5,326,700 5,240,800
Deposits.......................................... 6,742,200 6,600,900 6,573,500 6,530,900 6,743,800
Long-term debt.................................... 214,700 214,600 214,600 197,800 189,600
Common stockholder's equity....................... 947,300 905,000 883,800 865,200 835,500
Stockholders' equity.............................. 1,092,100 1,049,800 1,028,600 1,010,000 980,300
CONSOLIDATED RATIOS:
Return on average assets.......................... 1.20% 1.24% 1.24% 1.24% 1.18%
Return on average total stockholders' equity...... 10.70 11.02 10.99 11.21 11.49
Return on average common stockholder's equity..... 11.08 11.46 11.46 11.73 12.06
Average stockholders' equity to average total
assets.......................................... 11.25 11.27 11.25 11.04 10.26
Capital to risk-adjusted assets:
Tier 1.......................................... 13.64 14.03 14.05 13.71 13.70
Total........................................... 17.00 17.53 17.68 17.35 17.38
Tier 1 leverage ratio............................. 11.00 11.15 11.05 10.75 10.12
Net interest margin............................... 4.50 4.74 4.70 4.60 4.43
Net charge-offs to average loans, net of average
unearned income (annualized).................... 0.55 0.41 0.70 0.45 0.36
Allowance for credit losses to period end loans,
net of unearned income.......................... 3.17 3.35 3.50 3.67 3.81
Nonperforming assets to period end loans, net of
unearned income plus other foreclosed assets
owned........................................... 0.88 1.10 1.35 1.59 1.88
</TABLE>
<PAGE>
PAGE 17
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 June 30, 1995 of $99.7 million increased $2.5 million
(2.6%) when compared to net interest income of $97.2 million for the
quarter ended June 30, 1994. This increase was primarily due to
increased loan activity in the current period which resulted in a
shift from lower yielding investment securities and money market
investments to higher yielding loans. This favorable change in the
asset mix was partially offset by a narrowing of the interest rate
spread between asset yields and funding costs compared to the second
quarter of 1994. The net interest margin for the quarter ended June
30, 1995 was 4.50%, compared to 4.43% for the quarter ended June 30,
1994.
Net interest income on a fully tax equivalent basis for the six
months ended June 30, 1995 of $199.6 million increased $7.1 million
(3.7%) when compared to net interest income of $192.5 million for the
six months ended June 30, 1994. This increase was primarily due to
a change in asset mix in 1995 which has resulted in a shift from lower
yielding investment securities and money market investments to higher
yielding loans. In addition, net interest income benefited from
higher interest rates in the current period and an increase in
interest free sources of funds. The net interest margin for the six
months ended June 30, 1995 was 4.61%, compared to 4.38% for the six
months ended June 30, 1994.
An analysis of fully tax equivalent net interest income, interest rate
spreads and net interest margins for the three months and six months ended
June 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 June 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).............. $2,407.5 $39.3 6.55% $2,641.7 $39.8 6.05%
Loans held-for-sale.................... 77.1 1.7 8.95 99.0 1.6 6.56
Loans, net of unearned income.......... 5,768.4 127.4 8.86 5,240.8 106.8 8.17
Other earning assets................... 635.8 9.7 6.06 819.2 8.2 3.99
------- ------ ------- ------
Earning assets......................... $8,888.8 178.1 8.04 $8,800.7 156.4 7.13
======== ------ ======== ------
Interest bearing liabilities........... 6,732.6 78.4 4.67 6,684.5 59.2 3.55
Interest rate spread (2)............... 3.37 3.58
Interest free sources utilized
to fund earning assets............... 2,156.2 2,116.2
------- ------ ------- ------
Total sources of funds................. $8,888.8 78.4 3.54 $8,800.7 59.2 2.70
======== ------ ======== ------
Net interest income.................... $99.7 $97.2
====== ======
Net interest margin (3)................ 4.50% 4.43%
==== ====
<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 18
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>
Six Months ended June 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).............. $2,425.5 $77.6 6.45% $2,737.0 $83.7 6.17%
Loans held-for-sale.................... 62.9 2.7 8.80 125.7 4.5 7.12
Loans, net of unearned income.......... 5,644.7 249.5 8.91 5,222.1 207.3 8.01
Other earning assets................... 600.0 17.8 5.96 775.7 14.3 3.71
------- ------ ------- ------
Earning assets......................... $8,733.1 347.6 8.03 $8,860.5 309.8 7.05
======== ------ ======== ------
Interest bearing liabilities........... 6,570.2 148.0 4.54 6,766.0 117.3 3.50
Interest rate spread (2)............... 3.49 3.55
Interest free sources utilized
to fund earning assets............... 2,162.9 2,094.5
------- ------ ------- ------
Total sources of funds................. $8,733.1 148.0 3.42 $8,860.5 117.3 2.67
======== ------ ======== ------
Net interest income.................... $199.6 $192.5
====== ======
Net interest margin (3)................ 4.61% 4.38%
==== ====
<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 second quarter of 1995
totaled $4.0 million compared to $6.0 million for the second quarter
of 1994, a decrease of $2.0 million (34.0%). The provision for credit
losses for the six months ended June 30, 1995 totaled $8.0 million,
a decrease of $7.0 million (46.9%) over the $15.0 million provision
recorded for the first six months of 1994. These decreases were
primarily due to improved credit loss trends.
