SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
_____________________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 (594,480,215 shares of Common Stock, $1/7 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 MARCH 31, 1996
<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.............. 7-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 18-30
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)
Three months ended
March 31,
---------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans........................................ $131,233 $121,461
Interest and dividends on investment securities held-to-maturity:
Taxable....................................................... - 20,170
Interest on investment securities available-for-sale:
Taxable....................................................... 44,103 12,664
Tax-exempt.................................................... 1,664 3,716
Dividends..................................................... 350 290
Interest on loans held-for-sale................................... 2,032 1,021
Interest on money market investments.............................. 3,584 7,844
-------- --------
Total interest and dividend income.......................... 182,966 167,166
-------- --------
INTEREST EXPENSE
Interest on deposits.............................................. 51,564 47,006
Interest on Federal funds purchased and
other short-term borrowings..................................... 22,596 17,851
Interest on long-term debt........................................ 8,932 4,688
-------- --------
Total interest expense...................................... 83,092 69,545
-------- --------
NET INTEREST INCOME............................................... 99,874 97,621
Provision for credit losses (note 4).............................. 4,000 4,000
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............. 95,874 93,621
-------- --------
NONINTEREST INCOME
Service charges on deposit accounts............................... 18,807 17,446
Trust fees........................................................ 6,860 5,099
Servicing income from securitized assets, net..................... 5,477 4,146
Mortgage banking income........................................... 5,198 4,010
Bankcard charges and fees......................................... 4,099 4,246
Securities gains, net............................................. (604) 314
Other income...................................................... 9,776 11,355
-------- --------
Total noninterest income.................................... 49,613 46,616
-------- --------
NONINTEREST EXPENSES
Salaries and wages................................................ 43,180 40,976
Other personnel costs............................................. 13,496 10,503
Equipment costs................................................... 8,656 8,114
Net occupancy costs............................................... 8,195 7,687
Other operating expenses.......................................... 25,785 29,162
-------- --------
Total noninterest expenses.................................. 99,312 96,442
-------- --------
INCOME BEFORE INCOME TAXES........................................ 46,175 43,795
Income tax expense................................................ 16,106 15,259
-------- --------
NET INCOME........................................................ $30,069 $28,536
======== ========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 4
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks .......................................... $657,217 $775,582 $523,747
Money market investments (note 2)................................. 195,591 366,355 211,263
Investment securities available-for-sale (note 3)................. 2,782,738 2,794,023 1,066,983
Investment securities held-to-maturity (note 3)................... - - 1,474,845
Loans held-for-sale (at cost which approximates fair value)....... 128,611 116,002 69,652
Loans, net of unearned income of $112,133, $114,813
and $102,429:
Commercial.................................................... 1,867,298 1,798,248 1,715,129
Real estate,construction...................................... 282,737 290,262 275,270
Real estate,mortgage:
Residential................................................ 622,599 650,588 645,086
Commercial................................................. 981,603 975,474 971,707
Retail........................................................ 1,120,105 1,098,955 997,499
Bankcard...................................................... 654,665 654,653 488,941
Leases receivable............................................. 340,586 334,504 287,971
Foreign....................................................... 359,289 336,140 275,713
--------- --------- ---------
Total loans, net of unearned income...................... 6,228,882 6,138,824 5,657,316
Allowance for credit losses (note 4).......................... (170,853) (177,621) (189,428)
--------- --------- ---------
Loans, net .............................................. 6,058,029 5,961,203 5,467,888
--------- --------- ---------
Premises and equipment............................................ 102,546 104,379 103,198
Due from customers on acceptances................................. 11,292 14,144 17,490
Other assets...................................................... 530,007 334,484 315,748
--------- --------- ---------
Total assets........................................ $10,466,031 $10,466,172 $9,250,814
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits:
Noninterest bearing deposits ................................. $1,958,412 $2,055,129 $1,704,917
Interest bearing deposits..................................... 4,867,434 4,859,031 4,808,156
Interest bearing deposits in foreign banking office............... 144,897 129,022 113,491
--------- --------- ---------
Total deposits........................................... 6,970,743 7,043,182 6,626,564
Federal funds purchased and securities sold under
repurchase agreements........................................... 653,227 515,525 627,710
Other borrowed funds, short-term (note 8)......................... 759,182 908,644 544,150
Bank acceptances outstanding...................................... 11,292 14,144 17,490
Accrued taxes and other liabilities............................... 369,295 286,416 155,130
Long-term debt (note 9)........................................... 514,701 514,687 214,646
--------- --------- ---------
Total liabilities................................... 9,278,440 9,282,598 8,185,690
--------- --------- ---------
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, $1/7 par value per share; authorized
600,000,000 shares; issued 594,480,215 shares.............. 84,926 84,926 84,926
Capital surplus.............................................. 198,176 198,176 198,176
Retained earnings............................................ 872,956 846,058 763,272
Net unrealized gains (losses) on investment securities
available-for-sale......................................... 1,533 24,414 (11,250)
--------- --------- ---------
Total stockholders' equity.......................... 1,187,591 1,183,574 1,065,124
--------- --------- ---------
Total liabilities and stockholders' equity.......... $10,466,031 $10,466,172 $9,250,814
=========== =========== ==========
<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>
Net
unrealized
gains
(losses) on
investment
securities
Preferred Common Capital Retained available-
Stock Stock Surplus Earnings for-sale Total
------------ ----------- ----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Three months ended March 31, 1995
---------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,176 $737,891 ($26,969) $1,024,024
Net income............................. 28,536 28,536
Dividends declared on preferred
stock.................................. (2,955) (2,955)
Change in net cost not yet recognized
as periodic pension expense.......... (200) (200)
Change in net unrealized gains
(losses) on investment securities
available-for-sale................... 15,719 15,719
--------- --------- --------- --------- --------- ---------
Balance at March 31, 1995.............. $30,000 $84,926 $198,176 $763,272 ($11,250) $1,065,124
========== ========== ========== ========== ========== ==========
Three months ended March 31, 1996
---------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,176 $846,058 $24,414 $1,183,574
Net income............................. 30,069 30,069
Dividends declared on preferred
stock.................................. (2,955) (2,955)
Change in net cost not yet recognized
as periodic pension expense............ (216) (216)
Change in net unrealized gains
(losses) on investment securities
available-for-sale................... (22,881) (22,881)
--------- --------- --------- --------- --------- ---------
Balance at March 31, 1996.............. $30,000 $84,926 $198,176 $872,956 $1,533 $1,187,591
========== ========== ========== ========== ========== ==========
<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>
Three months ended March 31,
--------------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $30,069 $28,536
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................................................. 4,000 4,000
Depreciation and amortization........................................................... 9,366 7,790
Deferred income tax (credit) expense.................................................... (7,935) 3,114
Net (loss) gain on the sale of assets................................................... 640 (565)
Net (increase) decrease in loans originated for sale.................................... (12,609) 5,714
(Increase) decrease in trading account securities....................................... (4,712) 51
(Increase) decrease in accrued interest receivable...................................... (7,266) 3,491
(Decrease) increase in accrued interest payable......................................... (2,818) 3,091
Other, net.............................................................................. (62,868) 16,553
--------- ---------
Net cash (used for) provided by operating activities................................. (54,133) 71,775
--------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale........................... 350,196 35,275
Proceeds from paydowns and maturities of investment securities available-for-sale......... 8,903,110 41,577
Proceeds from paydowns and maturities of investment securities held-to-maturity........... - 66,860
Purchases of investment securities available-for-sale..................................... (9,281,374) (59,884)
Purchases of investment securities held-to-maturity....................................... - (204,131)
Net decrease in short-term investments.................................................... 153,992 35,803
Net disbursements from lending activities of bank subsidiaries............................ (95,190) (203,788)
Principal collected on loans of nonbank subsidiaries...................................... 6,484 6,701
Loans originated by nonbank subsidiaries.................................................. (12,177) (8,120)
Principal payments received under leases.................................................. 1,042 1,657
Purchases of assets to be leased.......................................................... (1,410) (1,777)
Proceeds from other real estate transactions.............................................. 121 1,990
Proceeds from the sale of premises and equipment.......................................... 341 270
Purchases of premises and equipment....................................................... (4,392) (6,350)
Other, net................................................................................ (19,305) (1,497)
--------- ---------
Net cash provided by (used for) investing activities................................. 1,438 (295,414)
--------- ---------
FINANCING ACTIVITIES
Net decrease in deposits ................................................................. (72,439) (6,982)
Net (decrease) increase in short-term borrowings.......................................... (11,760) 110,581
Cash dividends paid....................................................................... (2,955) (2,955)
--------- ---------
Net cash (used for) provided by financing activities................................. (87,154) 100,644
--------- ---------
Decrease in cash and cash equivalents ...................................................... (139,849) (122,995)
Cash and cash equivalents at beginning of year.............................................. 797,460 692,123
--------- ---------
Cash and cash equivalents at March 31,...................................................... $657,611 $569,128
========= =========
SUPPLEMENTAL DISCLOSURES
Interest payments......................................................................... $85,910 $66,453
Income tax payments (credits)............................................................. 8,808 (7,267)
NONCASH INVESTING AND FINANCING ACTIVITIES
Loan charge-offs.......................................................................... 12,874 7,957
Transfers to other real estate............................................................ 425 1,306
<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 unaudited interim
consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations
for the interim periods presented. These unaudited financial
statements should be read in conjunction with the audited
consolidated financial statements and related notes included in
the Corporation's 1995 Annual Report on Form 10-K. Certain
amounts in the 1995 consolidated financial statements have been
reclassified to conform with the 1996 presentation.
