SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
---------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
------------------ ------------------
Commission File Number: 1-9839
-----------------------------------------------
FIRST FIDELITY BANCORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2826775
----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 Broad Street 123 South Broad Street
Newark, New Jersey 07102 Philadelphia, Pennsylvania 19109
----------------------------------------------------------------------
(Address of principal executive offices)
(201) 565-3200
----------------------------------------------------
(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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
----------------------------- -------------------------------
Common Stock, $1.00 Par Value 80,130,115 Shares
2 of 36
Part I - Financial Information
------------------------------
Item 1 - Financial Statements
-----------------------------
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(thousands, except per share amounts) Three Months Ended
June 30
--------------------
1995 1994
-------- --------
INTEREST INCOME
Interest and fees on loans......................... $474,282 $403,509
Interest on federal funds sold and securities
purchased under agreements to resell............. 711 372
Interest and dividends on securities:
Taxable interest income.......................... 93,629 97,481
Tax-exempt interest income....................... 8,483 9,898
Dividends........................................ 985 1,422
Interest on bank deposits.......................... 565 7,322
Interest on trading account securities............. 1,350 1,846
-------- --------
Total Interest Income.......................... 580,005 521,850
-------- --------
INTEREST EXPENSE
Interest on:
Deposits......................................... 195,630 144,154
Short-term borrowings............................ 28,249 13,577
Long-term debt................................... 14,111 12,682
-------- --------
Total Interest Expense......................... 237,990 170,413
-------- --------
Net Interest Income.......................... 342,015 351,437
Provision for possible credit losses................. 10,000 20,000
-------- --------
Net Interest Income after Provision
for Possible Credit Losses....................... 332,015 331,437
-------- --------
NON-INTEREST INCOME
Trust income....................................... 27,513 27,628
Service charges on deposit accounts................ 36,503 36,621
Other service charges, commissions and fees........ 26,821 20,816
Trading revenue.................................... 2,158 984
Net securities transactions........................ 6,970 4,726
Other income....................................... 11,944 5,806
-------- --------
Total Non-Interest Income........................ 111,909 96,581
-------- --------
NON-INTEREST EXPENSE
Salaries and benefits expense...................... 123,664 118,883
Occupancy expense.................................. 28,891 28,443
Equipment expense.................................. 11,268 10,295
Other expenses..................................... 101,430 103,841
-------- --------
Total Non-Interest Expense....................... 265,253 261,462
-------- --------
3 of 36
Income before income taxes........................... 178,671 166,556
Income taxes......................................... 63,413 54,963
-------- --------
Net Income........................................... 115,258 111,593
Dividends on Preferred Stock......................... 5,113 5,146
-------- --------
Net Income Applicable to Common Stock................ $110,145 $106,447
======== ========
Per common share:
Net income:
Primary.......................................... $1.37 $1.29
Fully diluted.................................... 1.34 1.27
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 4 of 36
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(thousands, except per share amounts) Six Months Ended
June 30
---------------------
1995 1994
--------- ---------
INTEREST INCOME
Interest and fees on loans........................ $932,314 $797,655
Interest on federal funds sold and securities
purchased under agreements to resell............ 1,062 490
Interest and dividends on securities:
Taxable interest income......................... 198,634 194,196
Tax-exempt interest income...................... 17,261 20,407
Dividends....................................... 2,171 2,617
Interest on bank deposits......................... 1,095 17,681
Interest on trading account securities............ 2,574 3,421
--------- ---------
Total Interest Income......................... 1,155,111 1,036,467
--------- ---------
INTEREST EXPENSE
Interest on:
Deposits........................................ 379,910 287,261
Short-term borrowings........................... 55,840 24,057
Long-term debt.................................. 29,580 23,515
--------- ---------
Total Interest Expense........................ 465,330 334,833
--------- ---------
Net Interest Income......................... 689,781 701,634
Provision for possible credit losses................ 20,000 44,000
--------- ---------
Net Interest Income after Provision
for Possible Credit Losses...................... 669,781 657,634
--------- ---------
NON-INTEREST INCOME
Trust income...................................... 53,882 54,891
Service charges on deposit accounts............... 72,222 73,905
Other service charges, commissions and fees....... 52,141 40,686
Trading revenue................................... 5,065 4,635
Net securities transactions....................... 14,043 8,808
Other income...................................... 23,901 13,040
--------- ---------
Total Non-Interest Income....................... 221,254 195,965
--------- ---------
NON-INTEREST EXPENSE
Salaries and benefits expense..................... 249,880 241,022
Occupancy expense................................. 58,636 60,377
Equipment expense................................. 22,469 21,223
Other expenses.................................... 206,108 202,419
--------- ---------
Total Non-Interest Expense...................... 537,093 525,041
--------- ---------
5 of 36
Income before income taxes.......................... 353,942 328,558
Income taxes........................................ 125,749 108,099
--------- ---------
Net Income.......................................... 228,193 220,459
Dividends on Preferred Stock........................ 10,321 10,277
--------- ---------
Net Income Applicable to Common Stock............... $217,872 $210,182
========= =========
Per common share:
Net income:
Primary......................................... $2.69 $2.54
Fully diluted................................... 2.62 2.49
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 6 of 36
CONSOLIDATED STATEMENTS OF CONDITION
June 30 December 31
1995 1994
(thousands) (unaudited)
----------- -----------
ASSETS
Cash and due from banks............................ $1,750,833 $2,082,002
Interest-bearing time deposits..................... 455,033 35,567
Securities held to maturity........................ 3,877,896 4,186,860
(market value of $3,879,660 at June 30, 1995
and $4,049,457 at December 31, 1994)
Securities available for sale, at market value..... 2,409,976 3,781,163
Trading account securities, at market value........ 100,529 110,494
Federal funds sold and securities purchased under
agreements to resell............................. 703,375 50,675
Loans, net of unearned income...................... 23,999,147 23,801,241
Less: Reserve for possible credit losses......... (565,450) (599,333)
----------- -----------
Net loans...................................... 23,433,697 23,201,908
Premises and equipment............................. 428,328 437,677
Customers' acceptance liability.................... 160,374 215,556
Other assets....................................... 2,041,740 2,113,794
----------- -----------
Total Assets................................. $35,361,781 $36,215,696
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand deposits.................................. $5,195,045 $5,393,749
Savings/NOW deposits............................. 8,831,105 9,271,335
Money market deposit accounts.................... 3,919,395 4,257,135
Other consumer time deposits..................... 9,467,150 8,858,443
Corporate certificates of deposit................ 381,616 393,058
Deposits in overseas offices....................... 1,024,612 733,132
----------- -----------
Total Deposits................................. 28,818,923 28,906,852
Short-term borrowings.............................. 2,020,966 2,716,922
Acceptances outstanding............................ 161,355 218,625
Other liabilities.................................. 744,470 682,699
Long-term debt..................................... 676,750 813,623
----------- -----------
Total Liabilities............................ 32,422,464 33,338,721
7 of 36
STOCKHOLDERS' EQUITY
Preferred stock.................................... 219,219 229,707
Common stock ($1.00 par)
Authorized: 150,000,000 shares
Issued: 81,998,930 shares at June 30, 1995 and
82,003,121 shares at December 31, 1994......... 81,999 82,003
Surplus............................................ 1,255,143 1,256,020
Retained earnings.................................. 1,556,804 1,430,149
Net unrealized losses--securities
available for sale............................... (8,494) (75,232)
Less treasury stock, at cost: 3,345,884 shares at
June 30, 1995 and 1,020,282 shares
at December 31, 1994........................... (165,354) (45,672)
----------- -----------
Total Common Stockholders' Equity............ 2,720,098 2,647,268
----------- -----------
Total Stockholders' Equity................... 2,939,317 2,876,975
----------- -----------
Total Liabilities and Stockholders' Equity... $35,361,781 $36,215,696
=========== ===========
See accompanying notes to consolidated financial statements.