<PAGE>
PAGE 19
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 six months ended June 30, 1995 and 1994.
Table 4 Noninterest Income
<CAPTION>
Three months ended June 30, Six months ended June 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.... $18,005 $18,532 (2.8%) $35,451 $36,785 (3.6%)
Trust fees............................. 5,156 4,541 13.5 10,255 9,679 6.0
Servicing income from securitized
assets, net.......................... 4,631 3,813 21.5 8,777 9,289 (5.5)
Bankcard charges and fees.............. 4,549 4,340 4.8 8,795 8,718 0.9
Mortgage banking income................ 2,952 8,186 (63.9) 6,962 11,499 (39.5)
Securities gains, net.................. 1,531 1,548 (1.1) 1,845 12,748 (85.5)
Other income:
Security sales and fees.............. 1,967 2,156 (8.8) 3,851 3,786 1.7
Customer service fees................ 1,914 2,136 (10.4) 3,667 4,534 (19.1)
Other................................ 6,964 8,230 (15.4) 14,682 14,231 3.2
------- ------- ----- ------- ------- -----
Total other income..................... 10,845 12,522 (13.4) 22,200 22,551 (1.6)
------- ------- ----- ------- ------- -----
Total noninterest income........ $47,669 $53,482 (10.9) $94,285 $111,269 (15.3)
======= ======= ======= ======= ======= =======
</TABLE>
The Corporation's noninterest income for the second quarter of 1995
decreased $5.8 million (10.9%) when compared to the second quarter of
1994. Service charges on deposits decreased $527,000 (2.8%) due to lower
service charges on business checking accounts partially offset by higher
fees on retail deposits. Trust fees increased $615,000 (13.5%).
Servicing income from securitized assets increased $818,000 (21.5%) as
a result of lower credit losses on the Corporation's securitized
manufactured housing receivables portfolio partially offset by the impact
of repricing and higher interest rates on the Corporation's securitized
bankcard receivables portfolio. Mortgage banking income decreased $5.2
million (63.9%) as a result of a decline in origination activity and
lower gains on the sale of servicing due to a significant servicing
sale in June of 1994. Securities gains of $1.5 million were recorded
in the second quarter of 1995 and in the second quarter of 1994.
Securities sales are discussed in detail under "Changes in Financial
Position." Total other income decreased $1.7 million (13.4%) due to a
$1.7 million decline in trading income and a $937,000 decrease in gains
on the disposal of other real estate owned. These declines were
partially offset by $493,000 in income resulting from the sale of stock
received in partial satisfaction of a loan obligation and $500,000 in
income received from an other real estate owned property.
The Corporation's noninterest income for the first six months of
1995 decreased $17.0 million (15.3%) when compared to the first six months
of 1994. Service charges on deposits decreased $1.3 million (3.6%) due
to lower service charges on business checking accounts partially offset
by higher fees on retail deposits. Trust fees increased $576,000 (6.0%).
Servicing income from securitized assets decreased $512,000 (5.5%) due
to the impact of repricing and higher interest rates on the Corporation's
securitized bankcard receivables portfolio partially offset by lower
credit losses on the Corporation's securitized manufactured housing
receivables portfolio. Mortgage banking income decreased $4.5 million
(39.5%) reflecting the impact of higher interest rates on production
volumes, servicing gains and origination fees. Securities gains of
$1.8 million were recorded in the first six months of 1995 compared
to $12.7 million in securities gains in the first six months of 1994.
