<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
March 31, 1995
For the quarterly period ended..........................................
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 April 28, 1995
____________________________________
Common Stock, par value $3.00 per share - 51,925,314 shares
<PAGE>2
Midlantic Corporation and Subsidiaries
FORM 10-Q
MARCH 31, 1995
PART I - FINANCIAL INFORMATION
______________________________
INTRODUCTION The interim financial information disclosed in this Form 10-Q
should be read in conjunction with Midlantic Corporation's 1994
Annual Report to shareholders and Midlantic Corporation's 1994
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 29 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 30 through 45.
<PAGE>3
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
THREE MONTHS ENDED
MARCH 31
1995 1994
___________________________________________________________________________
INTEREST INCOME
Interest and fees on loans $174,500 $162,482
Interest on investment securities
Taxable interest income 49,778 27,526
Tax-exempt interest income 304 179
Interest on deposits with banks 3,190 4,964
Interest on other short-term investments 9,422 9,797
-------- --------
Total interest income 237,194 204,948
-------- --------
INTEREST EXPENSE
Interest on deposits 65,387 53,748
Interest on short-term borrowings 7,914 5,243
Interest on long-term debt 8,587 8,660
-------- --------
Total interest expense 81,888 67,651
-------- --------
Net interest income 155,306 137,297
Provision for loan losses 1,500 8,156
-------- --------
Net interest income after provision
for loan losses 153,806 129,141
NONINTEREST INCOME
Trust income 11,228 9,782
Service charges on deposits 18,845 18,946
Investment securities gains -- 1,263
Net gains on disposition of assets 3,100 --
Other 15,271 17,338
-------- --------
Total noninterest income 48,444 47,329
-------- --------
202,250 176,470
-------- --------
NONINTEREST EXPENSES
Salaries and benefits 62,423 56,214
Net occupancy 10,957 12,235
Equipment rental and expense 6,927 6,925
Other real estate owned, net (1,510) 4,034
FDIC assessment charges 5,944 7,194
Legal and professional fees 7,988 9,875
Other 24,123 24,372
-------- --------
Total noninterest expenses 116,852 120,849
-------- --------
<PAGE>4
Income before income taxes and
cumulative effect of the change in
accounting principle 85,398 55,621
Income tax expense 32,074 2,268
________ ________
Income before cumulative effect
of the change in accounting principle 53,324 53,353
Cumulative effect of the change in
accounting for postemployment benefits -- (7,528)
________ ________
NET INCOME $ 53,324 $ 45,825
======== ========
INCOME APPLICABLE TO PRIMARY COMMON SHARES
Income before cumulative effect
of the change in accounting principle $52,418 $52,447
Net income 52,418 44,919
INCOME APPLICABLE TO FULLY
DILUTED COMMON SHARES
Income before cumulative effect
of the change in accounting principle 53,397 53,453
Net income 53,397 45,925
======= =======
INCOME PER COMMON SHARE
Income before cumulative effect
of the change in accounting principle
Primary $ .98 $ .99
Fully diluted .97 .98
Cumulative effect of the change in
accounting for postemployment benefits
Primary -- (.14)
Fully diluted -- (.14)
Net income
Primary .98 .85
Fully diluted .97 .84
======= =======
AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS
Primary 53,244 52,821
Fully diluted 54,900 54,403
======= =======
See Notes to Consolidated Financial Statements.
<PAGE>5 1of2
Midlantic Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
MARCH 31 DECEMBER 31
1995 1994
_____________________________________________________________________________
ASSETS
Cash and due from banks $ 790,789 $ 819,928
Interest-bearing deposits in other banks 232,615 242,659
Other short-term investments 723,600 871,000
Investment securities
Held-to-maturity (market value 1995,
$2,477,258; 1994, $2,325,904) 2,502,384 2,415,635
Available-for-sale 777,868 333,295
Trading 8,884 7,613
Total loans (net of unearned income of
$153,362 in 1995 and $144,850 in 1994) 8,222,887 8,256,375
Less: allowance for loan losses 337,170 349,520
----------- -----------
Net loans 7,885,717 7,906,855
----------- -----------
Premises and equipment, net 147,132 146,523
Due from customers on acceptances 14,926 17,546
Other assets 550,301 532,484
----------- -----------
Total assets $13,634,216 $13,293,538
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Domestic deposits
Noninterest-bearing demand $ 2,599,415 $ 2,847,782
Interest-bearing demand 1,291,517 1,361,287
Savings 1,691,848 1,636,908
Retail money market accounts 1,785,795 1,920,175
CDs over $100,000 558,733 447,590
Other time 2,720,988 2,577,893
Overseas branch deposits 9,008 15,699
----------- -----------
Total deposits 10,657,304 10,807,334
----------- -----------
Short-term borrowings 1,009,002 584,489
Bank acceptances outstanding 14,926 17,546
Other liabilities 170,570 136,983
Long-term debt 372,940 373,000
----------- -----------
Total liabilities 12,224,742 11,919,352
----------- -----------
<PAGE>5 2of2
Shareholders' equity
Capital stock
Preferred stock: no par value
Authorized 40,000,000 shares
Issued 500,000 shares in 1995 and 1994 50,000 50,000
Common stock: par value $3 per share
Authorized 150,000,000 shares
Issued 52,663,679 shares in 1995 and
52,564,346 shares in 1994 157,991 157,693
Surplus 613,264 611,205
Retained earnings 599,231 558,385
Net unrealized holding losses on available
for sale securities, net of taxes (3,181) (3,097)
----------- -----------
1,417,305 1,374,186
Less treasury stock at cost:
230,000 common shares in 1995 7,831 --
----------- -----------
Total shareholders' equity 1,409,474 1,374,186
----------- -----------
Total liabilities and shareholders' equity $13,634,216 $13,293,538
=========== ===========
See Notes to Consolidated Financial Statements.
<PAGE>6 1of2
<TABLE>
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31 1995 1994
_____________________________________________________________________________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 53,324 $ 45,825
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for loan and OREO losses 1,500 11,521
Depreciation of premises and equipment 5,158 5,799
Amortization of goodwill and other intangibles 2,189 1,605
Deferred income tax expense 18,052 11,730
Cumulative effect of the change in
accounting for postemployment benefits -- 7,528
Net accretion of investment securities (3,302) (4,322)
Accretion of net deferred loan fees (2,367) (2,281)
Net gains on the sales of assets (3,908) (4,785)
Net increase in trading account assets (1,271) (13,096)
Net increase in OREO (738) (1,991)
Net increase in accrued interest receivable (23,528) (29,496)
Net increase (decrease) in accrued interest payable 3,085 (173)
Net increase in taxes receivable and
net deferred tax assets (10,490) (14,797)
Net decrease (increase) in other assets 517 (11,355)
Net increase in other liabilities 30,243 13,944
Other (1,776) 982
--------- ---------
Net cash provided by operating activities 66,688 16,638
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash received in acquisition of 3 branches 112,224 --
Proceeds from bulk sales of loans and OREO 6,009 13,940
Proceeds from sales of OREO and loans 9,474 13,366
Net (increase) decrease in money market investments
with an original maturity of 3 months or less (50,056) 664,819
Proceeds from money market investments with an
original maturity of greater than 3 months 235,000 140,000
Purchases of money market investments with an
original maturity of greater than 3 months (27,500) (548,000)
Proceeds from sales of available-for-sale securities 1 151,465
Proceeds from matured investment securities:
Held-to-maturity 26,893 332,744
Available-for-sale 156,350 70,551
Purchases of investment securities:
Held-to-maturity (113,722) (497,613)
Available-for-sale (596,967) (643)
Net decrease (increase) in loans 19,632 (105,231)
Purchases of premises and equipment (5,163) (2,038)
Sales of premises and equipment 34 284
--------- ---------
Net cash (used) provided by investing activities (227,791) 233,644
--------- ---------
<PAGE>6 2of2
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (274,543) (240,877)
Net increase (decrease) in short-term borrowings 424,513 (51,798)
Payments on long-term debt (60) (11,752)
Cash dividends paid (12,478) --
Purchase of common treasury shares (7,831) --
Proceeds from issuances of common stock 2,363 595
--------- ---------
Net cash provided (used) by financing activities 131,964 (303,832)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (29,139) (53,550)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 819,928 712,960
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 790,789 $ 659,410
========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>7 1of2
Midlantic Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
FOR THE THREE MONTHS ENDED MARCH 31 1995 1994
_____________________________________________________________________________
PREFERRED STOCK AT JANUARY 1 AND MARCH 31 $ 50,000 $ 50,000
========== ==========
Common Stock
Balance at January 1 $ 157,693 $ 156,522
Issuance of 35,776 common shares in 1994
for preferred stock dividend -- 107
Issuance of 39,796 common shares and 206 common
treasury shares in 1995 and 23,123 common shares
and 2,042 common treasury shares in 1994 for
stock options 119 70
Issuance of 59,537 common shares in 1995 and
6,799 common shares in 1994 purchased by
Midlantic's 401(k) plan and Dividend
Reinvestment and Stock Purchase Plan 179 20
---------- ----------
Balance at March 31 $ 157,991 $ 156,719
========== ==========
SURPLUS
Balance at January 1 $ 611,205 $ 603,732
Issuance of common shares for preferred
stock dividend -- 799
Issuance of common shares and common treasury
shares for stock options 569 284
Issuance of common shares purchased by
Midlantic's 401(k) plan and Dividend
Reinvestment and Stock Purchase Plan 1,490 165
---------- ----------
Balance at March 31 $ 613,264 $ 604,980
========== ==========
RETAINED EARNINGS
Balance at January 1 $ 558,385 $ 312,310
Net income 53,324 45,825
Cash dividends paid
Preferred stock (906) --
Common stock (11,572) --
Issuance of common shares for
preferred stock dividend -- (906)
---------- ----------
Balance at March 31 $ 599,231 $ 357,229
========== ==========
NET UNREALIZED HOLDING GAINS (LOSSES)
ON AVAILABLE-FOR-SALE SECURITIES
Balance at January 1, 1995/net unrealized
holding gain recognized on adoption
of change in accounting for investment
securities in 1994 $ (3,097) $ 1,859
Change in unrealized holding losses (84) (3,700)
---------- ----------
Balance at March 31 $ (3,181) $ (1,841)
========== ==========
<PAGE>7 2of2
TREASURY STOCK
Balance at January 1 $ -- $ --
Addition of 230,206 common shares in 1995
and 2,042 common shares in 1994 (7,837) (56)
Issuance of 206 common treasury
shares in 1995 and 2,042 common treasury
shares in 1994 for stock options 6 56
---------- ----------
Balance at March 31 $ (7,831) $ --
========== ==========
TOTAL SHAREHOLDERS' EQUITY
Balance at January 1 $1,374,186 $1,122,564
Net changes during period 35,288 44,523
---------- ----------
Balance at March 31 $1,409,474 $1,167,087
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE>8 1of2
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 1995 presentation.
This includes the reclassification for all periods presented of in-substance
foreclosures ("ISFs") from other real estate owned ("OREO") to loans (see
"Accounting for loan impairment").
ASSETS HELD FOR ACCELERATED DISPOSITION - At March 31, 1995, assets held for
accelerated disposition included in other assets, amounted to $5.7 million.
Such assets, which are carried at fair value less the estimated costs of
disposing of the properties, consist of real estate loans and OREO located
primarily in New Jersey and southeastern Pennsylvania. Management
anticipates that these assets will be sold or resolved on an individual basis
during the remainder of 1995.
CAPITAL STOCK
_____________
COMMON STOCK - On April 12, 1995, the Board of Directors of MC ("the Board")
declared a quarterly cash dividend on the Corporation's common stock of $.32
per share to shareholders of record on May 1, 1995, payable on May 15, 1995.