8 of 36
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(thousands)
Six Months Ended
June 30
----------------------
1995 1994
---------- ----------
Balance, January 1.................................. $2,876,975 $2,738,428
Net income........................................ 228,193 220,459
Common Stock issued:
Private placement--Santander exercise
of warrants................................... - 121,189
Stock options and dividend reinvestment plan.... 13,744 13,114
Other........................................... - 1,567
Purchases of treasury stock....................... (155,699) (144,634)
Dividends on Common Stock......................... (80,313) (67,118)
Dividends on Preferred Stock...................... (10,321) (10,277)
Net unrealized gains (losses)-- securities
available for sale.............................. 66,738 (55,624)
Other............................................. - 3,200
---------- ----------
Balance, June 30.................................... $2,939,317 $2,820,304
========== ==========
9 of 36
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended
June 30
-------------------------
(thousands) 1995 1994
----------- -----------
Cash flows from operating activities:
Net income......................................... $228,193 $220,459
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses............... 20,000 44,000
Depreciation, amortization and accretion........... 39,837 36,363
Deferred income tax provision...................... 26,858 27,524
Gain on sale of assets............................. (16,950) (6,828)
Net securities transactions (gains)................ (14,043) (8,808)
Proceeds from sales of trading account
securities....................................... 5,081,262 5,084,239
Purchases of trading account securities............ (5,066,232) (5,092,353)
Decrease (increase) in accrued interest receivable. 3,925 (3,081)
Increase in accrued interest payable............... 40,645 42,066
Change in current taxes payable.................... 13,965 35,621
Other, net......................................... 98,209 127,329
---------- ----------
Net cash provided by operating activities...... 455,669 506,531
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity................................. 736,264 1,439,318
Purchases of securities held to maturity........... (501,122) (936,070)
Proceeds from sales of securities available
for sale......................................... 1,621,565 497,067
Proceeds from maturities of securities
available for sale............................... 197,910 408,296
Purchases of securities available for sale......... (247,134) (1,396,346)
Net (disbursements) from lending activities........ (217,335) (129,033)
Purchases of premises and equipment................ (26,952) (31,043)
Proceeds from sales of premises and equipment...... 1,621 6,378
Net change in acceptances.......................... (2,088) (5,600)
Net cash on acquisitions........................... 943,182 49,454
---------- ----------
Net cash provided by/(used in)
investing activities......................... 2,505,911 (97,579)
Cash flows from financing activities:
Change in demand, savings/NOW, and money market
deposits......................................... (1,432,538) (546,401)
Change in corporate certificates of deposit and
deposits in overseas offices..................... 280,038 (6,880)
Change in other consumer time deposits............. 2,543 (469,920)
Change in short-term borrowings.................... (695,956) 442,503
Issuance of long-term debt......................... - 200,000
Payments on long-term debt......................... (136,873) (181)
Purchases of treasury stock........................ (155,699) (144,634)
Issuance of common stock........................... 13,744 134,303
Dividends paid..................................... (95,842) (77,380)
---------- ----------
Net cash (used in) financing activities........ (2,220,583) (468,590)
---------- ----------
10 of 36
Net change in cash and cash equivalents........ 740,997 (59,638)
Cash and cash equivalents at beginning
of period (A)................................ 2,168,244 2,826,039
---------- ----------
Cash and cash equivalents at end
of period (A)................................ $2,909,241 $2,766,401
========== ==========
Supplemental disclosures:
Total amount of interest paid for the period....... $424,685 $292,767
========== ==========
Total amount of income taxes paid for
the period....................................... $81,535 $99,196
========== ==========
Total amount of loans transferred to OREO.......... $17,668 $23,194
========== ==========
(A) Reconciliation: June 30 December 31
---------------------- ----------------------
1995 1994 1994 1993
---------- ---------- ---------- ----------
Cash and due from banks......... $1,750,833 $1,765,962 $2,082,002 $1,831,270
Interest-bearing time deposits.. 455,033 441,899 35,567 979,769
Federal funds sold and
securities purchased under
agreements to resell.......... 703,375 558,540 50,675 15,000
---------- ---------- ---------- ----------
Total cash and cash
equivalents................... $2,909,241 $2,766,401 $2,168,244 $2,826,039
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
11 of 36
SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) In Management's opinion, the financial information, which is
unaudited, reflects all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the
financial information as of and for the three and six month
periods ended June 30, 1995 and June 30, 1994 in conformity with
generally accepted accounting principles. These financial
statements should be read in conjunction with First Fidelity
Bancorporation's ("First Fidelity" or "the Company" herein) 1994
Annual Report on Form 10-K.
(2) Primary earnings per share is based on the weighted average
number of common shares outstanding during each period, including
the assumed exercise of dilutive stock options and warrants,
using the treasury stock method. Primary earnings per share also
reflects provisions for dividend requirements on all outstanding
shares of the Company's preferred stock.
Fully diluted earnings per share is based on the weighted average
number of common shares outstanding during each period, including
the assumed conversion of convertible preferred stock into common
stock and the assumed exercise of dilutive stock options and
warrants using the treasury stock method. Fully diluted earnings
per share also reflects provisions for dividend requirements on
non-convertible preferred stock.