Securities sales are discussed in detail under "Changes in Financial
Position." Customer service fees decreased $867,000 (19.1%) primarily
due to a decline in appraisal fees of $570,000.
<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 six months ended June 30, 1995 and 1994.
Table 5 Noninterest Expenses
<CAPTION>
Three months ended June 30, Six months ended June 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..................... $43,466 $39,635 9.7% $84,428 $79,991 5.5%
Other personnel costs.................. 10,140 12,775 (20.6) 20,710 28,751 (28.0)
Net occupancy costs.................... 7,858 7,926 (0.9) 15,786 16,073 (1.8)
Equipment costs........................ 7,026 7,215 (2.6) 15,158 14,175 6.9
Other operating expenses:
External processing fees............. 4,772 3,794 25.8 9,340 7,330 27.4
Regulatory fees and insurance........ 3,909 4,076 (4.1) 7,845 8,185 (4.2)
Advertising and public relations..... 3,870 3,542 9.3 8,664 7,154 21.1
Postage and communications........... 3,531 3,231 9.3 7,084 6,655 6.4
Professional fees.................... 1,640 4,859 (66.2) 3,562 8,414 (57.7)
Lending and collection............... 1,483 2,767 (46.4) 2,886 5,299 (45.5)
Other................................ 8,625 8,439 2.2 17,299 17,857 (3.1)
------ ------ ----- ------ ------ -----
Total other operating expenses..... 27,830 30,708 (9.4) 56,680 60,894 (6.9)
------ ------ ----- ------ ------ -----
Total noninterest expenses..... $96,320 $98,259 (2.0) $192,762 $199,884 (3.6)
======= ======= ======= ======= ======= =======
</TABLE>
The Corporation's noninterest expenses for the second quarter of
1995 decreased $1.9 million (2.0%) when compared to the second quarter
of 1994. Salaries and wages increased $3.8 million (9.7%) primarily
due to a $3.2 million increase in employee incentives and commissions
and a $1.4 million increase in regular salary expense partially offset
by a $697,000 decrease in severance expense. Other personnel costs
decreased $2.6 million (20.6%) primarily due to $1.7 million in pension
settlements stemming from executive retirements in the second quarter
of 1994. External processing fees increased $978,000 (25.8%).
Professional fees decreased $3.2 million (66.2%) due to consulting
expenses recorded in the second quarter of 1994 associated with a
corporate reengineering project and a trust system conversion. Lending
and collection expenses decreased $1.3 million (46.4%) primarily due
to a $507,000 decrease in collection expenses and a decline in appraisal
fee expense.
The Corporation's noninterest expenses for the first six months of
1995 decreased $7.1 million (3.6%) when compared to the first six months
of 1994. Salaries and wages increased $4.4 million (5.5%) primarily
due to a $3.2 million increase in employee incentives and commissions
and a $2.8 million increase in regular salary expense partially offset
by a $1.9 million decrease in severance expense. Other personnel
costs decreased $8.0 million (28.0%) primarily due to $4.4 million in
pension settlements stemming from executive retirements in 1994 and a
$2.7 million decrease in pension expense. External processing fees
increased $2.0 million (27.4%) primarily due to an increase in bankcard
processing fees of $1.1 million. Advertising and public relations
expense increased $1.5 million (21.1%). Professional fees decreased
$4.9 million (57.7%) due to consulting expenses recorded in 1994
associated with a corporate reengineering project and a trust system
conversion. Lending and collection expenses decreased $2.4 million
(45.5%) primarily due to a $907,000 decrease in collection expenses and
due to performance incentives which were paid to the subservicer of the
Corporation's manufactured housing receivables portfolio in 1994.
<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 $36.1 million
from December 31, 1994 to June 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.
Paydowns, maturities and/or calls on the available-for-sale securities
totaled $81.1 million in the first six months of 1995. These decreases
in the portfolio were partially offset by $599.4 million in purchases
which included the following: $270.5 million in U.S. Treasury
securities, $286.6 million in MBS's, $20.0 million in collateralized
mortgage obligations ("CMO's"), $5.2 million in obligations of state
and political subdivisions, $5.4 million in other debt securities and
$11.7 million in equity securities. The fair value of the available-
for-sale portfolio at June 30, 1995 was $7.5 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 $31.5 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 June 30, 1995.