2. Money Market Investments
<TABLE>
Money market investments at March 31, 1996, December 31, 1995
and March 31, 1995 included the following:
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Interest bearing deposits in other banks............. $394 $21,878 $45,381
Trading account securities........................... 5,038 326 20,741
Federal funds sold................................... 35,200 322,275 127,225
Securities purchased under agreements
to resell.......................................... 154,959 21,876 17,916
-------- -------- --------
Total money market investments................. $195,591 $366,355 $211,263
======== ======== ==========
</TABLE>
3. Investment Securities
<TABLE>
The following is a comparison of the amortized cost and fair values of the
available-for-sale securities:
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
--------------------- --------------------- ----------------------
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........... $932,111 $926,270 $891,263 $900,347 $52,480 $50,830
Mortgage-backed obligations of
Federal agencies.................................. 1,234,154 1,224,853 1,232,652 1,245,339 760,260 732,436
Collateralized mortgage obligations:
Issued by Federal agencies........................ 357,054 360,172 377,858 382,627 13,630 13,478
Privately issued.................................. 38,848 38,105 43,252 42,530 1,043 1,052
Obligations of states and political
subdivisions...................................... 93,519 98,719 98,009 104,886 188,027 195,727
Other investment securities.......................... 124,395 134,619 111,360 118,294 69,365 73,460
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $2,780,081 $2,782,738 $2,754,394 $2,794,023 $1,084,805 $1,066,983
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 8
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
3. Investment Securities (cont'd)
On December 8, 1995, consistent with the implementation guidance
provided in the Financial Accounting Standards Board Special
Report titled "A Guide to the Implementation of Statement 115 on
Accounting for Certain Debt and Equity Securities", the
Corporation reassessed the appropriateness of the classification
of securities in the held-to-maturity portfolio and elected to
transfer all securities from the held-to-maturity portfolio to the
available-for- sale portfolio.
<TABLE>
The following is a comparison of the amortized cost and fair values
of the held-to-maturity securities:
<CAPTION>
March 31, 1996 December 31, 1995 March 31, 1995
------------------------ --------------------- ---------------------
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........... $ - $ - $ - $ - $745,162 $725,345
Mortgage-backed obligations of
Federal agencies.................................. - - - - 156,500 152,351
Collateralized mortgage obligations:
Issued by Federal agencies........................ - - - - 517,939 506,231
Privately issued.................................. - - - - 54,244 50,624
Other investment securities.......................... - - - - 1,000 1,000
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $ - $ - $ - $ - $1,474,845 $1,435,551
========== ========== ========== ========== ========== ==========
</TABLE>
4. Impaired Loans and Allowance for Credit Losses
<TABLE>
The following table presents impaired loans by type and any related
valuation allowance at March 31, 1996.
<CAPTION>
Impaired Impaired
Total Loans with Loans with Related
Impaired No Valuation a Valuation Valuation
Loans Allowance Allowance Allowance
-------- ------------ ------------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Commercial ........................................ $16,604 $15,133 $1,472 $532
Real estate, construction.......................... 1,072 988 84 35
Real estate mortgage, commercial................... 5,019 4,687 331 85
-------- -------- -------- --------
Total........................................ $22,695 $20,808 $1,887 $652
======== ======== ======== ========
</TABLE>
<TABLE>
The following table presents impaired loans by type and any related
valuation allowance at December 31, 1995.
<CAPTION>
Impaired Impaired
Total Loans with Loans with Related
Impaired No Valuation a Valuation Valuation
Loans Allowance Allowance Allowance
-------- ------------ ------------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Commercial ........................................ $16,588 $15,370 $1,218 $570
Real estate, construction.......................... 1,125 1,033 92 35
Real estate mortgage, commercial................... 4,785 4,020 765 130
Foreign............................................ 521 521 - -
-------- -------- -------- --------
Total........................................ $23,019 $20,944 $2,075 $735
======== ======== ======== ========
</TABLE>
<PAGE>
PAGE 9
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
4. Impaired Loans and Allowance for Credit Losses (continued)
<TABLE>
The following table presents impaired loans by type and any related
valuation allowance at March 31, 1995.
<CAPTION>
Impaired Impaired
Total Loans with Loans with Related
Impaired No Valuation a Valuation Valuation
Loans Allowance Allowance Allowance
-------- ------------ ------------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Commercial ........................................ $10,415 $9,006 $1,409 $577
Real estate, construction.......................... 1,669 690 979 285
Real estate mortgage, commercial................... 25,928 15,740 10,188 4,807
Foreign............................................ 1,500 1,500 - -
-------- -------- -------- --------
Total........................................ $39,512 $26,936 $12,576 $5,669
======== ======== ======== ========
</TABLE>
<TABLE>
Three Months Ended March 31,
----------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Year-to-date average recorded investment in impaired loans..................... $22,857 $42,340
Year-to-date interest income recognized during impairment...................... 41 564
Year-to-date interest income recorded on a cash basis during impairment........ 41 564
</TABLE>
At March 31, 1996, $15,664,000 of the total impaired loans were
measured using the fair value of the loan's collateral. The remaining
impaired loans of $7,031,000 represented loans with recorded investments
of less than $500,000 which were measured at the outstanding loan
balance less any specific reserves. The $652,000 valuation allowance
for impaired loans at March 31, 1996 and the activity related to
impaired loans for the three months ended March 31, 1996 is included
in the allowance for credit losses discussed below.
In certain circumstances, a nonaccrual loan may not meet the
definition of an impaired loan under Statement of Financial
Accounting Standards No. 114 and 118, "Accounting by Creditors
for Impairment of a Loan". At March 31, 1996, the difference
between total nonaccrual loans and total impaired loans was $10.8
million which included the following: nonaccrual residential loans
of $7.0 million which were considered smaller balance homogeneous
loans and a $3.8 million nonaccrual foreign loan which is
classified as a nonaccrual loan due to regulatory requirements but
does not meet the definition of an impaired loan.