(3) As previously reported, effective January 1, 1995, the Company
adopted Statement of Financial Accounting Standards ("SFAS") 114,
"Accounting by Creditors for Impairment of a Loan" and SFAS 118,
"Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures". Under SFAS 114 and SFAS 118,
impaired loans must be measured based on the present value of
expected future cash flows, discounted at the loan's effective
interest rate, or as a practical expedient, at the loan's
observable market price, or the fair value of the collateral if
the loan is collateral-dependent.
Item 2
------
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and related
notes and with the statistical information and financial data
appearing in this report as well as the Company's 1994 Annual Report
on Form 10-K. Results of operations for the three and six month
periods ended June 30, 1995 are not necessarily indicative of results
to be attained for any other period.
Summary
-------
First Fidelity recorded net income of $115.3 million, or $1.37
per common share on a primary basis and $1.34 per common share on a
fully-diluted basis, for the second quarter of 1995. These results
compare to net income of $111.6 million or $1.29 per common share on a
primary basis and $1.27 per common share on a fully-diluted basis for
the second quarter of 1994.
12 of 36
The earnings increase for the current quarter, compared to the
second quarter of 1994, resulted from an increase in non-interest
income and a lower provision for possible credit losses, partially
offset by a decline in net interest income, an increased provision for
income taxes, and a slight increase in non-interest expenses,
attributable to recent acquisitions. Total non-performing assets
decreased 35%, to $276.1 million at June 30, 1995, from $421.6 million
at June 30, 1994.
Return on average stockholders' equity for the current quarter
was 16.17% compared to 16.24% for the second quarter of last year.
Return on average assets was 1.36% in the current quarter compared to
1.35% for the same period of 1994.
On June 19, 1995, First Fidelity and First Union Corporation
("First Union") announced that they had entered into a definitive
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to
which, among other things, First Fidelity would merge into a wholly-
owned subsidiary of First Union (the "Merger"). Upon consummation of
the Merger, (i) each outstanding share of First Fidelity Common Stock
will be converted into the right to receive 1.35 shares of First Union
Common Stock (the "Exchange Ratio"), (ii) each outstanding share of
the three currently outstanding series of First Fidelity preferred
stock will be converted into one share of one of three corresponding
new series of First Union Class A Preferred Stock having substantially
identical terms as the corresponding series of First Fidelity
preferred stock and (iii) each outstanding First Fidelity depositary
share, each representing a 1/40th interest in a share of First
Fidelity Series F 10.64% Preferred Stock, will be converted into one
First Union depositary share representing a comparable interest in the
corresponding new series of First Union Class A Preferred Stock. As
further described in the Merger Agreement, the Board of Directors of
First Fidelity has the right to terminate the Merger Agreement in the
event that the average price of First Union Common Stock during a ten-
day valuation period ending on the date of approval of the Merger by
the Board of Governors of the Federal Reserve System is below $34.22
or, in certain circumstances, is below $40.48, unless First Union
elects to increase the Exchange Ratio as provided in the Merger
Agreement.
The Merger will be accounted for as a pooling of interests under
generally accepted accounting principles, and currently is expected to
be consummated by January 1, 1996, subject to certain conditions,
including obtaining the requisite approvals of First Fidelity's and
First Union's shareholders and appropriate regulatory authorities.
On June 23, 1995, the Company completed its acquisition of the 24
Maryland branches and $1 billion in deposits of Household Bank, FSB,
("Household") for $76 million in cash. The Household acquisition
resulted in an increase in liquidity and is expected to have an
additive effect on First Fidelity's earnings per share in 1995,
assuming the absence of significant adverse economic conditions.
First Fidelity is continually evaluating acquisition
opportunities and frequently conducts due diligence activities in
connection with possible acquisitions. As a result, acquisition
discussions and, in some cases, negotiations frequently take place and
13 of 36
future acquisitions can be expected. Pursuant to the terms of the
Merger Agreement, pending consummation of the Merger, First Fidelity
is permitted, without First Union's written consent, to make
acquisitions in which the purchase price is cash and does not exceed
$150 million in any one case. Any acquisitions may involve the
payment of a premium over book and market values, and therefore some
dilution of First Fidelity's book value and net income per common
share may occur in connection with any future transactions.
On August 8, 1995, the Federal Deposit Insurance Corporation
("FDIC") amended its regulations on insurance assessments to establish
a new assessment rate schedule of 4 to 31 basis points in replacement
of the existing schedule of 23 to 31 basis points for institutions
whose deposits are subject to assessment by the Bank Insurance Fund
("BIF"). The FDIC has maintained the current assessment rate schedule
of 23 to 31 basis points for institutions whose deposits are subject
to assessment by the Savings Association Insurance Fund ("SAIF"). The
new BIF schedule will become effective on the first day of the month
after the month in which the BIF reaches its "designated reserve
ratio" of 1.25%, which the FDIC has estimated occurred sometime in the
second quarter of 1995. Assessments collected at the previous
assessment schedule that exceed the amount due under the new schedule
will be refunded, with interest, from the effective date of the new
schedule. As of June 30, 1995, the Company had a BIF assessment base
of approximately $23.6 billion and a SAIF assessment base of
approximately $3.5 billion. Various legislative proposals regarding
the future of the BIF and the SAIF have been reported recently.
Several of these proposals include a one-time special assessment for
SAIF deposits and a subsequent comparable and reduced level of annual
premiums for SAIF and BIF deposits. The Company does not know when or
if any such proposal, or any other related proposal, may be adopted.
Capital Markets:
Pursuant to the Company's previously authorized open market
repurchase program, entering 1995, the Company had authority to
repurchase approximately 2.7 million shares (exclusive of shares
to be acquired to fund certain benefit plans) of its Common Stock
during 1995. Through June 30, 1995 and pursuant to such
repurchase program, First Fidelity purchased 2.6 million shares
of its Common Stock (at an average exercise price of $50.73 per
share). On July 20, 1995, the Board authorized the purchase of
an additional 2.0 million shares of the Company's Common Stock.
In connection with the Merger, First Union and/or First Fidelity
may purchase up to 7.4 million shares of First Union Common
Stock, and, to the extent that less than 7.4 million of such
shares are purchased, First Union and/or First Fidelity may
purchase a proportionate number of shares of First Fidelity
Common Stock (i.e., up to 5.5 million shares). As of August 7,
1995, First Union had purchased 2,730,000 shares of First
Fidelity Common Stock and 250,000 shares of First Fidelity Series
B Convertible Preferred Stock.