PREFERRED STOCK - On March 22, 1995, the Board declared a cash dividend on
MC's Term Adjustable Rate Cumulative Preferred Stock - Series A (the
"Preferred Stock") of $906 thousand, representing full payment of the first
quarter 1995 dividend requirement, payable in April, 1995. Based upon a July
22, 1992 agreement between Midlantic and the holder of the Preferred Stock,
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 March 31, 1995:
MARCH 31
(In thousands) 1995
____________________________________________________________________________
Unused commitments to extend credit $2,671,476
Financial standby letters of credit and
similar arrangements 107,311
Performance standby letters of credit and
similar arrangements 158,772
Commercial letters of credit and other short-term
trade-related contingencies 49,808
Notional amount of interest rate swaps (1)
Agreements to receive a fixed rate of interest 2,575,000
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 (2) 45,016
==========
(1) For a discussion on interest rate swaps, see pages 21 through 24.
(2) Foreign exchange contracts are provided as a service to the Corporation's
customers or used by the Corporation for risk-management purposes. Gains
and losses on foreign exchange contracts are immaterial.
<PAGE>8 2of2
STATEMENT OF CASH FLOWS - Cash paid during the first three months of 1995 and
1994 for interest on deposits, short-term borrowings and long-term debt
amounted to $78.6 million and $67.8 million, respectively. Net cash received
for federal and state income taxes during the first three months of 1995 was
$7.6 million and net cash paid for the first quarter of 1994 was $97.5
million.
<PAGE>9 1of2
During the first three months of 1995 and 1994, $4.2 million and $5.9 million,
respectively, of loans, net of charge-offs, were transferred into OREO. Also,
during the first three months of 1994 the Corporation transferred loans and
OREO with a book value of $43.6 million ($30.6 million after related charge-
offs) to assets held for accelerated disposition and sold $12.3 million. 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.
ACCOUNTING FOR LOAN IMPAIRMENT - In the first quarter of 1995, Midlantic
adopted Statement of Financial Accounting Standards ("FAS") No. 114
"Accounting by Creditors for Impairment of a Loan" and FAS No. 118 "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosure."
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 according to the contractual terms of the loan agreement.
Midlantic classifies as impaired loans all nonaccrual loans except those loans
which are excluded from the scope of FAS No. 114, principally consumer
installment loans and residential mortgages and lease financing receivables.
For purposes of comparison, nonaccrual loans excluded from the scope of FAS
No. 114 were considered to be immaterial at December 31, 1994. 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. If the calculated measurement of an
impaired loan is less than the recorded investment in the loan, the deficiency
is recognized through a provision to the allowance for loan losses. FAS No.
118 amended the provisions of FAS No. 114 regarding the recognition of
interest income on impaired loans, allowing banks to substantially use the
methods of income recognition previously in effect. While a loan is
classified as impaired and the future collectibility of the recorded loan
balance is doubtful, collections of interest and principal are generally
applied as a reduction to principal outstanding. When the future
collectibility of the recorded loan balance is expected, interest income may
be recognized on a cash basis. In the case where an impaired loan had been
partially charged off, recognition of interest on a cash basis is limited to
that which would have been recognized on the recorded loan balance at the
contractual interest rate. Cash interest receipts in excess of that amount
are recorded as recoveries to the allowance for loan losses until prior
charge-offs have been fully recovered.
FAS No. 114 also provides for the reclassification of all ISFs outstanding
from OREO to the loan portfolio as nonaccrual loans at their current carrying
value. The reclassification of ISFs to loans has been made for all periods
presented. The Corporation will no longer be required to identify and isolate
future loans that may meet the former criteria for ISF classification.
Accounting policies relating to the allowance for loan losses, charge-offs and
income recognition for impaired loans are consistent with the accounting for
nonaccrual loans. The adoption of FAS Nos. 114 and 118 in the first quarter
of 1995 did not have a material impact on Midlantic's financial condition or
results of operations at the time of adoption and does not materially affect
the comparability of loans, the allowance for loan losses or income with prior
periods.
<PAGE>9 2of2
CARRYING VALUE OF IMPAIRED LOANS (IN THOUSANDS) MARCH 31,1995
_________________________________________________________________________
Commercial and financial $ 68,106
Real estate
Construction and development 9,484
Long-term mortgage 64,093
Loans to individuals (not on an installment basis) 7,594
--------
TOTAL IMPAIRED LOANS $149,277
========
REQUIRED FAS NO. 114 RESERVE $ 23,813
========
At March 31, 1995, impaired loans carried at $102.4 million were valued based
upon discounted cash flows and $46.9 million were valued using the fair value
of collateral. Based on these methods, $23.8 million of the $337.1 million
allowance for loan losses was allocated against $59.1 million of impaired
<PAGE>10 1of2
loans. The remaining impaired loans did not require a specific reserve under
FAS No. 114. The remaining allowance for loan losses, totalling $313.4
million at March 31, 1995, is available to absorb losses in the Corporation's
entire credit portfolio. During the first quarter of 1995, impaired loans
averaged $152.6 million. Interest income recorded on total impaired loans and
received in cash during the first quarter of 1995 was $274 thousand.
See Table X on page 39 for the reconciliation of the allowance for loan losses.
POSTEMPLOYMENT BENEFITS - 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 taxes) or $.14 per fully diluted common share. 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 postemployment benefits are attributable to services
already rendered; if the rights to those benefits accumulate or vest; 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 must nevertheless accrue for any 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 established 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.
Net unrealized holding losses on available-for-sale securities were $3.2
million at March 31, 1995 and $3.1 million at December 31, 1994 and were
included as a component of shareholders' equity.
<PAGE>10 2of2
RECENT EVENTS
_____________
On December 30, 1994, Midlantic announced it had entered into a definitive
agreement to acquire Old York Road Bancorp, Inc. ("Old York"), headquartered
in Willow Grove, Pennsylvania. for an approximate purchase price of $28.3
million, based on the December 31, 1994 closing price of Midlantic's common
stock. Old York's principle subsidiary is Bank and Trust Company of Old York
Road. As of December 31, 1994, Old York had total assets of $231.2 million
and shareholders' equity of $12.8 million. The acquisition will be accounted
for as a purchase and is expected to be consummated by the end of the second
quarter of 1995. Under the terms of the agreement, up to 49 percent of Old
York's common stock will be exchanged for cash at a rate of $10 for each share
of Old York common stock. Old York's shares not exchanged for cash will be
exchanged for Midlantic common stock (.3721 shares of Midlantic common stock
for each share of Old York common stock, subject to adjustment under certain
circumstances). Midlantic currently expects to repurchase from time-to-time
in the open market, outstanding Midlantic common shares equal to the
approximate number of Midlantic common shares estimated to be issued in the
acquisition.
On January 20, 1995, Midlantic acquired from the Resolution Trust Corporation
approximately $126 million in deposits of three branches of Carteret Federal
Savings Bank of New Jersey, located in Newark and Dover, New Jersey, for a
premium of $12.5 million.
<PAGE>11
In April 1995, the Corporation announced that its Board authorized repurchase
of up to five million shares of Midlantic's common stock. The Corporation
expects to repurchase its common shares from time-to-time in the open market
or through privately negotiated transactions. Repurchased common shares will
be added to treasury shares and may be used to meet the requirements of the
Corporation's dividend reinvestment plan, stock-based benefit plans, certain
corporate securities and acquisitions, including the above-mentioned proposed
acquisition of Old York. During the first quarter of 1995, the Corporation
purchased common shares in conjunction with Midlantic's previously announced
intentions to purchase treasury shares to fund the portion of the Old York
acquisition that will be payable in common stock. At March 31, 1995, the
Corporation had repurchased 230 thousand common shares for an aggregate $7.8
million.
<PAGE> 12
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 $53.3 million or $.97 per fully diluted common share
for the three months ended March 31, 1995 compared with net income of $45.8
million or $.84 per fully diluted common share for the corresponding period of
1994. For the first quarter of 1994, income before the cumulative effect of
adoption of Financial Accounting Standards ("FAS") No. 112 "Employers'
Accounting for Postemployment Benefits" was $53.4 million or $.98 per fully
diluted common share and included income tax credits, not available to the
Corporation in 1995, amounting to $20.2 million (see "Income Taxes").
Income before taxes, credit provisions and certain nonrecurring gains or
charges ("core earnings") amounted to $82.3 million in the first quarter of
1995 or nearly 25 percent over the level recorded in the first quarter of
1994. The rise in core earnings reflects higher levels of net interest income
due to increasing yields on earning assets, particularly prime rate-based
loans. The following table summarizes Midlantic's results of operations for
the three months ended March 31, 1995 and 1994:
MAJOR COMPONENTS OF THE RESULTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31
(In thousands) 1995 1994
_________________________________________________________________________
INCOME BEFORE TAXES, CREDIT PROVISIONS
AND NONRECURRING ITEMS ("CORE EARNINGS")
Net interest income $155,306 $137,297
Noninterest income* 45,344 46,066
Noninterest expenses* 118,362 116,815
-------- --------
CORE EARNINGS 82,288 66,548
-------- --------
ADDITIONS
Investment securities gains -- 1,263
Net gains on the sales of OREO 795 1,837
Other nonrecurring noninterest income 3,100 --
DEDUCTIONS
Provision for loan losses 1,500 8,156
Provision for OREO -- 3,365
Other OREO expenses (715) 2,506
-------- --------
Income before income taxes and cumulative
effect of change in accounting principle 85,398 55,621
Income tax expense 32,074 2,268
-------- --------
Income before cumulative effect of
change in accounting principle 53,324 53,353
Cumulative effect of change in
accounting for postemployment benefits in 1994 -- (7,528)
-------- --------
NET INCOME $ 53,324 $ 45,825
======== ========
*For purposes of this table, noninterest income excludes investment securities
gains or losses and other nonrecurring noninterest income, while noninterest
expenses excludes OREO expenses, net.
<PAGE> 13
RECENT ACTIVITIES OF THE CORPORATION (1994 AND 1995)
____________________________________________________
In March 1994, following Midlantic's significant improvements in financial
condition and performance, asset quality and capital ratios, the Federal
Reserve Bank of New York and the Office of the Comptroller of the Currency
terminated the written agreements under which the Corporation and its then
lead bank, Midlantic National Bank ("MNB") had been operating.
In April 1994, the Corporation's Board of Directors (the "Corporation's
Board") declared the first cash dividend to common shareholders (amounting to
$.10 per common share) since the third quarter of 1990. For each subsequent
quarter of 1994, the Corporation successively increased the quarterly dividend
($.13 declared in the third quarter of 1994, $.17 declared in the fourth
quarter of 1994 and $.22 declared in the first quarter of 1995). In the
second quarter of 1995, Midlantic again increased its common dividend to $.32
per share.
In August 1994, Midlantic consolidated its two bank subsidiaries by merging
Continental Bank ("CB") in Pennsylvania into MNB, a New Jersey banking ompany
The combined bank was renamed Midlantic Bank, National Association ("MB").
Also in August 1994, MNB's direct parent, Midlantic Banks Inc., was merged
into Midlantic Corporation ("MC").
In December 1994, Midlantic announced it had entered into a definitive
agreement to acquire Old York Road Bancorp, Inc. ("Old York") headquartered in
Willow Grove, Pennsylvania for an approximate purchase price of $28.3 million,
based on the December 31, 1994 closing price of Midlantic's common stock. As
of December 31, 1994, Old York had total assets of $231 million and
shareholders' equity of $13 million. The acquisition will be accounted for as
a purchase and is currently expected to be completed by the end of the second
quarter of 1995 or shortly thereafter.
In January 1995, Midlantic acquired from the Resolution Trust Corporation
approximately $126 million in deposits of three branches of Carteret Federal
Savings Bank of New Jersey, for a premium of $12.5 million.
In April 1995, the Corporation announced that its Board authorized repurchase
of up to five million shares of Midlantic's common stock. The Corporation
expects to repurchase its common shares from time-to-time in the open market
or through privately negotiated transactions. Repurchased common shares will
be added to treasury shares and may be used to meet the requirements of the
Corporation's dividend reinvestment plan, stock-based benefit plans, certain
corporate securities and acquisitions, including the above-mentioned proposed
acquisition of Old York.
