SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
_____________________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 SEPTEMBER 30, 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.............. 7-19
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 20-35
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 36
</TABLE>
<PAGE>
PAGE 3
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................................ $130,600 $129,522 $384,869 $377,917
Interest and dividends on investment securities held-to-maturity:
Taxable....................................................... - 22,357 - 63,928
Interest on investment securities available-for-sale:
Taxable....................................................... 40,341 16,838 125,008 42,210
Tax-exempt.................................................... 1,572 3,634 4,842 10,965
Dividends..................................................... 455 315 1,035 950
Interest on loans held-for-sale................................... 2,467 2,197 6,571 4,939
Interest on money market investments.............................. 3,054 3,077 11,334 20,086
-------- -------- -------- --------
Total interest and dividend income.......................... 178,489 177,940 533,659 520,995
-------- -------- -------- --------
INTEREST EXPENSE
Interest on deposits.............................................. 51,736 53,887 152,706 152,282
Interest on Federal funds purchased and
other short-term borrowings..................................... 15,330 21,287 54,710 61,499
Interest on long-term debt........................................ 9,457 4,692 27,782 14,060
-------- -------- -------- --------
Total interest expense...................................... 76,523 79,866 235,198 227,841
-------- -------- -------- --------
NET INTEREST INCOME............................................... 101,966 98,074 298,461 293,154
Provision for credit losses (note 5).............................. 2,000 2,373 6,000 10,334
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES............. 99,966 95,701 292,461 282,820
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts............................... 20,376 18,150 58,791 53,601
Mortgage banking income........................................... 10,904 4,422 22,810 11,384
Trust and investment advisory fees................................ 7,470 5,983 20,920 16,238
Servicing income.................................................. 7,401 6,397 19,236 15,174
Credit card income................................................ 2,056 4,517 8,262 13,312
Securities gains (losses), net.................................... (126) 342 175 2,187
Other income...................................................... 9,303 9,672 29,865 31,872
-------- -------- -------- --------
Total noninterest income.................................... 57,384 49,483 160,059 143,768
-------- -------- -------- --------
NONINTEREST EXPENSES
Salaries and wages................................................ 47,325 43,794 134,458 128,244
Other personnel costs............................................. 9,691 10,676 34,664 31,256
Occupancy costs................................................. 8,511 8,633 23,683 23,938
Equipment costs................................................... 8,103 7,426 24,474 22,547
Other operating expenses.......................................... 29,393 27,060 84,224 84,366
-------- -------- -------- --------
Total noninterest expenses.................................. 103,023 97,589 301,503 290,351
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES........................................ 54,327 47,595 151,017 136,237
Income tax expense................................................ 20,625 16,563 54,712 47,538
-------- -------- -------- --------
NET INCOME........................................................ $33,702 $31,032 $96,305 $88,699
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 4
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks .......................................... $826,569 $775,582 $588,876
Money market investments (note 3)................................. 47,106 366,355 55,572
Investment securities available-for-sale (note 4)................. 2,801,694 2,794,023 1,672,532
Investment securities held-to-maturity (note 4)................... - - 1,321,634
Loans held-for-sale (at cost which approximates fair value)....... 159,885 116,002 128,502
Loans, net of unearned income of $121,251, $114,813
and $111,575:
Commercial.................................................... 1,787,747 1,798,248 1,845,352
Real estate, construction..................................... 314,025 290,262 291,405
Real estate, mortgage:
Residential................................................ 838,208 650,588 647,842
Commercial................................................. 1,104,950 975,474 985,581
Retail........................................................ 1,340,145 1,098,955 1,062,651
Bankcard...................................................... 468,190 654,653 550,496
Leases receivable............................................. 399,495 334,504 314,924
Foreign....................................................... 362,401 336,140 327,546
--------- --------- ---------
Total loans, net of unearned income...................... 6,615,161 6,138,824 6,025,797
Allowance for credit losses (note 5).......................... (170,529) (177,621) (181,974)
--------- --------- ---------
Loans, net .............................................. 6,444,632 5,961,203 5,843,823
--------- --------- ---------
Premises and equipment............................................ 106,254 104,379 104,283
Due from customers on acceptances................................. 9,878 14,144 10,806
Other assets...................................................... 445,879 334,484 332,598
----------- ----------- -----------
Total assets........................................ $10,841,897 $10,466,172 $10,058,626
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits:
Noninterest bearing deposits ................................. $2,224,720 $2,055,129 $1,748,714
Interest bearing deposits..................................... 5,130,774 4,859,031 4,822,555
Interest bearing deposits in foreign banking office............... 142,896 129,022 121,468
--------- --------- ---------
Total deposits........................................... 7,498,390 7,043,182 6,692,737
Federal funds purchased and securities sold under
repurchase agreements........................................... 609,980 515,525 766,033
Other borrowed funds, short-term (note 9)......................... 647,236 908,644 955,083
Bank acceptances outstanding...................................... 9,878 14,144 10,806
Accrued taxes and other liabilities............................... 309,501 286,416 306,030
Long-term debt (note 10).......................................... 554,729 514,687 189,673
--------- --------- ---------
Total liabilities................................... 9,629,714 9,282,598 8,920,362
--------- --------- ---------
4.50% Cumulative, Redeemable preferred stock, $5 par value per
share; $100 liquidation preference per share; authorized and
issued 90,000 shares (note 11).................................. 9,000 - -
--------- --------- ---------
Stockholders' equity:
7.875% Noncumulative preferred stock, Series A, $5 par
value per share; $25 liquidation preference per share;
authorized 8,910,000 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............................................ 893,181 846,058 817,525
Net unrealized gains (losses) on investment securities
available-for-sale......................................... (3,100) 24,414 7,637
--------- --------- ---------
Total stockholders' equity.......................... 1,203,183 1,183,574 1,138,264
----------- ----------- -----------
Total liabilities, redeemable preferred stock and
stockholders' equity.............................. $10,841,897 $10,466,172 $10,058,626
=========== =========== ===========
<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>
Nine months ended September 30, 1995
------------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,176 $737,891 ($26,969) $1,024,024
Net income............................. 88,699 88,699
Dividends declared on preferred
stock.................................. (8,865) (8,865)
Change in net cost not yet recognized
as periodic pension expense.......... (200) (200)
Change in net unrealized gains
(losses) on investment securities
available-for-sale................... 34,606 34,606
--------- --------- --------- --------- --------- ----------
Balance at September 30, 1995.......... $30,000 $84,926 $198,176 $817,525 $7,637 $1,138,264
========= ========== ========== ========== ========== ==========
Nine months ended September 30, 1996
------------------------------------
Balance at beginning of year........... $30,000 $84,926 $198,176 $846,058 $24,414 $1,183,574
Net income............................. 96,305 96,305
Dividends declared on common stock..... (40,000) (40,000)
Dividends declared on preferred
stock.................................. (8,865) (8,865)
Dividends declared on redeemable
preferred stock........................ (101) (101)
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................... (27,514) (27,514)
--------- --------- --------- --------- --------- ----------
Balance at September 30, 1996.......... $30,000 $84,926 $198,176 $893,181 ($3,100) $1,203,183
========= ========== ========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
PAGE 6
<TABLE>
FIRST MARYLAND BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine months ended September 30,
--------------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................ $96,305 $88,699
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................................................. 6,000 10,334
Provision for other real estate losses.................................................. 77 237
Depreciation and amortization........................................................... 27,291 24,009
Deferred income tax expense............................................................. 27,465 16,206
Net loss (gain) on the sale of assets................................................... 335 (3,210)
Net increase in loans originated for sale............................................... (31,501) (53,136)
(Increase) decrease in trading account securities....................................... (2,898) 17,193
Decrease (increase) in accrued interest receivable...................................... 9,499 (527)
(Decrease) increase in accrued interest payable......................................... (14,209) 15,231
Other, net.............................................................................. (53,648) 135,338
--------- ---------
Net cash provided by operating activities............................................ 64,716 250,374
--------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale........................... 1,092,474 570,805
Proceeds from paydowns and maturities of investment securities available-for-sale......... 14,398,933 189,423
Proceeds from paydowns and maturities of investment securities held-to-maturity........... - 10,062,118
Purchases of investment securities available-for-sale.....................................(15,096,517) (1,315,241)
Purchases of investment securities held-to-maturity....................................... - (10,047,450)
Net decrease in short-term investments.................................................... 301,461 158,175
Purchase of loans......................................................................... - (19)
Net disbursements from lending activities of bank subsidiaries............................ (487,810) (591,076)
Principal collected on loans of nonbank subsidiaries...................................... 30,492 24,908
Loans originated by nonbank subsidiaries.................................................. (41,526) (23,001)
Principal payments received under leases.................................................. 2,785 3,623
Purchases of assets to be leased.......................................................... (14,942) (5,979)
Proceeds from other real estate transactions.............................................. 2,395 10,057
Proceeds from the sale of premises and equipment.......................................... 729 770
Purchases of premises and equipment....................................................... (18,853) (19,887)
Purchase of deposits...................................................................... - 6,694
Securitization and sale of bankcard receivables........................................... 337,716 -
Purchase of banking subsidiary............................................................ (83,522) -
Purchase of investment management company................................................. (4,767) -
Other, net................................................................................ (10,928) (25,489)
--------- ----------
Net cash provided by (used for) investing activities................................. 408,120 (1,001,569)
--------- ----------
FINANCING ACTIVITIES
Net increase in deposits ................................................................. 28,942 52,360
Net (decrease) increase in short-term borrowings.......................................... (503,260) 659,837
Payments on long-term debt................................................................ (10,000) -
Proceeds from issuance of medium-term bank notes.......................................... 50,000 -
Payments on medium-term bank notes........................................................ - (25,000)
Cash dividends paid....................................................................... (8,966) (8,865)
--------- ---------
Net cash (used for) provided by financing activities................................. (443,284) 678,332
--------- ---------
Increase (decrease) in cash and cash equivalents ........................................... 29,552 (72,863)
Cash and cash equivalents at beginning of year.............................................. 797,460 692,123
--------- ---------
Cash and cash equivalents at September 30,.................................................. $827,012 $619,260
========= =========
SUPPLEMENTAL DISCLOSURES
Interest payments......................................................................... $240,831 $212,610
Income tax payments....................................................................... 20,785 42,943
NONCASH INVESTING AND FINANCING ACTIVITIES
Loan charge-offs.......................................................................... 29,393 26,283
Transfers to other real estate............................................................ 1,671 5,254
<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. Acquisitions
On July 16, 1996, the Corporation acquired 1st Washington Bancorp,
Inc. ("1st Washington"), a savings and loan holding company headquartered
in Herndon, Virginia, whose principal subsidiary was Washington Federal
Savings Bank. Under terms of the agreement, the shareholders of 1st
Washington received $8.125 in cash per share, for a total purchase
price of $83.5 million. On the date of acquisition, the Corporation
acquired total assets of $866.2 million which included $325.7 million
in loans and $426.3 million in deposits. This acquisition was accounted
for as a purchase and the results of operations have been included with
the Corporation's results of operations since July 16, 1996. As a
result of the acquisition, the Corporation recorded $46.7 million in
goodwill which will be amortized on a straight line basis over a period
of 25 years.