Held-to-Maturity Portfolio
Investment securities held-to-maturity increased $15.7 million
from December 31, 1994 to June 30, 1995. This increase is the result
of $205.4 million in purchases in the first six months of 1995 which
included $200.6 million in CMO's and $4.8 million in U.S. Treasury
securities. These purchases were partially offset by $188.4 million
in paydowns and/or maturities. The fair value of the held-to-maturity
portfolio at June 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 June 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 June 30, 1995 are shown in the following table.
Table 6 Available-for-Sale Portfolio
<CAPTION>
June 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........... $140,326 $1,833 $ - $142,159
Mortgage-backed obligations of
Federal agencies.................................. 664,536 1,679 (7,332) 658,883
Collateralized mortgage obligations:
Issued by Federal agencies........................ 12,924 5 (89) 12,840
Privately issued.................................. 19,876 60 - 19,936
Obligations of states and political
subdivisions...................................... 179,764 8,491 (989) 187,266
Other debt securities................................ 1,730 - - 1,730
Equity securities.................................... 32,156 3,818 (6) 35,968
--------- --------- --------- ---------
Total.......................................... $1,051,312 $15,886 ($8,416) $1,058,782
========== ========== ========== ==========
</TABLE>
<TABLE>
The amortized cost and fair values of the held-to-maturity securities
at June 30, 1995 are shown in the following table.
Table 7 Held-to-Maturity Portfolio
<CAPTION>
June 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........... $642,489 $2,303 ($7,443) $637,349
Mortgage-backed obligations of
Federal agencies.................................. 152,538 968 (2,091) 151,415
Collateralized mortgage obligations:
Issued by Federal agencies........................ 504,269 4,551 (5,352) 503,468
Privately issued.................................. 53,717 - (1,850) 51,867
Other debt securities................................ 1,000 - - 1,000
--------- --------- --------- ---------
Total.......................................... $1,354,013 $7,822 ($16,736) $1,345,099
========== ========== ========== ==========
</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 $5.9 billion at
June 30, 1995 from $5.5 billion at December 31, 1994. This $392.0
million (7.2%) increase is due to both commercial and retail loan growth.
A $125.4 million increase in the commercial loan portfolio accounted
for 32.0% of the increase for loans from December 31, 1994 to June 30,
1995, with most of the growth coming from large corporate borrowers in
the multi-national sector.
The Corporation's commercial real estate loans, which include both
construction and commercial mortgages, increased $9.7 million when June
30, 1995 is compared to December 31, 1994. Growth in construction
mortgages more than offset a slight decline in commercial mortgage
balances. Construction mortgages outstanding increased $15.2 million
due to anticipated fundings under existing commitments and increased
originations during the first six months of 1995. Renewed activity
by institutional investors and a favorable long term rate environment
contributed to a $5.5 million reduction in commercial mortgages
outstanding. 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 increased $58.0 million when compared to
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 mortgages. Most of the increase in residential mortgages
occurred early in the first quarter of 1995 in response to demand for
adjustable rate products. Activity for the second quarter of 1995 slowed
as customers reacted to a drop in rates and the demand for adjustable
rate products declined.
Retail loans increased $36.2 million from December 31, 1994 to
June 30, 1995. Loan growth in the first quarter of 1995 was primarily
the result of funding second mortgages generated by a promotion in the
third quarter of 1994, while most of the growth in the second quarter
of 1995 was generated from a mix of direct and indirect installment
loans.
Bankcard outstandings increased $38.3 million when compared to
December 31, 1994. Marketing programs initiated in early 1995 have
resulted in an increase in bankcard outstandings and accounts in the
second quarter of 1995.
Leases receivable increased $49.7 million when June 30, 1995 is
compared to December 31, 1994. The increase in this portfolio was the
result of several large transportation equipment transactions in the
in the first and second quarter of 1995.
Foreign outstandings increased $74.7 million when June 30, 1995 is
compared to December 31, 1994. Most of this increase was generated
from the funding of shipping vessel financings.