<PAGE>14
RESULTS OF OPERATIONS
FIRST QUARTER 1995 VS. FIRST QUARTER 1994
THREE MONTHS ENDED MARCH 31, 1995 VS. THREE MONTHS ENDED MARCH 31, 1994
NET INTEREST INCOME
___________________
On a tax-equivalent basis, net interest income ("NII") of $159.0 million
exceeded that of the first quarter of 1994 by $20.9 million or 15.1 percent.
<TABLE>
NET INTEREST INCOME/NET INTEREST MARGIN
<CAPTION> THREE MONTHS ENDED
MARCH 31
(Dollars in thousands) 1995 1994 Variance
_____________________________________________________________________________________
<S> <C> <C> <C>
Net interest income (actual) $155,306 $137,297 $18,009
Net interest income (tax-equivalent basis) 158,968 138,099 20,869
Net interest margin (actual) 5.23% 4.44% .79%
Net interest margin (tax-equivalent basis) 5.36 4.46 .90
________ ________ _______
</TABLE>
The improvement in NII for the three month period ended March 31, 1995 was due
to higher loan and investment security yields coupled with a larger proportion
of higher-yielding investment securities to money market investments. These
factors more than offset the negative influence of rising funding costs and a
reduction in the overall volume of interest-earning assets. While funding
costs, in general, began to rise with market rates beginning in mid-1994,
earning asset yields increased in greater amounts due to a large base of
market rate assets and the timing of the Corporation's purchase of a
substantial amount of investment securities.
Average interest-earning assets declined $521 million or 4.1 percent for the
three months ended March 31, 1995 when compared with average interest-earning
assets for the corresponding period of 1994. This decline primarily reflected
a $935 million decrease in deposits, largely retail certificates of deposit.
The decline in funding was accompanied by a contraction in average loans of
$306 million for the quarter ended March 31, 1995, compared to the same period
of last year. Real estate loans fell by $425 million or 13.8 percent when
comparing average balances for the first three months of 1995 and 1994. This
was largely a result of the sale, charge-off or workout of problem credits and
the Corporation's continuing policy of exiting transactional (in contrast to
relationship-based) real estate lending. The decline was partially offset by
a $185 million or 8.0 percent rise in average consumer loans during the same
period. Other interest-earning assets, on average, fell by $215 million.
<PAGE>15 1of2
AVERAGE BALANCES
THREE MONTHS ENDED
MARCH 31
(In millions) 1995 1994 Variance
_____________________________________________________________________________
Interest-earning assets $12,033 $12,554 $(521)
Interest-bearing sources of funds 8,963 9,775 (812)
Noninterest-bearing sources of funds supporting
interest-earning assets* 3,070 2,779 291
_______ _______ _____
*Primarily comprised of noninterest-bearing demand deposits and shareholders'
equity.
The net interest margin on a tax-equivalent basis increased 90 basis points in
the first quarter of 1995, as compared to the same period of 1994, primarily
reflecting (i) the relatively favorable impact of the increase in market
interest rates on asset yields over funding costs due to the Corporation's
large holdings of prime rate-based earning assets and due to a decline in
nonaccrual loans and (ii) a 10.5 percent rise in noninterest-bearing sources
of funds (primarily reflecting a rise in shareholders' equity) supporting the
earning-asset portfolio.
PROVISION FOR LOAN LOSSES
_________________________
The provision for loan losses was $1.5 million and $8.2 million for the first
quarter of 1995 and 1994 respectively. Based upon Midlantic's methodology
which assists in the establishment of the allowance for loan losses as
discussed in the "Asset Quality" and "Allowance for Loan Losses" sections of
this report, Midlantic believes that its allowance for loan losses was
adequate at March 31, 1995 to absorb estimated losses in its credit
portfolios.
NONINTEREST INCOME
__________________
NONINTEREST INCOME
THREE MONTHS ENDED
March 31
(In thousands) 1995 1994 Variance
__________________________________________________________________________
Trust income $11,228 $ 9,782 $ 1,446
Service charges on deposit accounts 18,845 18,946 (101)
Investment securities gains -- 1,263 (1,263)
Factoring commissions and fees 1,969 1,717 252
Gains on the disposition of assets
and other nonrecurring income 3,100 -- 3,100
Miscellaneous 13,302 15,621 (2,319)
------- ------- -------
Total noninterest income $48,444 $47,329 $ 1,115
======= ======= =======
Higher trust income for the three months ended March 31, 1995 compared with
the first quarter of 1994 benefitted from increased fees from sales of mutual
funds and annuities, some of which may be associated with higher operating
expenses, particularly sales commissions that are reflected in salaries and
benefits expenses.
<PAGE>15 2of2
For the three months ended March 31, 1994, investment securities gains on the
sale of available-for-sale securities were $1.3 million. The Corporation did
not recognize any securities gains or losses in the first quarter of 1995 (see
Table VI).
The $252 thousand or 14.7 percent rise in factoring commissions and fees
reflects a higher level of business activity.
<PAGE>16 1of2
In the first quarter of 1995, Midlantic recognized $3.1 million of gains on
the sale of loans including the sale of assets held for accelerated
disposition.
The $2.3 million year-to-year decline in miscellaneous noninterest income for
the first quarter of 1995 primarily reflects the absence in 1995 of interest
revenues that had been received in 1994 from assets held for accelerated
disposition prior to their sale.
NONINTEREST EXPENSES
____________________
NONINTEREST EXPENSES
THREE MONTHS ENDED
MARCH 31
(In thousands) 1995 1994 Variance
____________________________________________________________________________
Salaries and benefits $ 62,423 $ 56,214 $ 6,209
Net occupancy 10,957 12,235 (1,278)
Equipment rental and expense 6,927 6,925 2
Other real estate owned, net (1,510) 4,034 (5,544)
FDIC assessment charges 5,944 7,194 (1,250)
Legal and professional fees 7,988 9,875 (1,887)
Miscellaneous 24,123 24,372 (249)
-------- -------- -------
Total noninterest expenses $116,852 $120,849 $(3,997)
======== ======== =======
Salary and benefit expenses increased $6.2 million or 11.0 percent for the
first quarter of 1995. The increase reflected approximately 300 additional
full-time equivalent employees primarily in customer service and sales
positions, including commissions on sales of mutual funds and annuities paid
to some of these employees.
Expenses for premises and fixed assets (net occupancy and equipment rental
expenses) declined $1.3 million in the first quarter of 1995 primarily
reflecting a decline in depreciation and lower snow and ice removal costs,
which were particularly heavy in early 1994.
Expenses associated with OREO decreased $5.5 million for the first quarter of
1995 compared to the corresponding period of 1994. A lower level of
writedowns to adjust the carrying value of OREO properties as well as
significantly lower OREO operating expenses led to the reduction in OREO
expenses. For the first quarter of 1995, rental income and net gains on the
sale of OREO exceeded operating costs.
The Federal Deposit Insurance Corporation ("FDIC") assessment decreased by
$1.3 million or 17.4 percent for the three months ended March 31, 1995
compared to the first quarter of 1994 largely as a result of a decline in the
premium rate assessed against Midlantic's bank subsidiary and a decrease in
deposit funding.
<PAGE>16 2of2
The decline in legal and professional fees of $1.9 million or 19.1 percent for
the first quarter of 1995, reflects, in part, lower loan workout expenses
which is the result of the Corporation's declining level of problem assets.
Also, during the fourth quarter of 1994, Midlantic discontinued utilizing the
services of an outside third party to assist in the origination of loans to
automobile purchasers that are originated through the selling dealer.
Midlantic now originates such loans directly through various automobile
retailers with which it has a customer relationship. Prior to this change,
fees amounting to approximately $2.5 million on an annualized basis were
recognized as professional fees.
<PAGE>17
INCOME TAXES
____________
Midlantic recorded income tax expenses of $32.1 million and $2.3 million in
the first quarter of 1995 and 1994, respectively. The tax provision for the
first quarter of 1995 reflected the Corporation's federal and state income
taxes on operating earnings without benefit of significant income tax credits.
Tax expenses recorded in the first quarter of 1994 were comprised of tax
benefits of $20.2 million, related to a reduction in the FAS No. 109 tax
valuation reserve, and $22.5 million of federal and state income tax expenses
on operating earnings. The tax valuation reserve adjustments were the result
of Midlantic's assessment of the future realization of its deferred tax asset
based upon estimated future profitability. At December 31, 1994, the
Corporation determined that a tax valuation reserve was no longer necessary.
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. 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; if the rights
to those benefits accumulate or vest; if payment of the benefits is probable;
and if the amount of the benefits can be reasonably estimated. If the four
criteria mentioned cannot be met, the employer must nevertheless 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.
<PAGE>18 1of2
FINANCIAL CONDITION
MARCH 31, 1995 VS. DECEMBER 31, 1994
ASSET QUALITY
_____________
As of March 31, 1995, nonaccrual loans and OREO totalled $215 million or 1.6
percent of total assets compared to $248 million or 1.9 percent at the end of
1994. At March 31, 1995, total nonaccrual loans amounted to $155 million of
which $149 million were determined by the Corporation to be impaired under the
guidelines pursuant to FAS No. 114 (see "Notes to Consolidated Financial
Statements - Accounting for loan impairment"). Loans are generally reported
as nonaccrual (and with limited exception as impaired, pursuant to the
requirements of FAS No. 114) if they are past due as to maturity or payment of
principal and/or interest for a period of more than ninety days. Since
December 31, 1994, nonaccrual loans have fallen by $29 million or 15.8
percent, while OREO has declined by $4 million or 6.7 percent. The levels of
nonaccrual assets are significantly influenced by national and regional
economic conditions.
Changes in nonaccrual loan totals are summarized in Table XI. At March 31,
1995, nonaccrual loans were primarily comprised of commercial and financial
loans (44.3 percent of the total) and long-term commercial mortgages (41.5
percent of the total). The relationship of each of these categories of
nonaccrual loans to its respective loan portfolio was 2.2 percent commercial
and financial and 4.0 percent long-term commercial mortgage.
Construction and development loans and long-term commercial mortgage loans
("commercial real estate loans") that were nonaccrual at quarter-end 1995
collectively amounted to $74 million, of which 22.5 percent comprised
industrial/warehouse, 21.9 percent residential properties and 11.3 percent
retail businesses and shopping centers (see Tables VIII and IX). Total
commercial real estate loans continued to contract during the past twelve
months as indicated in the following table:
COMMERCIAL REAL ESTATE LOANS
MARCH 31 Dec. 31 March 31
For the Quarter Ended (In millions) 1995 1994 1994
____________________________________________________________________________
Long-term commercial mortgage loans $1,611 $1,576 $1,651
Construction and development loans 510 598 803
------ ------ ------
Total commercial real
estate loans $2,121 $2,174 $2,454
====== ====== ======
The decline in total commercial real estate loans was primarily due to
principal paydowns, the transfer of loans to OREO, the transfer of loans to
assets held for accelerated disposition and loan charge-offs.
<PAGE>18 2of2
Midlantic has restructured certain loans in instances where a determination
was made that greater economic value would be realized under new terms than
through foreclosure, liquidation or other disposition. Such loans are
accounted for in accordance with generally accepted accounting principles
("GAAP"). 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 amounted to $38 million at March 31, 1995
compared with $60 million at year-end 1994 (see Table XII) The effective
interest rate as calculated under GAAP on these renegotiated loans is 9.13
<PAGE>19
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. At both March 31, 1995 and December 31, 1994,
the average current yield and the effective interest rate on renegotiated
loans were substantially the same. During the first three months of 1995,
Midlantic did not restructure any loans that would have been accounted for
under the provisions of FAS No. 114.
OREO, which represents real property for which the Corporation has obtained
legal title, amounted to $60 million at March 31, 1995, compared with the
December 31, 1994 level of $64 million (which has been restated to exclude in-
substance foreclosures). Pursuant to FAS No. 114, on January 1, 1995, in-
substance foreclosures were reclassified from OREO to loans. Midlantic also
elected to reclassify all appropriate historical data (see "Notes to Financial
Statements - Accounting for loan impairment"). The decline in OREO since
December 31, 1994 primarily reflected sales of OREO properties of $9 million,
and additions to OREO totalling $4 million (see Table XV).