On July 1, 1996, the Corporation acquired Zirkin-Cutler Investments,
Inc. ("Zirkin-Cutler"), a Washington, D.C. investment management company.
Under terms of the agreement, the principals of Zirkin-Cutler received
$4.8 million in cash and 90,000 shares of redeemable preferred stock.
On the date of acquisition, Zirkin-Cutler had $1.1 billion in assets
under investment management. This acquisition was accounted for as a
purchase and the results of operations have been included with the
Corporation's results of operations since July 1, 1996. As a result of
the acquisition, the Corporation recorded $13.6 million in goodwill and
other intangible assets which will be amortized on a straight line basis
over a period ranging from 6 to 25 years.
3. Money Market Investments
<TABLE>
Money market investments at September 30, 1996, December 31, 1995
and September 30, 1995 included the following:
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Interest bearing deposits in other banks............. $443 $21,878 $30,384
Trading account securities........................... 3,224 326 2,419
Federal funds sold................................... 3,450 322,275 4,850
Securities purchased under agreements
to resell.......................................... 39,989 21,876 17,919
------- -------- -------
Total money market investments................. $47,106 $366,355 $55,572
======= ======== =======
</TABLE>
<PAGE>
PAGE 8
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
4. Investment Securities
<TABLE>
The following is a comparison of the amortized cost and fair values of the
available-for-sale securities:
<CAPTION>
September 30, 1996 December 31, 1995 September 30, 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........... $827,644 $819,629 $891,263 $900,347 $357,142 $358,290
Mortgage-backed obligations.......................... 1,205,134 1,190,473 1,232,652 1,245,339 1,038,229 1,037,001
Collateralized mortgage obligations:
Issued by Federal Agencies........................ 328,578 331,355 377,858 382,627 12,223 12,256
Privately issued.................................. 224,947 224,922 43,252 42,530 16,643 16,694
Obligations of states and political
subdivisions...................................... 87,702 92,323 98,009 104,886 134,691 141,410
Other investment securities.......................... 132,328 142,992 111,360 118,294 100,964 106,881
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $2,806,333 $2,801,694 $2,754,394 $2,794,023 $1,659,892 $1,672,532
========== ========== ========== ========== ========== ==========
</TABLE>
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>
September 30, 1996 December 31, 1995 September 30, 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........... $ - $ - $ - $ - $640,871 $636,056
Mortgage-backed obligations.......................... - - - - 144,794 143,408
Collateralized mortgage obligations:
Issued by Federal Agencies........................ - - - - 482,277 481,559
Privately issued.................................. - - - - 52,692 50,734
Other investment securities.......................... - - - - 1,000 1,000
---------- ---------- ---------- ---------- ---------- ----------
Total.......................................... $ - $ - $ - $ - $1,321,634 $1,312,757
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
PAGE 9
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
5. Impaired Loans and Allowance for Credit Losses
<TABLE>
The following table presents impaired loans by type and any related
valuation allowance at September 30, 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 ........................................ $15,074 $13,600 $1,474 $543
Real estate, construction.......................... 3,894 1,465 2,429 500
Real estate mortgage, commercial................... 17,365 8,839 8,526 1,945
-------- -------- -------- --------
Total........................................ $36,333 $23,904 $12,429 $2,988
======== ======== ======== ========
</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>
<TABLE>
The following table presents impaired loans by type and any related
valuation allowance at September 30, 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 ........................................ $16,743 $14,964 $1,779 $724
Real estate, construction.......................... 1,254 529 725 250
Real estate mortgage, commercial................... 5,861 4,609 1,252 232
Foreign............................................ 5,903 5,903 - -
-------- -------- -------- --------
Total........................................ $29,761 $26,005 $3,756 $1,206
======== ======== ======== ========
</TABLE>
<TABLE>
Nine months ended September 30,
------------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Year-to-date average recorded investment in impaired loans..................... $25,964 $36,376
Year-to-date interest income recognized during impairment...................... 171 294
Year-to-date interest income recorded on a cash basis during impairment........ 171 294
</TABLE>
<PAGE>
PAGE 10
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
5. Impaired Loans and Allowance for Credit Losses (cont'd)
At September 30, 1996, $29.1 million of the total impaired loans
were measured using the fair value of the loan's collateral. The
remaining impaired loans of $7.2 million represented loans with recorded
investments of less than $500 thousand which were measured at the
outstanding loan balance less any specific reserves. The $3.0 million
valuation allowance for impaired loans at September 30, 1996 and the
activity related to impaired loans for the nine months ended September
30, 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 September 30, 1996, the difference
between total nonaccrual loans and total impaired loans was $11.8
million which included the following: nonaccrual residential loans
of $8.0 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 September 30, 1996. A summary of the
activity in the allowance for credit losses for the nine months ended
September 30, 1996 and 1995 follows:
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $177,621 $191,024
Provision for credit losses....................................... 6,000 10,334
Less: charge-offs, net of recoveries of $5,659 and $6,899......... (23,734) (19,384)
Allowance on acquired loans....................................... 10,642 -
-------- --------
Balance at September 30........................................... $170,529 $181,974
======== ========
</TABLE>
<PAGE>
PAGE 11
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
6. Intangible Assets
<TABLE>
Intangible assets at September 30, 1996, December 31, 1995 and
September 30, 1995 included the following:
<CAPTION>
September 30, December 31,September 30,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Goodwill............................................. $86,437 $28,693 $29,350
Premium on bankcard receivables...................... 9,336 11,476 12,263
Premium on deposits.................................. 6,960 7,787 8,076
Other................................................ 5,107 698 710
-------- ------- -------
Total intangible assets........................ $107,840 $48,654 $50,399
======== ======= =======
</TABLE>
As a result of the 1st Washington acquisition, the Corporation
recorded $46.7 million in goodwill which will be amortized on a straight
line basis over a period of 25 years. In addition, the Zirkin-Cutler
acquisition resulted in $13.6 million in goodwill and other intangible
assets which will be amortized on a straight line basis over a period
ranging from 6 to 25 years.
7. Mortgage Servicing Rights
<TABLE>
Mortgage servicing rights activity for the nine months ended
September 30, 1996 and September 30, 1995 follows:
<CAPTION>
Nine months ended September 30,
-------------------------------------------------
1996 1995
----------------------- ----------------------
Originated Purchased Originated Purchased
---------- --------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Balance beginning of year............................ $5,033 $1,067 $ - $1,270
Capitalized mortgage servicing rights................ 300 74 3,453 310
Amortization......................................... (743) (156) (239) (431)
Sale of servicing.................................... (4,334) (914) - -
Purchased mortgage servicing rights acquired......... - 2,598 - -
-------- -------- -------- --------
Balance at September 30.............................. $256 $2,669 $3,214 $1,149
======== ======== ======== ========
</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 September 30, 1996, there was no valuation allowance.