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>
June 30, 1995
----------------------------------------------------
Outstanding Unfunded Total Nonperforming
Balance Commitments Exposure Loans
----------- ----------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Communications Industries:
Cable............................................. $159,804 $36,425 $196,229 $2,949
Publishing & Newspapers........................... 65,951 14,692 80,643 -
Wireless.......................................... 54,135 21,994 76,129 -
Broadcast......................................... 27,351 14,967 42,318 -
-------- -------- -------- --------
$307,241 $88,078 $395,319 $2,949
-------- -------- -------- --------
Healthcare (1)....................................... $305,350 $78,186 $383,536 $9,765
Transportation (2)................................... $401,376 $24,841 $426,217 $ -
<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>
June 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..................................... $88,933 $258,323 $1,250 $274
Industrial warehouse and other commercial
properties......................................... 42,378 174,055 3,478 -
Retail............................................... 81,705 125,533 2,077 3,186
Hospitals/nursing home medical centers............... 2,517 80,236 - -
Hotels/motels........................................ - 58,708 - -
Commercial land...................................... 43,208 - 466 5,423
Churches, restaurants and other special purpose
properties........................................ 9,111 58,386 1,301 -
Apartments........................................... - 62,301 9,194 128
Mixed use............................................ 9 50,083 9 -
Residential land..................................... 9,632 - 1,423 1,343
Other land-farm recreational facilities.............. - 9,437 347 -
Residential properties held for resale............... 5,047 231 - -
Miscellaneous........................................ 1,306 95,380 235 -
--------- --------- --------- ---------
Total.......................................... $283,846 $972,673 $19,780 $10,354
========== ========== ========== ==========
</TABLE>
<TABLE>
Table 10 Loans Secured by Real Estate and Other Real Estate Owned by Geographic Region
<CAPTION>
June 30, 1995
-------------------------------------------------
Total loans
----------------------- Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Maryland............................................. $203,979 $646,111 $5,914 $6,425
Pennsylvania......................................... 24,505 171,176 4,918 1,059
Virginia............................................. 24,510 37,205 - 2,096
Washington, D.C...................................... 20,315 30,778 - 274
Florida.............................................. 9,743 28,107 8,941 500
New Jersey........................................... - 14,269 - -
Delaware............................................. - 8,951 7 -
All other............................................ 794 36,076 - -
--------- --------- --------- ---------
Total.......................................... $283,846 $972,673 $19,780 $10,354
========== ========== ========== ==========
</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 $51.6 million at June 30, 1995,
a decrease of $22.5 million when compared to nonperforming assets of
$74.1 million at December 31, 1994. The most significant changes in
nonperforming assets in the six months ended June 30, 1995 were
paydowns of $13.5 million, loans reclassified to accrual status of
$9.9 million, other real estate owned sales of $8.0 million and
charge-offs of $908,000. These decreases were partially offset by
$9.8 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 $5.4 million in commercial and real estate loans which
met the regulatory tests for return to accrual status. The most
significant charge-off was $625,000 on a nonaccrual construction loan.
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>
June 30, December 31, June 30,
1995 1994 1994
---------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans
Domestic:
Commercial......................................... $9,782 $13,326 $31,558
Real estate, construction.......................... 1,898 2,709 3,772
Real estate mortgage, commercial................... 17,882 27,633 38,328
Real estate mortgage, residential.................. 4,223 5,250 5,293
Leases receivable.................................. - 85 720
Foreign.............................................. 5,300 5,300 3,800
-------- -------- --------
Total nonaccrual loans......................... 39,085 54,303 83,471
-------- -------- --------
Restructured loans................................... 440 4,974 168
Other assets owned:
Other real estate.................................. 12,238 18,920 19,627
Valuation reserves................................. (345) (4,185) (4,185)
Other assets....................................... 196 118 257
-------- -------- --------
Total other assets owned....................... 12,089 14,853 15,699
-------- -------- --------
Total nonperforming assets......................... $51,614 $74,130 $99,338
======== ======== ========
Nonperforming assets as a percentage of total
loans, net of unearned income plus other
foreclosed assets owned........................... 0.88% 1.35% 1.88%
==== ==== ====
Accruing loans contractually past due
90 days or more as to principal or interest:
Domestic.......................................... $13,188 $13,338 $12,331
======== ======== ========
</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 six months
ended June 30, 1995 and June 30, 1994, respectively.