Accruing loans past due ninety days or more as to interest or principal
payments which do not meet the criteria for loan impairment under FAS No. 114
(in 1995) amounted to $31 million and $30 million at March 31, 1995 and December
31, 1994, respectively.
As of the end of the first quarter of 1995, Midlantic had identified an
additional $19 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. These loans have not
been classified as nonaccrual nor did they meet the specific criteria for loan
impairment under FAS No. 114.
At March 31, 1995, Midlantic held $6 million of obligations of states and
political subdivisions in its available-for-sale investment portfolio for
which it has suspended interest accruals.
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. As defined by bank regulators, 12 HLTs in
the amount of $90 million were outstanding at March 31, 1995 and Midlantic is
committed to lend an additional $44 million to these HLT borrowers. At
December 31, 1994, Midlantic had 13 reportable HLT outstandings amounting to
$85 million and unfunded commitments to HLT borrowers of $52 million.
Midlantic's entire HLT exposure is comprised of senior debt. HLTs comprised
1.1 percent of total loans at March 31, 1995 and their contribution to total
revenue was modest.
The Corporation's foreign outstandings (more than 80 percent representing
money market assets) at March 31, 1995, all of which were dollar denominated,
amounted to $239 million or 1.8 percent of total consolidated assets as
compared with $151 million or 1.1 percent at year-end, 1994. At March 31,
1995, outstandings to Japan (substantially all money market assets) amounted
to $139 million or 1.0 percent of total assets. At December 31, 1994, no
individual country exposure exceeded .75 percent of total assets.
<PAGE>20
ALLOWANCE FOR LOAN LOSSES
_________________________
Midlantic considers various factors in determining the appropriate level of
the allowance for loan losses ("ALL"), 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. Such factors as the condition of the national and regional
economies and the level and trend of interest rates are also considered.
Beginning in 1995, the recognition of impaired loans and specific allowances
that must be determined for such loans are also factored into the
Corporation's determination of an adequate ALL (see "Notes to Financial
Statements - Accounting for loan impairment"). Additions to the ALL are made
through provisions charged against current operations and through any
recoveries on loans previously charged off. Midlantic's ALL amounted to 4.10
percent and 4.23 percent of total loans, net of unearned income, at March 31,
1995 and December 31, 1994, respectively. At March 31, 1995, the ratio of the
ALL to nonaccrual loans was 218 percent compared with 191 percent at December
31, 1994.
In connection with the Corporation's bulk sale of distressed real estate
assets, during the first three months of 1994, $8 million was charged-off on
loans that had been designated during this period as held for accelerated
disposition.
Midlantic's net charge-offs of $14 million for the first three months of 1995
compares to $13 million for the corresponding period of 1994 (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 .69 percent, as compared with .64 percent for
the first three months of 1994 and .80 percent for the year ended December 31,
1994. Net charge-offs in 1995 principally reflected net losses incurred on
commercial and financial loans ($9 million, of which $7 million represented
factoring receivables), loans to individuals ($3 million) and commercial real
estate loans ($2 million).
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
ALL. 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 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 ALL as of March 31, 1995 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. Management believes that provisioning levels in the
near-term will remain low.
<PAGE>21 1of2
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
(see "Notes to Consolidated Financial Statements - Accounting for investments
in debt and equity securities").
At March 31, 1995, investment securities totalled $3.3 billion, up $533
million or 19 percent from the $2.8 billion recorded at December 31, 1994.
The investment securities portfolio at March 31, 1995 included $2.5 billion of
held-to-maturity securities, $778 million of available-for-sale ("AFS")
securities and $9 million of trading securities. On March 31, 1995, Midlantic
recorded, as a component of shareholders' equity, an unrealized holding loss
on AFS securities of $3.2 million, compared to a $3.1 million net holding loss
recorded at the end of 1994. Upon adoption of FAS No. 115 in the first
quarter of 1994, Midlantic had recorded a $1.9 million gain on AFS securities.
Increasing interest rates (which leveled somewhat during the first quarter of
1995), particularly on U.S. government securities, resulted in the unrealized
holding losses.
Net unrealized depreciation on Midlantic's held-to-maturity securities
portfolio, amounted to $25.1 million at March 31, 1995, comprised of gross
unrealized losses of $42.9 million and gross unrealized gains of $17.8 million
(see Table V). At December 31, 1994, net unrealized depreciation on the
Corporation's held-to-maturity portfolio amounted to $89.7 million, comprised
of gross unrealized losses of $90.7 million and gross unrealized gains of $974
thousand. The unrealized depreciation on the held-to-maturity portfolio in
management's judgment is a temporary decline caused by the rise in market
interest rates. In light of management's intention to hold these securities
to maturity, such depreciation is not expected to permanently affect the
ultimate amount realizable on these securities at maturity.
At March 31, 1995, the held-to-maturity securities portfolio was primarily
comprised of $851 million of federal agency mortgage-backed securities (with a
weighted average maturity of less than six years) and $1.6 billion of U.S.
Treasury securities with a remaining average maturity of approximately 2.4
years. The AFS securities portfolio consisted of $719 million of U.S.
Treasury obligations with a remaining average maturity of approximately 1.5
years and debt, equity and state and municipal securities totalling $59
million.
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, reverse
repurchase agreements and commercial paper. At March 31, 1995, money market
investments totalled $956 million or 7.7 percent of total interest-earning
assets compared with $1.1 billion or 9.2 percent of interest-earning assets at
year-end 1994. Midlantic anticipates that over time a portion of these liquid
assets will be utilized to fund loan demand and other longer-term investments.
<PAGE>21 2of2
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 institution, 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 various alternative balance sheet structures and
under a variety of interest rate scenarios. The amount of such risk as so
determined is typically maintained at a manageable percentage of net interest
income and capital, as set by policy.
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
<PAGE>22
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 calculates the
excess of assets or liabilities (including interest rate swaps) outstanding at
March 31, 1995, that are due to mature, to be repriced, or assumed to be
repriced in various time intervals. On March 31, 1995, Midlantic estimated
that slightly more liabilities than assets were repricing or maturing during
the subsequent one year period. This estimate includes certain assumptions
about the timing of rate changes on liabilities without stated maturities and
the effect on NII of changing levels of noninterest-bearing funding such as
demand deposit balances. The actual or assumed amount of liabilities in
excess of assets subject to maturing or repricing within one year of March 31,
1995 was approximately $100 million, an amount which management believes would
result in a negligible change in NII if interest rates were to rise or fall by
amounts similar to recent years. On the other hand, greater market interest
rate volatility would tend to have a more significant impact on prospective
NII. Midlantic manages its interest sensitivity position with the 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
March 31, 1995 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). At March 31, 1995,
Midlantic also held $300 million (notional value) of interest-rate swaps for
which it pays an interest rate tied to the prime rate and receives LIBOR.
Such swaps are utilized as hedges against the risk that funding costs might
rise faster than the prime rate on the underlying hedged prime rate-based
commercial mortgage loans. Midlantic did not hold any interest rate swap
contracts for trading purposes.
<PAGE>23
INTEREST RATE SWAPS
MARCH 31, 1995
Weighted Weighted Net Exchange
Average Average Rate
Notional Fixed Variable Favorable
(In millions) Amounts Rate Rate (Unfavorable)
____________________________________________________________________________
Receive a fixed rate of interest
Hedging commercial and
financial loans $1,325 5.92% 6.23% (.31)%
Hedging construction and
development loans 25 5.39 6.38 (.99)
Hedging long-term
commercial mortgage loans 300 5.83 6.29 (.46)
Hedging retail certificates
of deposit 725 5.64 6.32 (.68)
Hedging money market
investments 200 7.23 6.25 .98
Pay a fixed rate
of interest (all hedging
U.S. government agency
securities) 599 4.68 6.28 1.60
Receive and pay a
variable rate of
interest (all hedging 300 N/A 5.25 (receive)}
long-term commercial 6.46 (pay) }(1.21)
mortgage loans)
====== ==== ==== ====
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 March 31, 1995, Midlantic did not have
any interest rate swaps tied other than to a fixed rate, LIBOR or the 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. Midlantic is not a party
to any leveraged derivative contract.
INTEREST RATE SWAP CONTRACTS-ACTIVITY DURING 1995
(In millions)
________________________________________________________________________
Notional amount of interest rate
swaps at December 31, 1994 $3,449
New swaps (all receiving a fixed interest rate) 425
Matured swaps (all receiving a fixed interest rate) 400
______
Notional amount of interest rate
swaps at March 31, 1995 $3,474
======
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 March 31, 1995
were associated with organizations having securities rated as investment grade
by independent rating agencies.
<PAGE<24> 1of2
As of March 31, 1995, the estimated credit exposure associated with interest
rate swap contracts was approximately $32 million representing those swaps
that show a positive (favorable) mark-to-market position. Management believes
that the swap contracts it had in place as of March 31, 1995 have been
effective tools in the control of interest rate risk.
The following table describes the direct impact of interest rate swaps on NII.
During the periods indicated, Midlantic used such swaps exclusively as one of
several tools to manage interest rate risk. Any net benefit from these
interest rate contracts is intended as an offset to changing levels of NII
related to specific assets or liabilities on the Corporation's balance sheet.
Therefore, the net interest income from swap contracts alone (see table below)
is not indicative of the effectiveness of the hedged position as a whole.
IMPACT OF INTEREST RATE SWAPS ON NET INTEREST INCOME
THREE MONTHS ENDED
MARCH 31
Favorable (Unfavorable)
(In thousands) 1995 1994
___________________________________________________________________________
Interest income $ 107 $ 8,115
Interest expense (1,069) 6,146
------- -------
Net interest income $ (962) $14,261
======= =======
MATURITY DISTRIBUTION AND SUMMARY OF FAIR VALUES
OF SWAP CONTRACTS IN PLACE AS OF
MARCH 31, 1995
Notional Amounts
__________________________________________
Receive Pay Receive and
(In millions) Fixed Fixed Pay Variable Total
_____________________________________________________________________________
1995 - Second and third quarter $ -- $ -- $ -- $ --
1995 - Fourth quarter 1,000 -- -- 1,000
1996 900 -- 300 1,200
1997 250 599 -- 849
1998 and after 425 -- -- 425
-------- ------- ------- -------
Total interest rate swaps $ 2,575 $ 599 $ 300 $ 3,474
======== ======= ======= =======
FAIR VALUE OF INTEREST RATE SWAPS
(In thousands)
_____________________________________________________________________________
Contracts with a positive
mark-to-market position $ 563 $31,012 $ -- $31,575
Contracts with a negative
mark-to-market position (26,755) -- (3,063) (29,818)
-------- ------- ------- -------
Net fair value of interest
rate swaps $(26,192) $31,012 $(3,063) $ 1,757
======== ======= ======= =======
<PAGE>24 2of2
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 company and its major 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.
<PAGE>25 1of2
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 possible future growth in loans and other longer-term interest-earning
assets, 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.
LIQUIDITY RATIOS
MARCH 31 December 31 March 31
1995 1994 1994
___________________________________________________________________________
Liquidity ratio (1) 31.75% 30.72% 28.60%
Funding ratio (2) (2.52) (7.77) (11.87)
Total loans, net of unearned
income, as a % of total deposits 77.16 76.40 74.87
Core deposits as a % of total
loans, net of unearned income 122.70 125.29 128.93
Unfunded loan commitments as a
% of loans outstanding 32.49 33.00 32.29
======== ======= ======
(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 percent of investment securities due in more than
one year and total loans, net of unearned income.
At both March 31, 1995 and December 31, 1994, Midlantic had unfunded loan
commitments outstanding of $2.7 billion. Takedowns on commitments have been
occurring during the normal course of business at levels that have not
adversely affected the Corporation's liquidity.