<PAGE>
PAGE 12
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
8. Valuation Allowance for Other Real Estate Owned
<TABLE>
A summary of the activity in the valuation allowance for other
real estate owned is provided below:
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Balance at beginning of year...................................... $295 $4,185
Provisions........................................................ 77 237
Writedowns........................................................ (77) (4,077)
Valuation allowance of acquired other real estate owned........... 29 -
------ ------
Balance at September 30........................................... $324 $345
====== ======
</TABLE>
9. Other Borrowed Funds, Short-term
<TABLE>
Other borrowed funds, short-term at September 30, 1996, December
31, 1995 and September 30, 1995 included the following:
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
Master demand note of the Corporation................ $295,818 $402,489 $361,867
Treasury tax and loan note account................... 153,484 6,000 142,200
Bank notes........................................... 150,000 400,000 300,000
Federal funds purchased-term......................... 15,000 80,000 135,000
Other................................................ 32,934 20,155 16,016
-------- -------- --------
Total other borrowed funds, short-term......... $647,236 $908,644 $955,083
======== ======== ========
</TABLE>
10. Long-term Debt
<TABLE>
Following is a summary of the long-term debt of the Corporation
at September 30, 1996, December 31, 1995 and September 30, 1995 which
is all unsecured:
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
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 -
Floating Rate Medium term bank note due April 20,
1998............................................. 50,000 - -
10.375% Subordinated Capital Notes due August 1,
1999............................................. 59,975 59,969 59,966
9.15% Notes due June 1, 1996......................... - 10,000 10,000
8.68% Notes due January 31, 1997..................... 10,000 9,998 9,998
8.67% Notes due March 20, 1997....................... 9,999 9,998 9,998
8.375% Subordinated Notes due May 15, 2002........... 99,755 99,722 99,711
-------- -------- --------
Total long-term debt........................... $554,729 $514,687 $189,673
======== ======== ========
</TABLE>
<PAGE>
PAGE 13
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
11. Redeemable Preferred Stock
The Corporation authorized and issued 90,000 shares of 4.50%
cumulative, redeemable preferred stock with a $5 par value and a $100
liquidation preference per share. At September 30, 1996, all 90,000
shares were outstanding. The cumulative dividends are payable quarterly
when and as declared by the Corporation's Board of Directors out of
funds legally available for such payments. Other terms of the
redeemable preferred stock are as follows:
Preference: Upon liquidation, $100 per share (an aggregate of $9
million based upon redeemable preferred shares outstanding at September
30, 1996) plus accrued and unpaid cumulative dividends through the
distribution date before any distribution to holders of the
Corporation's common stock.
Optional Redemption: Redeemable at the Corporation's option or the
holders' options (on at least 30 days notice but no more than 60 days
notice) during a redemption period commencing July 1, 2002 and ending
June 30, 2003 at $100 per share (liquidation value) plus accrued and
unpaid cumulative dividends through the redemption date.
12. 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.
<PAGE>
PAGE 14
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
12. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
The following table presents the notional amounts and fair values
of the classes of trading instruments at September 30, 1996 and 1995 as
well as the average fair values for the three months and nine months ended
September 30, 1996.
<CAPTION>
Fair Values
-------------------------------------------------
Averages
End-of-period September 30, 1996
Notional Amounts September 30, -------------------------
---------------------- --------------------- Three months Nine months
1996 1995 1996 1995 ended ended
-------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Contracts
Interest Rate Swaps..... $1,030,433 $529,635
Receivable position... $9,754 $6,803 $10,858 $11,153
Payable position...... (6,998) (2,534) (7,785) (7,076)
Interest Rate Caps/Floors 1,308,150 329,539
Held.................. 2,739 385 2,570 1,027
Written............... (201) (385) (994) (498)
Futures................. 24,000 84,500
Favorable position.... - 39 - -
Unfavorable position.. (225) (115) - -
Foreign Exchange Contracts
Options................. 2,429,169 463,273
Held.................. 20,502 6,553 17,227 13,864
Written............... (13,924) (5,253) (10,861) (9,558)
Forwards................ 515,579 493,741
Favorable position.... 2,098 1,525 1,608 1,722
Unfavorable position.. (1,762) (893) (1,497) (1,426)
</TABLE>
Net Trading Income
<TABLE>
The following table summarizes the Corporation's net trading income
by category of instrument. Net trading income is included in the income
statement as a component of other noninterest income.
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Interest rate contracts:
Interest rate swaps..................... ($2,340) $1,678
Futures................................. 1,824 (2,121)
Interest rate caps and floors........... 12 50
Options................................. (5) 3
Securities.............................. 1,507 133
Miscellaneous........................... 301 389
------- -------
1,299 132
------- -------
Foreign exchange contracts:
Spot and forward contracts.............. 2,045 831
Futures................................. 20 (101)
Options................................. (1,501) (646)
Miscellaneous........................... 1,603 2,153
------- -------
2,167 2,237
------- -------
Total net trading income.......... $3,466 $2,369
======= =======
</TABLE>
<PAGE>
PAGE 15
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
12. Off-Balance Sheet Derivative Financial Instruments (cont'd)
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 16
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
12. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
The following table presents the notional amounts and fair values for
the risk management instruments entered into by the Corporation at
September 30, 1996 and 1995 as well as the weighted average maturity and
weighted average receive and pay rates for the instruments at September
30, 1996.
<CAPTION>
September 30, 1996
Notional Amount ---------------------------------- Estimated Fair Value
----------------------- Weighted ---------------------
September 30, Average Weighted Average Rate September 30,
--------------------- 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..................... $717,500 $175,000 3.84 6.20% 5.53% ($5,595) $350
-------- -------
Carrying amount (1)......... 5,380 8,611
Unrealized gross gains...... 4 320
Unrealized gross losses..... (10,979) (8,581)
Interest rate swaps purchased
-----------------------------
Convert fixed rate to floating
rate..................... 46,497 46,778 3.72 5.65 6.29 (117) (619)
-------- -------
Carrying amount (1)......... (64) (44)
Unrealized gross gains...... 429 425
Unrealized gross losses..... (482) (1,000)
Designated to Liabilities
-------------------------
Interest rate swaps sold
------------------------
Convert fixed rate to floating
rate..................... 342,000 189,000 1.18 6.14 5.55 1,935 3,597
-------- -------
Carrying amount (1)......... 552 382
Unrealized gross gains...... 1,779 3,348
Unrealized gross losses..... (396) (133)
Interest rate swaps purchased
-----------------------------
Convert floating rate to fixed
rate..................... - 25,000 - - - - 101
-------- -------
Carrying amount (1)......... (180) (240)
Unrealized gross gains...... 180 341
Unrealized gross losses..... - -
Interest rate caps purchased
----------------------------
Cap floating rate at strike
level.................... 165,000 217,900 2.70 Cap - 13.50% (2) - -
-------- -------
Carrying amount (1)......... - 53
Unrealized gross gains...... - -
Unrealized gross losses..... - (53)
Call options purchased........ 12,536 12,536 0.96 - - 2,009 703
--------------------- -------- -------
Carrying amount (1)......... 2,373 1,474
Unrealized gross gains...... - -
Unrealized gross losses..... (364) (771)
</TABLE>
<PAGE>
PAGE 17
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
12. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
<CAPTION>
September 30, 1996
Notional Amount ---------------------------------- Estimated Fair Value
----------------------- Weighted ---------------------
September 30, Average Weighted Average Rate September 30,
--------------------- 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.......... $180,000 $30,000 0.87 5.65% 5.51% $3,881 ($190)
-------- -------
Carrying amount (1)......... 4,440 (14)
Unrealized gross gains...... 18 -
Unrealized gross losses..... (577) (176)
<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, $5.1 million; deferred gain on the early termination of
an interest rate swap purchased, ($180) thousand; and deferred premiums on call options purchased, $364 thousand.
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, $8.6 million; deferred gain on the early
termination of an interest rate swap purchased, ($279) thousand; deferred premiums on interests rate caps purchased,
$53 thousand; and deferred premiums on call options purchased, $771 thousand.
(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 September 30,
1996.
<CAPTION>
1 Year 1-5
or Less Years Total
------------ ------------ -----------
(dollars in thousands)
<S> <C> <C> <C>
Designated to Assets
--------------------
Notional amount..................... $100,000 $663,997 $763,997
Weighted average receive rate....... 5.69% 6.23% 6.16%
Estimated fair value................ 11 (5,723) (5,712)
Designated to Liabilities
-------------------------
Notional amount..................... $194,236 $325,300 $519,536
Weighted average receive rate....... 5.58% 6.80% 6.14%
Estimated fair value................ 1,615 2,329 3,944
Basis Swaps
-----------
Notional amount..................... $100,000 $80,000 $180,000
Weighted average receive rate....... 5.81% 5.45% 5.65%
Estimated fair value................ 4,445 (564) 3,881
</TABLE>
<PAGE>
PAGE 18
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
12. Off-Balance Sheet Derivative Financial Instruments (cont'd)
<TABLE>
The following table summarizes the estimated maturities of the risk
management instruments entered into by the Corporation at September 30,
1995.
<CAPTION>
1 Year 1-5 5-10
or Less Years Years Total
------------ ------------ ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Designated to Assets
--------------------
Notional amount..................... $175,000 $21,328 $25,450 $221,778
Weighted average receive rate....... 6.11% 5.94% 5.81% 6.06%
Estimated fair value................ 350 444 (1,063) (269)
Designated to Liabilities
-------------------------
Notional amount..................... $112,344 $332,092 $ - $444,436
Weighted average receive rate....... 6.20% 6.78% - % 6.63%
Estimated fair value................ 285 4,116 - 4,401
Basis Swaps
-----------
Notional amount..................... $ - $30,000 $ - $30,000
Weighted average receive rate....... - % 4.83% - % 4.83%
Estimated fair value................ - (190) - (190)
</TABLE>
<TABLE>
The following table summarizes the activity of the risk management
instruments entered into by the Corporation, by notional amounts, for
the nine months ended September 30, 1996 and 1995.
