SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended June 30, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from __________ to __________.
No. 0-12364
(Commission File Number)
MERIDIAN BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-2237529
(State of Incorporation) (IRS Employer ID Number)
35 NORTH SIXTH STREET, READING, PA 19601
(Address of Principal Executive Offices) (Zip Code)
(610) 655-2000
(Registrant's Telephone Number)
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 ___
Number of Shares Outstanding as of July 31, 1995
COMMON STOCK ($5 Par Value) 58,338,038
(Title of Class) (Outstanding Shares)
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MERIDIAN BANCORP, INC.
FORM 10-Q
For the Quarter Ended June 30, 1995
Contents
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1995 and
June 30 and December 31,
1994 43
Consolidated Statements of Income for
the Three-Month and Six-Month
Periods Ended June 30, 1995
and 1994 45
Consolidated Statements of Changes in
Shareholders' Equity for the
Six-Month Periods Ended June 30,
1995 and 1994 47
Consolidated Statements of Cash Flows
for the Six-Month Periods Ended
June 30, 1995 and 1994 49
Notes to Consolidated Financial Statements 51
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Management's Discussion and Analysis of
Earnings and Financial Position 1
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security
Holders 57
Item 6. Exhibits and Reports on Form 8-K 59
<PAGE>
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF EARNINGS AND
FINANCIAL POSITION.
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
MANAGEMENTS' DISCUSSION AND ANALYSIS
OF EARNINGS AND FINANCIAL POSITION
(Dollars in Thousands, Except Per Share Data)
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
1995 1995 1994 1994 1994
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest Income........................................ $282,441 $273,735 $264,121 $257,210 $241,724
Interest Expense....................................... 129,154 123,258 110,888 100,799 85,880
Net Interest Income.................................... 153,287 150,477 153,233 156,411 155,844
Provision for Possible Loan Losses..................... 10,121 8,021 6,069 6,493 6,699
Net Interest Income After Provision for
Possible Loan Losses................................ 143,166 142,456 147,164 149,918 149,145
Non-Interest Income.................................... 67,109 57,757 57,453 57,302 55,334
Non-Interest Expenses..................................
Restructuring Charge ............................... 32,000 - - - -
All Other Expenses.................................. 140,537 140,404 144,102 153,686 145,012
Total Non-Interest Expenses............................ 172,537 140,404 144,102 153,686 145,012
Income Before Income Taxes............................. 37,738 59,809 60,515 53,534 59,467
Provision For Income Taxes............................ 11,809 18,574 16,370 16,914 18,683
Net Income ............................................ $25,929 $41,235 $44,145 $36,620 $40,784
Income Before Restructuring Charge..................... $46,729 $41,235 $44,145 $36,620 $40,784
Net Interest Margin.................................... 4.60% 4.58% 4.60% 4.65% 4.85%
Return on Average Assets............................... 0.70% 1.13% 1.18% 0.97% 1.13%
Before Restructuring Charge......................... 1.26% 1.13% 1.18% 0.97% 1.13%
Return on Average Common Shareholders' Equity.......... 8.43% 13.90% 14.33% 11.95% 13.74%
Before Restructuring Charge......................... 15.18% 13.90% 14.33% 11.95% 13.74%
Fully Diluted Earnings Per Share
Net Income.......................................... $0.45 $0.73 $0.77 $0.63 $0.70
Before Restructuring Charge......................... $0.82 $0.73 $0.77 $0.63 $0.70
Dividends Per Common Share............................. $0.37 $0.34 $0.34 $0.34 $0.34
Ratio of Dividends to Net Income....................... 80% 46% 44% 54% 48%
FINANCIAL CONDITION
Average Balances
Loans.................................................. $9,976,992 $9,775,050 $9,545,556 $9,499,372 $9,345,021
Assets................................................. 14,856,841 14,822,105 14,826,353 14,996,590 14,450,335
Deposits............................................... 11,246,269 11,097,803 11,230,079 11,380,801 11,170,222
Total Shareholders' Equity............................. 1,234,380 1,203,192 1,222,293 1,215,464 1,190,994
Primary Shares Outstanding............................. 56,452,388 56,452,905 57,535,268 58,301,343 58,170,280
Fully Diluted Shares Outstanding....................... 56,593,898 56,562,364 57,535,268 58,301,343 58,170,280
Total Shareholders' Equity to Assets................... 8.31% 8.12% 8.24% 8.10% 8.24%
<PAGE>
At Quarter-End
Loans.................................................. $10,056,692 $9,906,538 $9,763,523 $9,444,630 $9,520,497
Assets................................................. 14,911,173 14,996,342 15,052,647 14,782,400 15,184,724
Deposits............................................... 11,528,876 11,137,466 11,379,567 11,310,179 11,666,783
Total Shareholders' Equity............................. 1,236,161 1,222,835 1,215,085 1,231,596 1,214,604
Book Value Per Common Share............................ 22.12 21.90 21.50 21.31 21.01
Common Shares Outstanding.............................. 55,886,536 55,826,807 56,506,642 57,803,902 57,802,722
Total Shareholders' Equity to Assets................... 8.29% 8.15% 8.07% 8.33% 8.00%
Risk-Based Capital Ratio............................... 12.76% 12.80% 12.73% 13.07% 13.30%
Allowance for Possible Loan Losses..................... 170,684 168,426 169,402 173,503 172,343
Allowance for Possible Loan Losses to Loans............ 1.70% 1.70% 1.74% 1.84% 1.81%
Allowance for Possible Loan Losses to
Non-Performing Loans................................ 171% 158% 176% 168% 151%
Non-Performing Assets as a Percentage of
Total Period-End Loans and
Assets Acquired in Foreclosure...................... 1.17% 1.33% 1.24% 1.35% 1.50%
Non-Performing Assets and Loans Past Due 90 or
more Days as to Interest or Principal as a
Percentage of Loans and Assets Acquired
in Foreclosures..................................... 1.39% 1.57% 1.47% 1.56% 1.87%
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF EARNINGS AND FINANCIAL POSITION
FINANCIAL HIGHLIGHTS
Meridian Bancorp, Inc. (Meridian) reported income, before a
restructuring charge, of $46.7 million in the second quarter of
1995 compared to net income of $40.8 million in the second
quarter of 1994, an increase of 15%. On a fully-diluted per
share basis, income before the restructuring charge was $.82
compared to net income of $.70 last year, a 17% increase.
In June 1995, Meridian completed an internal review of its
operations and businesses and announced a company-wide plan
designed to improve its operating performance and competitive
position. As a result of this review, which is discussed at the
end of this section, Meridian recorded a restructuring charge in
the second quarter of 1995. After the restructuring charge of
$32.0 million (after-tax $20.8 million or $.37 per share), net
income in the second quarter of 1995 was $25.9 million or $.45
per fully-diluted share.
The returns on average assets and on average common
shareholders' equity, based on income before the restructuring
charge, for the quarter ended June 30, 1995 were 1.26% and
15.18%, respectively, compared to 1.13% and 13.74%, respectively,
for the same quarter of last year.
Net interest income was $153.3 million in the second quarter
of 1995 compared to $155.8 million in the second quarter of 1994.
On a taxable-equivalent basis, net interest income was
$157.4 million compared to $160.4 million in the second quarter
of 1994. The net interest margin was 4.60% in the second quarter
of this year compared to 4.85% a year ago and 4.58% in the first
quarter of 1995. The decline in the net interest margin from
last year resulted from asset and liability repricing in the
higher short-term interest rate environment in 1995.
The provision for possible loan losses was $10.1 million in
the second quarter of 1995, compared to $6.7 million in the
second quarter of 1994 and $8.0 million in the first quarter of
1995. The higher provision reflects the growth in loans during
the past year.
Non-performing loans were $100.0 million or .99% of loans at
June 30, 1995 compared to $106.5 million or 1.07% at March 31,
1995 and $113.8 million or 1.20% a year ago. The ratio of the
allowance for possible loan losses to non-performing loans was
171% at June 30, 1995 compared to 158% at March 31, 1995 and 151%
a year ago.
Total non-performing assets were $117.6 million at June 30,
1995, or 1.17% of loans and assets acquired in foreclosures,
compared to $131.7 million or 1.33% at March 31, 1995 and
$143.6 million or 1.50% at June 30, 1994.
Net loans charged-off in the second quarter of 1995 were
$7.9 million compared to $9.0 million in the first quarter of
1995 and $7.5 million in the comparable period a year ago. The
allowance for possible loan losses was 1.70% of total loans at
June 30, 1995 compared to 1.70% at March 31, 1995 and 1.81% a
year ago.
Non-interest income was $67.1 million in the second quarter
of 1995 compared to $55.3 million in the second quarter of last
year, an increase of 21%. Trust revenues grew by $5.0 million,
mostly as a result of the acquisition of McGlinn Capital
Management in mid-1994, and banking service charges and related
fees increased by $2.5 million. Securities gains were
$3.6 million higher in the quarter compared to last year. Non-
interest income was $57.8 million in the first quarter of 1995.
Meridian's expense control efforts are reflected in a
decline in operating expenses of $4.5 million or 3% between the
second quarters of 1995 and 1994. Non-interest expenses were
unchanged from the first quarter of 1995.
For the first six months of 1995, income before the
restructuring charge increased by 12% to $88.0 million or $1.55
per fully-diluted share compared to net income of $78.6 million
or $1.35 per fully-diluted share in the first half of 1994. Net
income in the first half of 1995 was $67.2 million or $1.18 per
fully-diluted share.
The returns on average assets and on average common
shareholders' equity, based on income before the restructuring
charge, for the six-month period ended June 30, 1995 were 1.20%
and 14.55% respectively, compared to 1.12% and 13.37%,
respectively, for the same period of last year.
Total assets at June 30, 1995 were $14.9 billion compared to
$15.2 billion at June 30, 1994. Total loans were $10.1 billion
compared to $9.5 billion a year ago, a 6% increase. Total
deposits were $11.5 billion compared to $11.7 billion at June 30,
1994. Meridian continues to fund a significant portion of its
assets with deposits acquired in its local marketplace.
Shareholders' equity was $1.24 billion or 8.29% of total
assets at June 30, 1995 compared to $1.21 billion or 8.00% a year
ago. The ratio of tangible shareholders' equity to assets, which
excludes $126.4 million of intangible assets in 1995 and
$98.5 million in 1994, was 7.51% at June 30, 1995 compared to
7.39% at June 30, 1994. Meridian's risk-based capital ratio was
12.76% at June 30, 1995, in excess of the 10% regulatory
requirement for well capitalized institutions. This ratio was
12.80% at March 31, 1995 and 13.30% at June 30, 1994. Book value
per common share was $22.12 at June 30, 1995 compared to $21.01
at June 30, 1994, an increase of 5%. Book value per common share
at March 31, 1995 was $21.90.
PERFORMANCE STUDY ("59.9" PROGRAM)
In January 1995, Meridian commenced an internal review of
its operations and businesses. The purpose of this review was to
improve the company's operating performance and competitive
position by streamlining and consolidating functions and work
processes and by increasing the focus on customers and service
levels. The improvement in operating results is to be measured
by Meridian's performance ratio (non-interest expense divided by
the total of non-interest income and net interest income on a
taxable-equivalent basis) with a goal of reducing the ratio to
59.9% by the end of the first quarter of 1996. The ratio was
67.6% for the year 1994 and 62.6% in the second quarter of 1995.
In June 1995, Meridian completed this review and announced a
company-wide plan that will be implemented over approximately the
next twelve months.
As a result of this review, Meridian recorded a $32 million
restructuring charge, $20.8 million after tax or $.37 per share.
The components of the restructuring charge were as follows (in
thousands):
Requiring
Cash
Total Outflow
------- ---------
Severance and Other Employee
Related Costs $15,900 $15,900
Lease and Other
Contract Terminations 2,600 2,600
Building and Other
Asset Write-offs 10,700 ---
Professional Fees 2,800 2,800
------- -------
Total $32,000 $21,300
======= =======
This process will result in the elimination of approximately
1,100 positions of a total of approximately 7,100 current
positions. The positions eliminated include 163 from attrition
and a partial hiring freeze in effect since January 1995, 334
from strategic alliances with outside firms, and 603 from
layoffs. These changes represent a 16% reduction in total
current positions and an 11% reduction excluding strategic
alliances.
The severance charge relates to the separation package given
to eligible employees based on years of service. Cash payments
will commence in July 1995 and will continue for varying terms.
