<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
...X.... QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
______________________________________
OR
........ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to..........................
Commission file number 0-15870
MIDLANTIC CORPORATION
______________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2699903
_________________ _______________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
METRO PARK PLAZA, P.O. BOX 600, EDISON, NEW JERSEY 08818
________________________________________________________
(Address of principal executive offices)
(Zip Code)
(908) 321-8000
______________
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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 ......
Shares outstanding on August 1, 1994
Common Stock, par value $3.00 per share - 52,452,208 shares
<PAGE>2
MIDLANTIC CORPORATION AND SUBSIDIARIES
FORM 10-Q
June 30, 1994
PART I - FINANCIAL INFORMATION
INTRODUCTION The interim financial information disclosed in this
Form 10-Q should be read in conjunction with Midlantic
Corporation's 1993 Annual Report to shareholders and Midlantic
Corporation's 1993 Annual Report on Form 10-K as the
disclosures contained within those reports are
considered an integral part of this Form 10-Q.
ITEM 1. FINANCIAL STATEMENTS
The accompanying interim comparative consolidated
financial statements of Midlantic Corporation ("MC") and
Subsidiaries ("Midlantic" or the "Corporation") on pages
3 through 7 and related notes on pages 8 through 11 are
unaudited and reflect adjustments of a normal recurring
nature, unless otherwise disclosed in this Form 10-Q,
which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods.
Such statements were prepared in accordance with Article
10 of Regulation S-X.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The accompanying interim management's discussion on
pages 12 through 28 provides an analysis of material
changes in financial condition and results of operations
in accordance with Item 303(b) of Regulation S-K and
should be read in conjunction with the financial
statements and related notes (see Item 1) and the tables
presented on pages 29 through 47.
<PAGE>3 1OF2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1994 1993 1994 1993
________ ________ ________ ________
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $168,539 $166,244 $331,021 $331,332
Interest on investment securities
Taxable interest income 25,933 21,171 53,459 46,224
Tax-exempt interest income 148 112 327 274
Interest on deposits with banks 4,705 4,894 9,669 9,673
Interest on other short-term investments 12,723 14,748 22,520 29,886
________ ________ ________ ________
Total interest income 212,048 207,169 416,996 417,389
________ ________ ________ ________
INTEREST EXPENSE
Interest on deposits 53,973 66,991 107,841 144,088
Interest on short-term borrowings 5,253 2,854 10,376 5,925
Interest on long-term debt 8,619 8,864 17,279 18,672
________ ________ ________ ________
Total interest expense 67,845 78,709 135,496 168,685
________ ________ ________ ________
Net interest income 144,203 128,460 281,500 248,704
Provision for loan losses 5,604 15,624 13,625 36,164
________ ________ ________ ________
Net interest income after provision
for loan losses 138,599 112,836 267,875 212,540
NONINTEREST INCOME
Trust income 10,860 10,331 20,642 20,564
Service charges on deposits 19,020 20,063 37,966 38,341
Investment securities (losses) gains (4,637) 9 (3,374) 4,860
Net gains on disposition of assets 25,056 -- 25,056 --
Other 19,930 14,999 37,268 32,072
________ ________ ________ ________
Total noninterest income 70,229 45,402 117,558 95,837
________ ________ ________ ________
208,828 158,238 385,433 308,377
________ ________ ________ ________
NONINTEREST EXPENSES
Salaries and benefits 57,901 52,060 114,115 106,382
Net occupancy 10,820 10,897 23,055 22,196
Equipment rental and expense 5,990 6,805 12,915 14,732
Other real estate owned, net 1,800 23,184 5,969 79,793
FDIC assessment charges 7,187 8,380 14,381 17,604
Legal and professional fees 11,260 12,904 21,135 24,317
Other 29,363 20,260 53,735 48,098
________ ________ ________ ________
Total noninterest expenses 124,321 134,490 245,305 313,122
________ ________ ________ ________
<PAGE>3 2OF2
Income (loss) before income taxes and
cumulative effect of the changes in
accounting principle 84,507 23,748 140,128 (4,745)
Income tax expense (benefit) 12,228 (17,168) 14,496 (30,194)
________ ________ ________ ________
Income before cumulative effect
of the changes in accounting principle 72,279 40,916 125,632 25,449
Cumulative effect of the change in
accounting for postemployment benefits -- -- (7,528) --
Cumulative effect of the change
in accounting for income taxes -- -- -- 38,962
________ ________ ________ ________
NET INCOME $ 72,279 $ 40,916 $118,104 $ 64,411
======== ======== ======== ========
</TABLE>
(continued on next page)
<PAGE>4
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
(continued)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1994 1993 1994 1993
======= ======= ======== =======
<S> <C> <C> <C> <C>
INCOME APPLICABLE TO PRIMARY
COMMON SHARES
Income before cumulative effect
of the changes in accounting principle $71,372 $40,010 $123,819 $23,637
Net income 71,372 40,010 116,291 65,599
INCOME APPLICABLE TO FULLY
DILUTED COMMON SHARES
Income before cumulative effect
of the changes in accounting principle 72,371 41,031 125,824 23,637
Net income 72,371 41,031 118,296 62,599
======= ======= ======== =======
INCOME PER COMMON SHARE
Income before cumulative effect
of the changes in accounting principle
Primary $1.35 $.79 $2.34 $.48
Fully diluted 1.33 .78 2.31 .48
Cumulative effect of the changes in
accounting principle
Postemployment benefits
Primary -- -- (.14) --
Fully diluted -- -- (.14) --
Income taxes
Primary -- -- -- .80
Fully diluted -- -- -- .80
Net income
Primary 1.35 .79 2.20 1.28
Fully diluted 1.33 .78 2.17 1.28
======= ======= ======= =======
AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS
Primary 52,915 50,715 52,868 48,854
Fully diluted 54,467 52,277 54,445 48,889
======= ======= ======== =======
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>5 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<CAPTION>
JUNE 30 December 31
1994 1993
___________ ___________
<S> <C> <C>
ASSETS
Cash and due from banks $ 872,258 $ 712,960
Interest-bearing deposits in other banks 403,976 488,821
Other short-term investments 1,451,000 1,290,000
Investment securities (market value 1994,
$1,880,851; 1993, $2,467,793) 1,936,195 2,455,410
Total loans (net of unearned income of $141,794
in 1994 and $137,241 in 1993) 8,397,659 8,409,697
Less: allowance for loan losses 373,345 400,311
___________ ___________
Net loans 8,024,314 8,009,386
___________ ___________
Premises and equipment, net 148,455 155,129
Due from customers on acceptances 12,642 11,084
Other real estate owned, net 108,308 132,670
Taxes receivable and net deferred tax assets 173,190 202,823
Other assets 298,687 450,895
___________ ___________
Total assets $13,429,025 $13,909,178
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Domestic deposits
Noninterest-bearing demand $ 2,817,001 $ 2,839,885
Interest-bearing demand 1,381,768 1,433,690
Savings 1,681,974 1,582,614
Retail money market accounts 2,095,962 2,193,582
CDs over $100,000 395,896 423,134
Other time 2,756,597 3,105,623
Overseas branch deposits 12,575 9,273
___________ ___________
Total deposits 11,141,773 11,587,801
___________ ___________
Short-term borrowings 506,391 674,497
Bank acceptances outstanding 12,642 11,084
Other liabilities 157,684 126,480
Long-term debt 373,000 386,752
___________ ___________
Total liabilities 12,191,490 12,786,614
___________ ___________
<PAGE>5 2of2
Shareholders' equity
Capital stock
Preferred stock: no par value
Authorized 40,000,000 shares
Issued 500,000 shares in 1994 and 1993 50,000 50,000
Common stock: par value $3 per share
Authorized 150,000,000 shares
Issued 52,406,449 shares in 1994 and
52,173,999 shares in 1993 157,219 156,522
Surplus 608,757 603,732
Retained earnings 423,375 312,310
Net unrealized holding losses on available
for sale securities, net of taxes (1,816) --
___________ ___________
Total shareholders' equity 1,237,535 1,122,564
___________ ___________
Total liabilities and shareholders' equity $13,429,025 $13,909,178
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>6 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30 1994 1993
_________ ___________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 118,104 $ 64,411
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for loan and OREO losses 19,625 120,095
Depreciation of premises and equipment 11,628 13,083
Amortization of goodwill and other intangibles 3,225 3,177
Deferred income tax expense 31,241 13,706
Cumulative effect of changes in accounting principle
Income taxes -- (38,962)
Postemployment benefits 7,528 --
Net accretion of investment securities (5,139) (10,560)
Accretion of net deferred loan fees (4,530) (5,172)
Net gains on the sales of assets (27,351) (8,849)
Net decrease in trading account assets 480 4,915
Net decrease in OREO 2,215 17,152
Net increase in accrued interest receivable (7,585) (5,646)
Net decrease in accrued interest payable (2,482) (11,197)
Net (increase) decrease in taxes receivable and
net deferred tax assets (357) 58,730
Net decrease (increase) in other assets 27,435 (31,695)
Net increase (decrease) in other liabilities 21,833 (23,021)
Other (621) (3,651)
_________ ___________
Net cash provided by operating activities 195,249 156,516
_________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from bulk sales of loans and OREO 221,723 185,556
Proceeds from sales of OREO 30,789 45,090
Net decrease in money market investments with
an original maturity of 3 months or less 333,870 545,031
Proceeds from money market investments with an
original maturity of greater than 3 months 448,040 772,097
Purchases of money market investments with an
original maturity of greater than 3 months (858,065) (1,441,040)
Proceeds from sales of available-for-sale securities 889,156 577,247
Proceeds from matured investment securities 548,890 342,633
Purchases of investment securities (920,648) (625,434)
Net (increase) decrease in loans (95,822) 88,739
Purchases of premises and equipment (5,083) (10,284)
Sales of premises and equipment 346 477
_________ ___________
Net cash provided by investing activities 593,196 480,112
_________ ___________
<PAGE>6 2of2
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (446,028) (739,862)
Net (decrease) increase in short-term borrowings (168,106) 47,851
Payments on long-term debt (13,752) (50,015)
Cash dividends paid (6,133) --
Proceeds from issuances of common stock 4,872 107,386
_________ ___________
Net cash used by financing activities (629,147) (634,640)
_________ ___________
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 159,298 $ 1,988
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 712,960 799,194
_________ ___________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 872,258 $ 801,182
========= ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>7 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30 1994 1993
__________ __________
<S> <C> <C>
PREFERRED STOCK AT JANUARY 1 AND JUNE 30 $ 50,000 $ 50,000
========== ==========
COMMON STOCK
Balance at January 1 $ 156,522 $ 138,443
Issuance of 5,750,000 common shares
in a public offering -- 17,250
Issuance of 35,776 common shares in 1994 and
89,091 common shares in 1993 for preferred
stock dividend 107 267
Issuance of 175,958 common shares and 2,042 common
treasury shares in 1994 and 22,096 common shares
in 1993 for stock options 528 67
Issuance of 20,716 common shares in 1994
purchased by Midlantic's 401(k) plan 62 --
__________ __________
Balance at June 30 $ 157,219 $ 156,027
========== ==========
SURPLUS
Balance at January 1 $ 603,732 $ 509,464
Issuance of common shares for preferred
stock dividend 799 1,546
Issuance of common shares and common treasury
shares for stock options 3,693 79
Issuance of common shares in a public offering -- 89,890
Issuance of common shares purchased by
Midlantic's 401(k) plan 533 --
__________ __________
Balance at June 30 $ 608,757 $ 600,979
========== ==========
RETAINED EARNINGS
Balance at January 1 $ 312,310 $ 145,578
Net income 118,104 64,411
Cash dividends paid in 1994
Preferred stock (907) --
Common stock (5,226) --
Issuance of common shares for
preferred stock dividend (906) (1,813)
__________ __________
Balance at June 30 $ 423,375 $ 208,176
========== ==========
NET UNREALIZED HOLDING GAINS (LOSSES)
ON AVAILABLE FOR SALE SECURITIES
Cumulative effect of adoption of change
in accounting for investment securities $ 1,859 $ --
Change in unrealized holding gains (3,675) --
__________ __________
Balance at June 30 $ (1,816) $ --
========== ==========
<PAGE>7 2of2
TREASURY STOCK
Balance at January 1 $ -- $ (23)
Addition of 2,042 common shares in 1994
and 4,081 common shares in 1993 (56) (95)
Issuance of 2,042 common treasury
shares in 1994 and 4,268 common
treasury shares in 1993 for stock options 56 100
__________ __________
Balance at June 30 $ -- $ (18)
========== ==========
TOTAL SHAREHOLDERS' EQUITY
Balance at January 1 $1,122,564 $ 843,462
Net changes during period 114,971 171,702
__________ __________
Balance at June 30 $1,237,535 $1,015,164
========== ==========
</TABLE>
<PAGE>8
MIDLANTIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECLASSIFICATIONS - Certain captions in the financial statements presented for
prior periods have been reclassified to conform with the 1994 presentation.
Effective June 30, 1994 and for all prior periods presented, the Corporation
reclassified factored receivables and the allowance for factored receivables
from other assets/other liabilities to loans and the allowance for loan
losses, respectively. Net discount income earned on factored receivables was
reclassified from noninterest income to interest income on loans while the
provision for losses on factored receivables was transferred from other
noninterest expenses to the provision for loan losses. Such reclassifications
were made to conform with general industry practice and are not considered to
have a material effect on Midlantic's results of operations or financial
condition.
ASSETS HELD FOR ACCELERATED DISPOSITION - During 1993 and 1994, the
Corporation initiated and completed two major bulk sale programs of distressed
real estate assets. Prior to their actual sales, these assets, comprised of
commercial real estate loans and other real estate owned ("OREO"), were
transferred to other assets as assets held for accelerated disposition
("AHAD"). Such assets were carried at fair value less the estimated cost of
disposing of the properties ("net realizable value").
In the first bulk sale program, Midlantic transferred loans and OREO with a
book value and a net realizable value of $244.0 million and $165.3 million,
respectively, to AHAD during the first six months of 1993. In the second
quarter of 1993, two bulk sales were completed. At June 30, 1993, AHAD
amounted to $22.4 million. These assets, along with certain additional loans
and OREO that were later transferred to AHAD, were subsequently sold in the
last half of 1993.
In the second bulk sale program, commenced in December 1993, the Corporation
initially transferred loans and OREO with a book value and a net realizable
value of $292.2 million and $158.2 million, respectively, to AHAD. During the
first six months of 1994, additional loans and OREO with a book value of $69.1
million and a net realizable value of $56.9 million, were transferred to AHAD.