RESULTS OF OPERATIONS 14 of 36
Net Interest Income
-------------------
The following table reflects the significant components of net
interest income for the three and six month periods ended June 30,
1995 and 1994.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 15 of 36
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Three months ended June 30, 1995
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial.................................. $6,428,832 $120,309 7.40%
Installment................................. 6,818,067 147,219 8.66
Mortgage.................................... 10,214,453 206,600 8.09
Loans in overseas offices..................... 128,313 2,436 7.61
----------- --------
Total Loans............................... 23,589,665 476,564 8.06
Taxable mortgage-backed securities (3)........ 4,114,938 63,889 6.21
Other taxable securities...................... 2,068,153 30,735 5.94
Tax-exempt securities......................... 483,283 12,355 10.23
Time deposits with banks...................... 35,111 565 6.36
Federal funds sold and securities
purchased under agreements to resell........ 44,551 711 6.31
Trading account............................... 89,717 1,475 6.58
----------- --------
Total Earning Assets.................... 30,425,418 586,294 7.69
Reserve for possible credit losses.............. (585,627)
Cash and due from banks......................... 1,687,287
Other assets.................................... 2,580,219
-----------
Total Assets.......................... $34,107,297
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................. $4,969,580
-----------
Interest-bearing Liabilities
Savings/NOW deposits.......................... 8,740,464 44,704 2.05
Money market deposit accounts................. 3,836,503 30,789 3.22
Other consumer time deposits.................. 8,985,111 104,298 4.66
Corporate certificates of deposit............. 396,182 5,733 5.80
Deposits in overseas offices.................. 691,064 10,106 5.79
Short-term borrowings......................... 1,983,129 28,249 5.64
Long-term debt................................ 757,986 14,111 7.45
----------- --------
Total Interest-bearing Liabilities.......... 25,390,439 237,990 3.75
Other liabilities............................... 888,320
Preferred stockholders' equity.................. 226,299
Common stockholders' equity..................... 2,632,659
----------- --------
Total Liabilities and
Stockholders' Equity.................... $34,107,297 237,990
=========== --------
Net interest income/spread...................... $348,304 3.94
========
Net interest margin............................. 4.56
Tax equivalent adjustment....................... $6,289
========
16 of 36
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 17 of 36
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Three months ended June 30, 1994
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial.................................. $6,556,205 $116,695 7.04%
Installment................................. 5,843,489 120,645 8.28
Mortgage.................................... 8,761,909 166,908 7.62
Loans in overseas offices..................... 111,460 1,653 5.95
----------- --------
Total Loans............................... 21,273,063 405,901 7.61
Taxable mortgage-backed securities (3)........ 4,517,227 60,295 5.34
Other taxable securities...................... 2,786,906 38,723 5.56
Tax-exempt securities......................... 557,346 14,492 10.40
Time deposits with banks...................... 567,636 7,322 5.10
Federal funds sold and securities
purchased under agreements to resell........ 32,459 372 4.54
Trading account............................... 155,721 2,085 5.36
----------- --------
Total Earning Assets.................... 29,890,358 529,190 7.07
Reserve for possible credit losses.............. (607,085)
Cash and due from banks......................... 1,866,853
Other assets.................................... 2,084,941
-----------
Total Assets.......................... $33,235,067
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................. $5,108,316
-----------
Interest-bearing Liabilities
Savings/NOW deposits.......................... 9,613,544 45,339 1.89
Money market deposit accounts................. 3,755,634 21,219 2.27
Other consumer time deposits.................. 8,348,766 72,344 3.48
Corporate certificates of deposit............. 342,750 3,211 3.76
Deposits in overseas offices.................. 228,686 2,041 3.53
Short-term borrowings......................... 1,499,927 13,577 3.58
Long-term debt................................ 812,967 12,682 6.24
----------- --------
Total Interest-bearing Liabilities.......... 24,602,274 170,413 2.78
Other liabilities............................... 767,493
Preferred stockholders' equity.................. 230,417
Common stockholders' equity..................... 2,526,567
----------- --------
Total Liabilities and
Stockholders' Equity.................... $33,235,067 170,413
=========== --------
Net interest income/spread...................... $358,777 4.29
========
Net interest margin............................. 4.78
Tax equivalent adjustment....................... $7,340
========
18 of 36
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 19 of 36
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Six months ended June 30, 1995
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- --------- -------
Loans in domestic offices
Commercial................................. $6,204,714 $235,840 7.56%
Installment................................ 6,822,337 290,745 8.59
Mortgage................................... 10,206,434 405,629 7.95
Loans in overseas offices.................... 124,128 4,656 7.56
----------- ---------
Total Loans.............................. 23,357,613 936,870 8.03
Taxable mortgage-backed securities (3)....... 4,198,755 128,600 6.13
Other taxable securities..................... 2,446,073 72,310 5.91
Tax-exempt securities........................ 497,554 25,201 10.13
Time deposits with banks..................... 35,539 1,095 6.13
Federal funds sold and securities
purchased under agreements to resell....... 33,960 1,062 6.22
Trading account.............................. 85,780 2,853 6.65
----------- ---------
Total Earning Assets................... 30,655,274 1,167,991 7.63
Reserve for possible credit losses............. (594,547)
Cash and due from banks........................ 1,709,858
Other assets................................... 2,605,945
-----------
Total Assets......................... $34,376,530
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................ $5,043,621
-----------
Interest-bearing Liabilities
Savings/NOW deposits......................... 8,844,299 90,645 2.07
Money market deposit accounts................ 3,966,712 61,595 3.13
Other consumer time deposits................. 8,944,918 198,377 4.47
Corporate certificates of deposit............ 392,304 11,265 5.79
Deposits in overseas offices................. 630,624 18,028 5.69
Short-term borrowings........................ 2,013,942 55,840 5.51
Long-term debt............................... 785,649 29,580 7.53
----------- ---------
Total Interest-bearing Liabilities......... 25,578,448 465,330 3.66
Other liabilities.............................. 894,443
Preferred stockholders' equity................. 227,771
Common stockholders' equity.................... 2,632,247
----------- ---------
Total Liabilities and
Stockholders' Equity................... $34,376,530 465,330
=========== ---------
Net interest income/spread..................... $702,661 3.97
=========
Net interest margin............................ 4.58
Tax equivalent adjustment...................... $12,880
=========
20 of 36
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 21 of 36
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Six months ended June 30, 1994
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial................................. $6,659,343 $232,009 6.93%