Lease and other contract terminations include estimated payments
related to bank branch closings and the consolidation of
brokerage activities. Building and other asset write-offs
include amounts related to buildings, equipment, and intangible
assets written-off as a result of branch closings and other
consolidations. Professional fees include consulting fees and
legal expenses incurred during the review process. Through June
30, 1995, payments of $2.1 million have been charged against the
restructuring reserve.
The process is expected to reduce net operating expenses on
an annualized pre-tax basis by $55 million while providing
recurring revenue enhancements of $13 million, increasing
Meridian's after-tax earnings on an annual basis by $44 million,
or $.78 per share. The gross reduction in operating expenses is
expected to approximate $73.2 million and is composed of salaries
and benefits of $54.2 million, furniture and fixtures of
$16.1 million, and occupancy of $2.9 million. Offsetting these
savings are foregone revenues, which are directly related to the
expense reductions mainly in the branches, of $7.5 million and
one-time implementation costs of $10.7 million, resulting in net
expense reductions of $55 million.
NET INTEREST INCOME AND RELATED ASSETS AND LIABILITIES (INCLUDING
DERIVATIVES)
Net interest income was $153.3 million in the second quarter
of 1995 compared to $155.8 million in the same quarter of 1994, a
decline of 2%. Net interest income on a taxable-equivalent basis
was $157.4 million in the second quarter of this year compared to
$160.4 million in the same period of last year.
The level of net interest income results from the
interaction between the volume and mix of interest-earning assets
and the related funding sources, and the net interest margin.
Over the past year, the positive impact on net interest income of
earning asset growth of 3% was offset by a 25 basis point decline
in the net interest margin as a result of asset and liability
repricing in the higher short-term interest rate environment in
1995. The net interest margin was 4.60% in the second quarter of
1995 compared to 4.85% in the same period of last year, and 4.58%
in the first quarter of 1995.
Average interest-earning assets increased by 3% to
$13.7 billion in the second quarter of 1995 from $13.3 billion in
the same period of last year. Average loans outstanding
increased by 7% between the two periods. Average investment
securities and investment securities available for sale decreased
by 1%. Average deposits were $11.2 in the second quarter of
1995, almost unchanged from the same period of last year.
Average short-term borrowings increased by 21% in the second
quarter of 1995 from the same period of last year, primarily to
fund the loan growth described above.
Net interest income for the six months ended June 30, 1995
was $303.8 million compared to $302.8 million last year, an
increase of less than 1%. As noted above, the positive impact of
earning asset growth has been offset by a decline in the net
interest margin. The net interest margins were 4.59% and 4.84%
for the first six months of 1995 and 1994, respectively.
Table 1 presents net interest income, yields and rates on a
taxable-equivalent basis, and average balances for the second
quarters of 1995 and 1994, the first quarter of 1995, and the six
months ended June 30, 1995 and 1994, respectively.
The level and volatility of interest rates can have a
significant impact on Meridian's profitability. The objective of
interest rate risk management is to identify and manage the
sensitivity of net interest income to changing interest rates and
other market factors in order to achieve overall financial goals.
Based on economic conditions, on and off-balance sheet positions,
asset quality and various other considerations, management
establishes tolerance ranges for interest rate sensitivity and
manages within these ranges.
Meridian uses several tools to measure interest rate risk.
Income simulation modeling, the primary risk measurement tool, is
used to project net interest income in different interest rate
environments. Simulation modeling considers not only the impact
of changing interest rates but also other potential causes of
variability, such as earning-asset volume and mix, yield curve
relationships, loan spreads, customer preferences and general
market conditions. Meridian also monitors the sensitivity of the
market value of assets, liabilities and off-balance sheet
positions to changing interest rates. An interest rate
sensitivity or gap analysis is used to supplement simulation
modeling.
Meridian uses off-balance sheet derivative products for
interest rate risk management and in the securities unit (broker-
dealer activities). Table 2 provides information on derivative
positions at June 30, 1995.
Meridian's core banking businesses generate a mix of loans
and deposits that tends to create an asset sensitive interest
rate risk profile, primarily because retail core deposits do not
reprice as quickly as loans. An asset sensitive position
generally indicates that net interest income would increase in
periods of rising interest rates and decrease in periods of
declining interest rates. Meridian manages this tendency towards
asset sensitivity through its securities and purchased funding
portfolios and by the use of off-balance sheet derivative
products. At June 30, 1995, Meridian's interest sensitivity
indicated a moderate asset sensitive position through the one-
year time period.
Meridian utilizes a variety of derivative instruments in
managing interest rate risk, including interest rate swaps,
options, forwards, caps and floors. These instruments provide an
efficient means to achieve risk management goals, while
supporting liquidity and capital management objectives.
Interest rate swaps account for approximately 70% of the
derivative products used for interest rate risk management
purposes. Interest rate swaps involve the exchange of fixed and
variable interest payments based on an underlying notional
amount. Meridian will generally receive a fixed rate and pay a
variable rate in order to reduce the asset sensitive position
associated with its core banking businesses. Meridian uses
interest rate swaps primarily to alter the repricing
characteristics of its retail core deposits, including time
deposits, interest-bearing checking accounts, and savings and
money market deposits.
The notional amount of interest rate swaps totaled
$2.6 billion at June 30, 1995 compared to $3.0 billion at
June 30, 1994 and $2.6 billion at March 31, 1995. Because of the
nature of risk being managed, the impact on net interest income
of swaps for which Meridian receives a fixed and pays a variable
interest rate will be positive during periods of declining rates
and negative in periods of rising rates. Consistent with this
profile, the impact of interest-rate swaps was to increase
interest expense on deposits by $6.8 million in the rising rate
environment of the second quarter of 1995 compared to a reduction
of $5.3 million in interest expense in the second quarter of
1994. For the six months, the comparable amounts were an
increase to interest expense of $14.8 million in 1995 and a
decrease to interest expense of $13.5 million in 1994.
Derivative products, as with all financial instruments,
contain elements of risk. A derivative product is subject to
market risk in that the value of a contract will increase or
decrease as a result of movements in market interest rates.
Meridian continually monitors the sensitivity of its derivative
contracts to changing interest rates. Unrealized gains and
losses are calculated based on the replacement costs of the
contracts. The decline in the market value of Meridian's
interest rate contracts over the past twelve months is consistent
with the rising interest rate environment over that time period.
Unrealized gains and losses on derivative positions should
be viewed in the context of the overall balance sheet. An
unrealized loss on a derivative product used for interest rate
risk management purposes is generally offset or mitigated by an
unrealized gain on the asset or liability to which the derivative
contract is assigned. Meridian, as part of its asset and
liability management process, continually monitors the impact of
interest rate movements on the market value of not only its
derivative positions, but also all other on and off-balance sheet
positions. In a rising rate environment, fixed-rate loan,
investment and off-balance sheet positions will decline in market
value, while core deposits and longer term borrowings will
appreciate in value.
The securities unit uses various off-balance sheet
derivative products for sale to customers and to manage the
market risks associated with the broker-dealer business, as
indicated in Table 2. The securities unit acts as remarketing
agent on tender option bonds totaling $233 million at June 30,
1995 compared to $315 million at June 30, 1994. The premium paid
for Treasury float contracts, which is included on the balance
sheet in other assets, was $1.5 million at June 30, 1995 and
represents the maximum exposure to Meridian from such contracts.
The objective of liquidity management is to ensure that
sufficient funding is available, at reasonable cost, to meet the
ongoing and potential cash needs of Meridian and to take
advantage of income producing opportunities as they arise. While
the desired level of liquidity may vary depending upon a variety
of factors, it is a primary goal of Meridian to maintain a high
level of liquidity in all economic environments. Management
considers Meridian's liquidity position at the end of the second
quarter of 1995 to be sufficient to meet its foreseeable cash
flow requirements.
Loans. The lending function is Meridian's principal
business activity and it is Meridian's continuing policy to serve
the credit needs of its customer base. Loans were $10.1 billion
at June 30, 1995 compared to $9.5 billion at June 30, 1994, a 6%
increase. Excluding the sale of $223 million of student loans in
the third quarter of 1994, loans increased by 8% over the past
year. Commercial loans increased by $451.7 million, or 8%.
Residential mortgage loans increased by $137.8 million or 12%.
Consumer loans, mostly home equity loans and other types of
personal loans, were $2.7 billion at June 30, 1995, almost
unchanged from the balance of a year ago. Excluding the sale of
student loans in the third quarter of 1994, consumer loans
increased by 7% over the twelve month period.
Table 4 presents a summary of period-end loan balances.
Investment Securities and Investment Securities Available
for Sale. The second largest use of funds for Meridian is the
portfolio of investment securities and investment securities
available for sale. The balance in the combined portfolio was
$3.0 billion at June 30, 1995 compared to $3.3 billion a year
ago, a decrease of 9%.
Table 5 presents a summary of the amortized cost,
approximate fair value, and gross unrealized gains and losses for
the portfolio at June 30, 1995 and 1994, and December 31, 1994.
Changes in long-term interest rates over the past year, with
rates rising through much of 1994 and then declining in the first
half of 1995, had a significant impact on the approximate fair
value of the combined portfolios, as reflected in this table.
Deposits. Meridian's deposits, the largest source of funds,
amounted to $11.5 billion at June 30,1995 compared to
$11.7 billion at June 30, 1994. During the second quarter of
1994, Meridian assumed approximately $487 million of deposits of
Security Federal Savings Bank from the Resolution Trust
Corporation. These additional deposits offset runoff from prior
years' acquisitions and the loss of escrow balances related to
mortgage servicing rights sold in mid-1994.
Table 6 presents a summary of period-end deposit balances.
PROVISION FOR POSSIBLE LOAN LOSSES AND RELATED CREDIT QUALITY
The provision for possible loan losses was $10.1 million in
the second quarter of 1995, compared to $6.7 million in the
second quarter of 1994 and $8.0 million in the first quarter of
1995. The provision for the six months ended June 30, 1995 was
$18.1 million compared to $15.5 million for the same period of
1994, an increase of 17%. The higher provision reflects the
growth in loans over during the past year. The balance in the
allowance for possible loan losses was $170.7 million or 1.70% of
total loans at June 30, 1995, compared to $168.4 million or 1.70%
at March 31, 1995 and $172.3 million or 1.81% at June 30, 1994.
Net charge-offs were $7.9 million or .32% of average loans
in the second quarter of 1995 compared to $7.5 million or .32% of
average loans in the second quarter of 1994. Recoveries were
$3.9 million in the second quarter of 1995 compared to
$4.1 million in the same period of last year. Net charge-offs
for the six months ended June 30, 1995 were $16.9 million
compared to $18.4 million in the similar period of 1994. Net
charge-offs represented .34% of average loans in the first six
months of 1995 compared to .40% last year.
Determining the level of the allowance for possible loan
losses at any given date is difficult, particularly in a
continually changing economy. Management must make estimates,
using assumptions and information which are often subjective and
changing. Management continues to review Meridian's loan
portfolio in light of a changing economy and possible future
changes in the banking and regulatory environment. In
management's opinion, the allowance for possible loan losses is
adequate at June 30, 1995.
Table 7 presents an analysis of the activity in the
allowance for possible loan losses. Table 8 presents a summary
of various indicators of credit quality.
Non-performing assets are comprised of non-accrual loans,
loans categorized as troubled debt restructurings, and assets
acquired in foreclosures. Non-performing assets do not include
loans past due 90 days or more as to interest or principal which
are well secured and in the process of collection, the majority
of which represent residential mortgage loans. Non-performing
assets totaled $117.6 million at June 30, 1995 compared to
$131.7 million at March 31, 1995 and $143.6 million a year ago.
Generally, a commercial loan is classified as non-accrual
when it is determined that the collection of interest or
principal is doubtful, or when a default of interest or principal
has existed for 90 days or more, unless such loan is well secured
and in the process of collection. When the accrual of interest
is discontinued, unpaid interest is reversed through a charge to
interest income. The majority of non-accrual loans are secured by
various forms of collateral, the ultimate recoverability of which
is, however, subject to economic conditions and other factors.
Residential mortgages which are 180 days or more delinquent
are placed on nonaccrual status when total principal, interest,
and escrow owed exceeds 80% of the property's appraised value.
Properties are reappraised when foreclosure proceedings are
initiated. Consumer loans are charged-off when deemed
uncollectible, which is generally at a time no later than 180
days past due.