PARENT COMPANY
MC requires sources of funds to meet contractual obligations, including
servicing long-term debt, and cash dividend payments on the Corporation's
preferred and common stock.
MC's 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 $300 million at March
31, 1995. A portion of MC's liquid assets will be used to fund the
Corporation's repurchase of up to five million of its common shares. See
"Recent Activities of the Corporation (1994 and 1995)". Ongoing parent
company operating and interest expenses and dividends are expected to be fully
funded from dividend payments and management fees from MB.
<PAGE>25 2of2
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 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 MB and its predecessors, MNB and CB,
<PAGE>26
have significantly increased. Federal bank regulators utilize risk-based and
leverage ratios to assess capital adequacy. As of March 31, 1995, Midlantic
reported a tier 1 risk-based capital ratio of 13.58 percent, a total risk-
based capital ratio (tier 1 plus tier 2 capital) of 17.77 percent and a
leverage ratio of 9.43 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 March 31, 1995, MB had a tier 1 risk-based capital ratio of 14.17
percent and a total risk-based capital ratio of 15.45 percent. MB's leverage
ratio as of March 31, 1995 was 10.04 percent.
CAPITAL RATIOS
MARCH 31 Dec. 31 Sept. 30 June 30 March 31
1995 1994 1994 1994 1994
_____________________________________________________________________________
Tier 1 risk-based
Midlantic 13.58% 13.07% 12.01% 10.85% 9.95%
MB 14.17 14.12 13.20 12.34 11.54
Total risk-based
Midlantic 17.77 17.22 16.10 14.87 13.98
MB 15.45 15.40 14.48 13.62 12.82
Leverage
Midlantic 9.43 9.43 8.87 8.17 7.35
MB 10.04 10.39 9.94 9.27 8.52
_____ _____ _____ _____ _____
In April 1994, the Corporation's Board approved a quarterly cash dividend on
Midlantic's common stock of $.10 per common share. Subsequently, in July 1994
and October 1994, the Corporation's Board declared quarterly cash dividends of
$.13 and $.17 per common share, respectively. In 1995, quarterly cash
dividends declared on Midlantic's common stock continued to increase to $.22
(declared in January) and $.32 (declared in April). See "Recent Activities of
the Corporation (1994 and 1995)."
As mentioned in "Recent Activities of the Corporation (1994 and 1995)",
Midlantic announced in April 1995, that its Board authorized repurchase of up
to five million shares of its common stock.
<PAGE>27
LINE OF BUSINESS RESULTS
________________________
Midlantic is organized and managed along its major lines of business:
Commercial, Retail Banking and Trust and Financial Management Services. The
Corporation separately accounts for these activities in order to facilitate
management's analysis of performance by defined business lines. Unlike
financial accounting, which has been formalized by generally accepted
accounting principles as set by recognized rulemaking bodies, cost and revenue
allocations used to develop business line results are less standardized. The
methodologies employed for these allocations are part of an evolving process
and are under periodic review for changing circumstances. A summary of
operating results for the three months ended March 31, 1995 and 1994 by major
business line is presented in the "Line of Business Results" table on the
following page.
Midlantic defines its major business lines as follows:
Commercial: Responsible for managing relationships with commercial
businesses, real estate developers and financial
institutions. Services delivered to this market segment
include credit-based products such as secured and
unsecured loans, commercial real estate financing,
asset-based finance and factoring, as well as cash
management and account information services, trade
finance and foreign exchange.
Retail Banking: Responsible for delivering products and services to the
consumer, community and small business market segments
including home finance, auto finance and other lending
products as well as deposit and other investment
services.
Trust and Financial
Management Services: Responsible for delivering personal and corporate trust
services to the wealth, affluent and business markets.
Provides asset management services for corporate benefit
plans, acts as manager for the Compass Mutual Funds
(Midlantic's proprietary mutual fund family) and manages
Midlantic Securities Corp., a subsidiary engaged in
discount brokerage services.
All Other Activities: Income and expenses associated with the Corporation's
investment portfolio and money market investments plus
unallocated revenues and expenses.
Corporate overhead, processing and support costs are allocated to each
business line. A matched maturity transfer pricing system is used to allocate
interest income and interest expense. The loan loss provision and allowance
for loan losses are allocated based on the level of outstandings, evaluations
of certain loan portfolios within the business line, credit loss experience
and other factors. Shareholders' equity is allocated based on levels of fixed
cost, perceived levels of risk within the business lines asset mix and other
factors.
<PAGE>28 1of2
<TABLE>
LINE OF BUSINESS RESULTS
<CAPTION>
THREE MONTHS ENDED Three Months Ended
MARCH 31, 1995 March 31, 1994
NET AVERAGE Net Average
(In thousands) INCOME ASSETS ROA Income Assets ROA
_______________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Commercial $13,729 $ 4,885,784 1.14% $ 9,114 $ 5,660,789 .65%
Retail Banking 30,261 4,194,316 2.93 17,746 3,931,435 1.83
Trust and Financial
Management Services 1,709 33,218 N/M 2,409 35,958 N/M
All Other Activities 7,625 4,012,738 .77 (3,648)* 4,212,634 (.35)
FAS #109 Tax Benefits -- -- -- 20,204 -- --
------- ----------- ---- ------- ----------- ----
Total $53,324 $13,126,056 1.65% $45,825 $13,840,816 1.34%
======= =========== ==== ======= =========== ====
<FN>
ROA - Return on average assets (net income as a percent of average assets)
N/M - Not Meaningful
* - Includes a $7.528 million charge representing the cumulative effect
of the change in accounting for postemployment benefits.
</TABLE>
Comments regarding the 1995 results follow.
Commercial
__________
Commercial loans on average decreased by $775 million or 13.7 percent from
first quarter 1994 to first quarter 1995. This decline primarily reflects the
bulk sales of real estate assets and other actions by management to reduce
problem assets along with the runoff of construction loan outstandings and
modest demand for new lending, although in recent months such demand appears
to be increasing. Absent the decline in loan balances due to continuing asset
quality improvement efforts, commercial loans would have reflected a small
increase similar to Midlantic's regional peers. Most loan originations have
been with customers in the Corporation's market area (Midlantic has generally
not originated or purchased loans from borrowers located outside its market).
During the first quarter of 1995, MB signed an agreement with Morgan Guaranty
Trust Company of New York ("Morgan") to provide long-term commercial mortgage
financing to Midlantic's clients. Under the terms of the agreement, MB will
originate and service commercial mortgage loans, which Morgan will package,
securitize and sell to investors.
While average volume declined during the past year, the $4.6 million or 50.1
percent rise in net income reflected the favorable impact on prime-based loans
of the increase in market interest rates together with the Corporation's
continuing efforts to control operating expenses.
Retail Banking
______________
In addition to loans and other consumer-related interest-earning assets, the
Retail Banking group is credited with interest income on deposit funding it
generates but which is employed by other business lines. Therefore, part of
the income credited to the consumer business line is not related to the
average asset base it specifically manages. Consequently, the ROA calculated
in the table above is high relative to the commercial business lines which
employ some of the funding generated by the consumer group. An adjusted ROA
to include all Retail Banking assets plus the funding it generates for other
business lines amounted to 1.14 percent in 1995 as compared to .62 percent in
the first quarter of 1994.
<PAGE>28 2of2
Average consumer loans increased by $263 million or 6.7 percent from first
quarter 1994 reflecting increasing penetration of Midlantic's targeted retail
markets. Efforts to raise consumer deposits in recent periods have focused on
relationship customers (customers who receive more than one bank service) and
Midlantic believes that this effort is beginning to succeed.
<PAGE<29
Trust and Financial Management Services
_______________________________________
Assets under management at March 31, 1995 amounted to $11.4 billion at market
values. Revenues in this business line are derived from estate management
fees, investment advisory fees and service fees such as those generated by
discount brokerage activities. The decline in net income for the three months
ended March 31, 1995 reflected higher salary and benefits (primarily
commissions) paid to sales personnel to promote mutual fund and annuity sales.
All Other Activities
____________________
The bulk of the assets in this group are associated with the money market and
investment securities portfolios.
<PAGE>30
MIDLANTIC CORPORATION AND SUBSIDIARIES
STATISTICAL TABLES TO
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<PAGE>31
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE I - ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAX-EQUIVALENT BASIS)
(In thousands)
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, 1995 VS. 1994 VOLUME(a) RATE(a)(b) TOTAL
_______ _______ _______
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-bearing deposits
in other banks $(3,985) $ 2,211 $(1,774)
Other short-term investments (5,993) 5,618 (375)
Investment securities (c) 8,414 14,985 23,399
Commercial and financial loans(d)(e)(f) (1,321) 8,397 7,076
Real estate loans(d)(e)(f) (8,640) 8,454 (186)
Loans to individuals(d)(e)(f) 3,787 3,179 6,966
_______ _______ _______
Total interest-earning assets (7,738) 42,844 35,106
_______ _______ _______
INTEREST-BEARING SOURCES OF FUNDS USED TO
FINANCE INTEREST-EARNING ASSETS
Domestic savings and time deposits (4,504) 16,067 11,563
Overseas branch deposits 15 61 76
Short-term borrowings (1,227) 3,898 2,671
Long-term debt (82) 9 (73)
_______ _______ _______
Total interest-bearing sources
of funds used to finance
interest-earning assets (5,798) 20,035 14,237
_______ _______ _______
CHANGE IN NET INTEREST INCOME $(1,940) $22,809 $20,869
======= ======= =======
<FN>
(a) 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.
(b) Includes the effect of interest rate swap positions.
(c) Includes a net increase of $1.022 million adjusted to a tax-equivalent basis,
using a 35 percent federal income tax rate.
(d) Includes a net increase of $1.838 million adjusted to a tax-equivalent basis, using a
35 percent federal income tax rate.
(e) Includes income from loan fees which is not significant.
(f) Includes nonaccrual loans.
</TABLE>
<PAGE>32 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 MARCH 31, 1995 MARCH 31 1994
_____________________________ ______________________________
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
___________ ________ ____ ___________ ________ ____
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Interest-bearing deposits $ 221,408 $ 3,190 5.84% $ 568,474 $ 4,964 3.54%
Other short-term investments 631,729 9,422 6.05 1,194,109 9,797 3.33
U.S. Treasury securities 2,130,952 33,202 6.32 1,260,779 12,056 3.88
Obligations of U.S.
government agencies 862,611 15,413 7.25 1,041,042 14,533 5.66
Obligations of states and
political subdivisions(1) 24,847 538 8.78 14,372 269 7.59
Other securities 61,898 2,042 13.38 69,410 938 5.48
___________ ________ ____ ___________ ________ ____
Total investment securities 3,080,308 51,195 6.74 2,385,603 27,796 4.73
___________ ________ ____ ___________ ________ ____
Commercial and financial loans 2,944,773 66,113 9.11 3,010,851 59,037 7.95
Real estate loans 2,657,558 58,257 8.89 3,082,140 58,443 7.69
Loans to individuals 2,497,547 52,679 8.55 2,312,681 45,713 8.02
___________ ________ ____ ___________ ________ ____
Total loans(1)(2)(3)(4) 8,099,878 177,049 8.86 8,405,672 163,193 7.87
___________ ________ ____ ___________ ________ ____
Total interest-earning
assets 12,033,323 240,856 8.12 12,553,858 205,750 6.65
___________ ________ ____ ___________ ________ ____
Noninterest-earning assets
Cash and due from banks 749,747 773,911
Other assets 693,729 914,794
Allowance for loan losses (350,743) (401,747)
___________ ___________
Total noninterest-earning
assets 1,092,733 1,286,958
___________ ___________
Total assets $13,126,056 $13,840,816
___________ ___________
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities
Domestic savings and time
deposits $ 8,005,391 65,236 3.30 $ 8,671,784 53,673 2.51
Overseas branch deposits 11,380 151 5.38 9,696 75 3.14
Short-term borrowings 573,611 7,914 5.60 717,393 5,243 2.96
Long-term debt 372,987 8,587 9.34 376,563 8,660 9.33
___________ ________ ____ ___________ ________ ____
Total interest-bearing
liabilities 8,963,369 81,888 3.71 9,775,436 67,651 2.81
___________ ________ ____ ___________ ________ ____
<PAGE>32 2of2
Noninterest-bearing liabilities
and shareholders' equity
Demand deposits 2,598,011 2,774,197
Other liabilities 170,567 147,802
___________ ___________
Total noninterest-bearing
liabilities 2,768,578 2,921,999
___________ ___________
Shareholders' equity 1,394,109 1,143,381
___________ ___________
Total liabilities and
shareholders' equity $13,126,056 $13,840,816
___________ ___________
NET INTEREST INCOME $158,968 $138,099
======== ========
INTEREST INCOME AS A % OF
AVERAGE INTEREST-EARNING ASSETS 8.12% 6.65%
==== ====
INTEREST EXPENSE AS A % OF
AVERAGE INTEREST-EARNING ASSETS 2.76% 2.19%
==== ====
NET INTEREST MARGIN (5) 5.36% 4.46%
==== ====
<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
(1) Interest income is reflected on a tax-equivalent basis using a 35 percent federal
income tax rate. The tax-equivalent adjustment for investment securities amounted
to $1.113 million and $91 thousand for the three months ended March 31, 1995 and 1994,
respectively. The tax-equivalent adjustment for loans amounted to $2.549 million
and $711 thousand for the three months ended March 31, 1995 and 1994, respectively.