<CAPTION>
Designated
Designated to Basis
to Assets Liabilities Swaps Total
---------- ------------ -------- -----
(in thousands)
<S> <C> <C> <C> <C>
Nine months ended September 30, 1996
------------------------------------
Balance at beginning of year........... $421,708 $541,736 $30,000 $993,444
Additions.............................. 517,500 170,000 50,000 737,500
Maturities/amortizations............... (175,211) (92,200) - (267,411)
Redesignations......................... - (100,000) 100,000 -
-------- -------- -------- ----------
Balance at September 30, 1996.......... $763,997 $519,536 $180,000 $1,463,533
======== ======== ======== ==========
Nine months ended September 30, 1995
------------------------------------
Balance at beginning of year........... $228,107 $857,761 $30,000 $1,115,868
Additions.............................. - 190,275 - 190,275
Maturities/amortizations............... - (503,600) - (503,600)
Terminations........................... (6,329) (100,000) - (106,329)
-------- -------- -------- ----------
Balance at September 30, 1995.......... $221,778 $444,436 $30,000 $696,214
======== ======== ======== ==========
</TABLE>
<PAGE>
PAGE 19
FIRST MARYLAND BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
12. 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 $5.1 million as of September 30, 1996. These
losses are scheduled to be amortized into income in the following periods:
$858 thousand for the remainder of 1996, $3.4 million in 1997 and $858
thousand 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 $180 thousand as of September 30, 1996. This
gain is scheduled to be amortized into income in the following periods:
$25 thousand for the remainder of 1996, $98 thousand in 1997 and $57
thousand in 1998.
For the nine months ended September 30, 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 $2.1 million
and gross interest expense decreased $2.6 million which resulted in
a $491 thousand increase in net interest income.
<PAGE>
PAGE 20
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Earnings Summary
The net income of First Maryland Bancorp (the "Corporation") for
the nine months and quarter ended September 30, 1996 was $96.3 million
and $33.7 million, respectively compared to $88.7 million and $31.0
million for the nine months and quarter ended September 30, 1995.
Return on average assets and return on average total equity were 1.24%
and 10.75%, respectively, for the nine months ended September 30, 1996
compared with 1.23% and 10.88% for the nine months ended September
30, 1995.
<TABLE>
Table 1 Selected Quarterly Financial Information
<CAPTION>
3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
1996 1996 1996 1995 1995
----------- ----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Net interest income (fully tax equivalent)........ $103,255 $97,898 $101,197 $100,872 $100,291
Tax equivalent adjustment......................... 1,289 1,277 1,323 1,033 2,217
-------- -------- -------- -------- --------
Net interest income............................... 101,966 96,621 99,874 99,839 98,074
Provision for credit losses....................... 2,000 - 4,000 5,666 2,373
-------- -------- -------- -------- --------
Net interest income after provision for credit
losses.......................................... 99,966 96,621 95,874 94,173 95,701
Noninterest income................................ 57,384 53,062 49,613 52,142 49,483
Noninterest expenses.............................. 103,023 99,168 99,312 98,373 97,589
-------- -------- -------- -------- --------
Income before income taxes........................ 54,327 50,515 46,175 47,942 47,595
Income tax expense................................ 20,625 17,981 16,106 16,454 16,563
-------- -------- -------- -------- --------
Net income........................................ $33,702 $32,534 $30,069 $31,488 $31,032
======== ======== ======== ======== ========
Dividends declared on preferred stock............. $2,955 $2,955 $2,955 $2,955 $2,955
Dividends declared on redeemable preferred stock.. 101 - - - -
CONSOLIDATED AVERAGE BALANCES:
Total assets...................................... 10,420,400 10,212,700 10,531,200 10,336,500 9,791,300
Loans, net of unearned income..................... 6,365,900 6,018,700 6,173,600 6,065,800 5,858,100
Deposits.......................................... 7,208,400 6,943,200 6,905,200 6,794,700 6,835,300
Long-term debt.................................... 554,700 551,700 514,700 440,500 206,500
Common stockholder's equity....................... 1,044,800 1,048,300 1,064,100 1,023,900 982,300
Stockholders' equity.............................. 1,189,600 1,193,100 1,208,900 1,168,700 1,127,100
CONSOLIDATED RATIOS:
Return on average assets.......................... 1.29% 1.28% 1.15% 1.21% 1.26%
Return on average total stockholders' equity...... 11.27 10.97 10.00 10.69 10.92
Return on average common stockholder's equity..... 11.67 11.35 10.25 11.06 11.34
Average stockholders' equity to average total
assets.......................................... 11.42 11.68 11.48 11.31 11.51
Capital to risk-adjusted assets:
Tier 1.......................................... 11.94 13.90 13.63 13.77 13.64
Total........................................... 15.01 17.11 16.78 17.05 16.94
Tier 1 leverage ratio............................. 10.71 11.19 10.99 10.91 11.21
Net interest margin............................... 4.36 4.25 4.26 4.24 4.45
Net charge-offs to average loans, net of average
unearned income (annualized).................... 0.40 0.44 0.70 0.66 0.40
Allowance for credit losses to period end loans,
net of unearned income.......................... 2.58 2.72 2.74 2.89 3.02
Nonperforming assets to period end loans, net of
unearned income plus other foreclosed assets
owned........................................... 0.92 0.72 0.73 0.73 0.84
</TABLE>
<PAGE>
PAGE 21
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations-(Continued)
Acquisitions
On July 16, 1996, the Corporation acquired 1st Washington Bancorp,
Inc. ("1st Washington"), a savings and loan holding company headquartered
in Herndon, Virginia, whose principal subsidiary was Washington Federal
Savings Bank. Under terms of the agreement, the shareholders of 1st
Washington received $8.125 in cash per share, for a total purchase
price of $83.5 million. On the date of acquisition, the Corporation
acquired total assets of $866.2 million which included $325.7 million
in loans and $426.3 million in deposits. This acquisition was accounted
for as a purchase and the results of operations have been included
with the Corporation's results of operations since July 16, 1996.
On July 1, 1996, the Corporation acquired Zirkin-Cutler Investments,
Inc. ("Zirkin-Cutler"), a Washington, D.C. investment management company.
Under terms of the agreement, the principals of Zirkin-Cutler received
$4.8 million in cash and 90,000 shares of redeemable preferred stock.
On the date of acquisition, Zirkin-Cutler had $1.1 billion in assets
under investment management. This acquisition was accounted for as a
purchase and the results of operations have been included with the
Corporation's results of operations since July 1, 1996.
Net Interest Income and Net Interest Margin
Net interest income on a fully tax equivalent basis for the
quarter ended September 30, 1996 of $103.3 million increased $3.0
million (3.0%) when compared to net interest income of $100.3 million
for the quarter ended September 30, 1995. The following significant
items had a positive impact on net interest income: the 1st Washington
acquisition, $4.2 million; a $217.9 million increase in net free funds,
$2.4 million; an increase in retail lending during 1996, $1.8 million;
the effects of a decline in market interest rates and competitive factors
on the Corporation's loan and deposit yields, $1.3 million; and other
rate/volume changes, $700 thousand. The Corporation securitized and
sold an additional $335 million in bankcard receivables in the second
quarter of 1996 which resulted in a $7.4 million negative impact on
net interest income. The revenues associated with these receivables
were reported in noninterest income as servicing income. The net
interest margin for the third quarter of 1996 was 4.36%, compared to
4.45% for the third quarter of 1995. The additional $335 million
bankcard receivables securitization and sale resulted in a 15 basis
point negative impact on the net interest margin and the 1st Washington
acquisition resulted in a 7 basis point negative impact. These
declines were partially offset by positive impacts of 10 basis points
from the net free funds increase and 3 basis points from other rate/
volume changes.
<PAGE>
PAGE 22
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations-(Continued)
Net Interest Income and Net Interest Margin (cont'd)
Net interest income on a fully tax equivalent basis for the
nine months ended September 30, 1996 of $302.4 million increased $2.5
million (0.8%) when compared to net interest income of $299.9 million
for the nine months ended September 30, 1995. The following significant
items had a positive impact on net interest income: the 1st Washington
acquisition, $4.2 million; a $217.8 million increase in net free funds,
$8.5 million; the Corporation's cobranded credit card program, $3.6
million; an increase in retail lending during 1996, $3.7 million; and
other rate/volume changes, $4.0 million. The additional $335 million
securitization and sale of bankcard receivables resulted in a $13.3
million decline in net interest income. As noted above, the revenues
associated with these receivables were reported in noninterest income
as servicing income. The effects of a reduction in market interest
rates and competitive factors on the Corporation's loan and deposit
yields resulted in an $8.2 million decline in net interest income on
a year-to-date basis. The net interest margin for the first nine
months of 1996 was 4.29%, compared to 4.56% for the first nine months
of 1995. The additional $335 million bankcard receivables
securitization and sale resulted in a 10 basis point negative impact
on the net interest margin. The effects of the reduction in market
interest rates and competitive factors on the Corporation's loan and
deposit yields had an 11 basis point negative impact. A change in
the investment securities portfolio mix resulted in a 13 basis point
decline in the net interest margin and other rate/volume changes
resulted in a 5 basis point decline. These declines were partially
offset by a 12 basis point positive impact from the net free funds
increase.