Meridian's non-accrual loans, which totaled $98.9 million at
June 30, 1995, included only three loans with balances in excess
of $2.5 million. These three loans aggregated $36.4 million or
37% of total non-accrual loans at the end of the second quarter
of 1995.
A loan is categorized as a troubled debt restructuring if
the original interest rate on the loan, repayment terms, or both,
were restructured on a below market basis due to a deterioration
in the financial condition of the borrower.
Assets acquired in foreclosures (except consumer related),
which totaled $15.2 million at the end of the second quarter of
1995, included only three properties with a balance in excess of
$1.0 million. These properties had a balance of $4.5 million or
30% of assets acquired in foreclosures.
Reference should be made to Table 4 for a summary of the
period-end balances in the loan portfolio. Except for a
reclassification of certain balances within consumer loans, there
has not been a significant change in the percentage of each
category to total loans from a year ago.
In addition, reference should be made to Table 9 for a
breakdown of commercial loans by major industry and to Table 10
for a breakdown of commercial real estate loans by category. As
can be seen in these tables, Meridian's portfolio of commercial
loans and commercial real estate loans covers a wide range of
borrowers. This diversification generally characterizes the
economy of Meridian's primary market area. Of Meridian's
commercial real estate loans, almost all, or 97%, are to
borrowers for property in Pennsylvania, Delaware, and New Jersey,
of which Pennsylvania has 80%, or the largest single share.
Loan concentrations are considered to exist when a multiple
number of borrowers are engaged in similar activities and have
similar economic characteristics which would cause their ability
to meet contractual obligations to be similarly impacted by
economic or other conditions. At June 30, 1995, Meridian's
commercial loans and commitments did not have any industry
concentration or other known concentration that exceeded 10% of
total loans and commitments.
Potential problem loans consist of loans which are included
in performing loans at June 30, 1995 but for which potential
credit problems of the borrowers have caused management to have
concerns as to the ability of such borrowers to comply with
present repayment terms. At June 30, 1995, such potential
problem loans, not included in Table 8, aggregated approximately
$24 million compared to $35 million at March 31, 1995. Depending
on the state of the economy and the impact thereof on Meridian's
borrowers, as well as other future events, these loans and others
not currently so identified could be classified as non-performing
assets in the future.
Meridian continues to service approximately $658 million of
residential mortgage loans on which there is potential credit
loss. This servicing was either originated by Meridian or
purchased with recourse from other financial institutions. These
institutions have since experienced financial difficulties,
including bankruptcies. As of June 30, 1995, reserves of $10.6
million have been established in recognition of potential losses
related to the recourse servicing portfolio.
NON-INTEREST INCOME
Non-interest income was $67.1 million in the second quarter
of 1995 compared to $55.3 million in the second quarter of last
year, an increase of 21%. Non-interest income was $57.8 million
in the first quarter of 1995.
Trust revenues were $16.2 million in the second quarter of
1995, an increase of $5.0 million or 45% from the second quarter
of 1994. Contributing to the higher level of revenues was the
acquisition of McGlinn Capital Management, Inc. in July 1994, and
increases in personal trust, corporate trust and investment
advisory fees.
Mortgage revenues declined by $1.1 million, or 26%, between
the two quarters, reflecting lower servicing revenues due to the
reduction in scope of Meridian's mortgage banking activities.
Broker-dealer and investment banking revenues totaled
$13.7 million in the second quarter of 1995 compared to
$14.2 million in the same period a year ago, a decrease of 3%.
The decrease in revenues reflects the impact of current financial
market conditions.
Service charges on deposits and fees for other customer
services increased by $2.5 million, or 11%, for the three months
ended June 30, 1995 compared to the same period of last year.
Increases in certain fees for deposit products, as well as the
introduction of new consumer-related demand deposit products,
contributed to the higher level of service charges.
Net securities gains were $3.6 million in the second quarter
of 1995 compared to losses of $49 thousand in the same period of
last year. The amount in 1995 was comprised of gains of
$3.7 million and losses of $111 thousand. These gains do not
include net gains of $339 thousand from sales primarily of
certain mortgage-related investments, which are included in
broker-dealer and investment banking revenues. The gains in 1995
resulted from the sale of investment securities either near the
maturity date or for which Meridian had collected a substantial
portion of the principal originally outstanding at the date of
purchase.
Non-interest income for the first six months of 1995 was
$124.9 million compared to $113.3 million a year ago. The same
factors that affected the quarter-to-quarter comparison
contributed to the increase between the six month periods.
NON-INTEREST EXPENSES
Non-interest expenses for the second quarter of 1995,
excluding the $32.0 million restructuring charge, were
$140.5 million compared to $145.0 million for the same quarter of
1994, a decrease of 3%. Non-interest expenses were unchanged
from the first quarter of 1995.
Salaries and employee benefits totaled $72.0 million in the
second quarter of 1995 compared to $72.7 million in the second
quarter of 1994, a decrease of 1%. The impact of staff reductions
in most of Meridian's business units was partially offset by
normal merit increases. Full-time equivalent staff levels were
6,571 at June 30, 1995 compared to 7,216 a year ago and 6,789 at
March 31, 1995.
Net occupancy and equipment expense was $20.7 million in the
second quarter of 1995 compared to $20.9 million in the same
period last year, a decrease of less than 1%.
Other operating expenses were $47.8 million in the second
quarter of 1995 compared to $51.5 million in the second quarter
of 1994. Meridian's expense control efforts were reflected in
reductions in various expense categories including consulting and
other types of professional fees, loan and deposit-related
expenses and stationery and supplies.
Non-interest expenses for the six months ended June 30, 1995
were $280.9 million, down slightly from $281.9 million in the
same period of last year. The same factors that affected the
quarter-to-quarter change contributed to the change between the
six month periods.
PROVISION FOR INCOME TAXES
The provision for income taxes was $11.8 million in the
second quarter of 1995, compared to $18.7 million in the same
quarter of last year. The decline resulted from the lower level
of income before taxes because of the restructuring charge
recorded in the second quarter of this year.
The effective tax rate, which is the ratio of income tax
expense to income before income taxes, was 31% in the second
quarter of 1995, unchanged from the same quarter of 1994. The
rate for the entire year of 1994 was 30%. The tax rate for both
periods was less than the federal statutory rate of 35% primarily
because of tax-exempt investment and loan income.
CAPITAL RESOURCES
Shareholders' equity at June 30, 1995 was $1.24 billion
compared to $1.21 billion at June 30, 1994, an increase of 2%.
Shareholders' equity was $1.22 billion at March 31, 1995. The
ratio of Shareholders' equity to assets was 8.29% at June 30,
1995 compared to 8.00% one year ago and 8.15% at March 31, 1995.
The ratio of tangible shareholders' equity to assets, which
excludes $126.4 million of intangible assets in 1995 and
$98.5 million in 1994, was 7.51% at June 30, 1995 compared to
7.39% a year ago and 7.35% at March 31, 1995. The increase in
intangible assets over the past year resulted from the
acquisition of McGlinn Capital Management, Inc. in July 1994.
Meridian's capital adequacy at June 30, 1995 can be
determined by analyzing the capital ratios presented in Table 11.
Meridian's consolidated ratios at June 30, 1995 exceeded all
regulatory requirements. The risk-based capital ratio was 12.76%
at June 30, 1995 compared to 13.30% a year ago and 12.80% at
March 31, 1995. The risk-based capital ratios of each of
Meridian's commercial banks also exceeded regulatory requirements
at June 30, 1995, as shown in the table.
Federal Reserve Board guidelines define a well capitalized
institution as having a Tier 1 capital ratio of 6% or more, a
total risk-based capital ratio of 10% or more, and a leverage
ratio of 5% or more. Meridian's consolidated ratios at June 30,
1995 exceeded these guidelines, as did the ratios of each of
Meridian's commercial banks.
INDUSTRY SEGMENTS
Table 12 presents a summary of the operating results of
Meridian's two reportable industry segments.
Banking. The banking unit provides a full range of retail
and corporate banking, and trust and asset management services to
customers in central and eastern Pennsylvania, as well as
Delaware and southern New Jersey.
Banking unit income before the restructuring charge
was $45.1 million in the second quarter of 1995 compared to net
income of $37.6 million for the same period of last year, an
increase of 20%. After the restructuring charge of $27.0 million
(after-tax $17.5 million), net income was $27.5 million in the
second quarter of 1995.
Net interest income was $152.1 million in the second quarter
of 1995 compared to $154.2 million in the second quarter of 1994.
The positive impact on net interest income of earning asset
growth was offset by a decline in the net interest margin as a
result of asset and liability repricing in the higher short-term
interest rate environment in 1995. The provision for possible
loan losses increased by $3.4 million between the two quarters.
The higher provision reflects the growth in loans during the past
year. Non-interest income increased by $12.2 million, or 30%, as
increases in trust revenues and other fee-related revenues more
than offset a decline in mortgage servicing revenues. Non-
interest expenses declined by $5.8 million, or 4%, reflecting the
impact of Meridian's expense control efforts.
Banking unit income before the restructuring charge was
$85.3 million in the first six months of 1995 compared to
$73.1 million for the same period of last year, an increase of
17%. After the restructuring charge of $27.0 million (after-tax
$17.5 million), net income was $67.7 million in the first six
months of 1995. The same factors that affected the quarter-to-
quarter comparison contributed to the increase between the two
six-month periods.
Securities (Broker-Dealer Activities). The securities unit
underwrites, brokers and distributes securities to
municipalities, and institutional and individual investors. In
addition, the unit buys, sells and securitizes mortgage loans and
brokers loan servicing portfolios. The area also provides
investment banking services by acting as financial advisors in
facilitating municipal and corporate transactions in the capital
markets.
The securities unit reported income before the restructuring
charge of $1.7 million in the second quarter of 1995 compared to
$3.2 million in the second quarter of 1994. The decline in
income resulted primarily from an increase in operating expenses
without a commensurate increase in revenues. The increase in
operating expenses resulted from the acquisition of a broker-
dealer company in mid-1994. Revenues declined by 3% between the
quarters,reflecting the impact of current financial market
conditions. After the restructuring charge of $5.0 million
(after-tax $3.3 million), the securities unit reported a net loss
of $1.6 million in the second quarter of 1995.
For the first six months of 1995, the securities unit
reported income before the restructuring charge of $2.7 million
compared to $5.5 million in the similar period of 1994. After
the restructuring charge of $5.0 million (after-tax
$3.3 million), the securities unit reported a net loss of $565
thousand in the first six months of 1995. The same factors that
affected the quarter-to-quarter comparison contributed to the
decline between the two six-month periods.