<TABLE>
Table 12 Analysis of the Allowance for Credit Losses
<CAPTION>
Six Months ended June 30,
--------------------------
1995 1994
---------- ----------
(dollars in thousands)
<S> <C> <C>
Allowance at beginning of year....................... $191,024 $200,006
Provision for credit losses.......................... 7,961 14,998
Losses charged off:
Commercial loans................................. (234) (1,419)
Real estate loans, construction.................. (635) (1,333)
Real estate loans, mortgage:
Residential.................................... (110) (228)
Commercial..................................... (23) (1,786)
Retail........................................... (1,440) (3,066)
Bankcard receivables............................. (14,254) (13,729)
Leases receivable................................ (20) (75)
Foreign.......................................... (1,763) -
-------- --------
Total losses charged off....................... (18,479) (21,636)
Recoveries of losses previously charged off:
Commercial loans................................. 557 2,698
Real estate loans, construction.................. - 11
Real estate loans, mortgage:
Residential.................................... 24 320
Commercial..................................... 204 213
Retail........................................... 1,194 1,518
Bankcard receivables............................. 2,821 2,674
Leases receivable................................ 130 271
-------- --------
Total recoveries............................... 4,930 7,705
Net losses charged off............................... (13,549) (13,931)
-------- --------
Total allowance at June 30........................... $185,436 $201,073
======== ========
Average loans, net of average unearned income........ $5,644,746 $5,222,139
========== ==========
Period end loans, net of unearned income............. $5,850,887 $5,274,375
========== ==========
Net charge-offs to average loans, net of average
unearned income (annualized)...................... 0.48% 0.54%
Allowance as a percentage of period end loans, net
of unearned income................................ 3.17 3.81
Allowance as a percentage of nonperforming loans..... 469.16 240.41
</TABLE>
<PAGE>
PAGE 27
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Deposits
Total deposits increased $233.9 million from December 31, 1994 to
June 30, 1995. Core deposits totaled $6.0 billion at June 30, 1995 and
at December 31, 1994. Money market deposits declined $109.5 million
offset by a $150.8 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 $238.2 million.
Total deposits increased $204.8 million from June 30, 1994 to June
30, 1995. Core deposits decreased $117.7 million primarily due to
declines in money market deposits of $210.2 million and other savings
deposits of $139.5 million partially offset by an increase in other
consumer time deposits of $154.7 million. Purchased deposits increased
$322.5 million primarily as a result of a $243.1 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 June 30, 1995, December 31, 1994 and June 30, 1994,
based upon the capital requirements of the Federal Reserve Board.
<TABLE>
Table 13 Capital Components
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
---------- ------------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Preferred stockholders' equity.................................... $144,852 $144,852 $144,852
Common stockholder's equity....................................... 962,194 879,172 841,708
Disallowed intangibles............................................ (39,094) (40,956) (34,079)
Unrealized losses (gains) on investment securities available-
for-sale (1)................................................... (4,490) 26,969 10,728
-------- -------- --------
Tier 1 capital.................................................... 1,063,462 1,010,037 963,209
-------- -------- --------
Qualifying long-term debt......................................... 103,699 109,676 109,654
Allowance for credit losses (2)................................... 98,551 91,105 89,285
Mandatory convertible securities.................................. 59,964 59,960 59,956
-------- -------- --------
Tier 2 capital.................................................... 262,214 260,741 258,895
-------- -------- --------
Total capital..................................................... $1,325,676 $1,270,778 $1,222,104
========== ========== ==========
Risk-adjusted assets.............................................. $7,797,181 $7,188,442 $7,031,005
========== ========== ==========
Average quarterly assets (regulatory guidelines).................. $9,708,522 $9,180,622 $9,547,432
========== ========== ==========
Risk-based capital ratios:
Tier 1 to risk adjusted assets.................................. 13.64% 14.05% 13.70%
Regulatory minimum.............................................. 4.00 4.00 4.00
Total capital to risk-adjusted assets........................... 17.00 17.68 17.38