An analysis of fully tax equivalent net interest income,
interest rate spreads and net interest margins for the three months
and nine months ended September 30, 1996 and 1995 is presented in
Tables 2 and 3.
<TABLE>
Table 2 Net Interest Income, Interest Rate Spread and Net Interest Margin on Average Earning Assets
(Tax Equivalent Basis)
<CAPTION>
Three months ended September 30,
-----------------------------------------------------------------------
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).............. $2,706.9 $43.1 6.34% $2,757.8 $44.8 6.44%
Loans held-for-sale.................... 127.4 2.5 7.70 112.8 2.2 7.72
Loans, net of unearned income.......... 6,365.9 131.1 8.19 5,858.1 130.1 8.81
Other earning assets................... 226.2 3.1 5.37 207.4 3.1 5.89
------- ------ ------- ------
Earning assets......................... $9,426.4 179.8 7.59 $8,936.1 180.2 8.00
======== ------ ======== ------
Interest bearing liabilities........... $6,974.6 76.5 4.36 $6,702.2 79.9 4.73
Interest rate spread (2)............... 3.23 3.27
Interest free sources utilized
to fund earning assets............... 2,451.8 2,233.9
------- ------ ------- ------
Total sources of funds................. $9,426.4 76.5 3.23 $8,936.1 79.9 3.55
======== ------ ======== ------
Net interest income.................... $103.3 $100.3
====== ======
Net interest margin (3)................ 4.36% 4.45%
==== ====
<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 23
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Net Interest Income and Net Interest Margin (cont'd)
<TABLE>
Table 3 Net Interest Income, Interest Rate Spread and Net Interest Margin on Average Earning Assets
(Tax Equivalent Basis)
<CAPTION>
Nine months ended September 30,
-----------------------------------------------------------------------
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).............. $2,826.9 $133.2 6.29% $2,555.1 $123.1 6.44%
Loans held-for-sale.................... 117.7 6.6 7.46 79.7 4.9 8.29
Loans, net of unearned income.......... 6,186.7 386.5 8.34 5,716.6 379.6 8.88
Other earning assets................... 285.1 11.3 5.31 450.1 20.1 5.97
------- ------ ------- ------
Earning assets......................... $9,416.4 537.6 7.63 $8,801.5 527.7 8.02
======== ------ ======== ------
Interest bearing liabilities........... $7,011.8 235.2 4.48 $6,614.7 227.8 4.61
Interest rate spread (2)............... 3.15 3.41
Interest free sources utilized
to fund earning assets............... 2,404.6 2,186.8
------- ------ ------- ------
Total sources of funds................. $9,416.4 235.2 3.34 $8,801.5 227.8 3.46
======== ------ ======== ------
Net interest income.................... $302.4 $299.9
====== ======
Net interest margin (3)................ 4.29% 4.56%
==== ====
<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>
Provision for Credit Losses
The provision for credit losses for the third quarter of 1996
was $2.0 million compared to a $2.4 million provision for credit losses
in the third quarter of 1995. The provision for credit losses in the
third quarter of 1996 included an $11.0 million bankcard provision
offset by provision recaptures of $9.1 million at subsidiary banks.
The provision for credit losses in the third quarter of 1995 included
a $6.0 million bankcard provision partially offset by a $3.7 million
provision recapture at a subsidiary bank.
The provision for credit losses for the nine months ended September
30, 1996 totaled $6.0 million, a $4.3 million decrease (41.9%) from the
$10.3 million provision recorded in the nine months ended September 30,
1995. The 1996 provision for credit losses included an $18.7 million
bankcard provision offset by provision recaptures of $12.9 million at
subsidiary banks. The securitization and sale of $335 million in
bankcard receivables in the second quarter of 1996 resulted in a
reduction in the level of bankcard receivables without a corresponding
reduction in the allowance for credit losses. Approximately $17
million of the allowance for credit losses was reallocated from the
bankcard receivables sold to the remaining book portfolio in light of
increasing delinquency and charge-off trends. The 1995 provision for
credit losses included a $16.0 million bankcard provision offset by a
$5.7 million provision recapture at a subsidiary bank.
<PAGE>
PAGE 24
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Noninterest Income
<TABLE>
The following table presents the components of noninterest income
for the three months and nine months ended September 30, 1996 and 1995.
Table 4 Noninterest Income
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------- ----------------------------------
Percent Percent
Change Change
1996 1995 1996/1995 1996 1995 1996/1995
------- ------- ----------- ------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts.... $20,376 $18,150 12.3% $58,791 $53,601 9.7%
Mortgage banking income................ 10,904 4,422 146.6 22,810 11,384 100.4
Trust and investment advisory fees..... 7,470 5,983 24.9 20,920 16,238 28.8
Servicing income....................... 7,401 6,397 15.7 19,236 15,174 26.8
Credit card income..................... 2,056 4,517 (54.5) 8,262 13,312 (37.9)
Securities gains (losses), net......... (126) 342 (136.8) 175 2,187 (92.0)
Other income:
Customer service fees................ 2,030 1,988 2.1 6,001 5,655 6.1
Trading income....................... 1,234 1,054 17.1 3,466 2,369 46.3
Security sales and fees.............. 1,108 1,028 7.8 3,804 3,528 7.8
Other................................ 4,931 5,602 (12.0) 16,594 20,320 (18.3)
------- ------- ----- ------- ------- -----
Total other income..................... 9,303 9,672 (3.8) 29,865 31,872 (6.3)
------- ------- ----- -------- -------- -----
Total noninterest income........ $57,384 $49,483 16.0% $160,059 $143,768 11.3%
======= ======= ===== ======== ======== =====
</TABLE>
The Corporation's noninterest income for the third quarter of
1996 increased $7.9 million (16.0%) when compared to the third quarter
of 1995. Service charges on deposits increased $2.2 million (12.3%)
due to increases in service charges on business checking and retail
deposit service charges. Mortgage banking income increased $6.5 million
(146.6%) as a result of a $7.2 million increase in gains on the sale of
servicing primarily due to a $5.5 million gain on the sale of bulk
servicing in the third quarter of 1996. Other mortgage banking income
increased $1.3 million. These increases were partially offset by $2.0
million in net capitalized mortgage servicing rights income recorded in
the third quarter of 1995. Trust and investment advisory fees increased
$1.5 million (24.9%) primarily due to increases in custody fees and
investment management and advisory fees. The acquisition of Zirkin-
Cutler resulted in $608 thousand in investment advisory fees in the
third quarter of 1996. Servicing income increased $1.0 million (15.7%)
as a result of an increase of $1.6 million in servicing income from
securitized bankcard receivables primarily due to the securitization
and sale of an additional $335 million in bankcard receivables in April
1996. This increase is partially offset by a $554 thousand increase in
the amount of servicing income set aside for credit losses for securitized
manufactured housing receivables. Credit card income decreased $2.5
million (54.5%) primarily due to the securitization and sale of an
additional $335 million in bankcard receivables which shifted $1.9 million
in fee income to servicing income. In addition, credit card income
declined because the cost of promotional incentives to new customers on
cobranded credit cards exceeded the fee income generated on these credit
card relationships in 1996. Securities losses of $126 thousand were
recorded in the third quarter of 1996 compared to $342 thousand in
securities gains in the third quarter of 1995. Securities sales are
discussed in detail under "Changes in Financial Position."
<PAGE>
PAGE 25
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Noninterest Income (cont'd)
The Corporation's noninterest income for the first nine months of
1996 increased $16.3 million (11.3%) when compared to the first nine
months of 1995. Service charges on deposits increased $5.2 million
(9.7%) due to a $3.4 million increase in service charges on business
checking and a $2.2 million increase in retail deposit service charges.
Mortgage banking income increased $11.4 million (100.4%) as a result of
a $13.2 million increase in gains on the sale of servicing primarily
due to $9.1 million in gains on the sale of bulk servicing during 1996.
These bulk servicing gains resulted from the Corporation's decision to
exit the mortgage servicing business which was announced in the first
quarter of 1996. The Corporation 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. In addition, mortgage placement
fees increased $1.2 million and origination fees and document review
fees increased $1.4 million. These increases were partially offset by
$3.0 million in net capitalized mortgage servicing rights income
recorded in 1995 and an $854 thousand decline in other mortgage banking
income. Trust and investment advisory fees increased $4.7 million
(28.8%) due to increases in custody fees and investment management and
advisory fees. As noted above, the acquisition of Zirkin-Cutler
resulted in an additional $608 thousand in investment advisory fees.
Servicing income increased $4.1 million (26.8%) primarily as a result
of an increase of $2.9 million in servicing income from securitized
bankcard receivables primarily due to the securitization and sale of
an additional $335 million in bankcard receivables in April 1996.
In addition, servicing income set aside for credit losses for
securitized manufactured housing receivables decreased $1.8 million.
Credit card income decreased $5.1 million (37.9%) primarily due to the
securitization and sale of an additional $335 million in bankcard
receivables which shifted $3.2 million in fee income to servicing income.
In addition, credit card income declined because the cost of promotional
incentives to new customers on cobranded credit cards exceeded the fee
income generated on these credit card relationships in 1996. Securities
gains of $175 thousand were recorded in the first nine months of 1996
compared to $2.2 million in securities gains in the first nine months
of 1995. Securities sales are discussed in detail under "Changes in
Financial Position." Trading income increased $1.1 million (46.3%).