<PAGE>
<TABLE>
<CAPTION>
TABLE 1: NET INTEREST INCOME, AVERAGE BALANCES AND RATES
(Dollars in Thousands)
1995 1994
Three Months Ended June 30 Three Months Ended June 30
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------ --------- ------ ------------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets
Short-Term Investments
Interest-Bearing Deposits in Other Banks..... $104,524 $1,668 6.40% $101,229 $1,093 4.33%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell................. 45,592 580 5.10 110,027 1,011 3.69
Total Short-Term Investments............... 150,116 2,248 6.01 211,256 2,104 3.99
Trading Account Assets (1)..................... 348,535 6,376 7.32 167,541 2,822 6.74
Investment Securities Available for Sale (1)... 456,252 8,106 7.11 308,353 5,787 7.51
Investment Securities
Taxable...................................... 2,386,557 34,011 5.72 2,544,162 33,764 5.32
Non-Taxable (1).............................. 307,357 6,394 8.32 331,091 6,822 8.24
Total Investment Securities................ 2,693,914 40,405 6.01 2,875,253 40,586 5.66
Loans Held for Sale............................ 95,875 2,005 8.37 354,754 6,727 7.58
Loans
Commercial (1)............................... 6,110,995 142,526 9.35 5,634,945 112,225 7.99
Real Estate-Residential...................... 1,248,191 25,994 8.33 1,052,036 20,913 7.95
Consumer..................................... 2,617,806 58,858 9.02 2,658,040 55,119 8.32
Total Loans (2)............................ 9,976,992 227,378 9.14 9,345,021 188,257 8.08
Total Interest-Earning Assets.............. 13,721,684 286,518 8.37 13,262,178 246,283 7.44
Allowance for Possible Loan Losses............... (171,050) -- -- (175,075) - --
Non-Interest Earning Assets...................... 1,306,207 -- -- 1,363,232 - --
Total Assets, Interest Income.............. $14,856,841 $286,518 7.73% $14,450,335 $246,283 6.83%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts................................. $1,460,317 $6,698 1.84% $1,476,267 $4,707 1.28%
Savings Deposits............................. 1,757,146 11,160 2.55 1,978,187 9,956 2.02
Money Market Deposit Accounts................ 2,174,373 19,325 3.56 2,317,536 13,157 2.28
Short-Term Time Deposits..................... 577,603 6,359 4.42 753,259 5,706 3.04
Long-Term Time Deposits...................... 2,787,830 40,921 5.89 2,427,049 26,197 4.33
Certificates of Deposits of $100,000 or More. 805,475 11,958 5.95 471,629 5,657 4.81
Total Interest-Bearing Deposits............ 9,562,744 96,421 4.04 9,423,927 65,380 2.78
Short-Term Borrowings
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........ 1,506,664 21,910 5.83 1,223,315 11,632 3.81
Other Short-Term Borrowings.................. 249,696 3,806 6.11 231,220 2,673 4.64
Total Short-Term Borrowings................ 1,756,360 25,716 5.87 1,454,535 14,305 3.94
Long-Term Debt and Other Borrowings............ 392,121 7,017 7.16 364,471 6,195 6.80
Total Interest-Bearing Liabilities......... 11,711,225 129,154 4.42 11,242,933 85,880 3.06
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................ 1,683,525 -- -- 1,746,295 -- --
Other Liabilities............................ 227,711 -- -- 270,113 -- --
Shareholders' Equity......................... 1,234,380 -- -- 1,190,994 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets.................. 3,145,616 -- -- 3,207,402 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense......................... $14,856,841 129,154 3.49% $14,450,335 85,880 2.38%
NET INTEREST INCOME.............................. $157,364 $160,403
NET INTEREST SPREAD (3)........................ 3.95% 4.38%
EFFECT OF NON-INTEREST BEARING FUNDS........... 0.65% 0.47%
NET INTEREST MARGIN (4)........................ 4.60% 4.85%
<PAGE>
1995
Three Months Ended March 31
Interest Average
Average Income/ Yield/
Balance Expense Rate
------------ --------- ------
<S> <C> <C> <C>
ASSETS
Interest-Earning Assets
Short-Term Investments
Interest-Bearing Deposits in Other Banks..... $119,082 $1,798 6.12%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell................. 54,231 667 4.99
Total Short-Term Investments............... 173,313 2,465 5.77
Trading Account Assets (1)..................... 333,777 6,350 7.61
Investment Securities Available for Sale (1)... 435,112 7,638 7.02
Investment Securities
Taxable...................................... 2,478,872 35,900 5.81
Non-Taxable (1).............................. 319,619 6,645 8.32
Total Investment Securities................ 2,798,491 42,545 6.10
Loans Held for Sale............................ 98,570 2,104 8.54
Loans
Commercial (1)............................... 5,966,633 135,630 9.22
Real Estate-Residential...................... 1,222,326 25,155 8.23
Consumer..................................... 2,586,091 56,007 8.78
Total Loans (2)............................ 9,775,050 216,792 8.98
Total Interest-Earning Assets.............. 13,614,313 277,894 8.25
Allowance for Possible Loan Losses............... (172,881) -- --
Non-Interest Earning Assets...................... 1,380,673 -- --
Total Assets, Interest Income.............. $14,822,105 $277,894 7.58%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts................................. $1,471,503 $7,109 1.96%
Savings Deposits............................. 1,810,738 11,709 2.62
Money Market Deposit Accounts................ 2,242,998 19,633 3.55
Short-Term Time Deposits..................... 619,635 6,023 3.94
Long-Term Time Deposits...................... 2,652,263 37,372 5.71
Certificates of Deposits of $100,000 or More. 601,151 8,570 5.78
Total Interest-Bearing Deposits............ 9,398,288 90,416 3.90
Short-Term Borrowings
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........ 1,622,883 22,710 5.68
Other Short-Term Borrowings.................. 234,535 3,544 6.13
Total Short-Term Borrowings................ 1,857,418 26,254 5.73
Long-Term Debt and Other Borrowings............ 368,677 6,588 7.15
Total Interest-Bearing Liabilities......... 11,624,383 123,258 4.30
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................ 1,699,515 -- --
Other Liabilities............................ 295,015 -- --
Shareholders' Equity......................... 1,203,192 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets.................. 3,197,722 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense......................... $14,822,105 123,258 3.37%
NET INTEREST INCOME.............................. $154,636
NET INTEREST SPREAD (3)........................ 3.95%
EFFECT OF NON-INTEREST BEARING FUNDS........... 0.63%
NET INTEREST MARGIN (4)........................ 4.58%
<PAGE>
1995 1994
Six Months Ended June 30 Six Months Ended June 30
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------ --------- ------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets
Short-Term Investments
Interest-Bearing Deposits in Other Banks..... $111,843 $3,466 6.25% $96,728 $1,862 3.88%
Federal Funds Sold and Securities Purchased
Under Agreements to Resell................. 49,888 1,247 5.04 78,350 1,392 3.58
Total Short-Term Investments............... 161,731 4,713 5.88 175,078 3,254 3.75
Trading Account Assets (1)..................... 341,196 12,726 7.46 140,969 4,705 6.68
Investment Securities Available for Sale (1)... 445,748 15,744 7.06 289,514 10,586 7.31
Investment Securities
Taxable...................................... 2,432,480 69,911 5.77 2,466,986 64,996 5.29
Non-Taxable (1).............................. 313,455 13,039 8.32 341,627 14,132 8.27
Total Investment Securities................ 2,745,935 82,950 6.05 2,808,613 79,128 5.65
Loans Held for Sale............................ 97,377 4,109 8.44 364,381 13,131 7.21
Loans
Commercial (1)............................... 6,039,178 278,156 9.29 5,546,186 213,059 7.75
Real Estate-Residential...................... 1,235,329 51,149 8.28 1,031,307 41,820 8.11
Consumer..................................... 2,602,037 114,865 8.90 2,607,689 107,098 8.28
Total Loans (2)............................ 9,876,544 444,170 9.06 9,185,182 361,977 7.94
Total Interest-Earning Assets.............. 13,668,531 564,412 8.31 12,963,737 472,781 7.34
Allowance for Possible Loan Losses............... (171,957) -- -- (176,241) - --
Non-Interest Earning Assets...................... 1,339,957 -- -- 1,400,829 - --
Total Assets, Interest Income.............. $14,836,531 $564,412 7.65% $14,188,325 $472,781 6.70%
LIABILITIES
Interest-Bearing Liabilities
Interest-Bearing Deposits
NOW Accounts................................. $1,465,879 $13,807 1.90% $1,462,172 $9,207 1.27%
Savings Deposits............................. 1,783,793 22,869 2.59 1,937,869 18,718 1.95
Money Market Deposit Accounts................ 2,208,496 38,958 3.56 2,327,605 24,953 2.16
Short-Term Time Deposits..................... 598,503 12,382 4.17 769,580 12,175 3.19
Long-Term Time Deposits...................... 2,720,421 78,293 5.80 2,449,734 50,967 4.20
Certificates of Deposits of $100,000 or More. 703,877 20,528 5.88 464,051 10,787 4.69
Total Interest-Bearing Deposits............ 9,480,969 186,837 3.97 9,411,011 126,807 2.72
Short-Term Borrowings
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase........ 1,564,450 44,620 5.75 945,106 16,451 3.51
Other Short-Term Borrowings.................. 242,158 7,350 6.12 215,998 4,326 4.04
Total Short-Term Borrowings................ 1,806,608 51,970 5.80 1,161,104 20,777 3.61
Long-Term Debt and Other Borrowings............ 380,464 13,605 7.15 392,190 13,353 6.81
Total Interest-Bearing Liabilities......... 11,668,041 252,412 4.36 10,964,305 160,937 2.96
Non-Interest Sources to Fund
Interest-Earning Assets
Non-Interest Bearing Deposits................ 1,691,476 -- -- 1,733,391 -- --
Other Liabilities............................ 258,146 -- -- 305,376 -- --
Shareholders' Equity......................... 1,218,868 -- -- 1,185,253 -- --
Total Non-Interest Sources to Fund
Interest-Earning Assets.................. 3,168,490 -- -- 3,224,020 -- --
Total Liabilities and Shareholders' Equity,
Interest Expense......................... $14,836,531 252,412 3.43% $14,188,325 160,937 2.29%
NET INTEREST INCOME.............................. $312,000 $311,844
NET INTEREST SPREAD (3)........................ 3.95% 4.38%
EFFECT OF NON-INTEREST BEARING FUNDS........... 0.64% 0.46%
NET INTEREST MARGIN (4)........................ 4.59% 4.84%
<FN>
(1) The indicated interest income and average yields are
presented on a taxable-equivalent basis. The
taxable-equivalent adjustments included above are $4,077,
$4,559, $4,159, $8,236 and $ 9,072 for the second quarter of
1995 and 1994, the first quarter of 1995 and the first six
months of 1995 and 1994, respectively.
(2) Loan fees have been included in interest income. Average
loan balances include non-accrual loans.
(3) Net Interest Spread is the arithmetic difference between the
yield on interest-earning assets and the rate paid on
interest-bearing liabilities.
(4) Net Interest Margin is computed by dividing net interest
income by average interest-earning assets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 2: OFF-BALANCE SHEET DERIVATIVES
MATURITIES AND OTHER INFORMATION
June 30, 1995
(Dollars in Thousands) 1999
and
Consolidated Notional Amount 1995 1996 1997 1998 Beyond Total
<S> <C> <C> <C> <C> <C> <C>
Related to Interest Rate Risk Management............ $696,066 $1,055,777 $783,587 $406,247 $736,577 $3,678,254
Related to Securities Unit (Broker-Dealer
Activities)....................................... 114,857 113,665 148,136 104,338 843,238 1,324,234
Consolidated Derivatives.......................... $810,923 $1,169,442 $931,723 $510,585 $1,579,815 $5,002,488
Related to Interest Rate Risk Management
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... $500,000 $950,000 $522,637 $300,000 $50,000 $2,322,637
Weighted Average Fixed Rate Receive........... 5.93% 5.86% 5.65% 5.37% 6.57% 5.78%
Weighted Average Floating Rate Pay............ 6.38% 6.07% 6.14% 6.18% 6.07% 6.17%
Fixed Rate Pay
Notional Amount............................... 50,000 - - - - 50,000
Weighted Average Floating Rate Receive........ 9.00% - - - - 9.00%
Weighted Average Fixed Rate Pay............... 6.81% - - - - 6.81%
Floating Rate Receive and Pay -- Basis Swaps
Notional Amount............................... - 100,000 150,000 - - $250,000
Weighted Average Floating Rate Receive........ - 6.19% 6.19% - - 6.19%
Weighted Average Floating Rate Pay............ - 6.10% 6.07% - - 6.08%
Purchased Interest Rate Floors
Notional Amount............................... - - 100,000 - 425,000 525,000
Weighted Average Rate......................... - - 7.00% - 6.50% 6.60%
Interest Rate Collars
Notional Amount............................... - - - 100,000 100,000 200,000
Weighted Average Rate on Floors............... - - - 6.25% 6.00% 6.13%
Weighted Average Rate on Caps................. - - - 8.12% 8.80% 8.46%
Notional Amount of Other Contracts
Interest Rate Caps and Floors for Customers... 27,489 5,777 10,950 6,247 161,577 212,040
Other......................................... 118,577 - - - - 118,577
Total Interest Rate Risk Management................... $696,066 $1,055,777 $783,587 $406,247 $736,577 $3,678,254
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
June 30, 1995 Net
(Dollars in Thousands) Unrealized
Unrealized Unrealized Gains
Consolidated Notional Amount Gains Losses (Losses)
<S> <C> <C> <C>
Related to Interest Rate Risk Management............ $27,548 ($16,346) $11,202
Related to Securities Unit (Broker-Dealer
Activities)....................................... 15,417 (2,718) 12,699
Consolidated Derivatives.......................... $42,965 ($19,064) $23,901
Related to Interest Rate Risk Management
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... $7,279 ($16,346) ($9,067)
Weighted Average Fixed Rate Receive...........