Installment................................ 5,814,153 238,636 8.28
Mortgage................................... 8,635,904 328,669 7.61
Loans in overseas offices.................... 113,924 3,108 5.50
----------- ---------
Total Loans.............................. 21,223,324 802,422 7.57
Taxable mortgage-backed securities (3)....... 4,642,072 123,619 5.33
Other taxable securities..................... 2,667,550 73,438 5.51
Tax-exempt securities........................ 560,179 29,777 10.63
Time deposits with banks..................... 718,469 17,681 4.89
Federal funds sold and securities
purchased under agreements to resell....... 25,392 490 3.84
Trading account.............................. 153,654 3,737 4.86
----------- ---------
Total Earning Assets................... 29,990,640 1,051,164 7.02
Reserve for possible credit losses............. (610,105)
Cash and due from banks........................ 1,848,340
Other assets................................... 2,077,906
-----------
Total Assets......................... $33,306,781
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................ $5,254,090
-----------
Interest-bearing Liabilities
Savings/NOW deposits......................... 9,699,886 89,812 1.87
Money market deposit accounts................ 3,737,819 42,162 2.27
Other consumer time deposits................. 8,309,133 145,465 3.53
Corporate certificates of deposit............ 358,139 6,143 3.46
Deposits in overseas offices................. 221,617 3,679 3.30
Short-term borrowings........................ 1,464,449 24,057 3.27
Long-term debt............................... 777,703 23,515 6.05
----------- ---------
Total Interest-bearing Liabilities......... 24,568,746 334,833 2.74
Other liabilities.............................. 734,685
Preferred stockholders' equity................. 230,419
Common stockholders' equity.................... 2,518,841
----------- ---------
Total Liabilities and
Stockholders' Equity................... $33,306,781 334,833
=========== ---------
Net interest income/spread..................... $716,331 4.28
=========
Net interest margin............................ 4.78
Tax equivalent adjustment...................... $14,697
=========
22 of 36
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
23 of 36
Taxable-equivalent net interest income for the second quarter of
1995 was $348.3 million, compared to $358.8 million for the second
quarter of 1994. The decrease was primarily attributable to a decline
in the net interest margin from 4.78% to 4.56%, partially offset by a
higher level of average earning assets. The net interest margin
decline was attributable to changes in the deposit mix and the
composition of the loan portfolio, and a reduced spread on fixed-rate
assets as interest rates rose. Other factors contributing to lower
net interest income were cash payments for acquisitions, the Company's
Common Stock repurchase program, and company-owned life insurance,
combined with the outsourcing of official checks. The increase in
average earning assets was largely due to growth in the mortgage and
auto lease portfolios, partially offset by decreases in the
"securities available for sale" portfolio, which resulted from the
sale of certain U.S. government securities. Average total loans
increased $2.3 billion, average total securities decreased $1.2
billion and average time deposits with banks declined $532.5 million.
Average deposits in overseas offices increased $462.4 million,
primarily due to an increase in short-term eurodollar placements.
Average core deposits (demand deposits, savings and NOW accounts,
money market deposits and other consumer time deposits) decreased
$294.6 million, while average short-term borrowings increased $483.2
million in the second quarter of 1995, compared to the same period of
1994.
For the six months ended June 30, 1995, taxable equivalent net
interest income was $702.7 million, compared to $716.3 million for the
first six months of 1994. The decrease was attributable to the same
factors as noted above. The net interest margin declined 20 basis
points from 4.78% in the first half of 1994 to 4.58% in the first half
of 1995, due to the factors noted above.
Non-Interest Income
-------------------
Non-interest income increased $15.3 million, or 16%, for the
second quarter of 1995, compared to the same quarter of 1994. Trust
income and service charges on deposits remained relatively flat.
Other service charges, commissions and fees were up $6.0 million, or
29%, primarily as a result of increased revenues from credit card
services, mortgage servicing fees from the Company's mortgage banking
activities, the outsourcing of official checks and higher commission
income earned on branch-based annuity and mutual fund sales. Other
income increased $6.1 million, primarily due to income from corporate
owned life insurance and net gains on the sale of various assets.
For the six months ended June 30, 1995, non-interest income was
$221.3 million compared to $196.0 million for the six months ended
June 30, 1994. Trust income decreased $1.0 million, or 2%, primarily
as a result of declines in corporate and personal trust income.
Service charges on deposit accounts declined $1.7 million, or 2%, in
the first half of 1995 compared to the first half of 1994. An
increase in customers' average deposit balances, largely resulting
from the introduction of a new relationship banking product in April,
1994, and an increase in commercial customers' compensating balances
had the effect of reducing service charges. Other service charges,
commissions and fees increased to $52.1 million in the first half of
1995 from $40.7 million for the same period in 1994, generally due to
the same factors as for the three months ended June 30, 1995. Other
24 of 36
income increased $10.9 million, primarily due to net gains on the sale
of various assets and income associated with corporate owned life
insurance.
Non-Interest Expense
--------------------
Total non-interest expense increased $3.8 million, or 1%, in the
second quarter of 1995 compared to the same quarter in 1994. Salaries
and benefits expense increased $4.8 million, or 4%, due to staff
additions associated with acquisitions. Occupancy expense and
equipment expense increased by $.4 million and $1.0 million,
respectively, primarily as a result of recent acquisitions. Other
expenses decreased $2.4 million, or 2%, from the prior year's second
quarter, reflecting the net effect of the following factors:
amortization of intangibles increased by $4.0 million, due primarily
to the Baltimore Bancorp acquisition; external check-processing
charges increased $3.1 million, and expenses related to other real
estate owned ("OREO") declined $3.7 million from the 1994 second
quarter, as the level of OREO declined. Declines in numerous other
expenses, each individually less than $1 million, resulted in an
aggregate $5.8 million reduction in other expenses (contributing to
the overall $2.4 million decrease in other expenses).
Total non-interest expense for the six months ended June 30, 1995
was $537.1 million, compared to $525.0 million for the six months
ended June 30, 1994. Salaries and benefits expense for the first half
of 1995 was $249.9 million, compared to $241.0 million. The $8.9
million, or 4%, increase was primarily due to acquisitions. Occupancy
expense decreased $1.7 million, or 3%, compared to the first half of
1994, due primarily to expenses related to severe weather conditions
which occurred during the first quarter of 1994, partially offset by
the effect of recent acquisitions. Equipment expense increased $1.2
million, or 6%, primarily as a result of recent acquisitions. Other
expenses increased by $3.7 million, or 2%, generally due to the same
factors as for the three months ended June 30, 1995, and due to the
impact of $2.2 million of non-recurring expenses related to the
Company's productivity program, which occurred during the first half
of 1995.