Other income decreased $3.7 million (18.3%) primarily due to the
following income recorded in the first nine months of 1995: $875
thousand in nonaccrual fee and interest payments on two loans, $743
thousand in loan funds received in excess of book value, $675 thousand
from an other real estate owned property, $493 thousand from the sale
of stock received in partial satisfaction of a loan obligation and
a $493 thousand leasing gain on the sale of an airplane.
<PAGE>
PAGE 26
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 expenses
for the three months and nine months ended September 30, 1996 and 1995.
Table 5 Noninterest Expenses
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------- ----------------------------------
Percent Percent
Change Change
1996 1995 1996/1995 1996 1995 1996/1995
------- ------- ----------- ------- ------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Salaries and wages..................... $47,325 $43,794 8.1% $134,458 $128,244 4.8%
Other personnel costs.................. 9,691 10,676 (9.2) 34,664 31,256 10.9
Occupancy costs....................... 8,511 8,633 (1.4) 23,683 23,938 (1.1)
Equipment costs........................ 8,103 7,426 9.1 24,474 22,547 8.5
Other operating expenses:
External services.................... 6,884 5,277 30.5 18,916 15,168 24.7
Postage and communications........... 4,255 3,855 10.4 12,412 10,939 13.5
Advertising.......................... 4,095 2,978 37.5 11,486 11,642 (1.3)
Professional service fees............ 2,091 1,590 31.5 6,545 4,974 31.6
Lending and collection............... 1,449 2,035 (28.8) 5,017 4,783 4.9
Examinations and assessments......... 1,122 1,710 (34.4) 2,871 9,555 (70.0)
Other................................ 9,497 9,615 (1.2) 26,977 27,305 (1.2)
------- ------- ----- ------- ------- -----
Total other operating expenses..... 29,393 27,060 8.6 84,224 84,366 (0.2)
-------- ------- ----- -------- -------- -----
Total noninterest expenses..... $103,023 $97,589 5.6% $301,503 $290,351 3.8%
======== ======= ===== ======== ======== =====
</TABLE>
The Corporation's noninterest expenses for the third quarter of
1996 increased $5.4 million (5.6%) when compared to the third quarter
of 1995. Salaries and wages increased $3.5 million (8.1%) primarily
due to approximately $2.2 million in additional salaries and wages as
a result of the 1st Washington acquisition and a $950 thousand increase
in regular salary expense. Other personnel costs decreased $985
thousand (9.2%) primarily due to a decrease in healthcare costs of
$1.6 million. This decrease was partially offset by pension settlement
costs of $976 thousand related to executive retirements in the third
quarter of 1996. Equipment costs increased $677 thousand (9.1%) due to
higher maintenance and depreciation expenses. External services increased
$1.6 million (30.5%) primarily as a result of higher servicing costs
associated with growth in the bankcard receivables portfolio and
outsourced processing associated with a government automated tax payment
program. Advertising expenses increased $1.1 million (37.5%).
The Corporation's noninterest expenses for the first nine months
of 1996 increased $11.2 million (3.8%) when compared to the first nine
months of 1995. Salaries and wages increased $6.2 million (4.8%)
primarily due to a $2.4 million increase in regular salary expense
and the impact of the 1st Washington acquisition of approximately
$2.2 million in salaries and wages. In addition, overtime and temporary
help expenses increased $1.0 million and severance expenses increased
$940 thousand. Other personnel costs increased $3.4 million (10.9%)
primarily as a result of a $2.9 million increase in employee retirement
expenses which included $2.0 million in pension settlement costs related
to executive retirements in 1996, an $810 thousand increase in payroll
taxes and a $788 thousand increase in relocation and recruiting expenses.
Partially offsetting these increases was a $969 thousand decline in
healthcare costs. Equipment costs increased $1.9 million (8.5%)
primarily due to higher maintenance and depreciation expenses in 1996.
External services increased $3.7 million (24.7%) primarily as a result
of higher servicing costs associated with growth in the bankcard
receivables portfolio and outsourced processing associated with a
government automated tax payment program. Postage and communications
increased $1.5 million (13.5%) primarily due to higher communications
expense in 1996. Professional service fees increased $1.6 million
(31.6%) due to an increase in consulting fees. Examinations and
assessments decreased $6.7 million (70.0%) as a result of a reduction
in the Federal Deposit Insurance Corporation assessment rate partially
offset by a $1.2 million Savings Association Insurance Fund special
assessment on the Corporation's OAKAR deposits.
<PAGE>
PAGE 27
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 $7.7 million
from December 31, 1995 to September 30, 1996. This increase is primarily
due to $15.1 billion in purchases in the first nine months of 1996 which
included the following: $14.4 billion in U.S. Treasury and U.S.
Government Agencies securities; $305.8 million in mortgage-backed
obligations ("MBS's"); $214.9 million collateralized mortgage obligations
("CMO's"); $174.9 million in other debt securities; $9.1 million in
obligations of state and political subdivisions and $3.5 million in
equity securities. In addition, the acquisition of 1st Washington
resulted in an additional $453.8 million of investment securities
available-for-sale. These increases are partially offset by paydowns,
maturities and/or calls of $14.4 billion in the first nine months of 1996.
In addition, the following significant sales were recorded during 1996.
In the first quarter of 1996, $109.8 million in U.S. Treasury securities
were sold, resulting in losses of $555 thousand and $241.0 million in
MBS's were sold, resulting in losses of $48 thousand. In the second
quarter of 1996, $330.3 million in U.S. Treasury securities were
sold, resulting in losses of $34 thousand; $83.5 million in MBS's were
sold, resulting in gains of $982 thousand and $8.7 million in CMO's were
sold, resulting in losses of $54 thousand. In the third quarter of 1996,
$125.6 million in U.S. Treasury securities were sold, resulting in
losses of $1.1 million; $98.1 million in MBS's were sold, resulting in
gains of $308 thousand and $89.1 million in CMO's were sold, resulting
in $543 thousand in gains. The fair value of the available-for-sale
portfolio at September 30, 1996 was $4.6 million below 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 $27.5 million net adjustment to the unrealized gains
(losses) on available-for-sale securities which is included as a
component of stockholders' equity. Table 6 provides information on the
gross unrealized gains and losses of the available-for-sale portfolio
at September 30, 1996.
<TABLE>
The amortized cost and fair values of the available-for-sale securities
at September 30, 1996 are shown in the following table.
Table 6 Available-for-Sale Portfolio
<CAPTION>
September 30, 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........... $827,644 $1,799 ($9,814) $819,629
Mortgage-backed obligations.......................... 1,205,134 4,428 (19,089) 1,190,473
Collateralized mortgage obligations:
Issued by Federal Agencies........................ 328,578 4,414 (1,637) 331,355
Privately issued.................................. 224,947 712 (737) 224,922
Obligations of states and political
subdivisions...................................... 87,702 4,956 (335) 92,323
Other debt securities................................ 83,212 466 - 83,678
Equity securities.................................... 49,116 10,228 (30) 59,314
---------- --------- --------- ----------
Total.......................................... $2,806,333 $27,003 ($31,642) $2,801,694
========== ========= ========= ==========
</TABLE>
<PAGE>
PAGE 28
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Loan Portfolio
Total loans, net of unearned income increased from $6.1 billion
at December 31, 1995 to $6.6 billion at September 30, 1996. The $476.3
million (7.8%) increase was primarily due to the acquisition of 1st
Washington and its wholly owned subsidiaries effective July 16, 1996
which included $325.7 million in loan outstandings. The majority of
the acquired loans were real estate secured including residential
mortgages of $193.3 million, commercial mortgages of $80.7 million and
construction loans of $32.2 million. Excluding the impact of the 1st
Washington acquisition, based on outstandings as of the date of
acquisition, total loans of the Corporation increased $150.6 million
or 2.5% in the nine months ended September 30, 1996.
On April 23, 1996, $500 million in bankcard receivables were
securitized and sold including $165 million from a prior securitization.
Excluding the net impact of the additional $335 million in securitized
bankcard receivables, total loans increased $811.3 million or 13.2%
for the nine months ended September 30, 1996. Excluding the impact
of both the 1st Washington acquisition and the April bankcard
securitization, total loans increased $485.6 million or 7.9% for
the nine months ended September 30, 1996.
Commercial loans decreased $10.5 million (0.6%) from December
31, 1995 to September 30, 1996. Month-end balances can show large
fluctuations due to the transactional nature of large corporate
customers that borrow for short periods of time under revolving
facilities. Specialized sectors including Communications and
Healthcare lending offer favorable financing opportunities for the
Corporation.
Commercial real estate loans, which include both construction
and commercial mortgages, increased $153.2 million (12.1%) from December
31, 1995 to September 30, 1996. Approximately 73.7% or $112.9 million
of the growth year-to-date was due to the 1st Washington acquisition.
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 8 and 9.
Residential mortgages increased $187.6 million (28.8%) from
December 31, 1995 to September 30, 1996. Excluding the impact of the
1st Washington acquisition, based on outstandings as of the date of
acquisition, residential loans declined $5.7 million or 0.9% since
December 31, 1995. The Corporation originates residential mortgages
primarily for sale in the secondary market. Originations for the
Corporation's permanent portfolio are principally low income housing
and adjustable rate products.
Retail loans increased $241.2 million (21.9%) from December 31,
1995 to September 30, 1996. Retail loan growth resulted primarily
from two major marketing campaigns for home equity credit products
and other consumer loan products.