Substantially a ll of the assets designated for bulk sale at year-end 1993 and
during 1994 were sold by the end of the second quarter of 1994. A gain of
$25.1 million was realized in the second quarter of 1994 on these sales. At
June 30, 1994, $20.9 million of assets designated for accelerated disposition
remained outstanding. Such assets are expected to be sold or settled on an
individual basis by year-end 1994.
CAPITAL STOCK
COMMON STOCK - On July 20, 1994, the Board of Directors of MC ("the Board")
declared a quarterly cash dividend on the Corporation's common stock of $.13
per share to shareholders of record on August 1, 1994, payable on August 15,
1994. This followed the declaration and payment of a cash dividend of $.10
per share on the common stock during the second quarter of 1994.
On May 4, 1993, Midlantic issued, through a public offering, 5.750 million
shares of common stock for a net cash price of $107.1 million.
PREFERRED STOCK - On June 22, 1994, the Board declared a cash dividend on MC's
Term Adjustable Rate Cumulative Preferred Stock - Series A (the "Preferred
<PAGE>9
Stock") of $907 thousand, representing full payment of the second quarter 1994
dividend requirement, payable in the third quarter of 1994. Based upon a July
22, 1992 agreement between Midlantic and the holder of the Preferred Stock,
dividends on the Preferred Stock for the second half of 1991 (as well as
payments in arrears) and all of 1992 and 1993 were paid through the issuance
of shares of Midlantic's common stock in lieu of a cash payment. Pursuant to
that agreement, Midlantic, at its discretion, may pay dividends in cash or in
shares of common stock or in any combination thereof, so long as any such
issuance would not result in the holder of the Preferred Stock being the
beneficial owner of more than 4.99 percent of the outstanding shares of
Midlantic's common stock.
FINANCIAL INSTRUMENTS - The following table summarizes Midlantic's significant
off-balance sheet financial instruments at June 30, 1994:
<TABLE>
<CAPTION>
JUNE 30
(In thousands) 1994
__________
<S> <C>
Unused commitments to extend credit $2,964,918
Financial standby letters of credit and similar arrangements 121,480
Performance standby letters of credit and similar arrangements 146,522
Commercial letters of credit and other short-term trade-related contingencies 58,116
Notional amount of interest rate swaps
Agreements to receive a fixed rate of interest 3,303,066
Agreements to pay a fixed rate of interest 598,500
Agreements to receive and pay a variable rate of interest 300,000
Foreign exchange contracts 63,789
==========
</TABLE>
STATEMENT OF CASH FLOWS - Cash paid during the first six months of 1994 and
1993 for interest on deposits, short-term borrowings and long-term debt
amounted to $123.8 million and $179.9 million, respectively. Net cash
received for federal and state income taxes during the first six months of
1994 and 1993 was $14.7 million and $85.5 million, respectively.
During the first half of 1994 and 1993, $11.4 million and $102.2 million,
respectively, of loans, net of charge-offs, were transferred into OREO. The
transfer of loans to OREO and the transfer of loans and OREO to assets held
for accelerated disposition constituted non-cash transactions and,
accordingly, are not reflected in the statement of cash flows.
POSTEMPLOYMENT BENEFITS - In the first quarter of 1994, Midlantic adopted
Statement of Financial Accounting Standards ("FAS") No. 112 "Employers'
Accounting for Postemployment Benefits" as a cumulative effect of a change in
accounting principle. The cumulative effect of this change in accounting
principle reduced net income for the first six months of 1994 by $7.5 million
or $.14 per fully diluted common share (net of income taxes). FAS No. 112
requires accrual accounting for postemployment benefits (benefits such as
severance and disability payments to former or inactive employees
after employment but before retirement) under the following circumstances: if
the employees' rights to those benefits are attributable to services already
rendered and the rights to those benefits accumulate or vest and if payment of
<PAGE>10
the benefits is probable and the amount of the benefits can be reasonably
estimated. If the four criteria mentioned cannot be met, the employer should
accrue an obligation for these benefits when payment is both probable and
estimable. Prior to the adoption of FAS No. 112, Midlantic accounted for
postemployment benefits on a pay-as-you-go basis.
ACCOUNTING FOR INVESTMENTS IN DEBT AND EQUITY SECURITIES - As of January 1,
1994, Midlantic adopted FAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" which establishes the accounting and reporting for
investments in equity securities that have readily determinable fair values
and for all investments in debt securities. In accordance with FAS No. 115,
those investments are classified and accounted for in three categories: (1)
held to maturity securities, which are reported at amortized cost; (2)
trading securities, which are reported at fair value with unrealized gains and
losses included in earnings (which is consistent with Midlantic's prior
accounting policy for such securities); and (3) available-for-sale securities,
which are reported at fair value with unrealized gains and losses, net of
applicable income taxes, reported as a separate component of shareholders'
equity and excluded from earnings. Data for periods prior to January 1, 1994
have not been restated.
Net unrealized holding losses on available-for-sale securities were $1.8
million at June 30, 1994, compared to a $1.9 million gain which was recorded
on January 1, 1994 when FAS No. 115 was adopted, and were included as a
component of shareholders' equity.
The investment securities portfolio at June 30, 1994 was comprised of the
following:
<TABLE>
<CAPTION>
(In thousands) June 30, 1994
__________
<S> <C>
Securities held to maturity $1,528,673
Securities available for sale 388,618
Trading securities 18,904
__________
Total investment securities $1,936,195
==========
</TABLE>
INCOME TAXES - In the first quarter of 1993, the Corporation adopted FAS No.
109 "Accounting for Income Taxes" as a cumulative effect of a change in
accounting principle. The cumulative effect of this change in accounting
principle increased year-to-date, June 30, 1993 net income by $39.0 million or
$.80 per fully diluted common share. FAS No. 109 requires a change from the
"deferred tax method", utilized by the Corporation prior to 1993, to a
comprehensive tax allocation using the "liability method" of accounting for
income taxes. Under the liability method, deferred income taxes are provided
for temporary differences based upon the expected tax rates in the years that
payment or receipt of such taxes is expected, and adjustment of the deferred
tax asset or liability is required to reflect subsequent changes in income tax
rates. The establishment of a valuation allowance is required for that
portion of a deferred tax asset for which a tax benefit is not expected to be
realized. As of June 30, 1994, the Corporation had approximately $62.5
million of FAS No. 109 valuation reserves which represent currently
unrecognized federal and state income tax benefits.
<PAGE>11
POSTRETIREMENT BENEFIT EXPENSES - In the first quarter of 1993, the Corporation
adopted FAS No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions" which requires that the projected future cost of providing
postretirement health care and other benefits be recognized on an accrual basis
during the periods employees provide services to earn those benefits. The
transition obligation, which is the unfunded and unrecognized accumulated
postretirement benefit obligation for all plan participants at the time of
adoption, is amortized by the Corporation (at its election) on a straight-line
basis over a period of 20 years, beginning in 1993 and is included as a
component of net periodic postretirement cost. The effect of the change in
accounting for postretirement benefits from a cash basis to an accrual basis
did not significantly impact the Corporation's earnings.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT - In May, 1993, the Financial
Accounting Standards Board ("FASB") issued FAS No. 114 "Accounting by
Creditors for Impairment of a Loan" which is effective for fiscal years
beginning after December 15, 1994. Under FAS No. 114 an impaired loan is
defined as a loan for which it is probable, based on current information, that
the lender will not collect all amounts due under the contractual terms of the
loan agreement. FAS No. 114 requires that impaired loans be measured based
upon either the present value of expected future cash flows discounted at the
loan's effective interest rate, the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. Midlantic has
not determined the effect of adoption and, at this time, does not plan to
elect early adoption.
<PAGE>12 1of2
MIDLANTIC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SUMMARY
Midlantic Corporation and Subsidiaries ("Midlantic" or the "Corporation")
reported net income of $72.3 million or $1.33 per fully diluted common share
for the three months ended June 30, 1994 compared with net income of $40.9
million, or $.78 per fully diluted common share for the corresponding period of
1993. For the six months ended June 30, 1994, net income amounted to $118.1
million or $2.17 per fully diluted common share compared with net income of
$64.4 million or $1.28 per fully diluted common share for the first six months
of 1993.
Income before taxes, credit provisions and certain nonrecurring gains or
charges ("core earnings") amounted to $78.3 million in the second quarter of
1994, nearly 15 percent over the level recorded in the second quarter of 1993.
For the first six months of 1994, core earnings were $144.2 million compared to
$110.5 million in 1993. The rise in core earnings primarily reflects
increasing net interest income due to a widening spread between the yield
earned on interest-earning assets and funding costs which more than offset a
decline in average loans. The following table summarizes Midlantic's results
of operations for the three months and six months ended June 30, 1994 and 1993:
<TABLE>
MAJOR COMPONENTS OF THE RESULTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(In thousands) 1994 1993 1994 1993
________ ________ ________ ________
<S> <C> <C> <C> <C>
INCOME BEFORE TAXES, CREDIT PROVISIONS
AND NONRECURRING ITEMS ("CORE EARNINGS")
Net interest income $144,203 $128,460 $281,500 $248,704
Noninterest income (1) 49,810 45,393 95,876 90,977
Noninterest expenses (1) 115,721 105,757 233,205 229,190
________ ________ ________ ________
CORE EARNINGS 78,292 68,096 144,171 110,491
________ ________ ________ ________
<PAGE>12 2of2
ADDITIONS
Investment securities (losses) gains (4,637) 9 (3,374) 4,860
Net gains on disposition of assets 25,056 -- 25,056 --
DEDUCTIONS
Provision for loan losses 5,604 15,624 13,625 36,164
Provision for OREO (2) 2,500 28,733 6,000 83,932
Expenses relating to the proposed consoli-
dation of operations of bank subsidiaries 6,100 -- 6,100 --
________ ________ ________ ________
Income (loss) before income taxes and cumulative
effect of changes in accounting principle 84,507 23,748 140,128 (4,745)
Income tax expense (benefit) 12,228 (17,168) 14,496 (30,194)
________ ________ ________ ________
Income before cumulative effect of
changes in accounting principle 72,279 40,916 125,632 25,449
Cumulative effect of changes in
accounting principle -- -- (7,528) 38,962
________ ________ ________ ________
NET INCOME $ 72,279 $ 40,916 $118,104 $ 64,411
======== ======== ======== ========
<FN>
(1) Noninterest income excludes investment securities gains or losses and net gains on asset
dispositions, while noninterest expenses excludes expenses relating to the proposed
consolidation of operations of bank subsidiaries.
(2) Results of operations for the six months ended June 30, 1993 include a $34 million
special provision for OREO that was identified for accelerated disposition.
</TABLE>
<PAGE>13
RECENT ACTIVITIES OF THE CORPORATION
On April 21, 1994, the Corporation filed an application with the Office of the
Comptroller of the Currency ("OCC") to merge Continental Bank ("CB") into
Midlantic National Bank ("MNB"). Upon completion of this proposed merger, the
combined bank will be named Midlantic Bank, National Association. Pending
regulatory approval, it is anticipated that this merger will be completed by
the end of the third quarter of 1994. In connection with this merger, MNB's
direct parent, Midlantic Banks Inc., will also be merged into Midlantic
Corporation. During the second quarter of 1994, Midlantic recorded an accrual
of $6.1 million for one-time expenses relating to the proposed consolidation of
operations of bank subsidiaries, which included the cost of communicating the
change in names and severance expenses resulting from the elimination of
duplicate operations.
Following Midlantic's significant improvements in financial condition and
performance, asset quality and capital ratios, in March 1994, the Federal
Reserve Bank of New York ("FRB") and the OCC terminated the written agreements
under which the Corporation and MNB operated. In addition, in April 1994, the
Corporation's Board of Directors (the "Corporation's Board") approved the first
cash dividend on Midlantic's common stock since the third quarter of 1990, of
$.10 per common share. A quarterly cash dividend of $.13 per common share was
declared in July 1994.
During 1993 and 1994, the Corporation initiated and completed two major bulk
sales programs of distressed real estate assets. The Corporation sold
commercial real estate loans and other real estate owned ("OREO") with a gross
book value of approximately $300 million in each of the bulk sales programs.
Prior to the sales, these assets were transferred to other assets as "assets
held for accelerated disposition" and carried at net realizable value. The
first bulk sales program was initiated and completed in 1993, while the second
bulk sales program, initiated in late 1993, was completed in the second quarter
of 1994. In the second quarter of 1994, the Corporation realized a net gain on
assets sold in bulk sales of $25.1 million. At June 30, 1994, $20.9 million of
assets designated for accelerated disposition remained outstanding. Such
assets are expected to be sold or settled on an individual basis by year-end
1994.
In the second quarter of last year, the Corporation bolstered its capital base
through the issuance, in a public offering, of 5.75 million shares of common
stock for net proceeds of $107.1 million.
<PAGE>14
RESULTS OF OPERATIONS
SECOND QUARTER 1994 VS SECOND QUARTER 1993
SIX MONTHS ENDED JUNE 30, 1994 VS SIX MONTHS ENDED JUNE 30, 1993
NET INTEREST INCOME
Net interest income ("NII") for the second quarter of 1994 exceeded that of the
second quarter of 1993 by $15.7 million or 12.3 percent. For the six months
ended June 30, 1994, NII increased $32.8 million or 13.2 percent over the
comparable period of 1993.
<TABLE>
NET INTEREST INCOME/NET INTEREST MARGIN
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(Dollars in thousands) 1994 1993 Variance 1994 1993 Variance
________ ________ _______ ________ ________ _______
<S> <C> <C> <C> <C> <C> <C>
Net interest income $144,203 $128,460 $15,743 $281,500 $248,704 $32,796
Net interest margin* 4.72% 4.16% .56% 4.58% 3.97% .61%
________ ________ _______ ________ ________ _______
<FN>
* Net interest income (not on a tax-equivalent basis) as a percent of those average
assets which generate contractual interest receivables.
</TABLE>
NII for the periods under analysis was primarily affected by declining funding
costs relative to asset yields. Lower levels of nonaccrual assets and higher
short-term market interest rates moderated the unfavorable effect on NII of a
decline in interest-earning assets.