Regulatory minimum.............................................. 8.00 8.00 8.00
Leverage ratio.................................................... 11.00 11.05 10.12
<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 $53.4 million and $54.9 million,
respectively, when June 30, 1995 is compared to December 31, 1994
primarily due to $57.7 million in net income partially offset by $5.9
million in dividends declared on preferred stock in the first six months
of 1995. Tier 1 and total capital increased $100.3 million and $103.6
million, respectively, when June 30, 1995 is compared to June 30, 1994
as a result of $114.7 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 June 30, 1995
-------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $573.0 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 30.2 0.5 6.34
Trading account securities......................... 43.9 0.7 5.98
Funds sold......................................... 561.7 8.5 6.05
Investment securities available-for-sale:
Taxable securities................................. 767.3 12.3 6.41
Tax-exempt securities(1)........................... 189.8 5.3 11.17
Equity investments................................. 35.9 0.3 3.86
--------- ---------
Total securities available-for-sale (2)......... 993.0 17.9 7.23
Investment securities held-to-maturity:
Taxable securities................................. 1,414.5 21.4 6.07
Loans held-for-sale.................................. 77.1 1.7 8.95
Loans, net of unearned income (1,3):
Commercial......................................... 1,752.0 36.5 8.36
Real estate, construction.......................... 277.6 6.4 9.23
Real estate mortgage, commercial................... 977.6 21.5 8.81
Real estate mortgage, residential.................. 649.7 11.6 7.18
Retail............................................. 1,011.1 22.0 8.74
Bankcard........................................... 516.6 19.4 15.03
Leases receivable.................................. 294.6 4.4 6.03
Foreign............................................ 289.2 5.6 7.82
--------- ---------
Total loans, net of unearned income........... 5,768.4 127.4 8.86
Allowance for credit losses....................... (188.2) - -
---------
Loans, net...................................... 5,580.2 - -
Other assets (4)..................................... 432.1 - -
--------- ---------
Total assets/interest income.................... $9,705.7 $178.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,737.8 $ - - %
---------
Interest bearing demand............................ 524.2 3.0 2.34
Money market accounts.............................. 1,160.2 10.2 3.53
Savings........................................... 1,073.9 7.3 2.71
Other consumer time................................ 1,470.9 19.1 5.21
Large denomination time............................ 598.7 9.1 6.07
Deposits in foreign banking offices.................. 176.5 2.7 6.08
--------- ---------
Total interest bearing deposits................. 5,004.4 51.4 4.12
--------- ---------
Total deposits.................................. 6,742.2 - -
Funds purchased...................................... 789.6 11.3 3.06
Other borrowed funds, short-term..................... 723.9 11.0 5.74
Other liabilities.................................... 143.2 - -
Long-term debt (5)................................... 214.7 4.7 8.75
Stockholders' equity................................. 1,092.1 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $9,705.7 $78.4
======== ========
Earning assets/interest income....................... $8,888.8 $178.1 8.04%
Interest bearing liabilities/interest expense........ 6,732.6 78.4 4.67
Earning assets/interest expense...................... 8,888.8 78.4 3.54
Interest rate spread (6).............................. 3.37%
=====
Net interest margin (7).............................. 4.50%
=====
<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>
Six Months ended June 30, 1995
------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $563.0 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 26.7 0.9 6.46
Trading account securities......................... 50.1 1.5 6.11
Funds sold......................................... 523.2 15.4 5.93
Investment securities available-for-sale:
Taxable securities................................. 822.4 24.6 6.04
Tax-exempt securities(1)........................... 185.6 10.8 11.69
Equity investments................................. 29.7 0.6 4.31
--------- ---------
Total securities available-for-sale (2)......... 1,037.7 36.0 7.00
Investment securities held-to-maturity:
Taxable securities................................. 1,387.8 41.6 6.04
Loans held-for-sale.................................. 62.9 2.7 8.80
Loans, net of unearned income (1,3):
Commercial......................................... 1,699.8 71.3 8.46
Real estate, construction.......................... 272.8 12.4 9.17
Real estate mortgage, commercial................... 981.2 42.7 8.77