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 March 31, 1996. A summary of the activity
in the allowance for credit losses for the three months ended March 31,
1996 and 1995 follows:
<PAGE>
PAGE 10
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
4. Impaired Loans and Allowance for Credit Losses (cont'd)
<TABLE>
<CAPTION>
Three months ended March 31,
--------------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $177,621 $191,024
Provision for credit losses....................................... 4,000 4,000
Less: charge-offs, net of recoveries of $2,106 and $2,361......... (10,768) (5,596)
-------- --------
Balance at March 31............................................... $170,853 $189,428
======== ========
</TABLE>
5. Intangible Assets
<TABLE>
Intangible assets at March 31, 1996, December 31, 1995 and
March 31, 1995 included the following:
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Goodwill............................................. $28,038 $28,693 $30,664
Premium on bankcard receivables...................... 10,762 11,476 13,839
Premium on deposits.................................. 7,498 7,787 8,514
Other................................................ 885 698 733
------- ------- -------
Total intangible assets........................ $47,183 $48,654 $53,750
======= ======= =======
</TABLE>
6. Mortgage Servicing Rights
<TABLE>
Mortgage servicing rights activity for the three months ended
March 31, 1996 and March 31, 1995 follows:
<CAPTION>
Three months ended March 31,
------------------------------------
1996 1995
----------------------- ---------
Originated Purchased Purchased
---------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Balance beginning of year............................ $5,033 $1,067 $1,270
Capitalized mortgage servicing rights................ 300 - 277
Amortization......................................... (501) (96) (161)
-------- -------- --------
Balance at March 31.................................. $4,832 $971 $1,386
======== ======== ========
</TABLE>
The Corporation analyzes 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
is recorded if the unamortized mortgage servicing rights exceed their
fair value. At March 31, 1996, there was a $39,000 valuation allowance.
<PAGE>
PAGE 11
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
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>
Three months ended March 31,
----------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $295 $4,185
Writedowns........................................................ - (340)
------ ------
Balance at March 31............................................... $295 $3,845
====== ======
</TABLE>
8. Other Borrowed Funds, Short-term
<TABLE>
Other borrowed funds, short-term at March 31, 1996, December
31, 1995 and March 31, 1995 included the following:
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Master demand note of the Corporation................ $358,927 $402,489 $378,019
Bank notes........................................... 350,000 400,000 55,000
Federal funds purchased-term......................... 10,000 80,000 90,000
Treasury tax and loan note account................... 5,985 6,000 6,000
Other................................................ 34,270 20,155 15,131
-------- -------- --------
Total other borrowed funds, short-term......... $759,182 $908,644 $544,150
======== ======== ========
</TABLE>
9. Long-term Debt
<TABLE>
Following is a summary of the long-term debt of the Corporation
at March 31, 1996, December 31, 1995 and March 31, 1995 which
is all unsecured:
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
5.75% Medium term bank note due September 1, 1995.... $ - $ - $25,000
Floating Rate Medium term bank note due October 2,
1996............................................. 75,000 75,000 -
Floating Rate Medium term bank note due October 23,
1996............................................. 100,000 100,000 -
5.72% Medium term bank note due October 31, 1996..... 100,000 100,000 -
Floating Rate Medium term bank note due November 1,
1996............................................. 50,000 50,000 -
10.375% Subordinated Capital Notes due August 1,
1999............................................. 59,971 59,969 59,962
9.15% Notes due June 1, 1996......................... 10,000 10,000 10,000
8.68% Notes due January 31, 1997..................... 9,999 9,998 9,997
8.67% Notes due March 20, 1997....................... 9,998 9,998 9,997
8.375% Subordinated Notes due May 15, 2002........... 99,733 99,722 99,690
-------- -------- --------
Total long-term debt........................... $514,701 $514,687 $214,646
======== ======== ========
</TABLE>
<PAGE>
PAGE 12
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 the 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 March 31, 1996 and 1995 as well
as the average fair values for the three months ended March 31, 1996
and 1995.
<CAPTION>
Fair Values
----------------------------------------------
End-of-period Average Three Months
Notional Amounts March 31, ended March 31,
---------------------- --------------------- --------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Contracts
Interest Rate Swaps................. $996,101 $489,967
In a receivable position.......... $9,504 $5,757 $11,828 $6,741
In a payable position............. (5,583) (2,947) (6,052) (3,990)
Interest Rate Caps/Floors........... 303,098 397,695
Interest rate caps/floors held.... 272 1,989 190 2,287
Interest rate caps/floors written. (272) (2,001) (190) (2,308)
Futures............................. 78,500 172,500
In a favorable position........... 183 98 - -
In an unfavorable position........ (50) (107) - -
Foreign Exchange Contracts
Options............................. 1,522,620 163,656
Options held...................... 15,039 1,269 7,803 258
Options written................... (10,949) (1,269) (6,647) (163)
Forwards............................ 380,933 544,098
In a favorable position........... 1,731 1,839 1,781 1,182
In an unfavorable position........ (1,391) (866) (1,380) (852)
</TABLE>
<PAGE>
PAGE 13
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>
Three months ended March 31,
----------------------------
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Interest rate contracts:
Interest rate swaps..................... ($1,929) $108
Futures................................. 1,554 (683)
Interest rate caps and floors........... - 32
Securities.............................. 604 294
Miscellaneous........................... 192 -
------- -------
421 (249)
------- -------
Foreign exchange contracts:
Spot and forward contracts.............. (1,740) 1,794
Futures................................. 2 (158)
Options................................. 1,947 (651)
Miscellaneous........................... 521 4
------- -------
730 989
------- -------
Total net trading income.......... $1,151 $740
======= =======
</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 14
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
10. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
The following table presents the notional amounts and fair values for
the risk management instruments entered into by the Corporation at March
31, 1996 and 1995 as well as the weighted average maturity and weighted
average receive and pay rates for the instruments at March 31, 1996.
<CAPTION>
March 31, 1996
Notional Amount ---------------------------------- Estimated Fair Value
----------------------- Weighted ---------------------
March 31, Average Weighted Average Rate March 31,
--------------------- Maturity --------------------- ---------------------
1996 1995 in Years Receive Pay 1996 1995
-------- -------- ------------ ----------- ----------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Designated to Assets
--------------------
Interest rate swaps sold
------------------------
Convert floating rate to fixed
rate..................... $450,000 $175,000 2.05 5.83% 5.36% ($3,958) ($1,254)
-------- -------
Carrying amount (1)......... 7,068 10,282
Unrealized gross gains...... 344 -
Unrealized gross losses..... (11,370) (11,536)
Interest rate swaps purchased
-----------------------------
Convert fixed rate to floating
rate..................... 46,638 53,107 4.22 5.53 6.28 (518) 1,798
-------- -------
Carrying amount (1)......... (74) (126)
Unrealized gross gains...... 364 1,924
Unrealized gross losses..... (808) -
Designated to Liabilities
-------------------------
Interest rate swaps sold
------------------------
Convert fixed rate to floating
rate..................... 259,000 164,000 1.80 6.09 5.09 3,040 1,313
-------- -------
Carrying amount (1)......... 504 639
Unrealized gross gains...... 2,825 1,430
Unrealized gross losses..... (289) (756)
Interest rate swaps purchased
-----------------------------
Convert floating rate to fixed
rate..................... - 335,500 - - - - 1,338
-------- -------
Carrying amount (1)......... (229) 315
Unrealized gross gains...... 229 1,100
Unrealized gross losses..... - (77)
Interest rate caps purchased
----------------------------
Cap floating rate at strike level 182,500 253,300 2.91 Cap - 13.50% (2) - -
-------- -------
Carrying amount (1).......... 41 65
Unrealized gross gains....... - -
Unrealized gross losses...... (41) (65)
Call options purchased......... 12,536 12,536 1.46 - - 1,121 119
--------------------- -------- -------
Carrying amount (1).......... 1,689 1,093
Unrealized gross gains....... - -
Unrealized gross losses...... (568) (974)
</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>
<CAPTION>
March 31, 1996
Notional Amount ---------------------------------- Estimated Fair Value
----------------------- Weighted ---------------------
March 31, Average Weighted Average Rate March 31,
--------------------- Maturity --------------------- ---------------------
1996 1995 in Years Receive Pay 1996 1995
-------- -------- ------------ ----------- ----------- -------- --------
(dollars in thousands)
S> <C> <C> <C> <C> <C> <C> <C>
Basis swaps
-----------
Convert floating rate to
different index............... 130,000 30,000 1.11 5.42% 5.34% 1,424 (1,781)
-------- -------
Carrying amount (1)......... 1,630 (5)
Unrealized gross gains...... 96 -
Unrealized gross losses..... (302) (1,776)
<FN>
(1) Carrying amounts for 1996 represent accrued interest receivable (payable) and the following deferred fees: deferred
losses on the early termination of interest rate swaps sold, $6,864,000; deferred gain on the early termination of
an interest rate swap purchased, ($229,000); deferred premiums on interest rate caps purchased, $41,000; and
deferred premiums on call options purchased, $568,000. Carrying amounts for 1995 represent accrued interest
receivable (payable) and the following deferred fees: deferred losses on the early termination of interest
rate swaps sold, $10,297,000; deferred fees on the redesignation of an interest rate swap purchased, ($112,000);
deferred premiums on interest rate caps purchased, $65,000; and deferred premiums on call options purchased,
$974,000.