Average interest-earning assets declined $124.5 million and $223.9 million for
the three months and six months ended June 30, 1994, respectively, when
compared with average interest-earning assets for the corresponding periods of
1993. This primarily reflected a decline in deposits which may be partially a
result of an industry-wide movement of depositors' funds to non-deposit
instruments. This decline in funding was accommodated by a contraction in
average loans and money market investments aggregating $551.6 million for the
quarter and $711.7 million for the year-to-date. Average loans decreased
$182.1 million and $308.8 million for the quarter and six months ended June 30,
1994, respectively, compared to the same periods of last year. Loans sold in
bulk sales or identified for accelerated disposition and charge offs were
primarily responsible for the decrease in loans for the quarter and year-to-
date periods of 1994 compared with the same periods of the prior year. On
average, consumer loans were $605.3 million or 34.8 percent higher than in the
first six months of 1993. However, commercial loans and real estate loans fell
by $277.0 million or 8.3 percent and $637.1 million or 17.8 percent,
respectively, when comparing average balances for the first six months of 1994
and 1993. Excluding real estate loans, the balance of which continues to
decline as older credits run off, loan originations during the first two
quarters of 1994 were stronger than in recent quarterly periods. Commercial
loans and consumer loans increased in the aggregate by $289.4 million or 5.3
percent from the balance at December 31, 1993.
<PAGE>15 1of2
<TABLE>
AVERAGE BALANCES
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(In millions) 1994 1993 Variance 1994 1993 Variance
_______ _______ _____ _______ _______ _____
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets $12,257 $12,382 $(125) $12,388 $12,612 $(224)
Interest-bearing sources of funds 9,501 10,019 (518) 9,638 10,246 (608)
Noninterest-bearing sources of funds* 2,756 2,363 393 2,750 2,366 384
_______ _______ _____ _______ _______ _____
<FN>
* Primarily comprised of noninterest-bearing demand deposits.
</TABLE>
The net interest margin increased 56 basis points and 61 basis points in the
second quarter and first six months of 1994, respectively, as compared to the
same periods of 1993, primarily reflecting the favorable impact of the recent
rise in short-term interest rates on interest-earning assets and growth in
consumer receivables as well as lower funding costs and lower levels of
nonaccrual loans.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $5.6 million and $13.6 million for the second
quarter and first six months of 1994, respectively, compared with $15.6
million and $36.2 million for the corresponding periods of 1993. Based upon
Midlantic's methodology for establishing an allowance for loan losses as
discussed under the "Asset Quality" and "Allowance for Loan Losses" sections
of this report, Midlantic believes that its allowance for loan losses, after
giving effect to 1994 loan loss provisions, was adequate at June 30, 1994 to
absorb estimated losses in its credit portfolios.
NONINTEREST INCOME
<TABLE>
NONINTEREST INCOME
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(In thousands) 1994 1993 Variance 1994 1993 Variance
_______ _______ _______ ________ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Trust income $10,860 $10,331 $ 529 $ 20,642 $20,564 $ 78
Service charges on
deposit accounts 19,020 20,063 (1,043) 37,966 38,341 (375)
Investment securities
(losses) gains (4,637) 9 (4,646) (3,374) 4,860 (8,234)
Income earned on factoring
receivables 1,971 1,888 83 3,688 3,504 184
Net gains on disposition of
assets 25,056 -- 25,056 25,056 -- 25,056
Miscellaneous 17,959 13,111 4,848 33,580 28,568 5,012
_______ _______ _______ ________ _______ _______
TOTAL NONINTEREST INCOME $70,229 $45,402 $24,827 $117,558 $95,837 $21,721
======= ======= ======= ======== ======= =======
</TABLE>
<PAGE>15 2of2
Trust fees for both the three month and six month periods ended June 30, 1994
benefitted from a higher level of investment advisory fees (reflecting both
revised fee schedules and an expansion in business activity) from the "Compass
Capital Group", Midlantic's proprietary mutual fund group, and fees generated
from "Enhanced Asset Management", a financial tool that matches asset
allocation to the trust or investment client's risk and return objectives. The
favorable impact of such fees was partially offset by the termination of a
small number of employee benefit accounts.
<PAGE>16 1of2
Service charge income decreased by $1.0 million or 5.2 percent for the second
quarter of 1994 and was substantially level for the first six months of 1994.
The decline for the quarter reflects a nominally lower level of business
activity, particularly in commercial services.
Net investment securities losses amounted to $4.6 million for the quarter ended
June 30, 1994. For the six months ended June 30, 1994, net investment
securities losses were $3.4 million compared with net investment securities
gains of $4.9 million for the corresponding period of 1993. Net losses in 1994
were realized primarily from the sale of nearly $900 million of U.S. Treasury
securities, the proceeds of which were then available for reinvestment at
higher yields. Gains in 1993 were realized from the sale of $562 million of
U.S. Treasury securities in the first quarter that had been previously
identified for sale.
During the second quarter of 1994, the Corporation recorded $25.1 million of
net gains on the sale of loans and OREO that had previously been identified for
accelerated disposition (see "Recent Activities of the Corporation"). The $4.8
million and $5.0 million rise in miscellaneous noninterest income for the
quarter and year-to-date periods of 1994, respectively, primarily reflected
revenues received from assets held for accelerated disposition prior to their
sale as well as higher levels of automated teller fees.
NONINTEREST EXPENSES
<TABLE>
NONINTEREST EXPENSES
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
(In thousands) 1994 1993 Variance 1994 1993 Variance
________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 57,901 $ 52,060 $ 5,841 $114,115 $106,382 $ 7,733
Net occupancy 10,820 10,897 (77) 23,055 22,196 859
Equipment rental and expense 5,990 6,805 (815) 12,915 14,732 (1,817)
Other real estate owned, net 1,800 23,184 (21,384) 5,969 79,793 (73,824)
FDIC assessment charges 7,187 8,380 (1,193) 14,381 17,604 (3,223)
Legal and professional fees 11,260 12,904 (1,644) 21,135 24,317 (3,182)
Expenses relating to the proposed consolidation
of operations of bank subsidiaries 6,100 -- 6,100 6,100 -- 6,100
Miscellaneous 23,263 20,260 3,003 47,635 48,098 (463)
________ ________ ________ ________ ________ ________
TOTAL NONINTEREST EXPENSES $124,321 $134,490 $(10,169) $245,305 $313,122 $(67,817)
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>16 2of2
Salaries and benefits expense increased $5.8 million or 11.2 percent for the
second quarter of 1994 and increased $7.7 million or 7.3 percent for the first
six months of 1994. The increase in salaries and benefits expense primarily
reflected performance-based salary increases granted employees, accruals for
bonus and profit sharing plans plus expenses associated with Financial
Accounting Standard ("FAS") No. 112, "Employers' Accounting for Postemployment
Benefits" (including liability for disability payments) which was adopted
January 1, 1994. Certain profit sharing and incentive plans were not in
effect during the first half of 1993.
For the six months ended June 30, 1994, net occupancy costs were $859 thousand
or 3.9 percent higher than for the corresponding period of 1993 due largely to
heavier than normal snow and ice removal costs. The $815 thousand and $1.8
million decline in equipment rental and expense for the three months and six
<PAGE>17
months ended June 30, 1994, respectively, reflected the renegotiation of
equipment rental contracts and a decline in depreciation.
Expenses associated with OREO decreased $21.4 million for the second quarter of
1994 compared to the corresponding period of 1993. On a year-to-date basis,
OREO expenses in 1994 declined $73.8 million compared to the same period in
1993. Included in the second quarter and year-to-date 1994 expenses were
charges of $2.5 million and $6.0 million, respectively, which adjusted the
carrying value of certain OREO properties to approximate net realizable value.
This compares with adjustments to carrying value of $28.7 million and $49.9
million for the corresponding periods of 1993, respectively. The decline in
such adjustments in 1994 is primarily due to lower levels of OREO assets and to
an apparent price stabilization on many OREO properties as reflected by
appraisals received during these periods. In the first quarter of 1993, $34.0
million was also specially provided against those OREO properties transferred
to "assets held for accelerated disposition" and subsequently sold later in the
year. That special provision represented the adjustment to carrying values
necessary in the Corporation's judgment to reflect the net realizable value of
those assets when liquidated in an accelerated manner in bulk sales
transactions. OREO expenses in both 1994 and 1993 also included operating
costs, net of rental income, for OREO properties and net gains or losses on
OREO sold in the normal course of business.
The Federal Deposit Insurance Corporation ("FDIC") assessment decreased by $1.2
million or 14.2 percent for the three months ended June 30, 1994 and decreased
by $3.2 million or 18.3 percent for the first six months of 1994 largely as a
result of a decline in the premium paid by Midlantic's bank subsidiaries. The
level of expenses in the first half of 1993 had increased following imposition
of a new risk-based assessment system which was adopted by the FDIC as of
January 1, 1993. The assessment fees on Midlantic's bank subsidiaries were
reduced later in 1993 and again as of January 1, 1994.
The decline in legal and professional fees of $1.6 million or 12.7 percent for
the second quarter of 1994 and $3.2 million or 13.1 percent for year-to-date
1994, was primarily due to a reduction in loan workout expenses which is a
reflection of the Corporation's lower level of problem assets.
Miscellaneous noninterest expenses increased $3.0 million in the second quarter
of 1994 but declined by $463 thousand for the first six months compared to the
same periods of the prior year. The second quarter increase is primarily due
to the timing of certain expense accruals as reflected in the year-to-date
decline in miscellaneous expenses. The overall decrease through June 30, 1994
compared to the similar period of 1993 is attributable to lower administrative
costs associated with certain nonaccrual loans as well as continued emphasis on
cost controls on several categories of expenditures.
INCOME TAXES
Adoption of FAS No. 109
In the first quarter of 1993, Midlantic adopted FAS No. 109 "Accounting for
Income Taxes" which requires a shift from the "deferred tax method," formerly
utilized by the Corporation, to the "liability method" of accounting for
income taxes and the establishment, when required, of a valuation allowance
for deferred tax assets. Midlantic adopted FAS No. 109 by recognizing the
effect of adoption as a cumulative change in accounting principle. The
adoption of FAS No. 109 provided the Corporation with an income credit,
realized in the first quarter of 1993, of $39.0 million or $.80
<PAGE>18
per fully diluted common share (on a year-to-date basis). As of June 30,
1994, the Corporation had approximately $62 million of FAS No. 109 valuation
reserves, which represent currently unrecognized federal and state income tax
benefits.
General
Midlantic recorded income tax expenses of $12.2 million and 14.5 million in the
second quarter and first half of 1994, respectively, and tax benefits of $17.2
million and $30.2 million for the corresponding periods of 1993. Tax expenses
recorded in the second quarter and first six months of 1994 were comprised of
tax benefits of $21.2 million and $41.4 million, respectively, related to a
reduction in the FAS No. 109 tax valuation reserve and $33.4 million and $55.9
million, respectively, of federal and state income tax expenses on operating
earnings. In 1993, the tax benefits recorded for the second quarter and first
six months amounted to $26.1 million all of which was recognized in the second
quarter. In addition, for the second quarter of 1993, such benefits were
reduced by an $8.9 million tax expense on operating earnings, while for the
year-to-date period, a credit of $4.1 million on operating losses was recorded.
The tax valuation reserve adjustments are the result of Midlantic's assessment
of the future realization of its deferred tax asset based upon estimated
future profitability.
POSTEMPLOYMENT BENEFIT EXPENSES
In the first quarter of 1994, Midlantic adopted FAS No. 112 "Employers'
Accounting for Postemployment Benefits" as a cumulative effect of a change in
accounting principle amounting to a charge of $7.5 million, net of income
taxes, or $.14 per fully diluted common share (on a year-to date basis). FAS
No. 112 requires accrual accounting for certain postemployment benefits
(benefits such as disability and health benefits to former or inactive
employees after employment but before retirement) under the following
circumstances: if the employees' rights to those benefits are attributable to
services already rendered, the rights to those benefits accumulate or vest, and
if payment of the benefits is probable and the amount of the benefits can be
reasonably estimated. If the four criteria mentioned cannot be met, the
employer should accrue an obligation for these benefits when payment is both
probable and estimable. Midlantic previously accounted for postemployment
benefits on a pay-as-you-go basis.
POSTRETIREMENT BENEFIT EXPENSES
In the first quarter of 1993, the Corporation adopted FAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" which requires that
the projected future cost of providing postretirement health care and other
benefits be recognized on an accrual basis during the periods employees provide
services to earn those benefits. The transition obligation, which is the
unfunded and unrecognized accumulated postretirement benefit obligation for all
plan participants at the time of adoption, is amortized by the Corporation (at
its election) on a straight-line basis over a period of 20 years, beginning in
1993 and is included as a component of net periodic postretirement cost. The
effect of the change in accounting for postretirement benefits from a cash
basis to an accrual basis did not significantly impact the Corporation's
earnings.
<PAGE>19 1of2
FINANCIAL CONDITION
JUNE 30, 1994 VS. DECEMBER 31, 1993
ASSET QUALITY
Midlantic has made significant progress in improving asset quality in recent
periods as nonaccrual assets (nonaccrual loans and OREO, which do not include
assets held for accelerated disposition) were reduced from the peak levels
experienced in 1991, amounting to over 12 percent of loans and OREO outstanding
at that time, to less than 4 percent as of June 30, 1994. Further improvement
is expected but, with a much smaller balance of nonaccrual assets, management
expects that the rate of improvement will likely be somewhat less rapid than in
the preceding two years. As of June 30, 1994, nonaccrual loans and OREO
totalled $333.3 million or 3.9 percent of loans and OREO outstanding compared
to $398.0 million or 4.7 percent at the end of 1993.
Changes in nonaccrual loan totals are summarized in Table XVI. At June 30,
1994, nonaccrual loans were primarily comprised of commercial, financial and
foreign loans (51.1 percent of the total), long-term commercial mortgages (21.4
percent of the total) and construction and development loans (16.2 percent of
the total). The relationship of each of these categories of nonaccrual loans
to its respective loan portfolio was 3.6 percent commercial, financial and
foreign; 3.0 percent long-term commercial mortgage; and 5.3 percent
construction and development.
Construction and development loans and long-term commercial mortgage loans
("commercial real estate loans") that were nonaccrual at quarter-end 1994
collectively amounted to $84.6 million, of which 26.9 percent comprised
industrial/warehouse, 18.6 percent land, 16.1 percent residential properties
and 8.3 percent office buildings. Total commercial real estate loans declined
significantly during the past twelve months as indicated in the following
table:
<TABLE>
COMMERCIAL REAL ESTATE LOANS
<CAPTION>
JUNE 30 Dec. 31 June 30
FOR THE QUARTER ENDED (In millions) 1994 1993 1993
______ ______ ______
<S> <C> <C> <C>
Long-term commercial mortgage loans $1,590 $1,665 $1,849
Construction and development loans 692 834 1,064
______ ______ ______
Total commercial real
estate loans $2,282 $2,499 $2,913
====== ====== ======
</TABLE>
The decline in total commercial real estate loans was primarily due to
principal paydowns, loans sold in bulk sales, the transfer of loans to OREO and
loan charge-offs.