Bankcard outstandings decreased $186.5 million (28.5%) since
December 31, 1995. If the impact of the April 23, 1996 securitization
is excluded, bankcard outstandings grew by $148.5 million (22.7%)
since December 31, 1995.
Leases receivable increased $65.0 million (19.4%) since December
31, 1995. Approximately 81.6% of the growth occurred in commercial
leases with the remainder in retail leases.
Foreign loans increased $26.3 million (7.8%) from December 31,
1995 to September 30, 1996. The growth occurred in loans to customers
within the shipping industry.
The Corporation monitors exposure based on industry classifications
and established limits that are reviewed by the Board of Directors.
Significant exposures by industry classification in the loan portfolio
are presented in Table 7.
<PAGE>
PAGE 29
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
Table 7 Loan Portfolio Distribution by Industry Classification
<CAPTION>
September 30, 1996
----------------------------------------------------
Outstanding Unfunded Total Nonperforming
Balance Commitments Exposure Loans
----------- ----------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Transportation (1)................................ $508,010 $35,334 $543,344 $ -
Communications (2)................................ 374,072 134,069 508,141 2,309
Healthcare (3).................................... 355,415 115,082 470,497 172
<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 8 Loans Secured by Real Estate and Other Real Estate Owned by Property Type
<CAPTION>
September 30, 1996
-------------------------------------------------
Total loans
------------------------ Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Office buildings..................................... $93,195 $301,945 $331 $274
Industrial warehouse................................. 54,799 173,157 6,803 -
Retail............................................... 47,889 164,456 2,204 4,116
Hospitals/nursing home............................... 13,014 118,173 - -
Hotels/motels........................................ 193 62,782 - -
Commercial land...................................... 29,504 654 916 4,793
Special purpose...................................... 4,511 87,626 1,498 -
Apartments........................................... 28,466 59,323 5,822 -
Mixed use............................................ - 44,396 - -
Residential land..................................... 16,779 237 550 1,630
Other land-farm/recreational......................... - 7,116 511 -
Residential properties for resale.................... 24,018 787 2,480 -
Miscellaneous........................................ 1,657 84,298 145 -
--------- ---------- --------- ---------
Total.......................................... $314,025 $1,104,950 $21,260 $10,813
========= ========== ========= =========
</TABLE>
<TABLE>
Table 9 Loans Secured by Real Estate and Other Real Estate Owned by Geographic Region
<CAPTION>
September 30, 1996
-------------------------------------------------
Total loans
----------------------- Other
Real estate Real estate Nonperforming real estate
construction mortgage loans owned
------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Maryland............................................. $246,285 $718,669 $6,117 $5,825
Pennsylvania......................................... 12,968 160,131 2,530 1,825
Virginia............................................. 24,790 71,718 11,741 2,389
Washington, D.C...................................... 16,265 47,208 812 274
Florida.............................................. 1,573 32,258 - 500
New Jersey........................................... - 36,263 - -
Delaware............................................. 5,069 9,023 - -
All other............................................ 7,075 29,680 60 -
--------- ---------- --------- ---------
Total.......................................... $314,025 $1,104,950 $21,260 $10,813
========= ========== ========= =========
</TABLE>
<PAGE>
PAGE 30
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Asset Quality
Nonperforming Assets
Nonperforming assets totaled $60.8 million at September 30, 1996,
an increase of $16.0 million when compared to nonperforming assets of
$44.8 million at December 31, 1995. The acquisition of 1st Washington
resulted in an additional $17.5 million in nonperforming assets which
included $16.4 million in nonaccrual real estate loans and $1.1 million
in other real estate owned. In addition to the 1st Washington non-
performing assets, there were $15.6 million in loans transferred to
nonaccrual status. These increases were partially offset by the
following decreases in nonperforming assets in the nine months ended
September 30, 1996: paydowns of $12.0 million, other real estate owned
sales of $2.0 million, charge-offs of $1.6 million and loans reclassified
to accrual status of $1.5 million. 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. The most significant charge-off was $1.0 million
on a nonaccrual construction loan. Information on the Corporation's
impaired loans is included in Note 5 of the Notes to the Consolidated
Financial Statements.
<TABLE>
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 10 Nonperforming Assets
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans
Domestic:
Commercial......................................... $15,074 $16,587 $16,743
Real estate, construction.......................... 3,894 1,125 1,254
Real estate mortgage, commercial................... 17,366 4,785 5,861
Real estate mortgage, residential.................. 7,992 6,375 5,364
Foreign.............................................. 3,800 4,321 9,703
-------- -------- --------
Total nonaccrual loans......................... 48,126 33,193 38,925
-------- -------- --------
Restructured loans................................... 131 143 437
Other assets owned:
Other real estate.................................. 12,120 11,546 11,153
Valuation reserves................................. (324) (295) (345)
Other assets....................................... 705 250 300
-------- -------- --------
Total other assets owned....................... 12,501 11,501 11,108
-------- -------- --------
Total nonperforming assets......................... $60,758 $44,837 $50,470
======== ======== ========
Nonperforming assets as a percentage of total
loans, net of unearned income plus other
foreclosed assets owned........................... 0.92% 0.73% 0.84%
==== ==== ====
Accruing loans contractually past due
90 days or more as to principal or interest:
Domestic.......................................... $16,734 $18,808 $12,932
======== ======== ========
</TABLE>
<PAGE>
PAGE 31
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
<TABLE>
The following table details certain information relating to the
allowance for credit losses of the Corporation for the nine months
ended September 30, 1996 and September 30, 1995, respectively. The
1st Washington acquisition resulted in an additional $10.6 million
allowance for credit losses for loans which were acquired.
Table 11 Analysis of the Allowance for Credit Losses
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
---------- ----------
(dollars in thousands)
<S> <C> <C>
Allowance at beginning of year....................... $177,621 $191,024
Provision for credit losses.......................... 6,000 10,334
Losses charged off:
Commercial loans................................. (1,265) (284)
Real estate loans, construction.................. (1,016) (635)
Real estate loans, mortgage:
Residential.................................... (106) (110)
Commercial..................................... (107) (582)
Retail........................................... (4,150) (2,160)
Bankcard receivables............................. (22,676) (20,721)
Leases receivable................................ (73) (28)
Foreign.......................................... - (1,763)
-------- --------
Total losses charged off....................... (29,393) (26,283)
Recoveries of losses previously charged off:
Commercial loans................................. 1,528 665
Real estate loans, construction.................. 265 103
Real estate loans, mortgage:
Residential.................................... 6 26
Commercial..................................... 6 337
Retail........................................... 1,576 1,754
Bankcard receivables............................. 2,196 3,844
Leases receivable................................ 82 170
-------- --------
Total recoveries............................... 5,659 6,899
Net losses charged off............................... (23,734) (19,384)
Allowance on acquired loans.......................... 10,642 -
-------- --------
Total allowance at September 30...................... $170,529 $181,974
======== ========
Average loans, net of average unearned income........ $6,186,704 $5,716,645
========== ==========
Period end loans, net of unearned income............. $6,615,161 $6,025,797
========== ==========
Net charge-offs to average loans, net of average
unearned income (annualized)...................... 0.51% 0.45%
Allowance as a percentage of period end loans, net
of unearned income................................ 2.58 3.02
Allowance as a percentage of nonperforming loans..... 353.38 462.31
</TABLE>
<PAGE>
PAGE 32
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Deposits
Total deposits increased $455.2 million (6.5%) from December 31,
1995 to September 30, 1996. Core deposits totaled $6.8 billion at
September 30, 1996, an increase of $413.2 million (6.5%) from core
deposits of $6.4 billion at December 31, 1995. Purchased deposits,
which include large denomination time and foreign time deposits
increased $42.0 million. These increases are primarily the result
of the acquisition of 1st Washington which included $426.3 million in
deposits: $413.3 million in core deposits and $13.0 million in large
denomination time deposits. The acquired core deposits on July 16, 1996
included $14.3 million in commercial noninterest bearing demand deposits,
$48.3 million in retail interest bearing demand deposits, $53.5 million
in retail money market deposits, $58.0 in retail savings deposits and
$239.2 million in retail certificates of deposit.
In addition, money market deposits increased $470.1 million
primarily offset by a decrease in interest bearing demand deposits
of $410.5 million. 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.
<PAGE>
PAGE 33
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations-(Continued)
Capital Resources
<TABLE>
The following table details the Corporation's capital components
and ratios at September 30, 1996, December 31, 1995 and September 30,
1995, based upon the capital requirements of the Federal Reserve Board.