(2) Pays interest if interest rates exceed 13.50%.
</TABLE>
<TABLE>
The following table summarizes the estimated maturities of the risk
management instruments entered into by the Corporation at March 31,
1996.
<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..................... $275,000 $196,188 $25,450 $496,638
Weighted average receive rate....... 5.96% 5.62% 5.56% 5.80%
Estimated fair value................ 483 (4,076) (883) (4,476)
Designated to Liabilities
-------------------------
Notional amount..................... $122,473 $331,563 $ - $454,036
Weighted average receive rate....... 5.32% 6.59% - % 6.09%
Estimated fair value................ 139 4,022 - 4,161
Basis Swaps
-----------
Notional amount..................... $100,000 $30,000 $ - $130,000
Weighted average receive rate....... 5.69% 4.50% - % 5.42%
Estimated fair value................ 1,736 (312) - 1,424
</TABLE>
<PAGE>
PAGE 16
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 March 31,
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..................... $ - $190,000 $38,107 $228,107
Weighted average receive rate....... - % 6.12% 6.19% 6.13%
Estimated fair value................ - (257) 801 544
Designated to Liabilities
-------------------------
Notional amount..................... $402,944 $362,392 $ - $765,336
Weighted average receive rate....... 6.62% 7.13% - % 6.72%
Estimated fair value................ 1,946 824 - 2,770
Basis Swaps
-----------
Notional amount..................... $ - $30,000 $ - $30,000
Weighted average receive rate....... - % 5.83% - % 5.83%
Estimated fair value................ - (1,781) - (1,781)
</TABLE>
<TABLE>
The following table summarizes the activity of the risk management
instruments entered into by the Corporation, by notional amounts, for
the three months ended March 31, 1996.
<CAPTION>
Designated
Designated to Basis
to Assets Liabilities Swaps Total
---------- ------------ -------- -----
(in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of year........... $421,708 $541,736 $30,000 $993,444
Additions.............................. 75,000 80,000 - 155,000
Maturities/amortizations............... (70) (67,700) - (67,770)
Redesignations......................... - (100,000) 100,000 -
-------- -------- -------- ----------
Balance at March 31.................... $496,638 $454,036 $130,000 $1,080,674
======== ======== ======== ==========
</TABLE>
<TABLE>
The following table summarizes the activity of the risk management
instruments entered into by the Corporation, by notional amounts, for
the three months ended March 31, 1995.
<CAPTION>
Designated
Designated to Basis
to Assets Liabilities Swaps Total
---------- ------------ -------- -----
(in thousands)
<S> <C> <C> <C> <C>
Balance at beginning of year........... $228,107 $857,761 $30,000 $1,115,868
Additions.............................. - 25,275 - 25,275
Maturities/amortizations............... - (117,700) - (117,700)
-------- -------- -------- ----------
Balance at March 31.................... $228,107 $765,336 $30,000 $1,023,443
======== ======== ======== ==========
</TABLE>
<PAGE>
PAGE 17
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
10. Off-Balance Sheet Derivative Financial Instruments (cont'd)
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 $6.9 million as of March 31, 1996. These
losses are scheduled to be amortized into income in the following periods:
$2.6 million for the remainder of 1996, $3.4 million in 1997 and $858,000
in 1998.
The deferred gain on the early termination of an interest rate swap
with a notional balance of $100.0 million designated to the Corporation's
federal funds purchased was $229,000 as of March 31, 1996. This
gain is scheduled to be amortized into income in the following periods:
$74,000 for the remainder of 1996, $98,000 in 1997 and $57,000 in 1998.
As of March 31, 1996, 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 $684,000 and gross interest expense decreased
$857,000 which resulted in a $173,000 increase in net interest income.
<PAGE>
PAGE 18
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 three months ended March 31, 1996 was $30.1 million compared to
$28.5 million for the three months ended March 31, 1995. Return on
average assets and return on average total equity were 1.15% and
10.00%, respectively, for the three months ended March 31, 1996
compared with 1.24% and 11.02% for the three months ended March 31,
1995.
<TABLE>
Table 1 Selected Quarterly Financial Information
<CAPTION>
1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
1996 1995 1995 1995 1995
----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Net interest income (fully tax equivalent)........ $101,197 $100,872 $100,291 $99,651 $99,954
Tax equivalent adjustment......................... 1,323 1,033 2,217 2,192 2,333
-------- -------- -------- -------- --------
Net interest income............................... 99,874 99,839 98,074 97,459 97,621
Provision for credit losses....................... 4,000 5,666 2,373 3,961 4,000
-------- -------- -------- -------- --------
Net interest income after provision for credit
losses.......................................... 95,874 94,173 95,701 93,498 93,621
Noninterest income................................ 49,613 52,142 49,483 47,669 46,616
Noninterest expenses.............................. 99,312 98,373 97,589 96,320 96,442
-------- -------- -------- -------- --------
Income before income taxes........................ 46,175 47,942 47,595 44,847 43,795
Income tax expense................................ 16,106 16,454 16,563 15,716 15,259
-------- -------- -------- -------- --------
Net income........................................ $30,069 $31,488 $31,032 $29,131 $28,536
======== ======== ======== ======== ========
Dividends declared on preferred stock............. $2,955 $2,955 $2,955 $2,955 $2,955
CONSOLIDATED AVERAGE BALANCES:
Total assets...................................... 10,531,200 10,336,500 9,791,300 9,705,800 9,313,200
Loans, net of unearned income..................... 6,173,600 6,065,800 5,858,100 5,768,400 5,519,700
Deposits.......................................... 6,905,200 6,794,700 6,835,300 6,742,200 6,600,900
Long-term debt.................................... 514,700 440,500 206,500 214,700 214,600
Common stockholder's equity....................... 1,064,100 1,023,900 982,300 947,300 905,000
Stockholders' equity.............................. 1,208,900 1,168,700 1,127,100 1,092,100 1,049,800
CONSOLIDATED RATIOS:
Return on average assets.......................... 1.15% 1.21% 1.26% 1.20% 1.24%
Return on average total stockholders' equity...... 10.00 10.69 10.92 10.70 11.02
Return on average common stockholder's equity..... 10.25 11.06 11.34 11.08 11.46
Average stockholders' equity to average total
assets.......................................... 11.48 11.31 11.51 11.25 11.27
Capital to risk-adjusted assets:
Tier 1.......................................... 13.63 13.77 13.64 13.64 14.03
Total........................................... 16.78 17.05 16.94 17.00 17.53
Tier 1 leverage ratio............................. 10.99 10.91 11.21 11.00 11.15
Net interest margin............................... 4.26 4.24 4.45 4.50 4.74
Net charge-offs to average loans, net of average
unearned income (annualized).................... 0.70 0.66 0.40 0.55 0.41
Allowance for credit losses to period end loans,
net of unearned income.......................... 2.74 2.89 3.02 3.17 3.35
Nonperforming assets to period end loans, net of
unearned income plus other foreclosed assets
owned........................................... 0.73 0.73 0.84 0.88 1.10
</TABLE>
<PAGE>
PAGE 19
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 March 31, 1996 of $101.2 million increased $1.2 million
(1.2%) when compared to net interest income of $100.0 million for the
quarter ended March 31, 1995. Net interest income benefited from the
following: a $998.4 million increase in earning assets, a more
favorable asset mix evidenced by a $653.9 million increase in average
loans, an increase in interest free sources of funds of $189.4 million
and an additional interest accrual day which added $649,000 to net
interest income. In addition, nonrecurring income from loan prepayments
and renegotiations improved net interest income by $934,000. Partially
offsetting these positive contributions to net interest income
was a 51 basis point decline in the interest rate spread. The net
interest margin for the quarter ended March 31, 1996 was 4.26%
compared to 4.74% for the quarter ended March 31, 1995.