<PAGE>19 2of2
Future levels of nonaccrual loans will continue to be dependent upon the
economy. Continued improvements in economic conditions would tend to result in
reductions in nonaccrual loans while a deterioration in economic conditions
would tend to have the opposite effect.
It is not possible to precisely predict the extent of losses which may
ultimately be incurred from Midlantic's remaining nonaccrual loans at the end
of the second quarter of 1994. Many of these loans are partially or fully
secured and since the total is much lower than the comparable totals of a year
ago, the relative aggregate risk of loss to the Corporation has been reduced.
<PAGE>20
Midlantic has restructured certain loans in accordance with the requirements of
FAS No. 15 "Accounting by Debtors and Creditors for Troubled Debt
Restructurings" in instances where a determination was made that greater
economic value would be realized under new terms than through foreclosure,
liquidation or other disposition. Prior to demonstrating performance,
restructured loans are classified as nonaccrual. When restructured loans can
demonstrate performance (as generally evidenced by six months of pre- or post-
restructuring payment performance in accordance with the restructured terms, or
by the presence of other significant factors) such loans are classified by the
Corporation as "renegotiated loans" and accrual of interest resumes.
Renegotiated loans that have demonstrated performance and have an effective
yield greater than or equal to a market interest rate at the date of closing
may be classified as accruing loans in the reporting period following the year
they were disclosed as renegotiated and were so reported in the annual
financial statements for that year. Renegotiated loans declined to $108.1
million at June 30, 1994 compared with $172.1 million at year-end 1993 (see
Table XIV) reflecting the bulk sale of $33.9 million and the classification of
$29.8 million as accruing loans (pursuant to the requirements for
classification as accruing loans referred to in the preceding sentence). The
average current yield recognized as interest on accruing renegotiated loans is
8.68 percent. The effective interest rate as calculated under FAS No. 15 on
these renegotiated loans is 9.52 percent. In those cases in which average
current yield differs from the effective yield, Midlantic's management has
elected to recognize income prospectively on the more conservative average
current yield basis until certain contingencies are met.
OREO (in-substance foreclosures and acquired OREO properties) amounted to
$108.3 million at June 30, 1994, compared with the December 31, 1993 level of
$132.7 million. At June 30, 1994, acquired OREO properties amounted to $86.6
million and in-substance foreclosures were $21.7 million compared with levels
of $97.2 million and $35.5 million, respectively, at December 31, 1993. The
decline in total OREO since December 31, 1993 primarily reflected payments and
sales (in the normal course of business) on OREO properties of $29.1 million,
writedowns of $6.0 million and additions to OREO totalling $11.4 million (see
Table XIX).
Accruing loans past due ninety days or more as to interest or principal
payments amounted to $40.0 million and $36.2 million at June 30, 1994 and
December 31, 1993, respectively.
As of the end of the second quarter of 1994, Midlantic had identified an
additional $34.2 million of currently performing loans outstanding for which
there is serious doubt as to whether the borrowers will be able to fully comply
with the present repayment terms of the loans.
Midlantic originated or participated in highly leveraged transactions ("HLTs"),
which represent loans for the buyout, acquisition or recapitalization of an
existing business resulting in a significant increase in the leverage of the
borrower. Based upon the bank regulators' February 1992 revised supervisory
definition, 18 HLTs in the amount of $176.0 million were outstanding at June
30, 1994 and Midlantic is committed to lend an additional $95.8 million
primarily to these HLT borrowers. At December 31, 1993, Midlantic had 22
reportable HLT outstandings amounting to $198.9 million and unfunded
commitments to HLT borrowers of $107.6 million. Midlantic's entire HLT
exposure is comprised of senior debt. HLTs comprised 2.1 percent of total
loans at June 30, 1994 and their contribution to total revenue was modest.
<PAGE>21
The Corporation's foreign outstandings (principally money market assets) at
June 30, 1994, all of which were dollar denominated, amounted to $537.5 million
or 4.0 percent of total consolidated assets as compared with $637.9 million or
4.6 percent at year-end, 1993. The majority of foreign outstandings are short-
term money market investments with domestic subsidiaries of foreign banks. At
June 30, 1994, outstandings to individual countries exceeding .75 percent of
total assets, were France and Japan (amounting to 1.20 percent and .75 percent,
respectively, of total assets). At December 31, 1993, outstandings to France,
Japan and Switzerland amounted to 1.1 percent, .9 percent and .9 percent of
total assets, respectively. Substantially all of these outstandings were with
banks.
ALLOWANCE FOR LOAN LOSSES
Midlantic considers various factors in determining the appropriate level of the
allowance for loan losses, including an assessment of the financial condition
of individual borrowers, a determination of the value and adequacy of
underlying collateral (based on appraisals, where appropriate or required), the
composition and balance of the credit portfolio, a review of historical loss
experience and an analysis of the levels and trends of delinquencies, charge-
offs and the risk ratings of the various loan categories and criticized loans.
Such factors as the condition of the national and regional economies and the
level and trend of interest rates are also considered. Additions to the
allowance are made through provisions charged against current operations and
through any recoveries on loans previously charged off. Midlantic's allowance
for loan losses amounted to 4.45 percent and 4.76 percent of total loans, net
of unearned income, at June 30, 1994 and December 31, 1993, respectively. At
June 30, 1994, the ratio of the allowance for loan losses to nonaccrual loans
amounted to 166 percent as compared with 151 percent at December 31, 1993.
As part of its process for assessing asset quality and the allowance for loan
losses, Midlantic refers to third party sources for data concerning economic
trends. This information indicates that the economies of Midlantic's primary
real estate lending markets have been adversely affected by overall corporate
downsizing, increasing unemployment, declining real estate values, diminishing
consumer confidence levels and relatively high debt levels. While certain
markets began to show signs of improvement or stabilization since late 1992,
this followed two years (1990 and 1991) of significant deterioration in the
value and marketability of all real estate types.
In connection with the bulk sale of distressed real estate loans, during 1993,
the Corporation charged-off a net $181.9 million of loans. During the first
six months of 1994, a net $7.9 million was charged-off on loans that had been
designated during this period as held for accelerated disposition.
Midlantic's net charge-offs of $32.7 million for the first six months of 1994
compares to $89.1 million for the corresponding period of 1993 (which
does not include the above-mentioned charge-offs on loans sold in bulk sales
transactions). Net charge-offs as a percent of average loans, on an annualized
basis, amounted to .79 percent, as compared with 2.08 percent for the first six
months of 1993 and 1.96 percent for the year ended December 31, 1993. Net
charge-offs in 1994 principally reflected net losses incurred on commercial and
financial loans ($18.9 million), loans to individuals ($6.8 million) and
commercial real estate loans ($6.3 million).
<PAGE>22
As part of its process to assess credit quality, Midlantic utilizes a risk
rating system to analyze its loans. The risk rating system monitors the risk
trends in Midlantic's loan portfolio and assists in establishing an adequate
allowance for loan losses. The rating system assigns a separate numerical
rating to each credit based upon an assessment of the inherent degree of risk.
Regular audits and reviews by employees independent of the line lending
function test the risk ratings, the integrity of the loan management
information system and the adherence to credit policies and procedures.
Reviews are also conducted to test portfolio, industry and borrower risk
trends.
Midlantic considers its allowance for loan losses as of June 30, 1994 to be
adequate based upon the size and risk characteristics of the credit portfolio
outstanding at that date, including the uncertainties that prevail in the
economy, most notably in the real estate market. If economic conditions were
to deteriorate significantly, future provisions for loan losses could increase
above the level taken in the first half of 1994 in order to maintain an
adequate allowance for loan losses. Conversely, if economic conditions for the
Corporation's borrowers improve, future provisions may be lower. Future
provisioning levels may also be lower in the absence of further improvements in
economic conditions if loan quality continues to improve and loan loss
recoveries continue at higher than expected levels.
INVESTMENT SECURITIES
In the first quarter of 1994, Midlantic adopted FAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". FAS No. 115 established
the accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securities.
Under the provisions of FAS No. 115, those investments have been classified
into three categories: (1) securities which the Corporation has both the
positive intent and ability to hold until maturity ("held to maturity
securities") are reported at amortized/accreted cost; (2) securities which are
purchased and held principally for the purpose of selling in the near-term
("trading securities") are reported at fair value with unrealized gains and
losses included in earnings, (which is consistent with Midlantic's prior
accounting policy for such securities); and (3) available for sale securities
("AFS securities"), which do not meet the criteria of the other two categories,
are reported at fair value with unrealized gains or losses, net of applicable
income taxes, reported as "net unrealized holding gains (losses) on available
for sale securities, net of taxes," a separate category of shareholders'
equity.
At June 30, 1994, investment securities totalled $1.9 billion down $519.2
million or 21.1 percent from the $2.5 billion recorded at December 31, 1993.
The investment securities portfolio at June 30, 1994 included $1.5 billion of
held to maturity securities, $388.6 million of AFS securities and $18.9 million
of trading securities. On June 30, 1994, Midlantic recorded as a component of
shareholders' equity, an unrealized holding loss on AFS securities of $1.8
million, compared to a $1.9 million gain recorded at the beginning of the year,
when FAS No. 115 was adopted. Increasing interest rates, particularly on U.S.
government securities, resulted in the unrealized holding loss.
Net unrealized depreciation on Midlantic's held to maturity securities
portfolio amounted to $55.3 million at June 30, 1994, comprised of gross
unrealized losses of $58.0 million and gross unrealized gains of $2.7 million
(see Table VI). At December 31, 1993, the Corporation had net unrealized
<PAGE>23
appreciation of $12.4 million on its total investment securities portfolio,
comprised of gross unrealized gains of $13.9 million and gross unrealized
losses of $1.5 million.
At June 30, 1994, the AFS securities portfolio consisted of $329.6 million of
U.S. Treasury obligations with a remaining average maturity of approximately
one year and debt, equity and state and municipal securities totalling $59.0
million. The held to maturity securities portfolio is comprised of $942.7
million of federal agency mortgage-backed securities (with a weighted average
maturity of less than five years) and $576.5 million of U.S. Treasury
securities with a remaining average maturity of approximately 1.5 years. The
average maturity of the investment portfolio outstanding on December 31, 1993
amounted to approximately 3 years.
MONEY MARKET INVESTMENTS
The Corporation presently invests a sizable portion of its available funds in
short-term money market investments, including federal funds sold, term federal
funds sold, interest-bearing deposits in other banks, repurchase agreements and
commercial paper. At June 30, 1994, money market investments totalled $1.9
billion or 15.2 percent of total interest-earning assets compared with $1.8
billion or 14.1 percent of interest-earning assets at year-end 1993. Midlantic
anticipates that over time a portion of these liquid assets will be utilized to
fund loan demand and other longer-term investments.
INTEREST SENSITIVITY MANAGEMENT
Interest rate risk refers to the periodic and cumulative exposure from changes
in interest rates on earnings and capital. While Midlantic, like any financial
intermediary, will typically incur some amount of interest rate risk in the
normal course of providing services to its borrowing customers and depositors,
the Corporation's policy is to protect its earnings and capital from undue
exposure to volatile interest rates. Midlantic's Asset-Liability Committee
("ALCO") assesses the degree of this risk by simulating the Corporation's
earnings under alternative balance sheet structures and under a variety of
interest rate scenarios, with the actual amount of such risk typically
maintained at a manageable percentage of net interest income and capital.
Earnings exposure to interest rates arises from a variety of factors, a primary
source being any mismatches in the maturity and repricing distribution of the
Corporation's assets and liabilities, including hedging positions created by
interest rate swaps (subsequently discussed in this section). For example, at
any point in time, if more of the Corporation's outstanding assets are
scheduled to mature or to reprice earlier than its liabilities, the
Corporation's earnings may be vulnerable to a decline in the general level of
interest rates because in this circumstance the Corporation's asset yields
would decline sooner than its funding costs. Conversely, if more of the
Corporation's liabilities reprice or mature earlier than its assets, earnings
may be exposed to an increase in the general level of interest rates since
funding costs would tend to rise before asset yields. This type of risk is
approximately illustrated in the "static gap" model which expresses the assets
and liabilities and interest rate swaps due to mature, to be repriced, or
assumed to be repriced in various time intervals. Within one year of June 30,
1994, Midlantic had less than $300 million more liabilities maturing or
repricing than assets. This June 30, 1994 gap indicated a possible decline in
NII if interest rates increase immediately. The calculated amount of
prospective NII at risk to interest rate changes within one year is estimated
to be minimal (assuming interest rate volatility is similar to that
<PAGE>24
experienced during the past several years) and in line with the Corporation's
policy parameters in this regard. Midlantic manages its interest sensitivity
position with an objective of avoiding material mismatching of the amounts of
assets and liabilities subject to rate changes within each significant time
interval.
In order to maintain earnings and capital exposure to interest rate changes
within prudent bounds, Midlantic utilizes interest rate swaps to hedge existing
balance sheet items that have a high degree of inverse rate correlation to the
swap. Most of the interest rate swaps outstanding as of June 30, 1994 entitled
Midlantic to receive or pay a fixed rate of interest to the final maturity of
each swap in exchange for a variable rate of interest, which is reset quarterly
and generally tied to the three month LIBOR (an internationally recognized
interest rate index).
<TABLE>
INTEREST RATE SWAPS
JUNE 30, 1994
<CAPTION>
Notional Fixed Variable Net Exchange
(In millions) Amounts Rate Rate Rate
______ ____ ____ ____
<S> <C> <C> <C> <C>
Receive a fixed
rate of interest $3,303 5.40% 4.34% 1.06%
Pay a fixed rate $ 599 4.68% 4.42% .26%
of interest
Receive and pay a
variable rate of
interest $ 300 N/A 4.33% (receive) }
4.71% (pay) }(.38)%
====== ==== ==== ====
</TABLE>
The notional amounts listed in the above table represent the base on which
interest due each counterparty is calculated. The notional amounts do not
represent amounts actually exchanged by the counterparties and are therefore
not recorded on the balance sheet. At June 30, 1994, Midlantic did not have
any interest swaps tied other than to a fixed rate, LIBOR or prime rate, nor
did the Corporation maintain or utilize, at that time, any exchange traded
futures contracts, options or other exchange traded off-balance sheet
derivative financial instruments. At that date, Midlantic did not engage in
any swap transactions as an intermediary, although the Corporation may decide
to do so in the future if customer demand warrants.