Real estate mortgage, residential.................. 636.5 22.7 7.19
Retail............................................. 1,002.4 43.4 8.74
Bankcard........................................... 503.2 38.5 15.43
Leases receivable.................................. 276.8 8.0 5.81
Foreign............................................ 272.0 10.5 7.76
--------- ---------
Total loans, net of unearned income........... 5,644.7 249.5 8.91
Allowance for credit losses....................... (188.9) - -
---------
Loans, net...................................... 5,455.8 - -
Other assets (4)..................................... 403.4 - -
--------- ---------
Total assets/interest income.................... $9,510.6 $347.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,720.6 $ - - %
---------
Interest bearing demand............................ 522.7 6.1 2.35
Money market accounts.............................. 1,188.8 20.6 3.49
Savings........................................... 1,074.7 14.5 2.71
Other consumer time................................ 1,448.0 35.9 5.00
Large denomination time............................ 571.5 17.1 6.02
Deposits in foreign banking offices.................. 145.7 4.2 5.89
--------- ---------
Total interest bearing deposits................. 4,951.4 98.4 4.01
--------- ---------
Total deposits.................................. 6,672.0 - -
Funds purchased...................................... 757.3 21.3 5.67
Other borrowed funds, short-term..................... 646.9 18.9 5.90
Other liabilities.................................... 148.7 - -
Long-term debt (5)................................... 214.6 9.4 8.80
Stockholders' equity................................. 1,071.1 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $9,510.6 $148.0
======== ========
Earning assets/interest income....................... $8,733.1 $347.6 8.03%
Interest bearing liabilities/interest expense........ 6,570.2 148.0 4.54
Earning assets/interest expense...................... 8,733.1 148.0 3.42
Interest rate spread (6).............................. 3.49%
=====
Net interest margin (7).............................. 4.61%
=====
<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 5. Other Information
On July 14, 1995, First Omni Bank, N.A., a subsidiary of First
Maryland Bancorp, entered into a Cobranding Agreement with Bell Atlantic
Network Services, Inc. pursuant to which First Omni will issue credit
cards bearing the Bell Atlantic name and trademarks.
First Omni issues MasterCard (R) and Visa (R) credit cards on a
nationwide basis. As of June 30, 1995, First Omni had over 660,000
accounts with managed outstandings in excess of $693 million. Bell
Atlantic Network Services, Inc. is a subsidiary of Bell Atlantic
Corporation, a regional Bell holding company serving over 11,000,000
customers in New Jersey, Delaware, Pennsylvania, Maryland, Virginia,
West Virginia and the District of Columbia.
Customers of Bell Atlantic who apply for and are qualified to
receive a cobranded First Omni credit card will receive "rewards",
funded by First Omni, based on use of the card which can be applied to
the purchase of residential telephone and calling card services from
Bell Atlantic.
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
A report on Form 8-K was filed on April 3, 1995 to report the
dismissal of the registrant's independent accountant after the
completion of the current audit for the year ended December 31,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Maryland Bancorp
August 11, 1995 BY /s/ Robert W. Schaefer
----------------------------
Robert W. Schaefer
Executive Vice President and
Chief Financial Officer
August 11, 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 JUNE 30, 1995 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 573,434
<INT-BEARING-DEPOSITS> 59,106
<FED-FUNDS-SOLD> 415,375
<TRADING-ASSETS> 32,278
<INVESTMENTS-HELD-FOR-SALE> 1,058,782
<INVESTMENTS-CARRYING> 1,354,013
<INVESTMENTS-MARKET> 1,345,099
<LOANS> 5,850,887
<ALLOWANCE> 185,436
<TOTAL-ASSETS> 9,742,991
<DEPOSITS> 6,867,429
<SHORT-TERM> 1,273,844
<LIABILITIES-OTHER> 266,313
<LONG-TERM> 214,660
<COMMON> 84,926
0
30,000
<OTHER-SE> 992,120
<TOTAL-LIABILITIES-AND-EQUITY> 9,742,991
<INTEREST-LOAN> 248,395
<INTEREST-INVEST> 74,171
<INTEREST-OTHER> 20,489
<INTEREST-TOTAL> 343,055
<INTEREST-DEPOSIT> 98,395
<INTEREST-EXPENSE> 147,975
<INTEREST-INCOME-NET> 195,080
<LOAN-LOSSES> 7,961
<SECURITIES-GAINS> 1,845
<EXPENSE-OTHER> 192,762
<INCOME-PRETAX> 88,642
<INCOME-PRE-EXTRAORDINARY> 88,642
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,667
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.61
<LOANS-NON> 39,085
<LOANS-PAST> 13,188
<LOANS-TROUBLED> 440
<LOANS-PROBLEM> 39,606
<ALLOWANCE-OPEN> 191,024
<CHARGE-OFFS> 18,479
<RECOVERIES> 4,930
<ALLOWANCE-CLOSE> 185,436
<ALLOWANCE-DOMESTIC> 90,634
<ALLOWANCE-FOREIGN> 9,875
<ALLOWANCE-UNALLOCATED> 84,927
</TABLE>