(2) Includes loan fees. Such income is not significant.
(3) Includes nonaccrual loans.
(4) Net of unearned income.
(5) Net interest margin is net interest income (on a tax-equivalent basis) as a percent
of average interest-earning assets. On an actual basis (not on a tax-equivalent
basis) net interest margin was 5.23 percent and 4.44 percent for the three months
ended March 31, 1995 and 1994, respectively.
</TABLE>
<PAGE>34 1of2
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE III - INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES
WITH RESULTANT INTEREST AND AVERAGE RATES
(In thousands)
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
FOR THE THREE MONTHS ENDED 1995 1994 1994 1994 1994
___________ ___________ ___________ __________ ___________
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Interest-bearing deposits
Average balance $ 221,408 $ 286,183 $ 395,985 $ 490,166 $ 568,474
Interest income 3,190 3,604 4,313 4,705 4,964
Average rate 5.84% 5.00% 4.32% 3.85% 3.54%
Other short-term
investments
Average balance $ 631,729 $ 1,099,417 $ 1,375,525 $ 1,311,013 $ 1,194,109
Interest income 9,422 14,167 15,583 12,723 9,797
Average rate 6.05% 5.11% 4.49% 3.89% 3.33%
Investment securities
Average balance $ 3,080,308 $ 2,439,842 $ 2,052,276 $ 2,141,463 $ 2,385,603
Interest income(1) 51,195 36,369 26,982 26,160 27,796
Average rate(1) 6.74% 5.91% 5.22% 4.90% 4.73%
Total loans
Average balance $ 8,099,878 $ 8,151,921 $ 8,317,699 $ 8,340,660 $ 8,405,672
Interest income(1) 177,049 173,651 174,902 169,196 163,193
Average rate(1) 8.86% 8.45% 8.34% 8.14% 7.87%
___________ ___________ ___________ __________ ___________
Total average interest-
earning assets $12,033,323 $11,977,363 $12,141,485 $12,283,302 $12,553,858
Total interest income 240,856 227,791 221,780 212,784 205,750
Total average rate on
interest-earning assets 8.12% 7.55% 7.25% 6.95% 6.65%
=========== =========== =========== ========== ===========
INTEREST-BEARING LIABILITIES
Deposits
Average balance $ 8,016,771 $ 8,103,600 $ 8,257,766 $ 8,481,242 $ 8,681,480
Interest expense 65,387 60,693 55,278 53,647 53,748
Average rate 3.31% 2.97% 2.66% 2.54% 2.51%
Short-term borrowings
Average balance $ 573,611 $ 459,920 $ 516,428 $ 644,947 $ 717,393
Interest expense 7,914 5,222 5,084 5,579 5,243
Average rate 5.60% 4.50% 3.91% 3.47% 2.96%
Long-term debt
Average balance $ 372,987 $ 373,000 $ 373,000 $ 374,483 $ 376,563
Interest expense 8,587 8,588 8,586 8,619 8,660
Average rate 9.34% 9.13% 9.13% 9.23% 9.33%
___________ ___________ ___________ __________ ___________
Total average interest-
bearing liabilities $ 8,963,369 $ 8,936,520 $ 9,147,194 $ 9,500,672 $ 9,775,436
Total interest expense 81,888 74,503 68,948 67,845 67,651
Total average rate on
interest-bearing
liabilities 3.71% 3.31% 2.99% 2.86% 2.81%
=========== =========== =========== ========== ===========
NET INTEREST INCOME $ 158,968 $ 153,288 $ 152,832 $ 144,939 $ 138,099
=========== =========== =========== ========== ===========
NET INTERET MARGIN(2) 5.36% 5.08% 4.99% 4.73% 4.46%
=========== =========== =========== ========== ===========
<PAGE>34 2of2
<FN>
(1) Interest income is presented on a tax-equivalent basis. The tax-equivalent adjustment
for investment securities using a 35 percent federal income tax rate amounted to
$1.113 million, $150 thousand, $100 thousand, $79 thousand, and $91 thousand for the
quarters ended March 31, 1995, December 31, 1994, September 30, 1994, June 30, 1994
and March 31, 1994, respectively. For each of those same periods, the tax-equivalent
adjustment for loans amounted to $2.549 million, $2.215 million, $618 thousand,
$657 thousand and $711 thousand, respectively.
(2) Net interest margin on an actual basis (not on a tax-equivalent basis) amounted
to 5.23 percent, 5.00 percent, 4.97 percent, 4.71 percent and 4.44 percent for
the quarters ended March 31, 1995, December 31, 1994, September 30, 1994,
June 30, 1994 and March 31, 1994, respectively.
</TABLE>
<PAGE>35
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE IV - AVERAGE FUNDING SOURCES - BALANCES AND RATES PAID
(In thousands)
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
FOR THE THREE MONTHS ENDED 1995 1994 1994 1994 1994
___________ ___________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCES
DEPOSITS
Noninterest-bearing demand $ 2,598,011 $ 2,680,786 $ 2,695,792 $ 2,666,221 $ 2,774,197
Interest-bearing demand 1,308,677 1,346,315 1,364,251 1,391,793 1,413,953
Savings 1,641,782 1,652,802 1,681,768 1,659,882 1,602,128
Retail money market
accounts 1,865,454 1,961,889 2,058,531 2,128,083 2,195,337
CDs over $100,000 492,974 533,295 455,249 391,517 400,235
Other time 2,696,504 2,595,063 2,685,757 2,897,013 3,060,131
Overseas branch deposits 11,380 14,236 12,210 12,954 9,696
___________ ___________ ___________ ___________ ___________
Total average deposits $10,614,782 $10,784,386 $10,953,558 $11,147,463 $11,455,677
=========== =========== =========== =========== ===========
SHORT-TERM BORROWINGS
Federal funds purchased $ 43,204 $ 39,718 $ 30,480 $ 35,962 $ 35,672
Repurchase agreements 503,171 395,862 461,536 580,362 653,096
Other short-term
borrowings 27,236 24,340 24,412 28,623 28,625
___________ ___________ ___________ ___________ ___________
Total average short-term
borrowings $ 573,611 $ 459,920 $ 516,428 $ 644,947 $ 717,393
=========== =========== =========== =========== ===========
LONG-TERM DEBT $ 372,987 $ 373,000 $ 373,000 $ 374,483 $ 376,563
=========== =========== =========== =========== ===========
AVERAGE RATES
DEPOSITS
Interest-bearing demand 1.24% 1.21% 1.17% 1.14% 1.20%
Savings 2.21 2.18 2.07 2.05 2.07
Retail money market
accounts 3.06 2.81 2.52 2.39 2.35
CDs over $100,000 5.18 4.64 4.14 3.87 3.64
Other time 4.80 4.16 3.62 3.41 3.31
Overseas branch deposits 5.38 4.40 4.03 3.53 3.14
___________ ___________ ___________ ___________ ___________
Total average rate
paid on deposits 3.31% 2.97% 2.66% 2.54% 2.51%
=========== =========== =========== =========== ===========
SHORT-TERM BORROWINGS
Federal funds purchased 5.84% 5.12% 4.52% 3.86% 3.16%
Repurchase agreements 5.57 4.41 3.86 3.44 2.94
Other short-term
borrowings 5.61 5.02 4.10 3.62 3.30
___________ ___________ ___________ ___________ ___________
Total average rate paid
on short-term borrowings 5.60% 4.50% 3.91% 3.47% 2.96%
=========== =========== =========== =========== ===========
LONG-TERM DEBT 9.34% 9.13% 9.13% 9.23% 9.33%
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>36
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE V - INVESTMENT SECURITIES - CARRYING AND FAIR VALUES
AND GROSS UNREALIZED GAINS AND LOSSES
MARCH 31, 1995
(In thousands)
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD-TO-MATURITY COST GAINS LOSSES VALUE
__________ _______ ________ __________
<S> <C> <C> <C> <C>
United States Treasury securities $1,621,538 $15,749 $ (9,440) $1,627,847
Obligations of United States
government agencies 851,490 1,856 (33,376) 819,970
Obligations of states and political
subdivisions 22,238 57 (23) 22,272
Other securities 7,118 146 (95) 7,169
__________ _______ ________ __________
$2,502,384 $17,808 $(42,934) $2,477,258
========== ======= ======== ==========
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE-FOR-SALE COST GAINS LOSSES VALUE
__________ _______ ________ __________
United States Treasury securities $ 714,528 $4,422 $ (64) $ 718,886
Obligations of states and political
subdivisions 6,280 -- (424) 5,856
Other securities 62,295 250 (9,419) 53,126
__________ _______ ________ __________
$ 783,103 $4,672 $ (9,907) $ 777,868
========== ======= ======== ==========
</TABLE>
<TABLE>
TABLE VI - INVESTMENT SECURITIES - GROSS REALIZED GAINS AND LOSSES*
(In thousands)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1995* 1994
_______ ______
<S> <C> <C>
Gross realized investment
securities gains $ -- $1,263
Gross realized investment
securities losses -- --
_______ ______
Investment securities gains $ -- $1,263
======= ======
<FN>
* Represents gains/losses on available-for-sale securities.