An analysis of fully tax equivalent net interest income, interest rate
spreads and net interest margins for the three months ended March 31, 1996
and 1995 is presented in Table 2.
<TABLE>
Table 2 Net Interest Income, Interest Rate Spread and Net Interest Margin on Average Earning Assets
(Tax Equivalent Basis)
<CAPTION>
Three months ended March 31,
-----------------------------------------------------------------------
1996 1995
----------------------------------- -------------------------------
Average Yield/ Average Yield/
balance Interest rate balance Interest rate
-------- -------- -------- -------- -------- --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Investment securities (1).............. $2,988.6 $46.9 6.31% $2,440.8 $38.6 6.41%
Loans held-for-sale.................... 115.1 2.0 7.10 48.4 1.0 8.56
Loans, net of unearned income.......... 6,173.6 131.8 8.59 5,519.7 122.0 8.97
Other earning assets................... 272.0 3.6 5.30 542.0 7.9 5.87
------- ------ ------- ------
Earning assets......................... $9,549.3 184.3 7.76 $8,550.9 169.5 8.04
======== ------ ======== ------
Interest bearing liabilities........... 7,214.9 83.1 4.63 6,405.9 69.5 4.40
Interest rate spread (2)............... 3.13 3.64
Interest free sources utilized
to fund earning assets............... 2,334.4 2,145.0
------- ------ ------- ------
Total sources of funds................. $9,549.3 83.1 3.50 $8,550.9 69.5 3.30
======== ------ ======== ------
Net interest income.................... $101.2 $100.0
====== ======
Net interest margin (3)................ 4.26% 4.74%
==== ====
<FN>
(1) Yields on investment securities are calculated based upon average amortized cost.
(2) Interest rate spread is the difference between the yield on average earning assets and the rate paid
on average interest bearing liabilities.
(3) Net interest margin is the ratio of net interest income on a fully tax-equivalent basis to
average earning assets.
</TABLE>
<PAGE>
PAGE 20
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Provision for Credit Losses
The provision for credit losses totaled $4.0 million for the first
quarter of 1996 as well as the first quarter of 1995. Provisions for
bankcard receivables increased $3.7 million when compared to
provisions for the first quarter of 1995. This increase was
offset by $3.7 million in provision recaptures in 1996.
Noninterest Income
<TABLE>
The following table presents the components of noninterest income
for the three months ended March 31, 1996 and 1995.
Table 3 Noninterest Income
<CAPTION>
Three months ended March 31,
----------------------------------
Percent
Change
1996 1995 1996/1995
------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C>
Service charges on deposit accounts.... $18,807 $17,446 7.8%
Trust fees............................. 6,860 5,099 34.5
Servicing income from securitized
assets, net.......................... 5,477 4,146 32.1
Mortgage banking income................ 5,198 4,010 29.6
Bankcard charges and fees.............. 4,099 4,246 (3.5)
Securities gains, net.................. (604) 314 (292.4)
Other income:
Customer service fees................ 1,963 1,753 12.0
Security sales and fees.............. 1,180 1,222 (3.4)
Trading income....................... 1,151 1,403 (18.0)
Other................................ 5,482 6,977 (21.4)
------- ------- -----
Total other income..................... 9,776 11,355 (13.9)
------- ------- -----
Total noninterest income........ $49,613 $46,616 6.4%
======= ======= =======
</TABLE>
The Corporation's noninterest income for the first quarter of
1996 increased $3.0 million (6.4%) when compared to the first quarter
of 1995. Service charges on deposits increased $1.4 million (7.8%)
Corporate deposit service charges increased $717,000 and retail deposit
service charges increased $643,000. Trust fees increased $1.8 million
(34.5%) as a result of increases in personal trust services income
and custody fee income. Servicing income on securitized assets
increased $1.3 million (32.1%) due to a decrease in the amount of
servicing income reserved for credit losses resulting from
improved credit experience on the securitized portfolios.
Mortgage banking income increased $1.2 million (29.6%) as a result
of an increase in mortgage loan placement fees of $1.0 million.
Securities losses of $604,000 were recorded in the first quarter
of 1996 compared to $314,000 in gains in the first quarter of
1995. Securities sales are discussed in detail under "Changes in
Financial Position." Total other income decreased $1.6 million
(13.9%) primarily due to the following income which was recorded
in the first quarter of 1995: $827,000 in nonaccrual fees and
interest payments received on two loans which were previously paid
off and $175,000 in income from an other real estate owned
property. In addition, leasing residual gains decreased $415,000
when the first quarter of 1996 is compared to the first quarter of
1995.
<PAGE>
PAGE 21
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 ended March 31, 1996 and 1995.
Table 4 Noninterest Expenses
<CAPTION>
Three months ended March 31,
----------------------------------
Percent
Change
1996 1995 1996/1995
------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C>
Salaries and wages..................... $43,180 $40,976 5.4%
Other personnel costs.................. 13,496 10,503 28.5
Equipment costs........................ 8,656 8,114 6.7
Net occupancy costs.................... 8,195 7,687 6.6
Other operating expenses:
External services.................... 5,480 4,837 13.3
Postage and communications........... 4,099 3,553 15.4
Advertising and public relations..... 3,701 4,795 (22.8)
Professional fees.................... 1,860 1,836 1.3
Lending and collection............... 1,427 1,330 7.3
Regulatory fees and insurance........ 858 3,937 (78.2)
Other................................ 8,360 8,874 (5.8)
------ ------ -----
Total other operating expenses..... 25,785 29,162 (11.6)
------ ------ -----
Total noninterest expenses..... $99,312 $96,442 3.0%
======= ======= =======
</TABLE>
The Corporation's noninterest expenses for the first quarter of
1996 increased $2.9 million (3.0%) when compared to the first quarter
of 1995. Salaries and wages increased $2.2 million (5.4%) primarily
due to a $760,000 increase in employee incentives and commissions and
a $540,000 severance accrual in 1996. Other personnel costs increased
$3.0 million (28.5%) primarily as a result of a $2.2 million increase
in employee retirement expenses which included $1.0 million in
pension settlements in 1996. In addition, payroll taxes increased
$586,000. Advertising and public relations expense decreased $1.1
million (22.8%) primarily due to expenses for a bankcard
solicitation in the first quarter of 1995. Regulatory fees and
insurance expense decreased $3.1 million (78.2%) due to a
reduction in the Federal Deposit Insurance Corporation ("FDIC")
assessment rate.