Weighted Average Floating Rate Pay............
Fixed Rate Pay
Notional Amount............................... 166 - 166
Weighted Average Floating Rate Receive........
Weighted Average Fixed Rate Pay...............
Floating Rate Receive and Pay -- Basis Swaps
Notional Amount............................... - - -
Weighted Average Floating Rate Receive.............
Weighted Average Floating Rate Pay.................
Purchased Interest Rate Floors
Notional Amount............................... 16,543 - 16,543
Weighted Average Rate.........................
Interest Rate Collars
Notional Amount............................... 3,560 - 3,560
Weighted Average Rate on Floors...............
Weighted Average Rate on Caps.................
Notional Amount of Other Contracts
Interest Rate Caps and Floors for Customers... - - -
Other......................................... - - -
Total Interest Rate Risk Management................... $27,548 ($16,346) $11,202
<FN>
Notes
1. Maturity information reflects contractual terms based on
interest rates in effect at June 30, 1995.
2. Fixed rate receive swaps convert retail deposits to floating
rates.
3. Fixed rates shown are rates over the life of the swaps;
floating rates represent rates in effect at June 30, 1995.
4. Fixed rate receive swaps contain $213 million of indexed
amortizing swaps, where amortization of the notional amount
is dependent upon the level of short term interest rates.
5. Basis swaps are based on the receipt of three month LIBOR
and the payment of one month LIBOR.
6. Weighted average rates shown for purchased floors are the
exercise rates; payments would be received when market rates
are below these predetermined exercise rates.
7. Interest rate collars combine the purchase of a floor with
the sale of a cap; payments would be received when market
rates are below a predetermined level and payments would be
made when market rates are above a predetermined level.
8. Other contracts include customer caps and floors, forward
delivery instruments to manage risks from mortgage
operations, and foreign exchange contracts.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
June 30, 1995
(Dollars in Thousands) 1999
and
Related to Securities Unit (Broker-Dealer Activities) 1995 1996 1997 1998 Beyond Total
<S> <C> <C> <C> <C> <C>
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... - - - - $8,000 $8,000
Weighted Average Fixed Rate Receive........... - - - - 7.09% 7.09%
Weighted Average Floating Rate Pay............ - - - - 6.11% 6.11%
Tender Option Bonds
Notional Amount............................... $13,036 $60,685 $100,335 $15,420 43,497 232,973
Weighted Average Fixed Rate Receive........... 8.11% 7.97% 7.88% 7.76% 8.04% 7.94%
Weighted Average Floating Rate Pay............ 4.79% 4.67% 4.88% 4.31% 5.29% 4.86%
Treasury Float Contracts............................ 31,602 43,265 42,964 83,202 741,614 942,647
Commitments to Purchase or
Sell Mortgages and Securities..................... 70,219 9,715 4,837 5,716 50,127 140,614
Total Securities Unit................................. $114,857 $113,665 $148,136 $104,338 $843,238 $1,324,234
<CAPTION> Net
Unrealized
Unrealized Unrealized Gains
Related to Securities Unit (Broker-Dealer Activities) Gains Losses (Losses)
<S> <C> <C> <C>
Interest Rate Swaps
Fixed Rate Receive
Notional Amount............................... $416 - $416
Weighted Average Fixed Rate Receive...........
Weighted Average Floating Rate Pay............
Tender Option Bonds
Notional Amount............................... 8,893 ($2,147) 6,746
Weighted Average Fixed Rate Receive...........
Weighted Average Floating Rate Pay............
Treasury Float Contracts............................ 4,724 - 4,724
Commitments to Purchase or
Sell Mortgages and Securities..................... 1,384 (571) 813
Total Securities Unit................................. $15,417 ($2,718) $12,699
<FN>
Notes
1. Maturity information reflects expected maturity based on
interest rates in effect at June 30, 1995.
2. Fixed rates shown are rates over the life of the swaps;
floating rates represent rates in effect at June 30, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 3: ACTIVITY IN DERIVATIVES RELATED TO INTEREST RATE RISK MANAGEMENT
NOTIONAL AMOUNTS
(Dollars in Thousands)
FIXED RATE FIXED RATE
RECEIVE SWAPS RECEIVE SWAPS FIXED RATE BASIS PURCHASED
OUTSTANDING FORWARD START PAY SWAPS SWAPS FLOORS COLLARS TOTAL
-------------- ----------------- --------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994.... $2,060,000 $150,000 $100,000 - - - $2,310,000
Maturities.................... (550,000) - (50,000) - - - (600,000)
Terminations.................. (225,000) - - - - - (225,000)
New contracts................. 875,000 525,000 - - $500,000 - 1,900,000
Forwards becoming effective... 625,000 (625,000) - - - - -
-------------- ----------------- --------- --------- ---------- ----------- -----------
Balance at December 31, 1994.. 2,785,000 50,000 50,000 - 500,000 - 3,385,000
============== ================= ========= ========= ========== =========== ===========
Maturities..................... (337,363) - - - - - (337,363)
Terminations................... (275,000) - - - (100,000) - (375,000)
New contracts.................. 50,000 50,000 - $250,000 125,000 $200,000 675,000
Forwards becoming effective.... 100,000 (100,000) - - - - -
-------------- ----------------- --------- --------- ---------- ----------- -----------
Balance at June 30, 1995...... $2,322,637 - $50,000 $250,000 $525,000 $200,000 $3,347,637 (1)
============== ================= ========= ========= ========== =========== ===========
<FN>
(1) Excludes customer caps and floors, forward delivery
instruments to manage risks from mortgage operations, and
foreign exchange contracts aggregating $330.6 million at
June 30, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 4: LOANS
(Dollars in Thousands)
June 30, 1995 June 30, 1994 December 31, 1994
Amount % Amount % Amount %
------------- ----- ------------- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Commercial Loans
Real Estate - Commercial Mortgage........... $1,720,334 17% $1,641,317 17% $1,702,816 17%
Real Estate - Construction.................. 254,219 3 300,878 3 278,271 3
Commercial, Financial and Agricultural...... 4,150,666 41 3,731,294 39 3,966,785 41
------------ ----- ------------ ----- ------------ -----
Total Commercial Loans................... 6,125,219 61 5,673,489 59 5,947,872 61
------------ ----- ------------ ----- ------------ -----
Real Estate - Residential...................... 1,271,420 13 1,133,624 12 1,217,142 12
Consumer Loans
Real Estate - Home Equity................... 1,141,237 (1) 11 720,556 8 744,173 8
Direct Auto Loans........................... 69,558 1 91,121 1 91,834 1
Indirect Auto Loans......................... 932,782 9 905,942 10 967,783 10
Autos Under Lease........................... 132,879 1 122,710 1 118,483 1
Other Consumer Loans........................ 383,597 (2) 4 873,055 9 676,236 (2) 7
------------ ----- ------------ ----- ------------ -----
Total Consumer Loans..................... 2,660,053 26 2,713,384 29 2,598,509 27
------------ ----- ------------ ----- ------------ -----
Total Loans, Net of Unearned Discount. $10,056,692 100% $9,520,497 100% $9,763,523 100%
============ ===== ============ ===== ============ =====
<FN>
(1) Includes $347 million of loans transferred from "Other
Consumer Loans" during the first quarter of 1995.
(2) Balances reflect the sale of $223 million of student loans
in the third quarter of 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 5: INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE
(Dollars In Thousands)
Investment Securities
A summary of the amortized cost and approximate fair value
of investment securities is as follows:
June 30, 1995 June 30, 1994 December 31, 1994
Approximate Approximate Approximate
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities...... $627,729 $622,554 $710,321 $693,172 $667,031 $638,476
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 1,283,455 1,268,480 1,343,007 1,301,817 1,380,105 1,311,068
Other ................................ 189,679 190,301 249,753 247,297 231,290 222,298
------------ ----------- ----------- ----------- ----------- ------------
Total Mortgage-Backed Securities... 1,473,134 1,458,781 1,592,760 1,549,114 1,611,395 1,533,366
State and Municipal Securities........... 297,607 301,433 411,074 411,699 335,401 327,811
Other Securities......................... 203,461 202,527 284,559 280,922 258,592 253,654
------------ ----------- ----------- ----------- ----------- ------------
Total Investment Securities........ $2,601,931 $2,585,295 $2,998,714 $2,934,907 $2,872,419 $2,753,307
============ =========== =========== =========== =========== ============
</TABLE>
A summary of gross unrealized gains and losses on investment
securities is as follows:
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994 December 31, 1994
Gross Gross Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities...... $1,271 $6,446 $1,007 $18,156 $162 $28,717
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 3,239 18,214 657 41,847 75 69,112
Other ................................ 2,498 1,876 3,431 5,887 1,056 10,048
------------ ----------- ----------- ----------- ----------- ------------
Total Mortgage-Backed Securities... 5,737 20,090 4,088 47,734 1,131 79,160
State and Municipal Securities........... 5,201 1,375 5,353 4,728 2,802 10,392
Other Securities......................... 161 1,095 724 4,361 128 5,066
------------ ----------- ----------- ----------- ----------- ------------
Total Investment Securities........ $12,370 $29,006 $11,172 $74,979 $4,223 $123,335
============ =========== =========== =========== =========== ============
</TABLE>
Investment Securities Available for Sale
<PAGE>
A summary of the amortized cost and approximate fair value
of investment securities available for sale is as follows:
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994 December 31, 1994
Approximate Approximate Approximate
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States Government Securities...... $236,488 $240,984 $189,546 $188,180 $282,500 $274,594
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 60,792 61,983 54 54 25,089 24,260
Other ................................ 88,191 89,235 103,007 101,745 96,501 91,678
------------ ----------- ----------- ----------- ----------- ------------
Total Mortgage-Backed Securities... 148,983 151,218 103,061 101,799 121,590 115,938
State and Municipal Securities........... 29,826 30,582 37,144 38,719 32,530 33,362
Other Securities......................... 7,220 9,371 18,820 22,270 9,163 11,100
Total Investment Securities ------------ ----------- ----------- ----------- ----------- ------------
Available for Sale.......... $422,517 $432,155 $348,571 $350,968 $445,783 $434,994
============ =========== =========== =========== =========== ============
</TABLE>
A summary of gross unrealized gains and losses on investment
securities available for sale is as follows:
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1994 December 31, 1994
Gross Gross Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
United States Government Securities...... $4,794 $298 $722 $2,088 $105 $8,011
Mortgage-Backed Securities
Collateralized Mortgage Obligations... 1,191 - - - - 829
Other ................................ 1,250 206 289 $1,551 72 4,895
------------ ----------- ----------- ----------- ----------- ------------
Total Mortgage-Backed Securities... 2,441 206 289 $1,551 72 5,724
State and Municipal Securities........... 762 6 1,634 59 958 126
Other Securities......................... 2,248 97 3,627 177 2,121 184
------------ ----------- ----------- ----------- ----------- ------------
Total Investment Securities
Available for Sale.......... $10,245 $607 $6,272 3,875 $3,256 $14,045
============ =========== =========== =========== =========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 6: DEPOSITS
(Dollars In Thousands)
June 30, 1995 June 30, 1994 December 31, 1994
Amount % Amount % Amount %
------------- ----- ------------- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing Deposits................. $1,877,744 16% $1,945,351 17% $1,998,660 18%
NOW Accounts.................................. 1,457,139 13 1,509,475 13 1,523,834 13
Savings Deposits.............................. 1,741,961 15 2,068,755 18 1,846,758 16
Money Market Deposit Accounts................. 2,167,371 19 2,326,322 20 2,287,039 20
Short-Term Time Deposits...................... 571,916 5 766,194 6 638,823 6
Long-Term Time Deposits....................... 2,793,500 24 2,577,105 22 2,586,443 23
Certificates of Deposit of $100,000 or More... 919,245 8 473,581 4 498,010 4
------------- ----- ------------- ----- ------------ -----
Total..................................... $11,528,876 100% $11,666,783 100% $11,379,567 100%
============= ===== ============= ===== ============ =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 7: ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars In Thousands)
Three Months Ended Six Months Ended
