FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-16947
PEOPLES HERITAGE FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
Maine 01-0137770
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
One Portland Square, Portland, Maine 04112
(Address of principal executive offices) (Zip Code)
(207) 761-8500
(Registrant's telephone number, including area code)
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
The number of shares outstanding of each of the Registrant's
classes of common stock as of May 1, 1997 is:
Common stock, par value $.01 per share 27,891,306
(Class) (Outstanding)
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INDEX
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Consolidated Balance Sheets - March 31, 1997
and December 31, 1996.
Consolidated Statements of Income - Three months
ended March 31, 1997 and 1996.
Consolidated Statements of Changes in
Shareholders' Equity - Three months ended
March 31, 1997 and 1996.
Consolidated Statements of Cash Flows - Three
months ended March 31, 1997 and 1996.
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal proceedings.
Item 2. Changes in securities.
Item 3. Defaults upon senior securities.
Item 4. Submission of matters to a vote of security
holders.
Item 5. Other information.
Item 6. Exhibits and reports on Form 8-K.
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<TABLE>
<CAPTION>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Number of Shares and Per Share Data)
(Unaudited)
March 31, December 31,
<S> 1997 1996
Assets <C> <C>
Cash and due from banks $ 249,781 $ 276,995
Federal funds sold 24,000 83,000
Securities available for sale,
at market value 1,172,472 1,045,069
Loans held for sale, market value
$118,610 and $103,790 respectively 118,417 103,270
Loans and leases:
Residential real estate mortgages 1,166,347 1,176,874
Commercial real estate mortgages 956,975 962,375
Commercial business loans and leases 496,805 477,402
Consumer loans and leases 1,033,001 1,037,949
3,653,128 3,654,600
Less: Allowance for loan and
lease losses 66,601 67,488
Net loans and leases 3,586,527 3,587,112
Premises and equipment 72,269 73,956
Goodwill and other intangibles 69,781 71,649
Mortgage servicing rights 27,080 33,314
Other assets 137,709 124,033
$5,458,036 $5,398,398
Liabilities and Shareholders' Equity
Deposits:
Regular savings $ 765,538 $ 760,340
NOW and money market accounts 1,016,072 1,023,448
Certificates of deposit (including
certificates of $100 or more of
$238,596 and $232,880, respectively) 1,806,519 1,796,521
Demand deposits 557,907 604,980
Total deposits 4,146,036 4,185,289
Federal funds purchased 17,000 ---
Securities sold under repurchase
agreements 195,985 197,005
Borrowings from the Federal Home Loan
Bank of Boston 464,673 470,080
Other borrowings 17,610 23,884
Other liabilities 68,896 85,130
Total liabilities 4,910,200 4,961,388
Company obligated, mandatorily
redeemable securities of subsidiary
trust holding solely parent junior
subordinated debentures 100,000 ---
Shareholders' Equity:
Preferred stock (par value $0.01 per share,
5,000,000 shares authorized, none issued) --- ---
Common stock (par value $0.01 per share,
100,000,000 shares authorized,
28,576,885 shares issued) 286 286
Paid-in capital 271,790 271,790
Retained earnings 183,307 170,855
Net unrealized gain (loss) on securities
available for sale (5,294) (582)
Treasury stock at cost (152,163 shares and
355,385 shares, respectively) (2,253) (5,339)
Total shareholders' equity 447,836 437,010
$5,458,036 $5,398,398
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Number of Shares and Per Share Data)
(Unaudited)
Three Months Ended
March 31,
1997 1996
<S>
Interest and dividend income: <C> <C>
Interest on loans and leases $ 83,742 $ 67,930
Interest on mortgage-backed investments 10,424 3,496
Interest on other investments 7,118 8,904