At June 30, 1994, the Corporation used interest rate swaps for which it
received interest at a fixed rate to hedge certain loans and fixed cost
deposits and other funding. For those swaps on which Midlantic has agreed to
pay a fixed rate, the hedged items are generally investment securities bearing
fixed rates of interest with stated maturities of five to seven years.
During the first half of 1994, the Corporation entered into $300.0 million
(notional amount) of swap contracts in which it pays an interest rate tied to
the prime rate and receives LIBOR. The purpose of these contracts is to hedge
against the risk that funding costs might rise faster than the prime rate. As
of June 30, 1994, there were no terminated swap contracts and accordingly, no
deferred gains or losses.
<PAGE>25 1of2
<TABLE>
INTEREST RATE SWAP CONTRACTS-ACTIVITY DURING 1994
<CAPTION>
(In millions)
______
<S> <C>
Notional amount of interest rate
swaps at December 31, 1993 $4,268
New swaps 300
Matured swaps (66)
Swaps sold (300)
______
Notional amount of interest rate
swaps at June 30, 1994 $4,202
======
</TABLE>
Credit risk associated with interest rate swap contracts arises from the
potential for a counterparty to default on its obligations. Midlantic attempts
to limit credit risk by transacting only with the most creditworthy
counterparties. All counterparties to contracts in place as of June 30, 1994
were associated with organizations having securities rated as investment grade
by independent rating agencies.
As of June 30, 1994, the estimated credit exposure associated with interest
rate swap contracts was approximately $38 million representing those swaps that
show a positive (favorable) mark-to-market position (see table below). The
following table summarizes the maturities of the notional amounts of all swap
contracts in place as of June 30, 1994. Net interest income recorded by the
Corporation in the first six months of 1994 for all interest rate swap
contracts amounted to $24.8 million. Management believes that the swap
contracts it has in place as of June 30, 1994 have been effective tools in the
control of interest rate risk.
<PAGE>25 2of2
<TABLE>
MATURITY OF DISTRIBUTION OF SWAP CONTRACTS IN PLACE AS OF
JUNE 30, 1994
<CAPTION>
Notional Amounts
________________________________
Receive Pay Receive and
(In millions) Fixed Fixed Pay Variable
______ _____ ____
<S> <C> <C> <C>
1994 - Third quarter $ 50 $ -- $ --
- Fourth quarter 703 -- --
1995 - First quarter 400 -- --
- Second quarter -- -- --
- Third quarter -- -- --
- Fourth quarter 1,000 -- --
1996 900 -- 300
1997 250 599 --
______ _____ ____
Total interest rate swaps $3,303 $ 599 $300
====== ===== ====
FAIR VALUE OF INTEREST RATE SWAPS
Contracts with a positive
mark-to-market position $ 6 $ 32 $ --
Contracts with a negative
mark-to-market position (21) -- (4)
______ _____ ____
Net fair value of interest rate swaps $ (15) $ 32 $ (4)
====== ===== ====
</TABLE>
<PAGE>26
LIQUIDITY
General
Liquidity represents the Corporation's ability to efficiently fulfill its
funding obligations at reasonable cost. Through its ALCO, Midlantic addresses
the liquidity requirements of its holding companies and its major bank and
nonbank subsidiaries on both a short-term and long-term basis using a variety
of operating scenarios that take into account the effect of both quantitative
and qualitative influences. These influences include national and regional
economic conditions, the interest rate environment, loan quality, unfunded
commitments, projections of deposit and loan growth and key ratio analyses. On
a longer-term basis, liquidity is projected using investment and funding
alternatives that take into consideration the Corporation's strategic
objectives.
Major sources of liquidity include short-term money market assets, maturing
investments in U.S. government and other investment securities and proceeds
from loan maturities or paydowns, as well as core deposits and the ability to
access large liability funding sources (primarily large CD's, federal funds
purchased and repurchase agreements). Such sources of liquidity may be used to
fund loan originations, depositor withdrawals and other demands on the
Corporation's liquid resources.
To fund future loan growth, Midlantic expects to first utilize a major portion
of its money market investments and proceeds from scheduled loan payments.
Liquidity may also be generated by the possible sale or securitization of
existing assets as well as through increases in core deposits to the extent
available.
<TABLE>
LIQUIDITY RATIOS
<CAPTION>
JUNE 30 December 31 June 30
1994 1993 1993
_____ _____ _____
<S> <C> <C> <C>
Liquidity ratio (1) 29.5% 31.6% 31.0%
Funding ratio (2) (11.6) (14.3) (24.4)
Total loans, net of unearned
income, as a % of total deposits 75.4 72.6 72.7
Core deposits as a % of total
loans, net of unearned income 127.8 132.6 130.7
Unfunded loan commitments as a
% of loans outstanding 35.3 32.0 28.6
===== ===== =====
<FN>
(1) Ratio of net short-term assets to net funding liabilities.
(2) Total purchased funds and money market investments less investment
securities due in one year as a percent of investment securities due in more
than one year and total loans, net of unearned income.
</TABLE>
At June 30, 1994, Midlantic had unfunded loan commitments outstanding of $3.0
billion as compared with $2.7 billion at December 31, 1993. Takedowns on
commitments have been occurring during the normal course of business at levels
that have not adversely affected the Corporation's liquidity.
<PAGE>27
Parent Companies
Midlantic Corporation ("MC") and its lower-tier holding company, Midlantic
Banks Inc. ("parent companies") require sources of funds to meet contractual
obligations, including servicing long-term debt, and cash dividend payments on
the Corporation's preferred and common stock.
The parent companies' liquidity (cash on hand, money market investments and
available for sale securities), which is managed in conjunction with the short-
term resources of the Corporation's nonbank subsidiaries, was in excess of $225
million at both June 30, 1994 and December 31, 1993. The parent companies'
liquidity position was enhanced in the second quarter of 1993 by proceeds of
$107.1 million from the issuance of common stock (see "Recent Activities of the
Corporation"). In the first quarter of 1994, the Corporation redeemed at par
value ($11.8 million), the remaining outstanding 7 3/4% Debentures. Ongoing
parent company operating and interest expenses and dividends are expected to
be fully funded from dividend payments and management fees from MNB and CB.
As a result of MNB's financial progress over the past several quarterly
periods, on April 13, 1994, the MNB Board of Directors ("MNB's Board") approved
a cash dividend from MNB to its parent (the last dividend paid by MNB was in
the first quarter of 1990). A cash dividend from MNB was also approved by
MNB's Board on July 20, 1994. Under certain circumstances, CB requires advance
approval from the FDIC and the Pennsylvania Department of Banking to pay
dividends. CB has remitted uninterrupted dividends to MC on a quarterly basis
since the third quarter of 1992.
CAPITAL ADEQUACY
Midlantic places a high priority on maintaining levels of capital that exceed
minimum bank regulatory guidelines and position the organization to compete
effectively in its market areas.
In recent years, in addition to the retention of earnings, Midlantic has
increased its capital position through a variety of actions, including common
stock offerings in August 1992 and May 1993. As a result, the Corporation's
capital ratios, as well as the capital ratios of MNB and CB, have significantly
improved. Federal bank regulators utilize risk-based and leverage ratios to
assess capital adequacy. As of June 30, 1994, Midlantic reported a tier 1
risk-based capital ratio of 10.85 percent, a total risk-based capital ratio
(tier 1 plus tier 2 capital) of 14.87 percent and a leverage ratio of 8.17
percent. These ratios compare with minimum regulatory guidelines of 4.00
percent for tier 1, 8.00 percent for total capital and 3.00 percent for
leverage.
As of June 30, 1994, MNB had a tier 1 risk-based capital ratio of 12.79 percent
and a total risk-based capital ratio of 14.08 percent. MNB's leverage ratio as
of June 30, 1994 was 9.28 percent. At June 30, 1994, CB exceeded all
regulatory capital requirements with a tier 1 risk-based capital ratio of 10.37
percent, a total risk-based capital ratio of 11.63 percent and a leverage ratio
of 8.55 percent.
<PAGE>28
<TABLE>
CAPITAL RATIOS*
<CAPTION>
FOR THE THREE MONTHS JUNE 30 March 31 Dec. 31 Sept. 30 June 30
ENDED 1994 1994 1993 1993 1993
_____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C>
Tier 1 risk-based
Midlantic 10.85% 9.95% 9.28% 9.04% 8.45%
MNB 12.79 11.97 11.03 10.71 9.96
CB 10.37 9.99 9.88 9.75 9.62
Total risk-based
Midlantic 14.87% 13.98% 13.29% 13.13% 12.52%
MNB 14.08 13.26 12.32 12.03 11.28
CB 11.63 11.26 11.15 11.03 10.90
Leverage
Midlantic 8.17% 7.35% 6.81% 6.86% 6.32%
MNB 9.28 8.52 7.89 7.91 7.23
CB 8.55 8.12 7.79 8.11 7.97
_____ _____ _____ _____ _____
<FN>
* Capital ratios take into account regulatory changes that became effective during
1993 including (i) a limitation in the amount of deferred tax assets includable in
tier 1 capital and (ii) a revision to the capital guidelines which specifies those
intangibles that are includable in tier 1 capital.
</TABLE>
On March 23, 1994, the Corporation's Board declared the payment in cash of the
second quarter dividend on the Term Adjustable Rate Cumulative Preferred Stock
- - Series A (the "Preferred Stock"). The third quarter dividend on the
Preferred Stock, also to be paid in cash, was declared by the Corporation's
Board in June, 1994. Based upon a July 22, 1992 agreement between Midlantic
and the holder of the Preferred Stock, dividends on the Preferred Stock for the
second half of 1991 (as well as payments in arrears) and all of 1992 and 1993
were paid through the issuance of shares of Midlantic's common stock in lieu of
a cash payment. Pursuant to that agreement, Midlantic may at its discretion
pay dividends in cash or shares of common stock or any combination thereof, so
long as any such issuance would not result in the holder of the Preferred Stock
being the beneficial owner of more than 4.99 percent of the outstanding shares
of Midlantic's common stock.
As mentioned in "Recent Activities of the Corporation," on April 13, 1994, the
Corporation's Board approved a quarterly cash dividend on Midlantic's common
stock of $.10 per common share. Subsequently, on July 20, 1994, the
Corporation's Board declared a quarterly cash dividend of $.13 per common
share.
<PAGE>29
MIDLANTIC CORPORATION AND SUBSIDIARIES
STATISTICAL TABLES TO
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<PAGE>30
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE I - ANALYSIS OF CHANGES IN NET INTEREST INCOME
(In thousands)
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, 1994 VS. 1993 VOLUME(c) RATE(c) TOTAL
________ ________ ________
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-bearing deposits
in other banks $ (445) $ 441 $ (4)
Other short-term investments (6,356) (1,010) (7,366)
Investment securities 10,318 (3,030) 7,288
Commercial, financial and foreign loans (a)(b) (10,944) (98) (11,042)
Real estate loans(a)(b) (14,851) 5,007 (9,844)
Loans to individuals(a)(b) 21,236 (661) 20,575
________ ________ ________
Total interest-earning assets (1,042) 649 (393)
________ ________ ________
INTEREST-BEARING SOURCES OF FUNDS USED TO
FINANCE INTEREST-EARNING ASSETS
Domestic savings and time deposits (12,238) (23,965) (36,203)
Overseas branch deposits (40) (4) (44)
Short-term borrowings 4,222 229 4,451
Long-term debt (1,387) (6) (1,393)
________ ________ ________
Total interest-bearing sources
of funds used to finance
interest-earning assets (9,443) (23,746) (33,189)
________ ________ ________
CHANGE IN NET INTEREST INCOME $ 8,401 $ 24,395 $ 32,796
======== ======== ========
<FN>
(a) Includes income from loan fees which is not significant.
(b) Includes nonaccrual loans.
(c) The changes which cannot be attributed solely to changes in the balances (volume) or
to changes in the rates are allocated to these categories on the basis of their
respective percentage changes.
</TABLE>
<PAGE>31 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE II - COMPARATIVE CONSOLIDATED AVERAGE BALANCE SHEET
WITH RESULTANT INTEREST AND AVERAGE RATES*
(In thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1994 JUNE 30, 1993
______________________________ ___________________________
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
___________ ________ _______ ________ ________ _______
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Interest-bearing deposits $ 490,166 $ 4,705 3.85% $ 615,984 $ 4,894 3.19%
Other short-term investments 1,311,013 12,723 3.89 1,554,658 14,748 3.80
U.S. Treasury securities 1,090,437 9,086 3.34 999,216 10,028 4.03
Obligations of U.S.
government agencies 970,814 15,896 6.57 636,015 10,172 6.41
Obligations of states and
political subdivisions 13,304 149 4.49 9,337 112 4.81
Other securities 66,908 950 5.70 69,878 971 5.57
___________ ________ _______ ___________ ________ _______
Total investment securities 2,141,463 26,081 4.89 1,714,446 21,283 4.98
___________ ________ _______ ___________ ________ _______
Commercial, financial and
foreign loans 3,093,633 61,701 8.00 3,241,119 65,299 8.08
Real estate loans 2,848,153 57,949 8.16 3,427,323 62,216 7.28
Loans to individuals 2,372,945 48,889 8.26 1,828,396 38,729 8.50
___________ ________ _______ ___________ ________ _______
Total loans(1)(2)(3) 8,314,731 168,539 8.13 8,496,838 166,244 7.85
___________ ________ _______ ___________ ________ _______
Total interest-earning
assets 12,257,373 212,048 6.94 12,381,926 207,169 6.71
___________ ________ _______ ___________ ________ _______
Noninterest-earning assets
Cash and due from banks 763,459 783,918
Other assets 884,527 1,087,613
Allowance for loan losses (378,875) (581,453)
___________ ___________
Total noninterest-earning
assets 1,269,111 1,290,078
___________ ___________
Total assets $13,526,484 $13,672,004
___________ ___________
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities
Domestic savings and time
deposits $ 8,468,288 53,859 2.55 $ 9,242,698 66,902 2.90
Overseas branch deposits 12,954 114 3.53 9,731 89 3.67
Short-term borrowings 644,947 5,253 3.27 376,081 2,854 3.04
Long-term debt 374,483 8,619 9.23 390,869 8,864 9.10
___________ ________ _______ ___________ ________ _______
Total interest-bearing
liabilities 9,500,672 67,845 2.86 10,019,379 78,709 3.15
___________ ________ _______ ___________ ________ _______
<PAGE>31 2of2
Noninterest-bearing liabilities
and shareholders' equity
Demand deposits 2,666,221 2,560,630
Other liabilities 166,796 156,446
___________ ___________
Total noninterest-bearing
liabilities 2,833,017 2,717,076
___________ ___________
Shareholders' equity 1,192,795 935,549
___________ ___________
Total liabilities and
shareholders' equity $13,526,484 $13,672,004
___________ ___________
Net interest income $144,203 $128,460
======== ========
INTEREST INCOME AS A % OF
AVERAGE INTEREST-EARNING ASSETS 6.94% 6.71%
======= =======
INTEREST EXPENSE AS A % OF
AVERAGE INTEREST-EARNING ASSETS 2.22% 2.55%
======= =======
NET INTEREST MARGIN (4) 4.72% 4.16%
======= =======
<FN>
See Notes to Comparative Consolidated Average Balance Sheet with Resultant Interest and Average Rates.