At the beginning of the year, First Fidelity launched a Company-
wide productivity program, to reduce expenses and increase efficiency,
including rationalization of work flow and paperwork, and reductions
in staff. At June 30, 1995, full-time equivalent staff approximated
12,000, excluding the Household staff, compared to approximately
13,100 at year-end 1994. In addition, the Company is reviewing the
size and composition of its branch network, with the goal of
optimizing customer convenience while maximizing the network's cost-
effectiveness. As a result, excluding the 24 newly acquired Household
branches, at June 30, 1995 the Company had 676 branches compared to
710 branches at December 31, 1994.
Income Taxes
------------
Income taxes increased to $63.4 million in the second quarter of
1995, from $55.0 million in the second quarter of 1994. Income taxes
for the six months ended June 30, 1995 increased to $125.7 million
from $108.1 million for the six months ended June 30, 1994. The
effective tax rates for the three months ended June 30, 1995 and 1994
25 of 36
were 35.5% and 33.0%, respectively. The effective tax rates for the
six months ended June 30, 1995 and June 30, 1994 were 35.5% and 32.9%,
respectively. For the three and six month periods ended June 30,
1995, the increase over the corresponding periods in 1994 was
attributable to a higher level of pre-tax income, an increase in state
income taxes and a lower level of tax-exempt income.
FINANCIAL CONDITION
Liquidity and Funding
---------------------
First Fidelity manages its liquidity in order to maximize
earnings opportunities and to ensure that the cash flow needs of the
parent and subsidiary companies are met in a cost-efficient manner.
The Company's total assets decreased by $853.9 million, from
$36.2 billion at December 31, 1994 to $35.4 billion at June 30, 1995.
The decline in total assets was primarily attributable to sales and
maturities of securities (primarily sales of U.S. Government
securities), combined with a decrease in cash and due from banks,
partially offset by increases in federal funds sold and securities
purchased under agreements to resell, interest bearing time deposits
and certain consumer loans. Deposits and short-term borrowings are
the Company's primary funding sources. The Company experienced a
slight net decline in core deposits during the first six months of
1995. The core deposits to total loans ratio was 114% at June 30,
1995, compared to 117% at December 31, 1994. Short-term borrowing
needs declined at June 30, 1995, compared to December 31, 1994. On
May 25, 1995, the Company redeemed (at maturity) $136.8 million of
long-term debt consisting of 9 3/4% subordinated notes.
Other sources of liquidity include the Company's portfolio of
securities available for sale and its ability to enter into repurchase
agreements, using investment securities as collateral.
Management believes that First Fidelity's liquidity position
continues to be more than adequate, based upon its levels of cash and
cash equivalents, a high level of core deposits, the stability of its
other funding sources and the support provided by its capital base.
Cash and cash equivalents (cash and due from banks, interest-
bearing time deposits, federal funds sold and securities purchased
under agreements to resell) are the Company's most liquid assets. At
June 30, 1995, cash and cash equivalents totaled $2.9 billion, an
increase of $741.0 million from December 31, 1994. Financing
activities absorbed $2.2 billion in cash and cash equivalents. This
was primarily due to: a decline in core deposits; a reduction in
short-term borrowings; First Fidelity's purchase of its own Common
Stock; repayment of long-term debt; and the payment of dividends.
Cash and cash equivalents of $2.5 billion were provided by investing
activities, including cash proceeds of $2.6 billion received from
sales and maturities of securities, and net cash received through
acquisitions of $943.2 million, partially offset by purchases of
securities of $748.3 million. Operating activities provided $455.7
million in cash and cash equivalents for the first half of 1995.
As part of management's objective of maintaining essentially
neutral interest rate sensitivity, the Company employed for hedging
purposes $6.0 billion (notional amount) of interest rate swaps at June
26 of 36
30, 1995, compared to $5.0 billion (notional amount) at December 31,
1994. Due to the natural maturity gap structure of First Fidelity's
core balance sheet items, the Company generally structures its
interest rate swap and futures contracts such that it receives a fixed
interest rate and pays a floating interest rate. Through this
process, management strives to maintain the Company's net interest
income at targeted levels, given reasonable changes in interest rates
(i.e.; plus or minus 200 basis points over a one year period).
The market value of the Company's derivative positions represents
the amount which First Fidelity would pay or receive in exchange for
the termination of such contracts. At June 30, 1995, the Company
would have had to pay $12.3 million to terminate all of its interest
rate swaps (First Fidelity would have paid $39.7 million associated
with indexed amortizing swaps and would have received $27.4 million
related to all other swaps), compared with $205.2 million (of which
$146.4 million related to indexed amortizing swaps) at December 31,
1994.
On a stand-alone basis, interest rate swaps and futures positions
had the effect of reducing net interest income in the first six months
of 1995 by $8.3 million, compared to $61.5 million of net interest
income provided by such instruments during the first half of 1994.
Should interest rates remain flat or increase, interest rate swaps
will have a negative impact on net interest income and net interest
margin for the remainder of 1995.
Capital
-------
The Federal Reserve Board (the "FRB") measures capital adequacy
for bank holding companies on the basis of a risk-based capital
framework and a leverage ratio. The Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") established a capital-based
supervisory system of prompt corrective action for all depository
institutions. The bank regulatory agencies' "implementing rule" under
FDICIA defines "well capitalized" institutions (the highest possible
rating) as those whose capital ratios equal or exceed all of the
following: Tier I Risk-Based Ratio, 6.0%, Total Risk-Based Ratio,
10.0% and Tier I Leverage Ratio, 5.0%. At June 30, 1995 and December
31, 1994, the Company and all of its subsidiary banks reported capital
ratios in excess of these "well capitalized" standards.
27 of 36
The following table provides detailed information pertaining to
the Company's risk-based capital position at June 30, 1995 and
December 31, 1994, calculated using the FRB guidelines.