</TABLE>
<PAGE>37
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE VII - LOANS
(In thousands)
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
1995 1994 1994 1994 1994
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Commercial and financial loans $3,060,195 $3,018,972 $3,041,452 $3,176,688 $3,155,468
Real estate
Construction and development 510,335 598,232 589,695 697,014 802,941
Long-term commercial
mortgage 1,611,088 1,575,685 1,593,468 1,607,327 1,651,409
Long-term 1-4 family
residential 527,671 544,428 542,653 555,883 566,278
Loans to individuals 2,666,960 2,663,908 2,608,270 2,524,202 2,457,718
__________ __________ __________ __________ __________
Total loans 8,376,249 8,401,225 8,375,538 8,561,114 8,633,814
Less: unearned income 153,362 144,850 144,257 141,794 138,777
__________ __________ __________ __________ __________
Total loans, net of
unearned income $8,222,887 $8,256,375 $8,231,281 $8,419,320 $8,495,037
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE VIII - CONSTRUCTION AND DEVELOPMENT LOANS - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
MARCH 31, 1995 NEW JERSEY PENNSYLVANIA NEW YORK FLORIDA OTHER TOTAL
________ ________ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO
Office buildings $ 50,558 $ 48,121 $14,000 $ -- $ 1 $112,680
Residential 49,957 28,317 -- 8,122 1,135 87,531
Shopping centers 38,458 34,475 -- -- -- 72,933
Hotels/motels 16,913 230 231 12,950 20,464 50,788
Land 24,261 17,381 3,684 1,744 2,219 49,289
Industrial/warehouse 28,324 11,159 6,945 -- 1,176 47,604
Other 74,789 5,414 3,866 -- 5,441 89,510
________ ________ _______ _______ _______ ________
Total $283,260 $145,097 $28,726 $22,816 $30,436 $510,335
======== ======== ======= ======= ======= ========
NONACCRUAL SEGMENT
Office buildings $ 1,025 $ -- $ -- $ -- $ -- $ 1,025
Residential 2,881 338 -- -- -- 3,219
Shopping centers 872 -- 60 -- -- 932
Hotels/motels 1,378 -- -- -- -- 1,378
Land 332 -- 448 -- -- 780
Industrial/warehouse -- -- -- -- -- --
Other -- -- -- -- 2,150 2,150
________ ________ _______ _______ _______ ________
Total $ 6,488 $ 338 $ 508 $ -- $ 2,150 $ 9,484
======== ======== ======= ======= ======= ========
PERCENT OF NONACCRUAL
TO PORTFOLIO 2.29% .23% 1.77% --% 7.06% 1.86%
======== ======== ======= ======= ======= ========
</TABLE>
<PAGE>38
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE IX - LONG-TERM COMMERCIAL MORTGAGE LOANS - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
MARCH 31, 1995 NEW JERSEY PENNSYLVANIA NEW YORK FLORIDA OTHER TOTAL
________ ________ _______ _______ _______ __________
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO
Industrial/warehouse $254,881 $156,541 $28,773 $ -- $ 7,732 $ 447,927
Office buildings 198,467 135,884 5,752 -- 8,758 348,861
Retail businesses 122,312 58,282 4,592 -- 376 185,562
Hospitals, medical
centers and nursing
homes 87,255 34,425 1,000 -- 15,823 138,503
Apartment houses and
other rental properties 84,379 41,733 1,126 1,381 7,667 136,286
Shopping centers 37,023 53,456 606 4,000 9,771 104,856
Automobile and truck
sales 51,565 15,275 84 -- -- 66,924
Hotels/motels 43,145 2,067 2,370 -- -- 47,582
Other 76,074 45,312 2,603 7,160 3,438 134,587
________ ________ _______ _______ _______ __________
Total $955,101 $542,975 $46,906 $12,541 $53,565 $1,611,088
======== ======== ======= ======= ======= ==========
NONACCRUAL SEGMENT
Industrial/warehouse $ 11,912 $ 4,359 $ 311 $ -- $ -- $ 16,582
Office buildings 3,191 1,657 -- -- -- 4,848
Retail businesses 5,028 -- 70 -- -- 5,098
Hospitals, medical
centers and nursing
homes 79 1,427 -- -- -- 1,506
Apartment houses and
other rental
properties 10,582 2,307 30 -- -- 12,919
Shopping centers 1,730 572 -- -- -- 2,302
Automobile and truck
sales 1,530 464 -- -- -- 1,994
Hotels/motels 874 4,852 -- -- -- 5,726
Other 12,533 66 519 -- -- 13,118
________ ________ _______ _______ _______ __________
Total $ 47,459 $ 15,704 $ 930 $ -- $ -- $ 64,093
======== ======== ======= ======= ======= ==========
PERCENT OF NONACCRUAL
TO PORTFOLIO 4.97% 2.89% 1.98% --% --% 3.98%
======== ======== ======= ======= ======= ==========
</TABLE>
<PAGE>39
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE X - SUMMARY OF LOAN LOSS EXPERIENCE/ALLOWANCE FOR LOAN LOSSES
(In thousands)
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
FOR THE THREE MONTHS ENDED 1995 1994 1994 1994 1994
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Allowance at beginning of period $349,520 $357,163 $373,345 $387,374 $400,311
Provision charged to operating
expense 1,500 (433) 4,785 10,827 8,156
Net charge-offs related to loans
sold in bulk sales or transferred
to "assets held for accelerated
disposition" -- -- -- -- 7,901
Loans charged off(1)
Commercial and financial 12,673(2) 12,687 11,196 20,096 10,604
Real estate
Construction and development 107 101 7,856 4,415 4,421
Long-term commercial mortgage 3,589 285 2,120 4,603 2,498
Long-term 1-4 family residential 155 13 513 180 422
Loans to individuals 5,580 5,475 7,059 6,281 5,887
________ ________ ________ ________ ________
Total loans charged off 22,104 18,561 28,744 35,575 23,832
________ ________ ________ ________ ________
Recoveries on loans(1)
Commercial and financial 3,923 4,580 4,141 6,433 5,356
Real estate
Construction and development 989 3,931 932 1,255 2,029
Long-term commercial mortgage 864 629 834 285 674
Long-term 1-4 family residential 2 1 1 2 1
Loans to individuals 2,476 2,210 1,869 2,744 2,580
________ ________ ________ ________ ________
Total recoveries on loans 8,254 11,351 7,777 10,719 10,640
________ ________ ________ ________ ________
Net loans charged off 13,850 7,210 20,967 24,856 13,192
________ ________ ________ ________ ________
Allowance at end of period $337,170 $349,520 $357,163 $373,345 $387,374
======== ======== ======== ======== ========
<FN>
(1) Excludes charge-offs and recoveries related to loans sold in bulk sales or transferred to
"assets held for accelerated disposition."
(2) Includes $7 million of charge-offs on factoring receivables.
</TABLE>
<PAGE>40
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE XI - NONACCRUAL LOANS, OTHER REAL ESTATE OWNED, NET,
RENEGOTIATED LOANS AND PAST DUE LOANS
(In thousands)
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
1995 1994 1994 1994 1994
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS
Commercial and financial $ 68,431 $ 81,304 $ 90,716 $114,980 $127,799
Real estate
Construction and development 9,484 28,765 41,686 41,036 53,893
Long-term mortgage 64,093 58,876 62,819 69,536 77,621
Loans to individuals 12,495 14,473 17,274 21,083 27,641
________ ________ ________ ________ ________
TOTAL NONACCRUAL LOANS $154,503 $183,418 $212,495 $246,635 $286,954
======== ======== ======== ======== ========
ALLOWANCE FOR LOAN LOSSES
AS A % OF NONACCRUAL LOANS 218.2% 190.6% 168.1% 151.4% 135.0%
======== ======== ======== ======== ========
OTHER REAL ESTATE OWNED, NET $ 60,050 $ 64,388 $ 80,612 $ 86,647 $ 87,503
________ ________ ________ ________ ________
TOTAL NONACCRUAL LOANS AND
OTHER REAL ESTATE OWNED, NET $214,553 $247,806 $293,107 $333,282 $374,457
======== ======== ======== ======== ========
TOTAL RENEGOTIATED LOANS $ 38,000 $ 59,821 $ 45,937 $108,064 $165,516
======== ======== ======== ======== ========
ACCRUING LOANS PAST DUE 90
DAYS OR MORE AS TO
INTEREST OR PRINCIPAL
PAYMENTS $ 31,051 $ 30,369 $ 27,903 $ 40,032 $ 20,862
======== ======== ======== ======== ========
</TABLE>
<PAGE>41
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE XII YEAR-TO-DATE INTEREST INCOME ON NONACCRUAL
AND RENEGOTIATED LOANS OUTSTANDING AT END OF PERIOD
(In thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31 1995 1994
______ ______
<S> <C> <C>
NONACCRUAL LOANS
Interest income that would have been
recorded on nonaccrual loans
outstanding at period-end in
accordance with original terms $3,747 $5,429
Interest income actually recorded
on nonaccrual loans 274 204
______ ______
Net decrease in interest income
on nonaccrual loans $3,473 $5,225
====== ======
RENEGOTIATED LOANS
Interest income that would have been
recorded on renegotiated loans
outstanding at period-end in
accordance with original terms $1,211 $2,543
Interest income actually recorded
on renegotiated loans 883 1,860
______ ______
Net decrease in interest
income on renegotiated loans $ 328 $ 683
====== ======
</TABLE>
<TABLE>
TABLE XIII - NONACCRUAL LOANS ACTIVITY
(In thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31 1995 1994
________ ________
<S> <C> <C>
Balance at beginning of year $183,418 $300,731
Additions 18,818 56,563
Payments (34,202) (34,769)
Returned to accrual status (4,473) (9,447)
Charge-offs (7,740) (20,985)
Transfers to OREO (1,313) (4,015)
Transfers to renegotiated loans -- --
Transfers to "assets held for
accelerated disposition" -- (884)
Other (5) (240)
________ ________
BALANCE AT MARCH 31 $154,503 $286,954
======== ========
</TABLE>
<PAGE>42
<TABLE>
TABLE XIV - ACQUIRED OREO PROPERTIES - PROPERTY TYPE BY STATE
(In thousands)
<CAPTION>
MARCH 31, 1995 NEW JERSEY PENNSYLVANIA NEW YORK FLORIDA OTHER TOTAL
_______ ______ ___ ____ ______ _______
<S> <C> <C> <C> <C> <C> <C>
Hotels/motels $21,252 $ -- $-- $ -- $ -- $21,252
Land 10,687 2,828 -- 716 -- 14,231
Residential tract 6,420 1,695 95 32 1,312 9,554
Industrial/warehouse 1,690 2,056 -- -- -- 3,746
Office buildings 2,996 175 -- -- -- 3,171
Shopping centers 2,239 80 -- -- -- 2,319
Other 5,548 229 -- -- -- 5,777
_______ ______ ___ ____ ______ _______
TOTAL $50,832 $7,063 $95 $748 $1,312 $60,050
======= ====== === ==== ====== =======
</TABLE>
<TABLE>
TABLE XV - OTHER REAL ESTATE OWNED ACTIVITY
(in thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31 1995 1994
_______ _______
<S> <C> <C>
Balance at beginning of year $64,388 $97,238
Transfers from loans 2,529 5,857
Advances -- 101
Charges to operating expenses to
absorb declines in net realizable value -- (3,365)
Sales of properties (8,679) (11,651)
Transfers from (to) "assets held for
accelerated disposition" 1,700 (876)
Other 112 199
_______ _______
BALANCE MARCH 31 $60,050 $87,503
======= =======
</TABLE>
<PAGE>43 1of2
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE XVI - CONSOLIDATED SUMMARY OF INCOME
(In thousands, except per share data)
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
FOR THE THREE MONTHS ENDED 1995 1994 1994 1994 1994
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $174,500 $171,436 $174,284 $168,539 $162,482
Interest on investment securities 50,082 36,219 26,882 26,081 27,705
Interest on deposits with banks 3,190 3,604 4,313 4,705 4,964
Interest on other short-term
investments 9,422 14,167 15,583 12,723 9,797
________ ________ ________ ________ ________
Total interest income 237,194 225,426 221,062 212,048 204,948