</TABLE>
<PAGE>32 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE III - COMPARATIVE CONSOLIDATED AVERAGE BALANCE SHEET
WITH RESULTANT INTEREST AND AVERAGE RATES*
(In thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1994 JUNE 30, 1993
_______________________________ _______________________________
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
___________ ________ _______ ___________ ________ _______
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Interest-bearing deposits $ 529,320 $ 9,669 3.68% $ 580,501 $ 9,673 3.36%
Other short-term investments 1,252,561 22,520 3.63 1,604,283 29,886 3.76
U.S. Treasury securities 1,175,608 21,142 3.63 1,043,763 22,837 4.41
Obligations of U.S.
government agencies 1,005,928 30,429 6.10 651,479 21,399 6.62
Obligations of states and
political subdivisions 13,838 327 4.77 9,064 274 6.10
Other securities 68,159 1,888 5.59 71,415 1,988 5.61
___________ ________ _______ ___________ ________ _______
Total investment securities 2,263,533 53,786 4.79 1,775,721 46,498 5.28
___________ ________ _______ ___________ ________ _______
Commercial, financial and
foreign loans 3,052,242 120,592 7.97 3,329,234 131,634 7.97
Real estate loans 2,947,914 115,838 7.92 3,585,035 125,682 7.07
Loans to individuals 2,342,813 94,591 8.14 1,737,487 74,016 8.59
___________ ________ _______ ___________ ________ _______
Total loans(1)(2)(3) 8,342,969 331,021 8.00 8,651,756 331,332 7.72
___________ ________ _______ ___________ ________ _______
Total interest-earning
assets 12,388,383 416,996 6.79 12,612,261 417,389 6.67
___________ ________ _______ ___________ ________ _______
Noninterest-earning assets
Cash and due from banks 768,685 784,004
Other assets 916,893 1,087,109
Allowance for loan losses (390,311) (629,554)
___________ ___________
Total noninterest-earning
assets 1,295,267 1,241,559
___________ ___________
Total assets $13,683,650 $13,853,820
___________ ___________
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities
Domestic savings and time
deposits $ 8,570,036 107,652 2.53 $ 9,422,797 143,855 3.08
Overseas branch deposits 11,325 189 3.37 13,673 233 3.44
Short-term borrowings 681,170 10,376 3.07 403,531 5,925 2.96
Long-term debt 375,523 17,279 9.28 405,657 18,672 9.28
___________ ________ _______ ___________ ________ _______
Total interest-bearing
liabilities 9,638,054 135,496 2.83 10,245,658 168,685 3.32
___________ ________ _______ ___________ ________ _______
<PAGE>32 2of2
Noninterest-bearing liabilities
and shareholders' equity
Demand deposits 2,720,209 2,541,224
Other liabilities 157,299 172,340
___________ ___________
Total noninterest-bearing
liabilities 2,877,508 2,713,564
___________ ___________
Shareholders' equity 1,168,088 894,598
___________ ___________
Total liabilities and
shareholders' equity $13,683,650 $13,853,820
___________ ___________
NET INTEREST INCOME $281,500 $248,704
======== ========
INTEREST INCOME AS A % OF
AVERAGE INTEREST-EARNING ASSETS 6.79% 6.67%
======= =======
INTEREST EXPENSE AS A % OF
AVERAGE INTEREST-EARNING ASSETS 2.21% 2.70%
======= =======
NET INTEREST MARGIN (4) 4.58% 3.97%
======= =======
<FN>
See Notes to Comparative Consolidated Average Balance Sheet with Resultant Interest and Average Rates.
<PAGE>33
MIDLANTIC CORPORATION AND SUBSIDIARIES
NOTES TO COMPARATIVE CONSOLIDATED AVERAGE BALANCE SHEET
WITH RESULTANT INTEREST AND AVERAGE RATES
<FN>
*Interest income and average rates are not presented on a tax-equivalent basis.
(1) Includes loan fees. Such income is not significant.
(2) Includes nonaccrual loans.
(3) Net of unearned income.
(4) Net interest margin is net interest income as a percent of average interest-earning
assets.
</TABLE>
<PAGE>34 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE IV - INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES
WITH RESULTANT INTEREST AND AVERAGE RATES*
(In thousands)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
___________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-bearing deposits
Average balance $ 490,166 $ 568,474 $ 431,521 $ 528,817 $ 615,984
Interest income 4,705 4,964 3,919 4,727 4,894
Average rate 3.85% 3.54% 3.60% 3.55% 3.19%
Other short-term
investments
Average balance $ 1,311,013 $ 1,194,109 $ 1,085,775 $ 1,364,439 $ 1,554,658
Interest income 12,723 9,797 8,797 13,087 14,748
Average rate 3.89% 3.33% 3.21% 3.81% 3.80%
Investment securities
Average balance $ 2,141,463 $ 2,385,603 $ 2,286,719 $ 1,902,459 $ 1,714,446
Interest income 26,081 27,705 24,109 21,441 21,283
Average rate 4.89% 4.71% 4.18% 4.47% 4.98%
Total loans
Average balance $ 8,314,731 $ 8,371,207 $ 8,575,474 $ 8,555,174 $ 8,496,838
Interest income 168,539 162,482 165,964 166,114 166,244
Average rate 8.13% 7.87% 7.68% 7.70% 7.85%
___________ ___________ ___________ ___________ ___________
Total average interest-
earning assets $12,257,373 $12,519,393 $12,379,489 $12,350,889 $12,381,926
Total interest income 212,048 204,948 202,789 205,369 207,169
Total average rate on
interest-earning assets 6.94% 6.64% 6.50% 6.60% 6.71%
=========== =========== =========== =========== ===========
<PAGE>34 2of2
INTEREST-BEARING LIABILITIES
Deposits
Average balance $ 8,481,242 $ 8,681,480 $ 8,798,017 $ 8,994,483 $ 9,252,429
Interest expense 53,973 53,868 57,217 61,581 66,991
Average rate 2.55% 2.52% 2.58% 2.72% 2.90%
Short-term borrowings
Average balance $ 644,947 $ 717,393 $ 421,955 $ 348,547 $ 376,081
Interest expense 5,253 5,123 3,080 2,581 2,854
Average rate 3.27% 2.90% 2.90% 2.94% 3.04%
Long-term debt
Average balance $ 374,483 $ 376,563 $ 386,749 $ 386,805 $ 390,869
Interest expense 8,619 8,660 8,856 8,857 8,864
Average rate 9.23% 9.33% 9.08% 9.08% 9.10%
___________ ___________ ___________ ___________ ___________
Total average interest-
bearing liabilities $ 9,500,672 $ 9,775,436 $ 9,606,721 $ 9,729,835 $10,019,379
Total interest expense 67,845 67,651 69,153 73,019 78,709
Total average rate on
interest-bearing
liabilities 2.86% 2.81% 2.86% 2.98% 3.15%
=========== =========== =========== =========== ===========
NET INTEREST INCOME $ 144,203 $ 137,297 $ 133,636 $ 132,350 $ 128,460
=========== =========== =========== =========== ===========
NET INTEREST MARGIN 4.72% 4.45% 4.28% 4.25% 4.16%
=========== =========== =========== =========== ===========
<FN>
*Interest income and average rates are not presented on a tax-equivalent basis.
</TABLE>
<PAGE>35
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE V - AVERAGE FUNDING SOURCES - BALANCES AND RATES PAID
(In thousands)
<CAPTION>
June 30 March 31 Dec. 31 Sept. 30 June 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
___________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCES
DEPOSITS
Noninterest-bearing demand $ 2,666,221 $ 2,774,197 $ 2,762,169 $ 2,620,355 $ 2,560,630
Interest-bearing demand 1,391,793 1,413,953 1,401,206 1,386,514 1,379,754
Savings 1,659,882 1,602,128 1,565,158 1,545,556 1,493,326
Retail money market
accounts 2,128,083 2,195,337 2,230,982 2,289,938 2,322,228
CDs over $100,000 391,517 400,235 451,447 496,946 622,897
Other time 2,897,013 3,060,131 3,140,090 3,267,037 3,424,493
Overseas branch deposits 12,954 9,696 9,134 8,492 9,731
___________ ___________ ___________ ___________ ___________
Total average deposits $11,147,463 $11,455,677 $11,560,186 $11,614,838 $11,813,059
=========== =========== =========== =========== ===========
SHORT-TERM BORROWINGS
Federal funds purchased $ 35,962 $ 35,672 $ 43,312 $ 51,546 $ 41,190
Repurchase agreements 580,362 653,096 354,592 268,096 307,038
Other short-term
borrowings 28,623 28,625 24,051 28,905 27,853
___________ ___________ ___________ ___________ ___________
Total average short-term
borrowings $ 644,947 $ 717,393 $ 421,955 $ 348,547 $ 376,081
=========== =========== =========== =========== ===========
LONG-TERM DEBT $ 374,483 $ 376,563 $ 386,749 $ 386,805 $ 390,869
=========== =========== =========== =========== ===========
AVERAGE RATES
DEPOSITS
Interest-bearing demand 1.14% 1.20% 1.28% 1.57% 1.87%
Savings 2.05 2.07 2.08 2.17 2.36
Retail money market
accounts 2.39 2.35 2.37 2.48 2.58
CDs over $100,000 3.87 3.64 3.66 3.77 3.44
Other time 3.45 3.33 3.41 3.47 3.68
Overseas branch deposits 3.53 3.14 3.08 3.04 3.67
___________ ___________ ___________ ___________ ___________
Total average rate
paid on deposits 2.55% 2.52% 2.58% 2.72% 2.90%
=========== =========== =========== =========== ===========
SHORT-TERM BORROWINGS
Federal funds purchased 3.86% 3.16% 2.98% 3.06% 2.93%
Repurchase agreements 3.21 2.86 2.92 2.87 2.99
Other short-term
borrowings 3.62 3.30 2.46 3.34 3.83
___________ ___________ ___________ ___________ ___________
Total average rate paid
on short-term borrowings 3.27% 2.90% 2.90% 2.94% 3.04%
=========== =========== =========== =========== ===========
LONG-TERM DEBT 9.23% 9.33% 9.08% 9.08% 9.10%
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>36
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE VI - INVESTMENT SECURITIES - CARRYING AND FAIR VALUES
AND GROSS UNREALIZED GAINS AND LOSSES
JUNE 30, 1994
(In thousands)
<CAPTION>
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
HELD-TO-MATURITY VALUE GAINS LOSSES VALUE
__________ ______ ________ __________
<S> <C> <C> <C> <C>
United States Treasury securities $ 576,480 $ -- $(12,408) $ 564,072
Obligations of United States
government agencies 942,722 2,519 (45,554) 899,687
Obligations of states and political
subdivisions 1,989 2 (35) 1,956
Other securities 7,482 160 (28) 7,614
__________ ______ ________ __________
$1,528,673 $2,681 $(58,025) $1,473,329
========== ====== ======== ==========
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
AVAILABLE-FOR-SALE VALUE GAINS LOSSES VALUE
__________ ______ ________ __________
United States Treasury securities $ 330,488 $ 56 $ (983) $ 329,561
Obligations of states and political
subdivisions 1,767 -- (207) 1,560
Other securities 59,430 220 (2,153) 57,497
__________ ______ ________ __________
$ 391,685 $ 276 $ (3,343) $ 388,618
========== ====== ======== ==========
</TABLE>
<TABLE>
TABLE VII - INVESTMENT SECURITIES - GROSS REALIZED GAINS AND LOSSES
(In thousands)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1994* 1993 1994* 1993
_______ ___ _______ ______
<S> <C> <C> <C> <C>
Gross realized investment
securities gains $ 1,768 $ 9 $ 3,031 $5,324
Gross realized investment
securities losses (6,405) -- (6,405) (464)
_______ ___ _______ ______
Investment securities gains $(4,637) $ 9 $(3,374) $4,860
======= === ======= ======
<FN>
* Represents gains/losses on available-for-sale securities.