June 30 December 31
(thousands) 1995 1994
----------- ----------- -----------
Tier I:
Common stockholders' equity............ $ 2,720,098 $ 2,647,268
Net unrealized losses--
securities available for sale........ 8,494 75,232
Qualifying perpetual
preferred stock...................... 219,219 229,707
Less: goodwill and other intangibles... (785,455) (709,054)
----------- -----------
Total Tier I capital............... 2,162,356 2,243,153
Tier II: ----------- -----------
Allowable portion of the reserve for
possible credit losses............... 321,962 322,604
Includable subordinated debt........... 270,695 270,695
Mandatory convertible debt securities.. 174,150 174,150
----------- -----------
Total Tier II capital.............. 766,807 767,449
----------- -----------
Total risk-based capital........... $ 2,929,163 $ 3,010,602
=========== ===========
Risk-adjusted assets..................... $25,592,452 $25,608,116
=========== ===========
Regulatory June 30 December 31
Minimums 1995 1994
---------- ------------ -----------
Tier I capital/risk-
adjusted assets................ 4.00% 8.45% 8.76%
Total risk-based capital/
risk-adjusted assets........... 8.00% 11.45% 11.76%
Tier I capital/quarterly average
total assets less deductible
intangibles(leverage ratio).... 3.00% 6.49% 6.58%
to 5.00%
The decline in the Company's capital ratios at June 30, 1995,
compared to December 31, 1994, was primarily attributable to purchases
of its Common Stock, the payment of dividends and additional goodwill
related to the Household acquisition, partially offset by the
retention of earnings. Regulatory capital, as defined, is calculated
without considering the impact on equity of unrealized gains and
losses associated with securities available for sale.
ASSET QUALITY
During the first half of 1995, asset quality continued to
improve. Non-accruing assets (defined as non-performing assets, plus
assets held for sale, which are assets carried at the lower of
adjusted cost or fair value and subject to an accelerated disposition
approach) were $310.3 million at June 30, 1995, compared with $360.2
million at the end of the first quarter and $398.2 million at December
28 of 36
31, 1994. The $49.9 million decline from March 31, 1995 included a
$31.4 million reduction in the assets held for sale portfolio, from
$65.6 million to $34.2 million, and an $18.5 million decline in non-
performing assets.
Non-Performing Assets
---------------------
Non-performing assets include non-accruing loans, restructured
loans and OREO, net of the OREO reserve. The following table presents
non-performing asset and contractually past due but still accruing
loan information at June 30, 1995, and December 31, 1994
(contractually past due but still accruing loan amounts are not
included in non-performing loan or non-performing asset totals).
(thousands)
----------- June 30 December 31
1995 1994
Non-performing assets (See Note): -------- -----------
Non-accruing loans:
Domestic:
Real estate..................... $ 96,025 $ 94,910
Other........................... 85,240 109,155
Foreign........................... 7,769 15,502
-------- --------
Total......................... 189,034 219,567
Restructured loans.................. 2,640 17,253
-------- --------
Total Non-Performing Loans........ 191,674 236,820
Other real estate owned ............ 86,701 98,786
Less reserve...................... (2,289) (6,752)
-------- --------
Net............................. 84,412 92,034
-------- --------
Total Non-Performing Assets... $276,086 $328,854
======== ========
Contractually past due but still
accruing loans (a):
Consumer........................ $114,330 $128,284
Other........................... 2,038 3,242
Total Contractually Past Due -------- --------
But Still Accruing Loans.... $116,368 $131,526
======== ========
Non-performing loans/loans............ .80% .99%
Non-performing assets/loans
and other real estate owned......... 1.15% 1.38%
Reserve for possible credit losses/
non-performing loans................ 295% 253%
Reserve for possible credit losses/
non-performing assets............... 205% 182%
-----------------
Note: Non-performing assets and non-performing loans exclude loans
classified as contractually past due 90 days or more but
still accruing, assets subject to FDIC loss-sharing
provisions and assets classified as held for sale, which are
included in other assets.
(a) Accruing loans past due 90 days or more.
29 of 36
The decline in total non-performing loans from December 31, 1994
to June 30, 1995 primarily reflected charge-offs and repayments
resulting from continuing collection and workout efforts. In
addition, the Company continued to experience a decreased volume of
loans migrating to non-accrual status during the first half of 1995,
compared to the first half of 1994.
Management's determination regarding the accrual of interest on
loans that were 90 days or more past due but still accruing is based
on the availability and sufficiency of collateral and the status of
collection efforts. In the present environment, certain of such loans
could become non-performing assets and/or result in charge-offs in the
future.
Management continues to focus on asset quality and its potential
impact on the provision and reserve for possible credit losses. The
Company believes that it has responded appropriately to the current
economic environment, and is prepared to forego transactions which do
not meet its quality standards.
Provision and Reserve for Possible Credit Losses
------------------------------------------------
The following table provides detailed information pertaining to
the Company's provision and reserve for possible credit losses and
charge-off experience.
Three Months Ended Six Months Ended
June 30 June 30
------------------ -------------------
(thousands) 1995 1994 1995 1994
----------- -------- -------- -------- --------
Balance at beginning
of period.............. $581,395 $597,356 $599,333 $602,183
Provision............... 10,000 20,000 20,000 44,000
-------- -------- -------- --------
Total................. 591,395 617,356 619,333 646,183
-------- -------- -------- --------
Charge-offs............. (36,543) (39,139) (73,349) (80,670)
Recoveries.............. 10,598 9,999 19,026 19,858
-------- -------- -------- --------
Net charge-offs........ (25,945) (29,140) (54,323) (60,812)
-------- -------- -------- --------
Acquired reserves....... - 2,720 440 5,565
-------- -------- -------- --------
Balance at end of
period................. $565,450 $590,936 $565,450 $590,936
======== ======== ======== ========
At June 30, 1995, the reserve for possible credit losses was
2.36% of total loans, compared to 2.52% of total loans at December 31,
1994.
30 of 36
The levels of the provision and reserve for possible credit
losses are based on management's ongoing assessment of the Company's
credit exposure and consideration of a number of relevant variables.
These variables include prevailing and anticipated domestic and
international economic conditions, assigned risk ratings on credit
exposures, the diversification and size of the loan portfolio, the
results of the most recent regulatory examinations available to the
Company, the current and projected financial status and
creditworthiness of borrowers, certain off balance-sheet credit risks,
the nature and level of non-performing assets and loans that have been
identified as potential problems, the adequacy of collateral, past and
expected loss experience and other factors deemed relevant by
management. The Company's risk rating system and the quarterly
reporting process for problem and vulnerable credits are utilized by
management in determining the adequacy of the Company's reserve for
possible credit losses.