<PAGE>
PAGE 22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Changes in Financial Position
Investment Securities
Available-for-Sale Portfolio
Investment securities available-for-sale decreased $11.3 million
from December 31, 1995 to March 31, 1996. In the first quarter of
1996, $109.8 million in U. S. Treasury securities were sold, resulting
in net losses of $555,000 and $241.0 million in mortgage-backed
obligations of Federal agencies ("MBS's") were sold, resulting in
net losses of $48,000. Paydowns, maturities and/or calls on the
the available-for-sale securities totaled $8.9 billion in the first
three months of 1996. These decreases in the portfolio were offset by
$9.3 billion in purchases which included the following: $8.9 billion
U.S. Treasury and U.S. Government agency securities, $303.0 million
in MBS's, $71.4 million in other debt securities and $1.0 million in
in equity securities. The fair value of the available-for-sale
portfolio at March 31, 1996 was $2.7 million above the amortized cost
compared to a fair value at December 31, 1995 which was $39.6 million
above the amortized cost. This change in the fair value resulted in
a $22.9 million net adjustment to the unrealized gains (losses) on
available-for-sale securities which is included as a component of
stockholders' equity. Table 5 provides information on the gross
unrealized gains and losses of the available-for-sale portfolio at
March 31, 1996.
<TABLE>
The amortized cost and fair values of the available-for-sale securities
at March 31, 1996 are shown in the following table.
Table 5 Available-for-Sale Portfolio
<CAPTION>
March 31, 1996
-------------------------------------------------
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........... $932,111 $2,812 ($8,653) $926,270
Mortgage-backed obligations of
Federal agencies.................................. 1,234,154 5,170 (14,471) 1,224,853
Collateralized mortgage obligations:
Issued by Federal agencies........................ 357,054 5,001 (1,883) 360,172
Privately issued.................................. 38,848 41 (784) 38,105
Obligations of states and political
subdivisions...................................... 93,519 5,735 (535) 98,719
Other debt securities................................ 90,052 232 - 90,284
Equity securities.................................... 34,343 9,992 - 44,335
--------- --------- --------- ---------
Total.......................................... $2,780,081 $28,983 ($26,326) $2,782,738
========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 23
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Loan Portfolio
Total loans, net of unearned income increased to $6.2 billion at
March 31, 1996 from $6.1 billion at December 31, 1995. This $90.1
million (1.5%) increase was due primarily to growth in commercial and
foreign loans.
Commercial loans increased $69.1 million (3.8%) from December 31,
1995 to March 31, 1996, thereby contributing more than three-quarters
of the total loan growth for the Corporation. The majority of the
commercial loan growth was from large corporate borrowers from the
multi-national sector including borrowers within the Communications
industry.
Commercial real estate loans, which include both construction and
commercial mortgages, were flat at $1.3 billion from December 31, 1995
to March 31, 1996. 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 7 and 8.
Residential mortgages decreased $28.0 million (4.3%) since
December 31, 1995. The Corporation originates residential
mortgages primarily for sale in the secondary market. New
originations for the Corporation's permanent portfolio are
principally low income housing and adjustable rate products.
Residential mortgages declined in the first quarter due to
decreased demand for adjustable rate mortgages.
Retail loans increased $21.2 million (1.9%) from December 31,
1995 to March 31, 1996. Most of the retail loan growth was within the
installment loan product lines including real estate secured, closed-
ended loans.
Bankcard outstandings from December 31, 1995 to March 31, 1996
were flat at $654.7 million.
Leases receivable increased $6.1 million (1.8%) since December 31,
1995. The majority of the growth was in retail leases, which comprises
10% of total leases receivable. Automobile leasing by consumers remains
a popular financing choice.
Foreign loans increased $23.1 million (6.9%) from December 31,
1995 to March 31, 1996. The majority of growth has been in loans to
customers within the shipping industry.
The Corporation monitors exposure based on industry classifications
and establishes exposure limits that are reviewed by the Board of
Directors. Significant exposures by industry classification in the
loan portfolio are presented in Table 6.
<PAGE>
PAGE 24
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 6 Loan Portfolio Distribution by Industry Classification
<CAPTION>
March 31, 1996
----------------------------------------------------
Outstanding Unfunded Total Nonperforming
Balance Commitments Exposure Loans
----------- ----------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Transportation (1)................................ $450,166 $25,986 $476,152 $516
Communications (2)................................ 359,438 113,776 473,214 2,388
Healthcare (3).................................... 326,095 117,948 444,043 181
<FN>
----------------
(1) Includes loans and leases for vessel, commercial aircraft and railroad equipment financing.
(2) Includes exposure to cable, publishing/newspapers, wireless communications and broadcasting.
(3) Includes exposure to hospitals, nursing care and noninstitutional borrowers, comprised of
both commercial and real estate secured loans.
</TABLE>
<TABLE>
Table 7 Loans Secured by Real Estate and Other Real Estate Owned by Property Type
<CAPTION>
March 31, 1996
-------------------------------------------------
Total loans
------------------------ Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Office buildings..................................... $91,642 $272,650 $413 $274
Industrial warehouse................................. 47,602 166,988 1,005 -
Retail............................................... 51,992 134,034 2,122 4,015
Hospitals/nursing home............................... 6,183 93,127 - -
Hotels/motels........................................ - 62,426 - -
Commercial land...................................... 37,564 712 449 4,959
Special purpose...................................... 11,344 68,970 423 -
Apartments........................................... 23,792 51,893 421 -
Mixed use............................................ - 46,765 - -
Residential land..................................... 8,235 239 623 1,282
Other land-farm/recreational......................... - 7,787 575 -
Residential properties for resale.................... 3,446 700 - -
Miscellaneous........................................ 937 75,312 60 -
--------- --------- --------- ---------
Total.......................................... $282,737 $981,603 $6,091 $10,530
========== ========== ========== ==========
</TABLE>
<TABLE>
Table 8 Loans Secured by Real Estate and Other Real Estate Owned by Geographic Region
<CAPTION>
March 31, 1996
-------------------------------------------------
Total loans
----------------------- Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Maryland............................................. $220,071 $654,447 $2,611 $5,934
Pennsylvania......................................... 11,061 164,803 3,473 1,726
Virginia............................................. 23,630 38,903 - 2,096
Washington, D.C...................................... 17,559 30,209 - 274
Florida.............................................. 6,591 26,315 - 500
New Jersey........................................... - 27,375 - -
Delaware............................................. 746 9,146 7 -
All other............................................ 3,079 30,405 - -
--------- --------- --------- ---------
Total.......................................... $282,737 $981,603 $6,091 $10,530
========== ========== ========== ==========
</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 $45.5 million at March 31, 1996,
an increase of $695,000 when compared to nonperforming assets of
$44.8 million at December 31, 1995. The most significant change in
nonperforming assets in the three months ended March 31, 1996 was
$4.8 million in additions to nonperforming assets primarily due to
the transfer of loans to nonaccrual status. This increase was
partially offset by paydowns of $3.7 million, loans reclassified to
accrual status of $433,000 and other real estate owned sales of
$129,000. The most significant paydowns were on a variety of
commercial and real estate transactions in which cash payments were
received on nonaccrual loans. Loans returned to accrual status were
residential loans which met the regulatory tests for return to accrual
status. Information on the Corporation's impaired loans is
included in note 4 of the Notes to the Consolidated Financial
Statements.