________ ________ ________ ________ ________
INTEREST EXPENSE
Interest on deposits 65,387 60,693 55,278 53,647 53,748
Interest on short-term borrowings 7,914 5,222 5,084 5,579 5,243
Interest on long-term debt 8,587 8,588 8,586 8,619 8,660
________ ________ ________ ________ ________
Total interest expense 81,888 74,503 68,948 67,845 67,651
________ ________ ________ ________ ________
Net interest income 155,306 150,923 152,114 144,203 137,297
Provision for loan losses 1,500 (433) 4,785 10,827 8,156
________ ________ ________ ________ ________
Net interest income after
provision for loan losses 153,806 151,356 147,329 133,376 129,141
NONINTEREST INCOME
Trust income 11,228 11,336 11,285 10,860 9,782
Service charges on deposits 18,845 19,342 20,029 19,020 18,946
Investment securities (losses) gains -- (3,289) -- (4,637) 1,263
Net gains on disposition of assets 3,100 6,180 1,064 25,056 --
Other 15,271 13,713 16,992 19,930 17,338
________ ________ ________ ________ ________
Total noninterest income 48,444 47,282 49,370 70,229 47,329
________ ________ ________ ________ ________
202,250 198,638 196,699 203,605 176,470
________ ________ ________ ________ ________
NONINTEREST EXPENSES
Salaries and benefits 62,423 54,338 58,223 57,901 56,214
Net occupancy 10,957 10,830 10,469 10,820 12,235
Equipment rental and expense 6,927 4,705 5,922 5,990 6,925
Other real estate owned, net (1,510) 3,363 (472) (3,423) 4,034
FDIC assessment charges 5,944 7,021 7,005 7,187 7,194
Legal and professional fees 7,988 12,527 11,512 11,260 9,875
Other 24,123 23,622 22,395 29,363 24,372
________ ________ ________ ________ ________
Total noninterest expenses 116,852 116,406 115,054 119,098 120,849
________ ________ ________ ________ ________
<PAGE>43 2of2
Income before income taxes
and cumulative effect of the
change in accounting for
postemployment benefits 85,398 82,232 81,645 84,507 55,621
Income tax expense 32,074 5,006 5,398 12,228 2,268
________ ________ ________ ________ ________
Income before cumulative effect
of the change in accounting for
postemployment benefits 53,324 77,226 76,247 72,279 53,353
Cumulative effect of the change in
accounting for postemployment
benefits -- -- -- -- (7,528)
________ ________ ________ ________ ________
NET INCOME $ 53,324 $ 77,226 $ 76,247 $ 72,279 $ 45,825
======== ======== ======== ======== ========
(continued on next page)
<PAGE>44
INCOME APPLICABLE TO PRIMARY
COMMON SHARES
Income before cumulative effect
of the change in accounting for
postemployment benefits $ 52,418 $ 75,414 $ 75,341 $ 71,372 $ 52,447
Net income 52,418 75,414 75,341 71,372 44,919
INCOME APPLICABLE TO FULLY
DILUTED COMMON SHARES
Income before cumulative effect
of the change in accounting for
postemployment benefits 53,397 76,393 76,319 72,371 53,453
Net income 53,397 76,393 76,319 72,371 45,925
======== ======== ======== ======== ========
INCOME PER COMMON SHARE
Income before cumulative effect
of the change in accounting for
postemployment benefits
Primary $.98 $1.42 $1.42 $1.35 $.99
Fully diluted .97 1.40 1.40 1.33 .98
Cumulative effect of the change
in accounting for postemployment
benefits
Primary -- -- -- -- (.14)
Fully diluted -- -- -- -- (.14)
Net income
Primary .98 1.42 1.42 1.35 .85
Fully diluted .97 1.40 1.40 1.33 .84
======== ======== ======== ======== ========
AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS
Primary 53,244 53,079 53,097 52,915 52,821
Fully diluted 54,900 54,600 54,618 54,467 54,403
======== ======== ======== ======== ========
</TABLE>
<PAGE>45 1of2
<TABLE>
Midlantic Corporation and Subsidiaries
TABLE XVII - CONSOLIDATED SHARE AND PER SHARE INFORMATION AND PERFORMANCE RATIOS
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
FOR THE THREE MONTHS ENDED 1995 1994 1994 1994 1994
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
BOOK VALUE AT QUARTER-END $25.93 $25.19 $23.96 $22.66 $21.38
______ ______ ______ ______ ______
MARKET PRICES OF COMMON STOCK
High $34.88 $28.63 $30.63 $31.88 $30.88
Low 26.25 24.00 27.63 27.50 24.25
Close 34.25 26.50 27.63 29.25 28.13
______ ______ ______ ______ ______
OPERATING RATIOS
Net interest margin (actual) 5.23% 5.00% 4.97% 4.71% 4.44%
Net interest margin (tax-equiv-
alent basis) 5.36 5.08 4.99 4.73 4.46
Return on average assets 1.65 2.33 2.28 2.14 1.34
Return on average common
equity 15.82 23.43 24.50 25.05 16.66
Return on average total equity 15.51 22.83 23.82 24.31 16.25
______ ______ ______ ______ ______
LIQUIDITY AND FUNDING RATIOS
Liquidity ratio (1) 31.8% 30.7% 30.7% 29.5% 28.6%
Funding ratio (2) (2.5) (7.8) (6.0) (11.8) (11.9)
______ ______ ______ ______ ______
CAPITAL RATIOS
Risk-adjusted ratios
Tier 1 capital ratio 13.58% 13.07% 12.01% 10.85% 9.95%
Total capital ratio 17.77 17.22 16.10 14.87 13.98
Leverage ratio 9.43 9.43 8.87 8.17 7.35
Average equity as a % of
average assets 10.62 10.22 9.57 8.82 8.26
______ ______ ______ ______ ______
LOAN QUALITY RATIOS
As a % of total period-end
loans, net of unearned income
Allowance for loan losses
at period-end 4.10% 4.23% 4.34% 4.43% 4.56%
Nonaccrual loans at
period-end 1.88 2.22 2.58 2.93 3.38
As a % of average loans, net
of unearned income
Net charge-offs (3) .69 .35 1.00 1.20 .64
Provision for loan losses .08 (.02) .23 .52 .39
______ ______ ______ ______ ______
<PAGE>45 2of2
AVERAGE TOTAL LOANS, NET OF
UNEARNED INCOME, AS A % OF
AVERAGE TOTAL DEPOSITS 76.31% 75.59% 75.94% 74.82% 73.38%
______ ______ ______ ______ ______
NONFINANCIAL DATA
Total number of employees 6,289 6,174 5,997 5,984 5,928
Total number of full-time
equivalent employees 5,416 5,327 5,213 5,194 5,129
Total number of domestic and
foreign banking offices 328 325 325 326 326
______ ______ ______ ______ ______
<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) Ratio for March 31, 1994 excludes net charge-offs on loans that were sold in bulk
sales or transferred to assets held for accelerated disposition.
</TABLE>
<PAGE>46
ITEM 1. LEGAL PROCEEDINGS
_________________
As MC reported in "Item 3 - Legal Proceedings" of its Annual
Report on Form 10-K for the year ended December 31, 1994, MC
and various directors and former 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 had been instituted by shareholders of MC, either on behalf
of MC against various directors and former officers of MC, or
directly against MC and various directors and former 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. In their pleadings,
plaintiffs do not seek damages in a stated dollar amount. 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.
The parties to the Action have entered into a Stipulation of
Settlement of the Action providing for the payment by the
defendants of an aggregate sum of $6.2 million, 60 percent of
which is payable by insurance carriers. Settlement of the Action
is subject to certain conditions, including court approval.
<PAGE>47
ITEM 6A. EXHIBITS
________
No exhibits were required to be filed in this Form 10-Q.
ITEM 6B. REPORTS ON FORM 8-K
___________________
No reports on Form 8-K were filed during the period covered
by this report.
<PAGE>48
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
By Howard I. Atkins
____________________________
Date May 11, 1995 Howard I. Atkins
Executive Vice President and
Chief Financial Officer
By James E. Kelly
____________________________
Date May 11, 1995 James E. Kelly
Controller
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1995 STATEMENTS OF INCOME AND FINANCIAL CONDITION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000793548
<NAME> CATHERINE MILLER
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 790,789
<INT-BEARING-DEPOSITS> 232,615
<FED-FUNDS-SOLD> 723,600
<TRADING-ASSETS> 8,884
<INVESTMENTS-HELD-FOR-SALE> 777,868
<INVESTMENTS-CARRYING> 2,502,384
<INVESTMENTS-MARKET> 2,477,258
<LOANS> 8,222,887
<ALLOWANCE> 337,170
<TOTAL-ASSETS> 13,634,216
<DEPOSITS> 10,657,304
<SHORT-TERM> 1,009,002
<LIABILITIES-OTHER> 185,496
<LONG-TERM> 372,940
<COMMON> 157,991
0
50,000
<OTHER-SE> 1,201,483
<TOTAL-LIABILITIES-AND-EQUITY> 13,634,216
<INTEREST-LOAN> 174,500
<INTEREST-INVEST> 50,082
<INTEREST-OTHER> 12,612
<INTEREST-TOTAL> 237,194
<INTEREST-DEPOSIT> 65,387
<INTEREST-EXPENSE> 81,888
<INTEREST-INCOME-NET> 155,306
<LOAN-LOSSES> 1,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 116,852
<INCOME-PRETAX> 85,398
<INCOME-PRE-EXTRAORDINARY> 53,324
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,324
<EPS-PRIMARY> .98
<EPS-DILUTED> .97
<YIELD-ACTUAL> 5.23
<LOANS-NON> 154,503
<LOANS-PAST> 31,051
<LOANS-TROUBLED> 38,000
<LOANS-PROBLEM> 19,000
<ALLOWANCE-OPEN> 349,520
<CHARGE-OFFS> 22,104
<RECOVERIES> 8,254
<ALLOWANCE-CLOSE> 337,170
<ALLOWANCE-DOMESTIC> 337,170
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 9/30/1994 AND
12/31/1994 STATEMENTS OF INCOME AND FINANCIAL CONDITION AS RESTATED FOR THE
RECLASSIFICATION OF IN-SUBSTANCE FORECLOSURES TO LOANS AS REQUIRED BY FAS NO
114 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000793548
<NAME> CATHERINE MILLER
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> SEP-30-1994 DEC-31-1994
<CASH> 923,580 819,928
<INT-BEARING-DEPOSITS> 257,723 242,659
<FED-FUNDS-SOLD> 1,202,912 871,000
<TRADING-ASSETS> 21,558 7,613
<INVESTMENTS-HELD-FOR-SALE> 492,974 333,295
<INVESTMENTS-CARRYING> 1,791,281 2,415,635
<INVESTMENTS-MARKET> 1,726,573 2,325,904
<LOANS> 8,231,281<F3> 8,256,375<F3>
<ALLOWANCE> 357,163 349,520
<TOTAL-ASSETS> 13,288,682 13,293,538
<DEPOSITS> 10,895,945 10,807,334
<SHORT-TERM> 533,717 584,489
<LIABILITIES-OTHER> 158,369 154,529
<LONG-TERM> 373,000 373,000
<COMMON> 157,473 157,693
0 0
50,000 50,000
<OTHER-SE> 1,100,178 1,166,493
<TOTAL-LIABILITIES-AND-EQUITY> 13,288,682 13,293,538
<INTEREST-LOAN> 505,305 676,741
<INTEREST-INVEST> 80,668 116,887
<INTEREST-OTHER> 52,085 69,856
<INTEREST-TOTAL> 638,058 863,484
<INTEREST-DEPOSIT> 162,673 223,366
<INTEREST-EXPENSE> 204,444 278,947
<INTEREST-INCOME-NET> 433,614 584,537
<LOAN-LOSSES> 23,768<F3> 23,335<F3>
<SECURITIES-GAINS> (3,374) (6,663)
<EXPENSE-OTHER> 355,001<F3> 471,407<F3>
<INCOME-PRETAX> 221,773 304,005
<INCOME-PRE-EXTRAORDINARY> 201,879 279,105
<EXTRAORDINARY> 0 0
<CHANGES> (7,528) (7,528)
<NET-INCOME> 194,351 271,577
<EPS-PRIMARY> 3.62 5.04
<EPS-DILUTED> 3.57 4.97
<YIELD-ACTUAL> 4.70<F3> 4.78<F3>
<LOANS-NON> 212,495<F3> 183,418<F3>
<LOANS-PAST> 27,903<F3> 30,369<F3>
<LOANS-TROUBLED> 45,937 59,821
<LOANS-PROBLEM> 25,877 22,700
<ALLOWANCE-OPEN> 400,311 400,311
<CHARGE-OFFS> 88,151<F1><F3> 106,712<F1><F3>
<RECOVERIES> 29,136<F2> 40,487<F2>
<ALLOWANCE-CLOSE> 357,163 349,520
<ALLOWANCE-DOMESTIC> 354,987 349,520
<ALLOWANCE-FOREIGN> 2,176 0
<ALLOWANCE-UNALLOCATED> 0 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."
<F3>Restated to reflect the reclassification of in-substance
foreclosures to loans as required by FAS No 114.
</FN>
</TABLE>