Table 12 Capital Components
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
------------ ------------- -------------
(dollars in thousands)
<S> <C> <C> <C>
Preferred stockholders' equity.................................... $144,852 $144,852 $144,852
Common stockholder's equity....................................... 1,058,331 1,038,722 993,412
Disallowed intangibles............................................ (98,504) (37,178) (38,136)
Net unrealized (gains) losses on investment securities available-
for-sale (1)................................................... 3,100 (24,414) (7,637)
--------- --------- ---------
Tier 1 capital.................................................... 1,107,779 1,121,982 1,092,491
--------- --------- ---------
Qualifying long-term debt......................................... 99,755 103,721 103,710
Intermediate preferred stock...................................... 9,000 - -
Allowance for credit losses (2)................................... 116,662 102,754 101,146
Mandatory convertible securities.................................. 59,975 59,969 59,966
--------- --------- ---------
Tier 2 capital.................................................... 285,392 266,444 264,822
---------- ---------- ----------
Total capital..................................................... $1,393,171 $1,388,426 $1,357,313
========== ========== ==========
Risk-adjusted assets.............................................. $9,279,066 $8,145,412 $8,010,869
=========== =========== ==========
Average quarterly assets (regulatory guidelines).................. $10,438,200 $10,316,684 $9,783,313
=========== =========== ==========
Risk-based capital ratios:
Tier 1 to risk adjusted assets.................................. 11.94% 13.77% 13.64%
Regulatory minimum.............................................. 4.00 4.00 4.00
Total capital to risk-adjusted assets........................... 15.01 17.05 16.94
Regulatory minimum.............................................. 8.00 8.00 8.00
Leverage ratio.................................................... 10.71 10.91 11.21
<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 capital decreased $14.2 million when September 30, 1996 is
compared to December 31, 1995 and total capital increased $4.7 million
during this same period. Net income of $96.3 million was partially
offset by $40.0 million and $9.0 million in dividends declared on common
stock and preferred stock, respectively, in the first nine months of
1996. Tier 1 capital declined due to additional disallowed goodwill
at September 30, 1996 from the acquisitions of 1st Washington and
Zirkin-Cutler. Tier 2 capital was positively impacted by the issuance
of $9.0 million in intermediate preferred stock in the third quarter of
1996. Additional information regarding the Corporation's capital is
presented in the Consolidated Statements of Changes in Stockholders'
Equity.
<PAGE>
PAGE 34
<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 September 30, 1996
-------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $649.4 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 0.4 - 2.79
Trading account securities......................... 1.7 - 5.59
Funds sold......................................... 224.1 3.1 5.38
Investment securities available-for-sale:
Taxable securities................................. 2,568.2 40.3 6.25
Tax-exempt securities (1).......................... 94.5 2.3 9.84
Equity investments................................. 44.2 0.5 4.08
--------- --------
Total securities available-for-sale (2)......... 2,706.9 43.1 6.34
Loans held-for-sale.................................. 127.4 2.5 7.70
Loans, net of unearned income (1,3):
Commercial......................................... 1,740.9 33.8 7.72
Real estate, construction.......................... 300.7 6.7 8.84
Real estate mortgage, commercial................... 1,051.9 23.7 8.96
Real estate mortgage, residential.................. 803.8 14.6 7.22
Retail............................................. 1,309.0 27.4 8.34
Bankcard........................................... 434.5 13.1 12.02
Leases receivable.................................. 379.7 5.3 5.53
Foreign............................................ 345.4 6.5 7.49
--------- --------
Total loans, net of unearned income........... 6,365.9 131.1 8.19
Allowance for credit losses....................... (169.0) - -
---------
Loans, net...................................... 6,196.9 - -
Other assets......................................... 513.6 - -
--------- --------
Total assets/interest income.................... $10,420.4 $179.8
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,976.2 $ - - %
---------
Interest bearing demand............................ 118.8 0.8 2.58
Money market accounts.............................. 1,621.7 12.0 2.94
Savings........................................... 1,071.9 6.7 2.48
Other consumer time................................ 1,753.9 23.1 5.25
Large denomination time............................ 540.2 7.5 5.52
Deposits in foreign banking offices.................. 125.7 1.6 5.27
--------- --------
Total interest bearing deposits................. 5,232.2 51.7 3.93
--------- --------
Total deposits.................................. 7,208.4 - -
Funds purchased...................................... 666.8 8.7 5.18
Other borrowed funds, short-term..................... 520.9 6.6 5.08
Other liabilities.................................... 271.0 - -
Long-term debt....................................... 554.7 9.5 6.78
Redeemable preferred stock........................... 9.0 - -
Stockholders' equity................................. 1,189.6 - -
--------- --------
Total liabilities and stockholders'
equity/interest expense...................... $10,420.4 $76.5
========= ========
Earning assets/interest income....................... $9,426.4 $179.8 7.59%
Interest bearing liabilities/interest expense........ 6,974.6 76.5 4.36
Earning assets/interest expense...................... 9,426.4 76.5 3.23
Interest rate spread (4)............................. 3.23%
=====
Net interest margin (5).............................. 4.36%
=====
<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 35
<TABLE>
Table 14
First Maryland Bancorp and Subsidiaries
Average Balances, Interest Rates and Yields and Net Interest Margin
(Tax Equivalent Basis)
<CAPTION>
Nine months ended September 30, 1996
------------------------------------
Average
Average rate/
Balance Interest yield
------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Cash and due from banks.............................. $655.2 $ - - %
Money market investments:
Interest bearing deposits in other banks........... 4.7 0.2 5.57
Trading account securities......................... 1.7 0.1 5.87
Funds sold......................................... 278.7 11.0 5.30
Investment securities available-for-sale:
Taxable securities................................. 2,694.2 125.0 6.20
Tax-exempt securities (1).......................... 95.0 7.1 10.01
Equity investments................................. 37.7 1.1 3.66
--------- --------
Total securities available-for-sale (2)......... 2,826.9 133.2 6.29
Loans held-for-sale.................................. 117.7 6.6 7.46
Loans, net of unearned income (1,3):
Commercial......................................... 1,793.0 103.6 7.72
Real estate, construction.......................... 288.5 19.1 8.84
Real estate mortgage, commercial................... 996.8 66.4 8.89
Real estate mortgage, residential.................. 687.0 37.9 7.36
Retail............................................. 1,205.6 75.6 8.38
Bankcard........................................... 511.7 49.5 12.94
Leases receivable.................................. 354.7 14.7 5.55
Foreign............................................ 349.4 19.7 7.53
--------- --------
Total loans, net of unearned income........... 6,186.7 386.5 8.34
Allowance for credit losses....................... (169.9) - -
---------
Loans, net...................................... 6,016.8 - -
Other assets......................................... 486.5 - -
--------- --------
Total assets/interest income.................... $10,388.2 $537.6
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Noninterest bearing demand......................... $1,944.0 $ - - %
---------
Interest bearing demand............................ 117.1 2.2 2.55
Money market accounts.............................. 1,586.4 36.0 3.03
Savings........................................... 1,049.9 20.7 2.63
Other consumer time................................ 1,653.5 66.0 5.33
Large denomination time............................ 538.7 22.6 5.61
Deposits in foreign banking offices.................. 130.0 5.2 5.36
--------- --------
Total interest bearing deposits................. 5,075.6 152.7 4.02
--------- --------
Total deposits.................................. 7,019.6 - -
Funds purchased...................................... 735.3 28.6 5.19
Other borrowed funds, short-term..................... 660.5 26.1 5.29
Other liabilities.................................... 232.2 - -
Long-term debt....................................... 540.4 27.8 6.87
Redeemable preferred stock........................... 3.0 - -
Stockholders' equity................................. 1,197.2 - -
--------- --------
Total liabilities and stockholders'
equity/interest expense...................... $10,388.2 $235.2
========= ========
Earning assets/interest income....................... $9,416.4 $537.6 7.63%
Interest bearing liabilities/interest expense........ 7,011.8 235.2 4.48
Earning assets/interest expense...................... 9,416.4 235.2 3.34
Interest rate spread (4)............................. 3.15%
=====
Net interest margin (5).............................. 4.29%
=====
<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 36
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is furnished to this Form 10-Q:
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the
quarter ended September 30, 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
November 14, 1996 BY /s/ Jerome W. Evans
----------------------------
Jerome W. Evans
Executive Vice President and
Chief Financial Officer
November 14, 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 SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 826,569
<INT-BEARING-DEPOSITS> 443
<FED-FUNDS-SOLD> 43,439
<TRADING-ASSETS> 3,224
<INVESTMENTS-HELD-FOR-SALE> 2,801,694
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,615,161
<ALLOWANCE> 170,529
<TOTAL-ASSETS> 10,841,897
<DEPOSITS> 7,498,390
<SHORT-TERM> 1,257,216
<LIABILITIES-OTHER> 309,501
<LONG-TERM> 554,729
9,000
30,000
<COMMON> 84,926
<OTHER-SE> 1,088,257
<TOTAL-LIABILITIES-AND-EQUITY> 10,841,897
<INTEREST-LOAN> 384,869
<INTEREST-INVEST> 130,885
<INTEREST-OTHER> 17,905
<INTEREST-TOTAL> 533,659
<INTEREST-DEPOSIT> 152,706
<INTEREST-EXPENSE> 235,198
<INTEREST-INCOME-NET> 298,461
<LOAN-LOSSES> 6,000
<SECURITIES-GAINS> 175
<EXPENSE-OTHER> 301,503
<INCOME-PRETAX> 151,017
<INCOME-PRE-EXTRAORDINARY> 96,305
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,305
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.29
<LOANS-NON> 48,126
<LOANS-PAST> 16,734
<LOANS-TROUBLED> 131
<LOANS-PROBLEM> 29,631
<ALLOWANCE-OPEN> 177,621
<CHARGE-OFFS> 29,393
<RECOVERIES> 5,659
<ALLOWANCE-CLOSE> 170,529
<ALLOWANCE-DOMESTIC> 86,274
<ALLOWANCE-FOREIGN> 14,457
<ALLOWANCE-UNALLOCATED> 69,798
</TABLE>