--------- ---------------------------------------------------- -------------------
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
1995 1995 1994 1994 1994 1995 1994
--------- ----------- ------------ -------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Period.......... $168,426 $169,402 $173,503 $172,343 $173,021 $169,402 $175,078
Additions (Deductions):
Loans Charged-Off:
Commercial (includes
Commercial Real Estate)...... (6,708) (8,397) (12,182) (7,621) (3,672) (15,105) (12,096)
Real Estate - Residential......... (619) (499) (989) (838) (5,165) (1,118) (7,473)
Consumer.......................... (4,392) (3,014) (3,035) (2,808) (2,750) (7,406) (5,191)
--------- ----------- ------------ -------------- ----------- --------- ---------
Total Loans Charged-Off.. (11,719) (11,910) (16,206) (11,267) (11,587) (23,629) (24,760)
--------- ----------- ------------ -------------- ----------- --------- ---------
Recoveries on Charged-Off Loans:
Commercial (includes
Commercial Real Estate)...... 2,102 1,485 7,063 3,528 2,524 3,587 3,792
Real Estate - Residential......... 76 80 45 216 132 156 199
Consumer.......................... 1,678 1,348 1,305 1,161 1,415 3,026 2,371
--------- ----------- ------------ -------------- ----------- --------- ---------
Total Recoveries on
Charged-Off Loans. 3,856 2,913 8,413 4,905 4,071 6,769 6,362
--------- ----------- ------------ -------------- ----------- --------- ---------
Net Loans Charged-Off................ (7,863) (8,997) (7,793) (6,362) (7,516) (16,860) (18,398)
--------- ----------- ------------ -------------- ----------- --------- ---------
Acquired Allowances................. - - - 1,029 139 - 139
Other Deductions.................... - - (2,377) - - - -
Provision Charged to
Operating Expense........... 10,121 8,021 6,069 6,493 6,699 18,142 15,524
--------- ----------- ------------ -------------- ----------- --------- ---------
Balance at End of Period................ $170,684 $168,426 $169,402 $173,503 $172,343 $170,684 $172,343
========= =========== ============ ============== =========== ========= =========
Net Charge-Offs to Average Loans........ 0.32% 0.37% 0.32% 0.27% 0.32% 0.34% 0.40%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 8: CREDIT QUALITY
(Dollars in Thousands)
June 30, March 31, December 31, September 30, June 30,
1995 1995 1994 1994 1994
----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans
Commercial
Real Estate-Commercial Mortgage...................... $31,620 $23,152 $32,521 $35,152 $35,021
Real Estate-Construction............................. 1,786 2,059 3,000 6,492 8,808
Commercial, Financial and Agricultural............... 50,872 63,054 42,899 46,459 52,654
----------- ----------- ------------ ------------- -------------
Total Commercial.................................. 84,278 88,265 78,420 88,103 96,483
Real Estate-Residential................................ 13,562 16,235 16,370 13,304 15,472
Consumer............................................... 997 817 233 822 758
----------- ----------- ------------ ------------- -------------
Total Non-Accrual Loans........................... 98,837 105,317 95,023 102,229 112,713
----------- ----------- ------------ ------------- -------------
Restructured Loans
Real Estate-Commercial Mortgage........................ 761 769 761 10 10
Real Estate-Construction............................... 29 31 33 34 37
Commercial, Financial and Agricultural................. 331 349 351 1,138 1,086
----------- ----------- ------------ ------------- -------------
Total Restructured Loans.......................... 1121 1,149 1,145 1,182 1,133
----------- ----------- ------------ ------------- -------------
TOTAL NON-PERFORMING LOANS................... 99,958 106,466 96,168 103,411 113,846
----------- ----------- ------------ ------------- -------------
Assets Acquired in Foreclosures
Foreclosed Real Estate............................... 15,156 23,338 23,392 23,519 28,058
Assets Related to Consumer Loans..................... 2,475 1,923 2,178 1,127 1,677
----------- ----------- ------------ ------------- -------------
Total Assets Acquired.............................. 17,631 25,261 25,570 24,646 29,735
----------- ----------- ------------ ------------- -------------
TOTAL NON-PERFORMING ASSETS.................. $117,589 $131,727 $121,738 $128,057 $143,581
=========== =========== ============ ============= =============
Allowance for Possible Loan Losses as a Percentage of:
Loans.................................................. 1.70% 1.70% 1.74% 1.84% 1.81%
Non-Performing Loans................................... 171% 158% 176% 168% 151%
Non-Performing Assets.................................. 145% 128% 139% 135% 120%
Total Non-Performing Loans as a Percentage
of Loans............................................... 0.99% 1.07% 0.98% 1.09% 1.20%
Total Non-Performing Assets as a Percentage
of Loans and Assets Acquired in Foreclosures........... 1.17% 1.33% 1.24% 1.35% 1.50%
Loans Past Due 90 or more Days as to Interest or Principal
not Included Above (Includes $13,102 of Real Estate-
Residential as of June 30, 1995).................. $22,681 $24,071 $22,355 $19,639 $35,036
Total Non-Performing Assets and Loans Past Due
90 or more Days as to Interest or Principal............ $140,270 $155,798 $144,093 $147,696 $178,617
Total Non-Performing Assets and Loans Past Due 90 or
more Days as to Interest or Principal as a Percentage
of Loans and Assets Acquired in Foreclosures........... 1.39% 1.57% 1.47% 1.56% 1.87%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 9: COMMERCIAL LOANS BY MAJOR INDUSTRY CLASSIFICATION
June 30,
(Dollars in Thousands)
1995 1994
--------------------------------------------------------------------
Loans Non-Accrual Loans Non-Accrual
Outstanding % Loans % Outstanding % Loans %
------------ ----- --------- ---- ------------ ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Agriculture......................... $149,560 2% $1,547 2% $158,380 3% $365 *
Mining.............................. 16,975 * 243 * 16,117 * 204 *
Construction........................ 220,483 4 2,407 3 254,768 4 3,861 4%
Manufacturing....................... 1,204,791 20 31,101 37 1,115,765 20 23,564 25
Transportation, Communication and
Public Utilities................. 365,632 6 3,002 4 300,848 5 1,148 1
Wholesale Trade..................... 388,909 6 4,489 5 369,418 7 7,216 8
Retail Trade........................ 858,844 14 7,113 8 732,472 13 14,834 15
Finance, Insurance and Real Estate.. 1,392,804 23 23,949 28 1,227,894 22 24,424 25
Services............................ 1,440,252 24 9,798 12 1,379,546 24 19,714 21
Public Administration............... 18,810 * - - 9,437 * - -
Other............................... 68,159 1 629 1 108,844 2 1,153 1
------------ ----- --------- ---- ------------ ---- ---------- ----
Total............................. $6,125,219 100% $84,278 100% $5,673,489 100% $96,483 100%
============ ===== ========= ==== ============ ==== ========== ====
<FN>
* Less than one percent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 10: COMMERCIAL REAL ESTATE
June 30
(Dollars in Thousands)
Outstanding Loans 1995 1994
---------------------------------------------------------------------------- --------------------------
Investor-Developer Owner-Occupied Total Total
----------------------- ----------------------- -------------------------- --------------------------
Commercial Commercial Commercial Commercial
Mortgage Construction Mortgage Construction Mortgage Construction Mortgage Construction
---------- ------------ ---------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment Buildings..... $221,540 $1,437 - - $221,540 $1,437 $220,574 $4,943
Office Buildings........ 166,313 17,838 $187,396 $9,200 353,709 27,038 339,321 29,418
Residential Properties.. - 108,437 - - - 108,437 130 92,289
Shopping Centers........ 161,945 22,238 70,240 1,707 232,185 23,945 212,484 36,910
Land.................... - 35,869 - - - 35,869 - 43,995
Industrial Plants....... 103,696 4,526 188,702 11,365 292,398 15,891 285,029 27,416
Hotel/Motel/Restaurant.. 132,450 2,746 - - 132,450 2,746 119,367 6,377
Healthcare Facilities... - - 90,494 1,250 90,494 1,250 95,774 30,520
Other................... 150,232 15,081 247,326 22,525 397,558 37,606 368,638 29,010
---------- ---------- ---------- ----------- ----------- ---------- ------------ ----------
Total................. $936,176 $208,172 $784,158 $46,047 $1,720,334 (1) $254,219 (1) $1,641,317 $300,878
========== ========== ========== =========== =========== ========== ============ ==========
<FN>
(1) The geographic distribution by state is as follows:
Pennsylvania $1,570,863 (80%), Delaware $223,405 (11%), New
Jersey $113,222 (6%), and all other states $67,063 (3%).
</TABLE>
<TABLE>
<CAPTION>
Non-Accrual Loans 1995 1994
--------------------------------------------------------------------------- ------------------------
Investor-Developer Owner-Occupied Total Total
----------------------- ----------------------- ------------------------- ------------------------
Commercial Commercial Commercial Commercial
Mortgage Construction Mortgage Construction Mortgage Construction Mortgage Construction
---------- ------------ ---------- ------------ ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Apartment Buildings..... $1,686 - - - $1,686 - $6,240 $3,156
Office Buildings........ 12,559 - $3,631 - 16,190 - 4,433 -
Residential Properties.. - $1,168 - - - $1,168 130 630
Shopping Centers........ 1,328 - 609 - 1,937 - 3,785 -
Land.................... - 341 - - - 341 - 4,729
Industrial Plants....... 515 - 3,443 - 3,958 - 6,684 -
Hotel/Motel/Restaurant.. 4,121 277 - - 4,121 277 7,967 293
Other................... 1,561 - 2,167 - 3,728 - 5,782 -
---------- ---------- ---------- ----------- ----------- ---------- ------------ ----------
Total................. $21,770 $1,786 $9,850 - $31,620 (2) $1,786 (2) $35,021 $8,808
========== ========== ========== =========== =========== ========== ============ ==========
<FN>
(2) The geographic distribution by state is as follows:
Pennsylvania $17,530, (52%), Delaware $12,645 (38%), New
Jersey $1,482 (4%), and all other states $1,749 (6%).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Assets Acquired in
Foreclosures 1995 1994
---------- ----------
<S> <C> <C>
Apartment Buildings................. $150 $423
Office Buildings.................... 2,273 12,502
Residential Properties.............. 2,799 -
Shopping Centers.................... 175 3,784
Land................................ 2,544 817
Industrial Plants................... 2,087 4,168
Hotel/Motel/Restaurant.............. 232 2,395
Other............................... 1,033 1,957
---------- ----------
Total............................. $11,293 (3) $26,046
========== ==========
<FN>
(3) The geographic distribution by state is as follows:
Pennsylvania $6,419 (57%), Delaware $356 (3%), and New
Jersey $4,518 (40%).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 11: CAPITAL ADEQUACY
June 30, March 31, December 31, September 30, June 30,
1995 1995 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Consolidated
Total Shareholders' Equity to Assets..... 8.29% 8.15% 8.07% 8.33% 8.00%
Tangible Shareholders' Equity to Assets.. 7.51 7.35 7.23 7.46 7.39
Risk-Based Capital
Tier 1.............................. 9.31 9.32 9.25 9.44 9.66
Tier 2.............................. 3.45 3.48 3.48 3.63 3.64
Total (1,2)....................... 12.76 12.80 12.73 13.07 13.30
Leverage (1,2)........................... 7.57 7.52 7.47 7.47 7.84
Banking
Total Risk-Based Capital (1,2)
Meridian Bank........................ 12.35 12.39 12.16 12.53 12.66
Delaware Trust Company............... 14.95 14.59 14.32 13.58 13.56
Meridian Bank, New Jersey............ 14.06 15.20 15.06 15.88 16.67
<FN>
(1) The minimum ratios required by Federal Reserve Board
guidelines are 4% for Tier 1 capital, 8% for total
risk-based capital, and a leverage ratio of 3% plus an
additional cushion of 100 to 200 basis points.
(2) Federal Reserve Board guidelines define a well-capitalized
institution as having a Tier 1 capital ratio of 6% or more,
a total risk-based capital ratio of 10% or more, and a
leverage ratio of 5% or more.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 12: INDUSTRY SEGMENTS
(Dollars in Thousands)
Net Income (Loss)
-------------------------------------- Assets
Three Months Ended Six Months Ended -----------------------------------------
June 30, June 30, June 30, December 31,
1995 1994 1995 1994 1995 1994 1994
--------- -------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Banking (1).............................. $27,513 $37,578 $67,729 $73,103 $14,375,185 $14,377,454 $14,550,315
Securities (Broker-Dealer Activities) (2) (1,584) 3,206 (565) 5,490 535,988 807,270 502,332
--------- -------- --------- --------- ------------- ------------- -------------
Consolidated (3)......................... $25,929 $40,784 $67,164 $78,593 $14,911,173 $15,184,724 $15,052,647
========= ======== ========= ========= ============= ============= =============
<FN>
(1) Includes restructuring charge of $27.0 million (after-tax
$17.5 million) in the second quarter of 1995.