</TABLE>
<PAGE>37
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE VIII - LOANS
(In thousands)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
1994 1994 1993 1993 1993
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Commercial, financial
and foreign loans $3,176,688 $3,155,468 $2,996,145 $3,069,301 $3,269,864
Real estate
Construction and development 692,454 789,445 834,013 1,015,701 1,063,419
Long term commercial
mortgage 1,590,226 1,631,406 1,664,757 1,795,809 1,849,367
Long-term 1-4 family
residential 555,883 566,278 636,632 414,112 456,467
Loans to individuals 2,524,202 2,457,718 2,415,391 2,302,193 2,067,278
__________ __________ __________ __________ __________
Total loans 8,539,453 8,600,315 8,546,938 8,597,116 8,706,395
Less: unearned income 141,794 138,777 137,241 127,406 113,328
__________ __________ __________ __________ __________
Total loans, net of
unearned income $8,397,659 $8,461,538 $8,409,697 $8,469,710 $8,593,067
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
TABLE IX - GEOGRAPHIC DISTRIBUTION OF REAL ESTATE LOANS
(In thousands)
<CAPTION>
LONG-TERM LONG-TERM
CONSTRUCTION COMMERCIAL 1-4 FAMILY
AND DEVELOPMENT MORTGAGE RESIDENTIAL TOTAL
JUNE 30, 1994 LOANS LOANS LOANS PORTFOLIO
________ __________ ________ __________
<S> <C> <C> <C> <C>
PORTFOLIO
New Jersey $388,901 $ 927,358 $396,341 $1,712,600
Pennsylvania 165,029 568,341 151,817 885,187
New York 36,236 46,877 2,474 85,587
Florida 28,381 9,729 2,026 40,136
Other 73,907 37,921 3,225 115,053
________ __________ ________ __________
Total $692,454 $1,590,226 $555,883 $2,838,563
======== ========== ======== ==========
NONACCRUAL SEGMENT
New Jersey $ 29,496 $ 30,722 $ 120 $ 60,338
Pennsylvania 3,442 16,550 4,130 24,122
New York 465 901 -- 1,366
Florida 300 -- -- 300
Other 2,773 -- 12 2,785
________ __________ ________ __________
Total $ 36,476 $ 48,173 $ 4,262 $ 88,911
======== ========== ======== ==========
PERCENT OF NONACCRUAL
TO PORTFOLIO 5.27% 3.03% .77% 3.13%
======== ========== ======== ==========
</TABLE>
<PAGE>38
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE X - CONSTRUCTION AND DEVELOPMENT LOANS - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
JUNE 30, 1994 NEW JERSEY PENNSYLVANIA NEW YORK FLORIDA OTHER TOTAL
________ ________ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO
Office buildings $127,274 $ 57,082 $14,450 $ -- $11,536 $210,342
Shopping centers 57,916 37,994 5,164 4,000 20,394 125,468
Residential 62,503 29,902 890 9,137 6,298 108,730
Land 41,680 23,962 3,237 1,744 4,440 75,063
Hotels/motels 15,590 1,465 325 13,200 15,692 46,272
Industrial/warehouse 24,137 7,713 7,014 -- -- 38,864
Other 59,801 6,911 5,156 300 15,547 87,715
________ ________ _______ _______ _______ ________
Total $388,901 $165,029 $36,236 $28,381 $73,907 $692,454
======== ======== ======= ======= ======= ========
NONACCRUAL SEGMENT
Office buildings $ 3,033 $ 291 $ -- $ -- $ -- $ 3,324
Shopping centers -- -- -- -- -- --
Residential 7,317 1,165 291 -- -- 8,773
Land 13,159 1,986 -- -- 623 15,768
Hotels/motels 1,340 -- -- -- -- 1,340
Industrial/warehouse -- -- -- -- -- --
Other 4,647 -- 174 300 2,150 7,271
________ ________ _______ _______ _______ ________
Total $ 29,496 $ 3,442 $ 465 $ 300 $ 2,773 $ 36,476
======== ======== ======= ======= ======= ========
PERCENT OF NONACCRUAL
TO PORTFOLIO 7.58% 2.09% 1.28% 1.06% 3.75% 5.27%
======== ======== ======= ======= ======= ========
</TABLE>
<PAGE>39
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XI - LONG-TERM COMMERCIAL MORTGAGE LOANS - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
JUNE 30, 1994 NEW JERSEY PENNSYLVANIA NEW YORK FLORIDA OTHER TOTAL
________ ________ _______ ______ _______ __________
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO
Industrial/warehouse $357,862 $174,431 $38,679 $ 958 $12,719 $ 584,649
Office buildings 177,802 137,401 4,353 -- 4,149 323,705
Apartment houses and
other rental properties 54,684 63,606 1,313 1,485 7,012 128,100
Shopping centers 65,274 55,314 -- -- 5,851 126,439
Hospitals, medical
centers and nursing
homes 86,194 20,254 -- -- -- 106,448
Retail businesses 46,359 46,198 1,007 -- 389 93,953
Automobile and truck
sales 41,807 16,857 18 -- -- 58,682
Hotels/motels 43,578 7,067 440 -- 294 51,379
Other 53,798 47,213 1,067 7,286 7,507 116,871
________ ________ _______ ______ _______ __________
Total $927,358 $568,341 $46,877 $9,729 $37,921 $1,590,226
======== ======== ======= ====== ======= ==========
NONACCRUAL SEGMENT
Industrial/warehouse $ 16,075 $ 6,384 $ 348 $ -- $ -- $ 22,807
Office buildings 2,840 878 -- -- -- 3,718
Apartment houses and
other rental
properties 2,659 2,204 -- -- -- 4,863
Shopping centers -- 349 -- -- -- 349
Hospitals, medical
centers and nursing
homes -- -- -- -- -- --
Retail businesses 2,411 1,056 -- -- -- 3,467
Automobile and truck
sales 1,212 485 -- -- -- 1,697
Hotels/motels 951 4,916 -- -- -- 5,867
Other 4,574 278 553 -- -- 5,405
________ ________ _______ ______ _______ __________
Total $ 30,722 $ 16,550 $ 901 $ -- $ -- $ 48,173
======== ======== ======= ====== ======= ==========
PERCENT OF NONACCRUAL
TO PORTFOLIO 3.31% 2.91% 1.92% --% --% 3.03%
======== ======== ======= ====== ======= ==========
</TABLE>
<PAGE>40 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XII - SUMMARY OF LOAN LOSS EXPERIENCE/ALLOWANCE FOR LOAN LOSSES
(In thousands)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Allowance at beginning of period $387,374 $400,311 $505,827 $547,784 $583,211
Allowances of divested subsidiaries -- -- -- (712)
Provision charged to operating
expense 5,604 8,021 30,581 14,598 15,624
Net (charge-offs) recoveries
related to loans sold in bulk
sales or transferred to "assets
held for accelerated disposition" -- (7,901) (97,407) (15,362) 9,676
Loans charged off*
Commercial and financial 20,096 10,604 23,169 23,964 16,031
Real estate
Construction and development 1,858 4,335 7,569 9,597 41,572
Long-term commercial mortgage 1,937 2,449 10,245 7,690 2,904
Long-term 1-4 family residential 180 422 666 172 --
Loans to individuals 6,281 5,887 8,089 5,424 7,117
________ ________ ________ ________ ________
Total loans charged off 30,352 23,697 49,738 46,847 67,624
________ ________ ________ ________ ________
Recoveries on loans
Commercial and financial 6,433 5,356 7,539 2,945 4,315
Real estate
Construction and development 1,255 2,029 1,824 382 868
Long-term commercial mortgage 285 674 340 626 319
Long-term 1-4 family residential 2 1 2 8 7
Loans to individuals 2,744 2,580 1,343 1,693 2,100
________ ________ ________ ________ ________
Total recoveries on loans 10,719 10,640 11,048 5,654 7,609
________ ________ ________ ________ ________
Net loans charged off 19,633 13,057 38,690 41,193 60,015
________ ________ ________ ________ ________
Allowance at end of period $373,345 $387,374 $400,311 $505,827 $547,784
======== ======== ======== ======== ========
<FN>
*Excludes charge-offs related to loans sold in bulk sales or transferred to "assets held
for accelerated disposition."
</TABLE>
<PAGE>40 2of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XIII - SUMMARY OF ALLOWANCE FOR OTHER REAL ESTATE OWNED ("OREO")
(In thousands)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
________ _______ ________ ________ _______
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 34,739 $37,032 $ 67,731 $ 71,276 $51,935
Allowances related to OREO
transferred to "assets held
for accelerated disposition" -- -- (36,672) -- --
Provision charged to OREO expense 2,500 3,500 31,497 15,116 28,733
Write-downs and sales (5,537) (5,793) (25,524) (18,661) (9,392)
________ _______ ________ ________ _______
Balance at end of period $ 31,702 $34,739 $ 37,032 $ 67,731 $71,276
======== ======= ======== ======== =======
</TABLE>
<PAGE>41
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XIV - NONACCRUAL LOANS, OTHER REAL ESTATE OWNED, NET,
RENEGOTIATED LOANS AND PAST DUE LOANS
(In thousands)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
1994 1994 1993 1993 1993
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS
Commercial, financial
and foreign $114,980 $127,799 $114,632 $137,233 $165,055
Real estate
Construction and development 36,476 40,397 50,143 160,937 174,423
Long-term commercial mortgage 48,173 53,550 63,431 132,269 146,011
Long-term 1-4 family
residential 4,262 4,068 4,489 5,222 4,474
Loans to individuals 21,083 27,641 32,604 32,948 38,942
________ ________ ________ ________ ________
TOTAL NONACCRUAL LOANS $224,974 $253,455 $265,299 $468,609 $528,905
======== ======== ======== ======== ========
ALLOWANCE FOR LOAN LOSSES
AS A % OF NONACCRUAL LOANS 166.0% 152.8% 150.9% 107.9% 103.6%
======== ======== ======== ======== ========
OTHER REAL ESTATE OWNED, NET
Acquired properties $ 86,647 $ 87,503 $ 97,238 $178,313 $208,578
In-substance foreclosures 21,661 33,499 35,432 94,762 117,617
________ ________ ________ ________ ________
TOTAL OTHER REAL ESTATE
OWNED, NET $108,308 $121,002 $132,670 $273,075 $326,195
======== ======== ======== ======== ========
TOTAL NONACCRUAL LOANS AND
OTHER REAL ESTATE OWNED, NET $333,282 $374,457 $397,969 $741,684 $855,100
======== ======== ======== ======== ========
TOTAL RENEGOTIATED LOANS $108,064 $165,516 $172,058 $181,320 $162,974
======== ======== ======== ======== ========
ACCRUING LOANS PAST DUE 90
DAYS OR MORE AS TO
INTEREST OR PRINCIPAL
PAYMENTS $ 40,032 $ 20,862 $ 36,161 $ 50,389 $ 35,735
======== ======== ======== ======== ========
</TABLE>
<PAGE>42
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XV - YEAR-TO-DATE INTEREST INCOME ON NONACCRUAL AND
RENEGOTIATED LOANS OUTSTANDING AT END OF PERIOD
(In thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30 1994 1993
______ _______
<S> <C> <C>
NONACCRUAL LOANS
Interest income that would have been
recorded on nonaccrual loans in
accordance with original terms $9,442 $19,514
Interest income actually recorded
on nonaccrual loans 904 759
______ _______
Net decrease in interest income on
nonaccrual loans $8,538 $18,755
====== =======
RENEGOTIATED LOANS
Interest income that would have been
recorded on renegotiated loans in
accordance with original terms $4,457 $ 4,797
Interest income actually recorded
on renegotiated loans 4,867 3,963
______ _______
Net (increase) decrease in interest income on
renegotiated loans $ (410) $ 834
====== =======
</TABLE>
<TABLE>
TABLE XVI - NONACCRUAL LOANS ACTIVITY
(In thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30 1994 1993
________ _________
<S> <C> <C>
Balance at beginning of year $265,299 $ 809,669
Additions 95,817 169,634
Payments (67,185) (103,146)
Returned to accrual status (15,514) (20,566)
Charge-offs (44,820) (99,688)
Transfers to OREO (7,410) (101,233)
Transfers to renegotiated loans -- (2,987)
Transfers to "assets held for
accelerated disposition" (884) (120,959)
Other (primarily transfers to
other repossessed assets) (329) (1,819)
________ _________
Balance at June 30 $224,974 $ 528,905
======== =========
</TABLE>
<PAGE>43
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XVII - IN-SUBSTANCE FORECLOSURES - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
JUNE 30, 1994 NEW JERSEY PENNSYLVANIA NEW YORK TOTAL
_______ ______ ______ _______
<S> <C> <C> <C> <C>
Office buildings $10,197 $ -- $ -- $10,197
Land 4,047 -- 448 4,495
Industrial/warehouse 808 1,800 87 2,695
Residential tract 356 -- -- 356
Other 3,432 -- 486 3,918
_______ ______ ______ _______
TOTAL $18,840 $1,800 $1,021 $21,661
======= ====== ====== =======
</TABLE>
<TABLE>
TABLE XVIII - ACQUIRED OREO PROPERTIES - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
JUNE 30, 1994 NEW JERSEY PENNSYLVANIA NEW YORK FLORIDA OTHER TOTAL
_______ _______ ______ ____ ______ _______
<S> <C> <C> <C> <C> <C> <C>
Land $34,923 $ 3,326 $ -- $949 $ 56 $39,254
Residential tract 9,090 2,366 287 -- 2,770 14,513
Industrial/warehouse 7,047 1,571 -- -- -- 8,618
Office buildings 2,828 1,930 1,341 -- 2,242 8,341
Shopping centers 3,022 278 214 -- -- 3,514
Hotels/motels 649 -- -- -- -- 649
Other 9,167 1,391 1,200 -- -- 11,758
_______ _______ ______ ____ ______ _______
TOTAL $66,726 $10,862 $3,042 $949 $5,068 $86,647
======= ======= ====== ==== ====== =======
</TABLE>
<TABLE>
TABLE XIX - OTHER REAL ESTATE OWNED ACTIVITY
(In thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED IN-SUBSTANCE ACQUIRED OREO
JUNE 30, 1994 FORECLOSURES PROPERTIES TOTAL
_______ ________ ________
<S> <C> <C> <C>
Balance December 31, 1993 $35,432 $ 97,238 $132,670
Transfers from loans -- 11,420 11,420
Advances 40 101 141
Charges to operating expenses to
absorb declines in net realizable value (1,693) (4,307) (6,000)
Transfers from in-substance
foreclosures to foreclosed properties (8,785) 8,785 --
Sales of properties and payments (3,387) (25,729) (29,116)
Transfers to "assets held for
accelerated disposition" -- (876) (876)
Other 54 15 69
_______ ________ ________
BALANCE JUNE 30, 1994 $21,661 $ 86,647 $108,308
======= ======== ========
</TABLE>
<PAGE>44
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XX - SUPPLEMENTAL DATA ON NONACCRUAL LOANS AND
IN-SUBSTANCE FORECLOSURES (1)
(In thousands)
<CAPTION>
CASH INTEREST PAYMENTS
AT JUNE 30, 1994 IN 1994 APPLIED AS(3)
___________________________________ ____________________
Nonaccrual In-substance Performance Interest Reduction of
Loans Foreclosures Ratio(2) Income Principal
_______ _______ ______ _____ ______
<S> <C> <C> <C> <C> <C>
CONTRACTUALLY CURRENT
Payment in full of
principal and interest
expected $ 9,832 $ -- 8.1% $123 $ 304
Payment in full of
principal or interest
in doubt -- -- -- -- --
_______ _______ ______ _____ ______
CONTRACTUALLY PAST DUE
Substantial performance(4) 22,361 -- 18.4 -- 972
Limited performance(5) 27,196 9,907 22.4 -- 1,611
No performance 62,195 10,390 51.1 -- 793
======= ======= ====== ===== ======
<FN>
(1) Disclosure has been limited to nonaccrual loans and in-substance foreclosures
whose principal balance at June 30, 1994 was $500 thousand or above.
Nonaccrual loans of $500 thousand or more comprised 54.0 percent of total
nonaccrual loans. Substantially all in-substance foreclosures outstanding
at June 30, 1994 had carrying values in excess of $500 thousand.