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 9 Nonperforming Assets
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans
Domestic:
Commercial......................................... $16,605 $16,587 $10,415
Real estate, construction.......................... 1,072 1,125 1,669
Real estate mortgage, commercial................... 5,019 4,785 25,928
Real estate mortgage, residential.................. 6,964 6,375 4,374
Leases receivable.................................. - - 85
Foreign.............................................. 3,800 4,321 5,300
-------- -------- --------
Total nonaccrual loans......................... 33,460 33,193 47,771
-------- -------- --------
Restructured loans................................... 139 143 444
Other assets owned:
Other real estate.................................. 11,832 11,546 17,945
Valuation reserves................................. (295) (295) (3,845)
Other assets....................................... 396 250 146
-------- -------- --------
Total other assets owned....................... 11,933 11,501 14,246
-------- -------- --------
Total nonperforming assets......................... $45,532 $44,837 $62,461
======== ======== ========
Nonperforming assets as a percentage of total
loans, net of unearned income plus other
foreclosed assets owned........................... 0.73% 0.73% 1.10%
==== ==== ====
Accruing loans contractually past due
90 days or more as to principal or interest:
Domestic.......................................... $20,580 $18,808 $15,006
======== ======== ========
</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 three months
ended March 31, 1996 and March 31, 1995, respectively.
<TABLE>
Table 10 Analysis of the Allowance for Credit Losses
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
---------- ----------
(dollars in thousands)
<S> <C> <C>
Allowance at beginning of year....................... $177,621 $191,024
Provision for credit losses.......................... 4,000 4,000
Losses charged off:
Commercial loans................................. (459) (94)
Real estate loans, mortgage:
Residential.................................... (14) (16)
Commercial..................................... - (5)
Retail........................................... (1,174) (763)
Bankcard receivables............................. (11,227) (7,068)
Leases receivable................................ - (11)
-------- --------
Total losses charged off....................... (12,874) (7,957)
Recoveries of losses previously charged off:
Commercial loans................................. 352 357
Real estate loans, construction.................. 10 -
Real estate loans, mortgage:
Residential.................................... 3 22
Commercial..................................... 5 3
Retail........................................... 443 546
Bankcard receivables............................. 1,267 1,364
Leases receivable................................ 26 69
-------- --------
Total recoveries............................... 2,106 2,361
Net losses charged off............................... (10,768) (5,596)
-------- --------
Total allowance at March 31.......................... $170,853 $189,428
======== ========
Average loans, net of average unearned income........ $6,173,601 $5,519,715
========== ==========
Period end loans, net of unearned income............. $6,228,882 $5,657,316
========== ==========
Net charge-offs to average loans, net of average
unearned income (annualized)...................... 0.70% 0.41%
Allowance as a percentage of period end loans, net
of unearned income................................ 2.74 3.35
Allowance as a percentage of nonperforming loans..... 508.51 392.88
</TABLE>
<PAGE>
PAGE 27
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Deposits
Total deposits decreased $72.4 million from December 31, 1995 to
March 31, 1996. Core deposits totaled $6.3 billion at March 31, 1996
and at December 31, 1995. Interest bearing demand deposits decreased
$403.9 million offset by a $443.0 million increase in money market
deposits. During the first quarter of 1996 the Corporation
introduced a new sweep product which resulted in a decrease in
interest bearing demand deposits with an offsetting increase in
money market deposits. This shift in deposits resulted in a
reduction in the level of required reserves that the Corporation
must maintain in cash and noninterest earning balances with the
Federal Reserve Bank. Purchased deposits, which include large
denomination time and foreign time deposits, decreased $26.2
million.
Total deposits increased $344.2 million from March 31, 1995 to
March 31, 1996. Core deposits increased $365.5 million primarily due
to increases in money market deposits of $334.4 million, noninterest
bearing demand deposits of $243.9 million and other consumer time
deposits of $173.4 million. As noted above, the increase in money
market deposits was offset by a decline in interest bearing demand
deposits of $346.7 million which was primarily due to the
introduction of a new sweep product. Purchased deposits decreased
$21.3 million.
<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 March 31, 1996, December 31, 1995 and March 31, 1995,
based upon the capital requirements of the Federal Reserve Board.
<TABLE>
Table 11 Capital Components
March 31, December 31, March 31,
1996 1995 1995
------------ ------------- -------------
(dollars in thousands)
<S> <C> <C> <C>
Preferred stockholders' equity.................................... $144,852 $144,852 $144,852
Common stockholder's equity....................................... 1,042,739 1,038,722 920,272
Disallowed intangibles............................................ (36,421) (37,178) (39,911)
Net unrealized (gains) losses on investment securities available-
for-sale (1)................................................... (1,533) (24,414) 11,250
-------- -------- --------
Tier 1 capital.................................................... 1,149,637 1,121,982 1,036,463
-------- -------- --------
Qualifying long-term debt......................................... 99,733 103,721 105,688
Allowance for credit losses (2)................................... 106,272 102,754 93,567
Mandatory convertible securities.................................. 59,971 59,969 59,962
-------- -------- --------
Tier 2 capital.................................................... 265,976 266,444 259,217
-------- -------- --------
Total capital..................................................... $1,415,613 $1,388,426 $1,295,680
========== ========== ==========
Risk-adjusted assets.............................................. $8,437,187 $8,145,412 $7,389,540
========== ========== ==========
Average quarterly assets (regulatory guidelines).................. $10,494,467 $10,316,684 $9,337,935
========== ========== ==========
Risk-based capital ratios:
Tier 1 to risk adjusted assets.................................. 13.63% 13.77% 14.03%
Regulatory minimum.............................................. 4.00 4.00 4.00
Total capital to risk-adjusted assets........................... 16.78 17.05 17.53
Regulatory minimum.............................................. 8.00 8.00 8.00
Leverage ratio.................................................... 10.99 10.91 11.15
<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 $27.7 million and $27.2 million,
respectively, when March 31, 1996 is compared to December 31, 1995
primarily due to $30.1 million in net income partially offset by $3.0
million in dividends declared on preferred stock in the first three
months of 1996. Tier 1 and total capital increased $113.2 million and
$119.9 million, respectively, when March 31, 1996 is compared to March
31, 1995 primarily as a result of $121.7 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
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Pending Transactions
On January 24, 1996, the Corporation announced that it had
entered into a definitive agreement to acquire 1st Washington
Bancorp, Inc. ("1st Washington"), a savings and loan holding
company headquartered in Herndon, Virginia, whose principal
subsidiary is Washington Federal Savings Bank. Under the terms of
the agreement the Corporation will pay in cash a purchase price of
$81.9 million or $8.125 per share. Consummation of the
transaction is subject to 1st Washington shareholder approval and
regulatory approvals. The transaction is expected to be completed
in 1996. At March 31, 1996, 1st Washington had total assets of
$795 million and total deposits of $441 million and conducted
its business from offices in the District of Columbia and
surrounding portions of northern Virginia and Maryland.
The Corporation has decided to exit the mortgage servicing
business. Of its $1.6 billion servicing portfolio, the
Corporation has entered into agreements to sell $708 million and
has solicited bids to sell an additional $500 million.
Anticipated net gains on the sale of servicing are expected to
exceed $9.0 million, with $3.0 million attributable to
agreements already entered into. The sales are subject to
regulatory approvals and are expected to settle during the second
and third quarter of 1996.
The Corporation has entered into a subservicing agreement to
service the remainder of its mortgage servicing portfolio and to
provide interim servicing for future loan originations until the
originated mortgage servicing is sold.