Net charge-offs were $25.9 million in the second quarter of 1995,
compared to $29.1 million in the second quarter of 1994. In the
second quarter of 1995 and 1994, respectively, net charge-offs
included $11.4 million and $10.7 million related to commercial
borrowers, $4.1 million and $5.8 million in commercial real estate-
related credits and $10.4 million and $12.6 million of consumer
credits.
Net charge-offs were $54.3 million in the first half of 1995,
compared to $60.8 million in the first six months of 1994. In the
first half of 1995 and 1994, respectively, net charge-offs included
$22.7 million and $30.2 million related to commercial borrowers, $8.5
million and $8.7 million in commercial real estate-related credits and
$23.1 million and $21.9 million of consumer credits.
OREO Reserve
------------
The following table presents information regarding the Company's
provision and reserve for OREO:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
(thousands) 1995 1994 1995 1994
----------- ------ ------ ------ ------
Balance at beginning
of period................ $4,156 $6,391 $6,752 $6,622
Provision................. 1,000 3,000 1,000 6,250
Acquired reserves......... - - - 456
Charge-offs and
write-downs.............. (2,867) (1,375) (5,463) (5,312)
------ ------ ------ ------
Balance at end of
period................... $2,289 $8,016 $2,289 $8,016
====== ====== ====== ======
The OREO reserve is maintained at a level sufficient to absorb
unidentified declines in the fair value of OREO properties between
periodic evaluations, and for estimated selling costs.
31 of 36
Part II - Other Information
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Information regarding the Company's Annual Meeting of
Shareholders was provided in the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits as required by Item 601 of Regulation S-K.
(11) Statement regarding computation of per share earnings.
(27) Financial Data Schedule.
(29) Letter from the Company's independent accountants
referred to in Paragraph (d) of Rule 10-01 of
Regulation S-X.
(b) Reports on Form 8-K filed during the second quarter:
During the quarter ended June 30, 1995, the Company filed a
current report on Form 8-K dated June 23, 1995, pertaining
to its announcement of the execution of the Merger Agreement
by the Company and First Union.
32 of 36
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FIRST FIDELITY BANCORPORATION
Wolfgang Schoellkopf
Vice Chairman
Chief Financial Officer
Date: August 11, 1995
Anthony R. Burriesci
Executive Vice President
Corporate Controller
Date: August 11, 1995
33 of 36
EXHIBIT 11
Six Months
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) Ended
COMPUTATION OF EARNINGS PER SHARE June 30
1995
------------
Net income.................................................. $228,193,000
Less: Total preferred dividends............................. 10,321,000
------------
A. Net income applicable to common stock....................... $217,872,000
============
Net income.................................................. $228,193,000
Less: Non-convertible preferred dividends................... 5,250,000
------------
B. Net income for fully diluted earnings per share............. $222,943,000
============
Primary Earnings Per Share:
---------------------------
Average shares outstanding.................................. 79,697,397
Dilutive average shares outstanding under options........... 4,539,049
Exercise prices............................................. $12.31 to
$49.38
Assumed proceeds on exercise................................ $166,509,689
Market value per share...................................... $49.68
Less: Treasury stock purchased with the assumed proceeds
from exercise of options.................................. 3,351,489
------------
C. Adjusted average shares - Primary........................... 80,884,957
------------
Primary Earnings Per Share (A/C)............................ $2.69
============
Fully Diluted Earnings Per Share: 34 of 36
---------------------------------
Average shares outstanding.................................. 79,697,397
Dilutive average shares outstanding under options........... 4,635,351
Exercise prices............................................. $12.31 to
$52.19
Assumed proceeds on exercise................................ $171,322,549
Market value per share...................................... $59.00
Less: Treasury stock purchased with the assumed proceeds
from exercise of options.................................. 2,903,772
------------
Adjusted average shares..................................... 81,428,976
Common shares from the assumed conversion of Convertible
Preferred Stock........................................... 3,674,960
------------
D. Adjusted average shares - Fully diluted..................... 85,103,936
------------
Fully Diluted Earnings Per Share (B/D)...................... $2.62
============
35 of 36
EXHIBIT 29
KPMG Peat Marwick LLP
Certified Public Accountants
345 Park Avenue
New York, NY 10154
Independent Auditors' Review Report
----------------------------------
The Board of Directors
First Fidelity Bancorporation:
We have reviewed the accompanying consolidated statement of condition
of First Fidelity Bancorporation and subsidiaries as of June 30, 1995,
and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the six-month periods ended
June 30, 1995 and 1994. These consolidated financial statements are
the responsibility of First Fidelity Bancorporation's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated statement of condition of First
Fidelity Bancorporation and subsidiaries as of December 31, 1994
(presented herein) and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the year then ended
(not presented herein); and in our report dated January 18, 1995, we
expressed an unqualified opinion on those consolidated financial
statements.
KPMG Peat Marwick LLP
July 13, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1995 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,750,833
<INT-BEARING-DEPOSITS> 455,033
<FED-FUNDS-SOLD> 703,375
<TRADING-ASSETS> 100,529
<INVESTMENTS-HELD-FOR-SALE> 2,409,976
<INVESTMENTS-CARRYING> 3,877,896
<INVESTMENTS-MARKET> 3,879,660
<LOANS> 23,999,147
<ALLOWANCE> 565,450
<TOTAL-ASSETS> 35,361,781
<DEPOSITS> 28,818,923
<SHORT-TERM> 2,020,966
<LIABILITIES-OTHER> 905,825
<LONG-TERM> 676,750
<COMMON> 81,999
0
219,219
<OTHER-SE> 2,638,099
<TOTAL-LIABILITIES-AND-EQUITY> 35,361,781
<INTEREST-LOAN> 932,314
<INTEREST-INVEST> 218,066
<INTEREST-OTHER> 4,731
<INTEREST-TOTAL> 1,155,111
<INTEREST-DEPOSIT> 379,910
<INTEREST-EXPENSE> 465,330
<INTEREST-INCOME-NET> 689,781
<LOAN-LOSSES> 20,000
<SECURITIES-GAINS> 14,043
<EXPENSE-OTHER> 537,093
<INCOME-PRETAX> 353,942
<INCOME-PRE-EXTRAORDINARY> 228,193
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 228,193
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.62
<YIELD-ACTUAL> 4.58
<LOANS-NON> 189,034
<LOANS-PAST> 116,368
<LOANS-TROUBLED> 2,640
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 599,333
<CHARGE-OFFS> 73,349
<RECOVERIES> 19,026
<ALLOWANCE-CLOSE> 565,450
<ALLOWANCE-DOMESTIC> 550,766
<ALLOWANCE-FOREIGN> 14,684
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