(2) Nonaccrual loans as a percent of total nonaccrual loans of over $500 thousand.
(3) Represents the cash interest payments received since loans outstanding as of June
30, 1994 were categorized as nonaccrual or in-substance foreclosures.
(4) Periodic (at least quarterly) payments received represent at least 75 percent of
the contractual principal and/or interest due.
(5) Periodic (at least quarterly) payments received represent between 1 percent and
75 percent of the contractual principal and/or interest due.
</TABLE>
<PAGE>45 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XXI - CONSOLIDATED SUMMARY OF INCOME
(In thousands, except per share data)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $168,539 $162,482 $165,964 $166,114 $166,244
Interest on investment securities 26,081 27,705 24,109 21,441 21,283
Interest on deposits with banks 4,705 4,964 3,919 4,727 4,894
Interest on other short-term
investments 12,723 9,797 8,797 13,087 14,748
________ ________ ________ ________ ________
Total interest income 212,048 204,948 202,789 205,369 207,169
________ ________ ________ ________ ________
INTEREST EXPENSE
Interest on deposits 53,973 53,868 57,217 61,581 66,991
Interest on short-term borrowings 5,253 5,123 3,080 2,581 2,854
Interest on long-term debt 8,619 8,660 8,856 8,857 8,864
________ ________ ________ ________ ________
Total interest expense 67,845 67,651 69,153 73,019 78,709
________ ________ ________ ________ ________
Net interest income 144,203 137,297 133,636 132,350 128,460
Provision for loan losses 5,604 8,021 30,581 14,598 15,624
________ ________ ________ ________ ________
Net interest income after
provision for loan losses 138,599 129,276 103,055 117,752 112,836
<PAGE>45 2of2
NONINTEREST INCOME
Trust income 10,860 9,782 10,396 10,499 10,331
Service charges on deposits 19,020 18,946 20,951 19,523 20,063
Investment securities (losses) gains (4,637) 1,263 2,142 3 9
Net gains on disposition of assets 25,056 -- -- -- --
Other 19,930 17,338 13,836 13,266 14,999
________ ________ ________ ________ ________
Total noninterest income 70,229 47,329 47,325 43,291 45,402
________ ________ ________ ________ ________
208,828 176,605 150,380 161,043 158,238
________ ________ ________ ________ ________
NONINTEREST EXPENSES
Salaries and benefits 57,901 56,214 57,212 55,738 52,060
Net occupancy 10,820 12,235 11,456 10,970 10,897
Equipment rental and expense 5,990 6,925 6,372 5,777 6,805
Other real estate owned, net 1,800 4,169 41,293 13,251 23,184
FDIC assessment charges 7,187 7,194 8,135 8,102 8,380
Legal and professional fees 11,260 9,875 13,628 13,566 12,904
Other 29,363 24,372 18,922 21,903 20,260
________ ________ ________ ________ ________
Total noninterest expenses 124,321 120,984 157,018 129,307 134,490
________ ________ ________ ________ ________
Income (loss) before income taxes
and cumulative effect of the
change in accounting for
postemployment benefits 84,507 55,621 (6,638) 31,736 23,748
Income tax expense (benefit) 12,228 2,268 (65,698) (15,151) (17,168)
________ ________ ________ ________ ________
Income before cumulative effect
of the change in accounting for
postemployment benefits 72,279 53,353 59,060 46,887 40,916
Cumulative effect of the change in
accounting for postemployment
benefits -- (7,528) -- -- --
________ ________ ________ ________ ________
NET INCOME $ 72,279 $ 45,825 $ 59,060 $ 46,887 $ 40,916
======== ======== ======== ======== ========
(continued on next page)
<PAGE>46
</TABLE>
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XXI - CONSOLIDATED SUMMARY OF INCOME
(In thousands, except per share data)
(continued)
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
INCOME APPLICABLE TO PRIMARY
COMMON SHARES
Income before cumulative effect
of the change in accounting for
postemployment benefits $71,372 $52,447 $58,153 $45,981 $40,010
Net income 71,372 44,919 58,153 45,981 40,010
INCOME APPLICABLE TO FULLY
DILUTED COMMON SHARES
Income before cumulative effect
of the change in accounting for
postemployment benefits 72,371 53,453 59,174 47,002 41,031
Net income 72,371 45,925 59,174 47,002 41,031
======= ======= ======= ======= =======
INCOME PER COMMON SHARE
Income before cumulative effect
of the change in accounting for
postemployment benefits
Primary $1.35 $ .99 $1.10 $.87 $.79
Fully diluted 1.33 .98 1.08 .86 .78
Cumulative effect of the change
in accounting for postemployment
benefits
Primary -- (.14) -- -- --
Fully diluted -- (.14) -- -- --
Net income
Primary 1.35 .85 1.10 .87 .79
Fully diluted 1.33 .84 1.08 .86 .78
======= ======= ======= ======= =======
AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS
Primary 52,915 52,821 53,030 52,969 50,715
Fully diluted 54,467 54,403 54,610 54,601 52,277
======= ======= ======= ======= =======
</TABLE>
<PAGE>47 1of2
<TABLE>
MIDLANTIC CORPORATION AND SUBSIDIARIES
TABLE XXII - CONSOLIDATED SHARE AND PER SHARE INFORMATION AND PERFORMANCE RATIOS
<CAPTION>
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
FOR THE THREE MONTHS ENDED 1994 1994 1993 1993 1993
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
BOOK VALUE AT QUARTER-END $22.66 $21.38 $20.56 $19.44 $18.56
______ ______ ______ ______ ______
MARKET PRICES OF COMMON STOCK
High $31.88 $30.88 $28.63 $27.75 $25.13
Low 27.50 24.25 22.25 21.13 17.50
Close 29.25 28.13 25.50 27.50 21.13
______ ______ ______ ______ ______
OPERATING RATIOS
Net interest margin 4.72% 4.45% 4.28% 4.25% 4.16%
Return on average assets 2.14 1.34 1.72 1.37 1.20
Return on average common
equity 25.05 16.66 22.43 18.69 18.12
Return on average total equity 24.31 16.25 21.72 18.13 17.54
______ ______ ______ ______ ______
LIQUIDITY AND FUNDING RATIOS
Liquidity ratio (1) 29.5% 28.6% 31.6% 28.7% 31.0%
Funding ratio (2) (11.6) (10.4) (14.3) (23.3) (24.4)
______ ______ ______ ______ ______
CAPITAL RATIOS
Risk-adjusted ratios
Tier 1 capital ratio 10.85% 9.95% 9.28% 9.04% 8.45%
Total capital ratio 14.87 13.98 13.29 13.13 12.52
Leverage ratio 8.17 7.35 6.81 6.86 6.30
Average equity as a % of
average assets 8.82 8.26 7.94 7.58 6.84
______ ______ ______ ______ ______
LOAN QUALITY RATIOS
As a % of total period-end
loans, net of unearned income
Allowance for loan losses
at period-end 4.45% 4.58% 4.76% 5.97% 6.37%
Nonaccrual loans at
period-end 2.68 3.00 3.15 5.53 6.16
As a % of average loans, net
of unearned income
Net charge-offs (3) .95 .63 1.79 1.91 2.83
Provision for loan losses .27 .39 1.41 .68 .74
______ ______ ______ ______ ______
AVERAGE TOTAL LOANS, NET OF
UNEARNED INCOME, AS A % OF
AVERAGE TOTAL DEPOSITS 75.37% 73.07% 74.18% 73.66% 71.93%
______ ______ ______ ______ ______
<PAGE>47 2of2
NONFINANCIAL DATA
Total number of employees 5,984 5,928 5,863 5,861 6,024
Total number of full-time
equivalent employees 5,194 5,129 5,090 5,100 5,256
Total number of banking offices 326 326 326 330 331
====== ====== ====== ====== ======
<FN>
(1) Ratio of net short-term assets to net funding liabilities.
(2) Total purchased funds less investment securities due in one year and money market
investments as a percentage of investment securities due in more than one year and
total loans, net of unearned income.
(3) Ratios exclude net charge-offs on loans that were sold in bulk sales or transferred
to assets held for accelerated disposition.
</TABLE>
<PAGE>48
ITEM 1. LEGAL PROCEEDINGS
As Midlantic Corporation ("MC") reported in "Item 3 - Legal Proceedings" of
its Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and
in "Item 1 - Legal Proceedings" of its Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, MC and various present and former directors and
officers of MC are defendants in a consolidated action, initially commenced in
March 1990, pending in Federal District Court in New Jersey (the "Action").
The Action has been instituted by shareholders of MC, either on behalf of MC
against various directors and officers of MC, or directly against MC and
various directors and officers of MC. In general, the Action seeks damages
payable either to MC or to the shareholders and holders of certain debt
securities because of alleged discrepancies between certain public statements
made by MC and later results of MC's operations. The Action includes claims
that certain actions of MC are void. The claims are based upon alleged
violations of the United States securities laws and New Jersey common law. In
their pleadings, plantiffs do not seek damages in a stated dollar amount.
In June 1990, the plaintiffs filed a motion for class certification. The
defendants moved to dismiss the complaint on July 31, 1990. On October 11,
1990, the Court filed an opinion denying the defendants' motion to dismiss the
complaint. On December 3, 1990, an answer to the complaint was served on
behalf of those defendants who had been served with the complaint. The parties
have stipulated to the certification of a plaintiff class, which stipulation
was reflected in an order entered by the Court on March 6, 1991. On May 6,
1991, the court entered a consent order setting forth a discovery schedule for
the production of documents by MC. Currently, documents are being produced
and depositions are being conducted.
<PAGE>49
ITEM 4. Submission of Matters to a Vote of Security Holders
MC's 1994 Annual Meeting of Shareholders was held on May 5, 1994. At
the meeting, shareholders voted for the election of directors, the
ratification of independent accountants and upon a shareholder
proposal relating to management compensation. The results of the
votes are as follows:
Election of Directors
_____________________
Nominee Votes For Votes Withheld
_______ __________ ______________
Charles E. Ehinger 38,893,626 687,496
David F. Girard-diCarlo 38,794,462 786,660
Frederick C. Haab 38,936,673 644,449
Kevork S. Hovnanian 37,847,641 1,733,481
Arthur J. Kania 38,863,006 718,116
Aubrey C. Lewis 38,807,595 773,527
David F. McBride 38,921,440 659,682
Desmond P. McDonald 38,842,224 738,898
William E. McKenna 38,770,935 810,187
Marcy Syms Merns 37,903,173 1,677,949
Ralph H. O'Brien* 38,872,951 708,171
Roy T. Peraino 38,824,325 756,797
Ernest L. Ransome, III 38,593,001 988,121
Ronald Rubin 37,889,057 1,692,065
B. P. Russell 38,818,891 762,231
Garry J. Scheuring 38,907,287 673,835
Fred R. Sullivan 38,503,745 1,077,377
Harold L. Yoh, Jr. 38,674,484 906,638
Ratification of Independent Accountants
_______________________________________
Votes for: 39,139,116
Votes against: 283,504
Abstentions: 158,502
Shareholder Proposal Relating To Management Compensation
________________________________________________________
Votes for: 4,909,907
Votes against: 26,277,436
Abstentions: 1,044,681
Broker nonvotes: 7,349,098
* Mr. O'Brien died on May 11, 1994. The vacancy on the MC Board of
Directors caused by Mr. O'Brien's death has not been filled.
<PAGE>50
ITEM 6A. EXHIBITS
27 - Financial Data Schedule
ITEM 6B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period covered by
this report:
<PAGE>51
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.
Midlantic Corporation
_____________________
Registrant
Date August 11, 1994
_______________ By ____________________________
Howard I. Atkins
Executive Vice President and
Chief Financial Officer
Date August 11, 1994
_______________ By ____________________________
James E. Kelly
Controller
<PAGE>52
Index of Exhibits
Exhibit Number
Per Item 601 of
Regulation S-K Page Number
______________ ___________
27 Financial Data Schedule 53
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MIDLANTIC
CORPORATION AND SUBSIDIARIES' CONSOLIDATED BALANCE SHEET AS OF 6/30/94 AND
CONSOLIDATED STATEMENTS OF INCOME, CHANGES IN SHAREHOLDERS' EQUITY AND CASH
FLOWS FOR THE SIX MONTHS ENDED 6/30/94 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000793548
<NAME> MIDLANTIC CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1994
<CASH> 872,258
<INT-BEARING-DEPOSITS> 403,976
<FED-FUNDS-SOLD> 1,451,000
<TRADING-ASSETS> 18,904
<INVESTMENTS-HELD-FOR-SALE> 388,618
<INVESTMENTS-CARRYING> 1,528,673
<INVESTMENTS-MARKET> 1,473,329
<LOANS> 8,397,659
<ALLOWANCE> 373,345
<TOTAL-ASSETS> 13,429,025
<DEPOSITS> 11,141,773
<SHORT-TERM> 506,391
<LIABILITIES-OTHER> 170,326
<LONG-TERM> 373,000
<COMMON> 157,219
0
50,000
<OTHER-SE> 1,030,316
<TOTAL-LIABILITIES-AND-EQUITY> 13,429,025
<INTEREST-LOAN> 331,021
<INTEREST-INVEST> 53,786
<INTEREST-OTHER> 32,189
<INTEREST-TOTAL> 416,996
<INTEREST-DEPOSIT> 107,841
<INTEREST-EXPENSE> 135,496
<INTEREST-INCOME-NET> 281,500
<LOAN-LOSSES> 13,625
<SECURITIES-GAINS> (3,374)
<EXPENSE-OTHER> 245,305
<INCOME-PRETAX> 140,128
<INCOME-PRE-EXTRAORDINARY> 125,632
<EXTRAORDINARY> 0
<CHANGES> (7,528)
<NET-INCOME> 118,104
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.17
<YIELD-ACTUAL> 4.58
<LOANS-NON> 224,974
<LOANS-PAST> 40,032
<LOANS-TROUBLED> 108,064
<LOANS-PROBLEM> 34,200
<ALLOWANCE-OPEN> 400,311
<CHARGE-OFFS> 54,049<F1>
<RECOVERIES> 21,359<F2>
<ALLOWANCE-CLOSE> 373,345
<ALLOWANCE-DOMESTIC> 371,169
<ALLOWANCE-FOREIGN> 2,176
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Excludes charge-offs of $11.885 million related to loans transferred to
"assets held for accelerated disposition".
<F2>Excludes recoveries of $3.984 million related to loans transferred to
"assets held for accelerated disposition".
</FN>
</TABLE>