<PAGE>
PAGE 30
<TABLE>
Table 12
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Three months ended March 31, 1996
-------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $664.0 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 13.4 0.2 5.80
Trading account securities......................... 0.9 - 5.49
Funds sold......................................... 257.7 3.4 5.27
Investment securities available-for-sale:
Taxable securities................................. 2,858.6 44.1 6.21
Tax-exempt securities (1).......................... 96.2 2.4 10.07
Equity investments................................. 33.8 0.4 4.16
--------- ---------
Total securities available-for-sale (2)......... 2,988.6 46.9 6.31
Loans held-for-sale.................................. 115.1 2.0 7.10
Loans, net of unearned income (1,3):
Commercial......................................... 1,830.5 35.0 7.69
Real estate, construction.......................... 283.9 6.3 8.89
Real estate mortgage, commercial................... 973.1 21.6 8.92
Real estate mortgage, residential.................. 637.8 11.8 7.45
Retail............................................. 1,105.2 23.3 8.49
Bankcard........................................... 657.8 22.6 13.80
Leases receivable.................................. 335.0 4.6 5.54
Foreign............................................ 350.3 6.6 7.65
--------- ---------
Total loans, net of unearned income........... 6,173.6 131.8 8.59
Allowance for credit losses....................... (174.0) - -
---------
Loans, net...................................... 5,999.6 - -
Other assets......................................... 491.9 - -
--------- ---------
Total assets/interest income.................... $10,531.2 $184.3
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,900.3 $ - - %
---------
Interest bearing demand............................ 115.8 0.7 2.55
Money market accounts.............................. 1,550.0 12.1 3.13
Savings........................................... 1,022.6 6.9 2.71
Other consumer time................................ 1,623.1 22.0 5.46
Large denomination time............................ 556.0 8.0 5.77
Deposits in foreign banking offices.................. 137.4 1.9 5.50
--------- ---------
Total interest bearing deposits................. 5,004.9 51.6 4.14
--------- ---------
Total deposits.................................. 6,905.2 - -
Funds purchased...................................... 849.5 11.1 5.23
Other borrowed funds, short-term..................... 845.8 11.5 5.49
Other liabilities.................................... 207.1 - -
Long-term debt....................................... 514.7 8.9 6.98
Stockholders' equity................................. 1,208.9 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $10,531.2 $83.1
======== ========
Earning assets/interest income....................... $9,549.3 $184.3 7.76%
Interest bearing liabilities/interest expense........ 7,214.9 83.1 4.63
Earning assets/interest expense...................... 9,549.3 83.1 3.50
Interest rate spread (4)............................. 3.13%
=====
Net interest margin (5).............................. 4.26%
=====
<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) Interest rate spread is the difference between the yield on average earning assets and the rate paid
on average interest bearing liabilities.
(5) Net interest margin is the ratio of net interest income on a fully tax-equivalent basis to
average earning assets.
</TABLE>
<PAGE>
PAGE 31
<TABLE>
Table 13
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Three months ended December 31, 1995
------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $609.4 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 24.6 0.4 5.93
Trading account securities......................... 2.2 - 8.24
Funds sold......................................... 43.6 0.6 5.36
Investment securities available-for-sale:
Taxable securities................................. 1,782.8 28.0 6.24
Tax-exempt securities (1).......................... 108.1 3.6 13.31
Equity investments................................. 33.3 0.3 3.31
--------- ---------
Total securities available-for-sale (2)......... 1,924.2 31.9 6.59
Investment securities held-to-maturity:
Taxable securities................................. 1,260.8 18.8 5.90
Loans held-for-sale.................................. 124.5 2.4 7.54
Loans, net of unearned income (1,3):
Commercial......................................... 1,813.0 36.8 8.06
Real estate, construction.......................... 287.9 6.7 9.26
Real estate mortgage, commercial................... 997.4 21.3 8.46
Real estate mortgage, residential.................. 647.7 12.4 7.60
Retail............................................. 1,082.2 23.3 8.54
Bankcard........................................... 589.2 22.3 15.03
Leases receivable.................................. 314.3 4.5 5.66
Foreign............................................ 334.1 6.2 7.37
--------- ---------
Total loans, net of unearned income........... 6,065.8 133.5 8.73
Allowance for credit losses....................... (179.7) - -
---------
Loans, net...................................... 5,886.1 - -
Other assets......................................... 461.1 - -
--------- ---------
Total assets/interest income.................... $10,336.5 $187.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,796.1 $ - - %
---------
Interest bearing demand............................ 535.4 3.1 2.29
Money market accounts.............................. 1,103.2 9.9 3.55
Savings........................................... 1,009.8 6.8 2.69
Other consumer time................................ 1,627.3 22.7 5.54
Large denomination time............................ 592.6 9.0 6.00
Deposits in foreign banking offices.................. 130.3 1.8 5.44
--------- ---------
Total interest bearing deposits................. 4,998.6 53.3 4.23
--------- ---------
Total deposits.................................. 6,794.7 - -
Funds purchased...................................... 814.7 11.6 5.67
Other borrowed funds, short-term..................... 929.6 13.7 5.85
Other liabilities.................................... 188.3 - -
Long-term debt....................................... 440.5 8.1 7.26
Stockholders' equity................................. 1,168.7 - -
--------- ---------
Total liabilities and stockholders'
equity/interest expense...................... $10,336.5 $86.7
======== ========
Earning assets/interest income....................... $9,445.7 $187.6 7.88%
Interest bearing liabilities/interest expense........ 7,183.4 86.7 4.79
Earning assets/interest expense...................... 9,445.7 86.7 3.64
Interest rate spread (4)............................. 3.09%
=====
Net interest margin (5).............................. 4.24%
=====
<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) Interest rate spread is the difference between the yield on average earning assets and the rate paid
on average interest bearing liabilities.
(5) Net interest margin is the ratio of net interest income on a fully tax-equivalent basis to
average earning assets.
</TABLE>
<PAGE>
PAGE 32
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is furnished to this Form 10-Q:
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the
quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Maryland Bancorp
May 13, 1996 BY /s/ Robert W. Schaefer
----------------------------
Robert W. Schaefer
Executive Vice President and
Chief Financial Officer
May 13, 1996 BY /s/ Robert L. Carpenter, Jr.
-------------------------------
Robert L. Carpenter, Jr.
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 MARCH 31, 1996 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 657,217
<INT-BEARING-DEPOSITS> 394
<FED-FUNDS-SOLD> 190,159
<TRADING-ASSETS> 5,038
<INVESTMENTS-HELD-FOR-SALE> 2,782,738
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,228,882
<ALLOWANCE> 170,853
<TOTAL-ASSETS> 10,466,031
<DEPOSITS> 6,970,743
<SHORT-TERM> 1,412,409
<LIABILITIES-OTHER> 369,295
<LONG-TERM> 514,701
0
30,000
<COMMON> 84,926
<OTHER-SE> 1,072,665
<TOTAL-LIABILITIES-AND-EQUITY> 10,466,031
<INTEREST-LOAN> 131,233
<INTEREST-INVEST> 46,117
<INTEREST-OTHER> 5,616
<INTEREST-TOTAL> 182,966
<INTEREST-DEPOSIT> 51,564
<INTEREST-EXPENSE> 83,092
<INTEREST-INCOME-NET> 99,874
<LOAN-LOSSES> 4,000
<SECURITIES-GAINS> (604)
<EXPENSE-OTHER> 99,312
<INCOME-PRETAX> 46,175
<INCOME-PRE-EXTRAORDINARY> 30,069
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,069
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.26
<LOANS-NON> 33,460
<LOANS-PAST> 20,580
<LOANS-TROUBLED> 139
<LOANS-PROBLEM> 38,238
<ALLOWANCE-OPEN> 177,621
<CHARGE-OFFS> 12,874
<RECOVERIES> 2,106
<ALLOWANCE-CLOSE> 170,853
<ALLOWANCE-DOMESTIC> 81,138
<ALLOWANCE-FOREIGN> 16,175
<ALLOWANCE-UNALLOCATED> 73,540
</TABLE>