(2) Includes restructuring charge of $5.0 million (after-tax
$3.3 million) in the second quarter of 1995.
(3) Includes restructuring charge of $32.0 million (after-tax
$20.8 million) in the second quarter of 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30, June 30, December 31,
1995 1994 1994
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks...................................... $643,237 $869,440 $669,642
Short-Term Investments
Interest-Bearing Deposits in Other Banks.................. 63,821 114,031 123,608
Federal Funds Sold and Securities Purchased Under
Agreements to Resell................................... 14,992 158,719 96,810
Total Short-Term Investments........................... 78,813 272,750 220,418
Trading Account Assets....................................... 247,867 220,460 346,170
Investment Securities Available for Sale
(Amortized Cost, $422,517, $348,571 and $445,783 at
June 30, 1995, June 30, 1994 and
December 31, 1994, Respectively)...................... 432,155 350,968 434,994
Investment Securities
(Fair Value $2,585,295, $2,934,907 and $2,753,307 at
June 30, 1995, June 30, 1994 and
December 31, 1994, Respectively)...................... 2,601,931 2,998,611 2,872,419
Loans and Other Assets Held for Sale......................... 108,043 374,887 90,590
Total Loans, Net of Unearned Discount........................ 10,056,692 9,520,497 9,763,523
Less Allowance for Possible Loan Losses................. 170,684 172,343 169,402
Net Loans........................................... 9,886,008 9,348,154 9,594,121
Premises and Equipment....................................... 253,108 244,688 263,583
Accrued Interest Receivable.................................. 109,055 106,461 111,936
Other Assets................................................. 550,956 398,305 448,774
Total Assets..................................... $14,911,173 $15,184,724 $15,052,647
LIABILITIES
Deposits
Non-Interest Bearing Deposits............................. $1,877,744 $1,945,351 $1,998,660
Interest-Bearing Deposits................................. 9,651,132 9,721,432 9,380,907
Total Deposits......................................... 11,528,876 11,666,783 11,379,567
Short-Term Borrowings
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase......................... 825,119 1,242,301 1,569,153
Other Short-Term Borrowings............................... 505,475 383,152 243,413
Total Short-Term Borrowings............................ 1,330,594 1,625,453 1,812,566
Long-Term Debt and Other Borrowings.......................... 512,182 363,646 372,153
Accrued Interest Payable..................................... 73,374 50,603 62,344
Other Liabilities............................................ 229,986 263,635 210,932
Total Liabilities...................................... 13,675,012 13,970,120 13,837,562
<PAGE>
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Preferred Stock (Par Value $25.00)
Authorized - 25,000,000 Shares
Common Stock (Par Value $5.00)
Authorized - 200,000,000 Shares
Issued - 58,336,538 Shares at June 30, 1995, and
58,316,978 Shares at June 30, 1994 and
December 31, 1994, Respectively........................ 291,683 291,585 291,585
Surplus...................................................... 211,292 207,270 211,011
Retained Earnings............................................ 797,382 729,992 771,150
Net Unrealized Gains (Losses) on Securities.................. 6,096 1,388 (7,182)
Treasury Stock - 500,000, 514,256 and 525,336 Shares at
June 30, 1995, June 30, 1994 and December 31, 1994,
Respectively............................................... (15,214) (15,631) (15,911)
Unallocated Shares Held by Employees Stock Ownership Plan
(ESOP) Trust - 1,950,002, 1,285,000 Shares at
June 30, 1995, and December 31, 1994, Respectively......... (55,078) - (35,568)
Total Shareholders' Equity............................. 1,236,161 1,214,604 1,215,085
Total Liabilities and Shareholders' Equity........ $14,911,173 $15,184,724 $15,052,647
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 30 June 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans.............................. $225,932 $186,775 $441,272 $359,051
Interest on Trading Account Assets...................... 6,327 2,567 12,619 4,341
Interest on Investment Securities Available for Sale.... 7,763 5,353 15,077 9,750
Interest on Investment Securities....................... 38,167 38,198 78,387 74,182
Interest on Loans Held for Sale......................... 2,005 6,727 4,109 13,131
Other Interest Income................................... 2,247 2,104 4,712 3,254
Total Interest Income................................ 282,441 241,724 556,176 463,709
INTEREST EXPENSE
Interest on Deposits.................................... 96,421 65,380 186,837 126,807
Interest on Short-Term Borrowings....................... 25,716 14,305 51,970 20,777
Interest on Long-Term Debt and Other Borrowings......... 7,017 6,195 13,605 13,353
Total Interest Expense............................... 129,154 85,880 252,412 160,937
NET INTEREST INCOME........................................ 153,287 155,844 303,764 302,772
PROVISION FOR POSSIBLE LOAN LOSSES......................... 10,121 6,699 18,142 15,524
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES.................................... 143,166 149,145 285,622 287,248
NON-INTEREST INCOME
Trust................................................... 16,197 11,168 31,880 21,957
Mortgage................................................ 3,075 4,155 5,962 12,006
Broker-Dealer and Investment Banking.................... 13,676 14,151 26,147 29,433
Service Charges on Deposit Accounts..................... 16,436 13,899 30,947 27,025
Fees for Other Customer Services ....................... 8,809 8,865 17,085 16,741
Net Securities Gains (Losses)........................... 3,580 (49) 3,167 641
Other Income............................................ 5,336 3,145 9,678 5,468
Total Non-Interest Income............................ 67,109 55,334 124,866 113,271
NON-INTEREST EXPENSES
Salaries and Employee Benefits.......................... 72,004 72,651 148,379 147,837
Net Occupancy Expense................................... 10,827 11,156 22,378 23,227
Equipment Expense....................................... 9,888 9,710 18,882 19,432
Restructuring Charge.................................... 32,000 - 32,000 -
Other Expenses.......................................... 47,818 51,495 91,302 91,384
Total Non-Interest Expenses.......................... 172,537 145,012 312,941 281,880
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE................ 37,738 59,467 97,547 118,639
Provision for Income Taxes................................. 11,809 18,683 30,383 37,316
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE................................. 25,929 40,784 67,164 81,323
CUMULATIVE AFTER-TAX EFFECT ON PRIOR YEARS OF CHANGE IN
METHOD OF ACCOUNTING FOR POSTEMPLOYMENT BENEFITS........ - - - (2,730)
NET INCOME................................................. $25,929 $40,784 $67,164 $78,593
<PAGE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 30 June 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
PER COMMON SHARE
Income Before Cumulative Effect of Change
in Accounting Principle
Primary.............................................. $0.46 $0.70 $1.19 $1.40
Fully Diluted........................................ $0.45 $0.70 $1.18 $1.40
Cumulative After-Tax Effect on Prior Years of Change
in Accounting Principle
Primary.............................................. - - - ($0.05)
Fully Diluted........................................ - - - ($0.05)
Net Income
Primary.............................................. $0.46 $0.70 $1.19 $1.35
Fully Diluted........................................ $0.45 $0.70 $1.18 $1.35
Dividends............................................... $0.37 $0.34 $0.71 $0.66
AVERAGE SHARES OUTSTANDING
Primary.............................................. 56,452,388 58,170,280 56,442,669 58,174,985
Fully Diluted........................................ 56,593,898 58,170,280 56,712,878 58,200,984
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
Common Stock Net Unrealized
------------------------- Gains
Shares Retained (Losses) on Treasury
Outstanding Amount Surplus Earnings Securities Stock
------------ ------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED
June 30, 1994
Balance at January 1, 1994.............................. 58,154,486 $290,760 $205,174 $690,058 ($359) -
Net Income.............................................. - - - 78,593 - -
Common Stock Dividends Declared......................... - - - (38,109) - -
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. 79,774 51 (102) (550) - 2,059
Purchases of Treasury Stock............................. (586,250) - - - - (17,690)
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - - - - 1,747 -
Common Stock Issued in Merger........................... 154,712 774 2,198 - - -
Balance at June 30, 1994................................ 57,802,722 $291,585 $207,270 $729,992 $1,388 ($15,631)
FOR THE SIX MONTHS ENDED
June 30, 1995
Balance at January 1, 1995.............................. 56,506,642 $291,585 $211,011 $771,150 ($7,182) ($15,911)
Net Income.............................................. - - - 67,164 - -
Common Stock Dividends Declared......................... - - - (39,791) - -
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. 146,870 98 151 (1,141) - 3,009
Purchases of Treasury Stock............................. (101,974) - - - (2,312)
Purchases of Shares of Employee Stock Ownership
Plan (ESOP)........................................... (715,000) - - - - -
Employee Stock Ownership Plan (ESOP) Shares Committed
To Be Released to Participants........................ 49,998 - 130 - - -
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - - - - 13,278 -
Balance at June 30, 1995................................ 55,886,536 $291,683 $211,292 $797,382 $6,096 ($15,214)
<CAPTION>
<PAGE>
Unallocated
ESOP
Shares Total
------------ ------------
<S> <C> <C>
FOR THE SIX MONTHS ENDED
June 30, 1994
Balance at January 1, 1994.............................. - $1,185,633
Net Income.............................................. - 78,593
Common Stock Dividends Declared......................... - (38,109)
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. - 1,458
Purchases of Treasury Stock............................. - (17,690)
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - 1,747
Common Stock Issued in Merger........................... - 2,972
Balance at June 30, 1994................................ - $1,214,604
FOR THE SIX MONTHS ENDED
June 30, 1995
Balance at January 1, 1995.............................. ($35,568) $1,215,085
Net Income.............................................. - 67,164
Common Stock Dividends Declared......................... - (39,791)
Sales of Stock Under Dividend Reinvestment,
Stock Option and Employee Benefit Plans.............. - 2,117
Purchases of Treasury Stock............................. - (2,312)
Purchases of Shares of Employee Stock Ownership
Plan (ESOP)........................................... (20,922) (20,922)
Employee Stock Ownership Plan (ESOP) Shares Committed
To Be Released to Participants........................ 1,412 1,542
Unrealized After-Tax Gain on Investment Securities
Available for Sale................................... - 13,278
Balance at June 30, 1995................................ ($55,078) $1,236,161
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Six Months Ended
June 30,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................... $67,164 $78,593
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities
Restructuring Charge...................................... 29,920 -
Depreciation and Amortization............................. 26,054 25,006
Deferred Tax Benefit...................................... (4,464) (565)
Cumulative Effect of Change in Accounting Principle....... - (2,730)
Provision for Possible Loan Losses........................ 18,142 15,524
Provision for Other Real Estate Losses and Mortgage
Servicing Recourse............................. 4,001 6,555
Net Gains - Investment Securities......................... (3,937) (410)
Net Losses (Gains) - Investment Securities Available
for Sale................................................ 18 (229)
Gains On Sales Of Mortgage Servicing...................... (570) -
Decrease (Increase) in Trading Account Assets............. 98,303 (183,844)
Decrease (Increase) in Loans and Other Assets
Held for Sale.......................................... (14,314) 256,352
Decrease (Increase) in Other Assets....................... (117,805) 97,868
Decrease in Other Liabilities............................. (2,157) (25,718)
Other, Net................................................ 975 2,666
Net Cash Provided by Operating Activities 101,330 269,068
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Short-Term Investments........... 151,434 147,515
Purchases of Short-Term Investments.......................... (91,644) (159,688)
Proceeds from Sales of Investment Securities................. 29,524 156
Proceeds from Maturities, Calls and Paydowns of Investment
Securities................................................. 278,031 591,274
Purchases of Investment Securities........................... (53,932) (826,281)
Proceeds from Sales of Investment Securities Available
for Sale................................................... 160,432 13,876
Proceeds from Maturities, Calls and Paydowns of Investment
Securities Available for Sale.............................. 8,992 54,615
Purchases of Investment Securities Available for Sale........ (145,785) (123,486)
Net Principal Disbursed on Loans to Customers................ (324,502) (536,921)
Proceeds from Sales of Premises and Equipment................ 2,199 6,790
Purchases of Premises and Equipment.......................... (7,516) (25,502)
Proceeds from Sales of Mortgage Servicing.................... 1,224 4,804
Proceeds from Sales of Assets Acquired in Foreclosures....... 17,450 19,298
Net Cash Provided by Acquisitions............................ - 426,000
Net Cash Provided by (Used For) Investing Activities...... 25,907 (407,550)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits.......................... 148,851 (157,198)
Net Increase (Decrease) in Short Term Borrowings ............ (481,971) 833,730
Proceeds from Issuance of Long-Term Debt..................... 149,223 -
Repayment of Long Term Debt.................................. (11,577) (57,821)
Purchases of Treasury Stock.................................. (2,312) (17,690)
Proceeds from Issuance of Common Stock....................... 2,117 1,448
Cash Dividends Paid to Common Shareholders................... (39,791) (38,109)
Net Cash Provided by (Used For) Financing Activities...... (235,460) 564,360
<PAGE>
CASH AND CASH EQUIVALENTS
Net Increase (Decrease) During the Period................. (108,223) 425,878
Balance at Beginning of the Period........................ 766,452 602,281
Balance at End of the Period.............................. $658,229 $1,028,159
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1) Summary of Significant Accounting Policies
The accounting policies and reporting practices of Meridian
Bancorp, Inc. (Meridian) are in accordance with generally
accepted accounting principles and have been followed on a
consistent basis except for the changes described in Note 4.
This Quarterly Report should be read in conjunction with the
1994 Annual Report. Financial information for the interim
periods is not independently audited. However, the financial
information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the financial condition and results of operations
of the interim periods. Such adjustments are of a normal
recurring nature.
The results of operations for the interim periods are not
necessarily indicative of the consolidated results to be expected
for the entire year.
The consolidated financial statements include the accounts
of Meridian and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Certain amounts in the prior period financial statements
have been reclassified to conform with the presentation used in
the 1995 financial statements. These reclassifications have no
effect on net income.
In the accompanying Consolidated Statements of Cash Flows,
cash and cash equivalents include cash on hand, amounts due from
banks, federal funds sold, and securities purchased under
agreements to resell. The original maturities of such
instruments are less than 90 days. Federal funds are sold and
securities are purchased under agreements to resell for generally
one-day periods.
Relative to the Consolidated Statements of Cash Flows,
income tax payments totaled $28 million in 1995 and $19 million
in 1994. Interest payments totaled $241 million in 1995 and
$180 million in 1994. Non-cash investing activity consists of
net transfers of loans in liquidation to other real estate
aggregating $13 million in 1995 and $22 million in 1994.
2) Performance Study ("59.9" Program)
In June 1995, Meridian completed an internal review of its
operations and businesses and announced a company-wide plan
designed to improve the company's operating performance and
competitive position. As a result of this review, Meridian
recorded a restructuring charge of $32.0 million (after-tax
$20.8 million or $.37 per share) in the second quarter of 1995.
Implementation of the plan will occur over approximately the
next twelve months. Over that time period, the process is
expected to reduce net operating expenses on an annualized pre-
tax basis by $55 million while providing recurring revenue
enhancements of $13 million, increasing Meridian's earnings on a
annual basis by $44 million, or $.78 per share. The gross
reduction in operating expenses is expected to approximate
$73.2 million and is composed of salaries and benefits of
$54.2 million, furniture and fixtures of $16.1 million, and
occupancy of $2.9 million. Offsetting these savings are foregone
revenues, which are directly related to the expense reductions
mainly in the branches, of $7.5 million and one-time
implementation costs of $10.7 million, resulting in net expense
reductions of $55 million.
3) Securities Transactions
Total gains (losses) from securities transactions, which
were included in the following categories in the non-interest
income section of the consolidated statements of income, are as
follows:
<PAGE>
Three Months Ended
June 30
1995 1994
---- ----
Broker-Dealer and Investment
Banking $ 339,000 $ 5,000
Net Securities Gains (Losses) 3,580,000 (49,000)
---------- ---------
Total Gains (Losses)from Securities
Transactions $3,919,000 $ (44,000)
========== =========
Six Months Ended
June 30
1995 1994
---- ----
Broker-Dealer and Investment
Banking $ 353,000 $ (2,000)
Net Securities Gains 3,167,000 641,000
---------- ---------
Total Gains from Securities
Transactions $3,520,000 $ 639,000
========== =========
The gains in 1995 resulted from the sale of investment
securities either near the maturity date or for which Meridian
had collected a substantial portion of the principal originally
outstanding at the date of purchase. The gains and losses in
1994 resulted mainly from sales of investments classified as
available for sale and calls of investments.
4) Accounting Pronouncements
Effective January 1, 1994, Meridian adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits". This statement establishes
standards for employers who provide benefits to former employees
after employment but before retirement. Such benefits include,
among other things, severance, disability, and workers'
compensation benefits. The implementation of these new
accounting rules resulted in a charge of $4.2 million
($2.7 million after-tax or $.05 per share) in the first quarter
of 1994.
During the second quarter of 1995, the Financial Accounting
Standards Board issued Statements of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" and No. 122
"Accounting for Mortgage Servicing Rights." SFAS 121 requires
that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS 122 amends FASB
Statement No. 65 to require that a mortgage banking enterprise
recognize as a separate asset rights to service mortgage loans
for others, however those servicing rights are acquired
(purchased or originated). In addition, this statement requires
that a mortgage banking enterprise assess its capitalized
mortgage servicing assets for impairment based on the fair value
of those rights.
The effective date for both Statements is fiscal years
beginning after December 15, 1995. Management is currently
analyzing the impact of both SFAS 121 and 122 and has not yet
determined the impact on Meridian's consolidated financial
position and results of operations.
5) Commitments and Contingencies
At June 30, 1995, there were outstanding commitments,
contingent liabilities, and off-balance sheet financial
instruments on which management does not anticipate any material
losses. These include, among other things, commitments to extend
credit, letters of credit undertaken in the normal course of
business, and various off-balance sheet financial instruments
used in conducting Meridian's business activities and in managing
its balance sheet risks.
Meridian and certain of its subsidiaries were party
(plaintiff or defendant) to a number of lawsuits. While any
litigation has an element of uncertainty, management after
reviewing these actions with its legal counsel, is of the opinion
that the liability, if any, resulting from all legal actions will
not have a material effect on the consolidated financial
condition or results of operations of Meridian.
<PAGE>
PART II
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The 1995 Annual Meeting of Shareholders (the "Meeting") of the
Company was held on April 25, 1995. Notice of the Meeting was
mailed to shareholders on or about March 17, 1995, together with
proxy solicitation materials prepared in accordance with
Section 14(a) of the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
The Meeting was held for the following purposes:
1. to elect eight Class III directors to hold office
for three years from the date of election and until their
successors are elected and qualified (Matter No. 1);
2. to consider and act upon a proposal to amend the
Company's 1993 Stock Option Plan (matter No. 2);
3. to ratify the appointment by the Company's Board
of Directors of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1995
(Matter No. 3); and
4. to consider and act upon a shareholder proposal to
provide for cumulative voting in the election of directors
(Matter No. 4).
There was no solicitation in opposition to the nominees of the
Board of Directors for election to the Board of Directors. All
nominees of the Board of Directors were elected. The number of
votes cast for or withheld, as well as the number of abstentions
and broker nonvotes for each of the nominees for election to the
Board of Directors were as follows:
Abstentions
and Broker
Nominee For Withheld Nonvotes
DeLight E. Breidegam, Jr. 49,808,476 475,806 0
Harry Corless 48,488,876 1,795,406 0
Lawrence C. Karlson 49,906,089 378,193 0
George W. Leighow 49,814,732 469,550 0
Samuel A. McCullough 49,827,247 457,035 0
Lawrence R. Pugh 49,789,990 494,292 0
George Strawbridge, Jr. 49,893,832 390,350 0
Anita A. Summers 49,782,078 502,204 0
Matter Nos. 2 and 3 were approved by shareholders at the
Meeting. Matter No. 4 was not approved by shareholders at the
Meeting. The votes cast on each of these Matters were as
follows:
Abstentions and
Matter For Against Broker Nonvotes
No. 2 46,640,101 2,902,493 741,688
No. 3 49,818,280 287,599 178,403
No. 4 8,559,846 35,462,026 830,013
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement and Plan of Merger, dated as of
May 23, 1995, between Meridian Bancorp, Inc.
and United Counties Bancorporation is
incorporated herein by reference to
Exhibit 2.1 to the Current Report on Form 8-K
dated May 23, 1995 of Meridian Bancorp, Inc.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
On June 7, 1995, Meridian filed a Current Report
on Form 8-K dated May 23, 1995 with the Commission
reporting information under Items 5, 7(a), 7(b)
and 7(c). The Current Report on Form 8-K
contained the following financial statements:
(i) The Consolidated Balance Sheets as of
December 31, 1994 and 1993, and the
Consolidated Statements of Income,
Consolidated Statements of Changes in
Stockholders' Equity and Consolidated
Statements of Cash Flow for the years ended
December 31, 1994, 1993 and 1992, of United
Counties Bancorporation, and the related
Notes to Consolidated Financial Statements,
were incorporated by reference to pages 14
through 27 of Exhibit 13.1 (United Counties
Bancorporation 1994 Annual Report to
Shareholders) to the Annual Report on
Form 10-K for the year ended December 31,
1994 of United Counties Bancorporation.
(ii) The Unaudited Consolidated Balance Sheets as
of March 31, 1995 and 1994, the Unaudited
Consolidated Income Statements, the Unaudited
Statements of Changes in Stockholders' Equity
and the Unaudited Consolidated Statements of
Cash Flow for the three-month periods ended
March 31, 1995 and 1994, of United Counties
Bancorporation, and the related Notes to
Unaudited Consolidated Financial Statements,
were incorporated by reference to pages 1
through 11 of the Quarterly Report on
Form 10-Q for the quarter ended March 31,
1995 of United Counties Bancorporation.
(iii) The Unaudited Pro Forma Condensed
Consolidated Balance Sheet of Meridian
Bancorp, Inc. and United Counties
Bancorporation as of March 31, 1995. The
Unaudited Pro Forma Condensed Consolidated
Statements of Income for the three-month
periods ended March 31, 1995 and 1994 and the
years ended December 31, 1994, 1993 and 1992.
<PAGE>
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.
August 14, 1995 /s/ David E. Sparks
David E. Sparks,
Vice Chairman and Chief Financial
Officer (Authorized Officer and Chief
Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10.1 Agreement and Plan of Merger,
dated as of May 23, 1995,
between Meridian Bancorp, Inc.
and United Counties Bancorporation
is incorporated herein by reference
to Exhibit 2.1 to the Current Report
on Form 8-K dated May 23, 1995 of
Meridian Bancorp, Inc.
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 643,237
<INT-BEARING-DEPOSITS> 63,821
<FED-FUNDS-SOLD> 14,992
<TRADING-ASSETS> 247,867
<INVESTMENTS-HELD-FOR-SALE> 432,155
<INVESTMENTS-CARRYING> 2,601,931
<INVESTMENTS-MARKET> 2,585,295
<LOANS> 10,056,692
<ALLOWANCE> 170,684
<TOTAL-ASSETS> 14,911,173
<DEPOSITS> 11,528,876
<SHORT-TERM> 1,330,594
<LIABILITIES-OTHER> 303,360
<LONG-TERM> 512,182
<COMMON> 291,683
0
0
<OTHER-SE> 944,478
<TOTAL-LIABILITIES-AND-EQUITY> 14,911,173
<INTEREST-LOAN> 441,272
<INTEREST-INVEST> 93,464
<INTEREST-OTHER> 21,440
<INTEREST-TOTAL> 556,176
<INTEREST-DEPOSIT> 186,837
<INTEREST-EXPENSE> 252,412
<INTEREST-INCOME-NET> 303,764
<LOAN-LOSSES> 18,142
<SECURITIES-GAINS> 3,167
<EXPENSE-OTHER> 312,941
<INCOME-PRETAX> 97,547
<INCOME-PRE-EXTRAORDINARY> 67,164
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,164
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 4.59
<LOANS-NON> 98,837
<LOANS-PAST> 22,681
<LOANS-TROUBLED> 1,121
<LOANS-PROBLEM> 519,915
<ALLOWANCE-OPEN> 169,402
<CHARGE-OFFS> 23,629
<RECOVERIES> 16,860
<ALLOWANCE-CLOSE> 170,684
<ALLOWANCE-DOMESTIC> 170,684
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