Dividends on equity securities 639 424
Total interest and dividend income 101,923 80,754
Interest expense:
Interest on deposits 35,358 29,568
Interest on borrowed funds 8,852 6,047
Total interest expense 44,210 35,615
Net interest income 57,713 45,130
Provision for loan and lease losses --- 450
Net interest income after provision
for loan and lease losses 57,713 44,689
Noninterest income:
Customer services 5,339 3,269
Mortgage banking services 4,231 3,364
Trust and investment advisory services 1,887 1,644
Net securities gains (losses) 3 504
Other noninterest income 874 688
12,334 9,469
Noninterest expenses:
Salaries and employee benefits 21,183 18,238
Occupancy 3,810 3,297
Data processing 3,657 2,798
Equipment 2,927 2,008
Amortization of goodwill and deposit
premiums 1,881 925
Advertising and marketing 1,520 993
Distributions on securities of
subsidiary trust 1,510 ---
Merger expenses --- 453
Other noninterest expenses 6,746 5,870
43,234 34,582
Income before income tax expense 26,813 19,576
Applicable income tax expense 9,803 6,970
Net income $ 17,010 $ 12,606
Weighted average shares outstanding 28,355,812 25,128,427
Earnings per share $ 0.60 $ 0.50
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands, Except Number of Shares and Per Share Data)
(Unaudited)
Net
Par Paid in Retained Unrealized Treasury
Value Capital Earnings Gain (loss) Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $256 $224,268 $134,443 $ 3,763 $ (7,805) $354,925
Treasury stock issued for employee
benefit plans (83,971 shares at
an average price of $8.75) -- -- (215) -- 1,250 1,035
Change in unrealized gains (losses)
on securities available for
sale, net of tax -- -- -- (2,956) -- (2,956)
Net income -- -- 12,606 -- -- 12,606
Cash dividends $0.14 -- -- (3,455) -- -- (3,455)
Balances at March 31, 1996 $256 $224,268 $143,379 $ 807 $ (6,555) $362,155
Balances at December 31, 1996 $286 $271,790 $170,855 $ (582) $ (5,339) $437,010
Treasury stock issued for employee
benefit plans (207,222 shares at
an average price of $11.52) -- -- 494 -- 3,086 3,580
Change in unrealized gains (losses)
on securities available for sale,
net of tax -- -- -- (4,712) -- (4,712)
Net income -- -- 17,010 -- -- 17,010
Cash dividends $0.18 -- -- (5,052) -- -- (5,052)
Balances at March 31, 1997 $286 $271,790 $183,307 $ (5,294) $ (2,253) $447,836
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
<S> 1997 1996
Cash flows from operating activities: <C> <C>
Net income $ 17,010 $ 12,606
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses --- 450
Provision for depreciation 2,494 1,689
Amortization of goodwill and other
intangibles 1,868 923
Net (increase) decrease in net
deferred tax assets 3,894 (452)
Net (gains) losses realized from sales
of other real estate owned (169) 54
Net (gains) losses realized from sales
of securities and consumer loans (3) (504)
Net (gains) realized from sales of
loans held for sale (a component
of mortgage banking services) (2,366) 510
Net decrease (increase) in mortgage
servicing rights 6,234 (2,878)
Proceeds from sales of loans held
for sale 334,191 233,363
Residential loans originated and
purchased for sale (346,972) (251,079)
Net decrease (increase) in interest
and dividends receivable and
other assets (14,046) 276
Net increase (decrease) in other
liabilities (17,911) 3,493
Net cash provided (used) by
operating activities $ (15,776) $ (1,549)
Cash flows from investing activities:
Proceeds from sales of securities
available for sale $ 52,742 $ 31,143
Proceeds from maturities and principal
repayments of securities available
for sale 121,317 150,528
Purchases of securities available
for sale (308,888) (186,647)
Net (increase) decrease in loans
and leases 1,651 (239,570)
Premiums paid on deposits purchased --- (18,231)
Net additions to premises and equipment (807) (2,477)
Proceeds from sales of other real
estate owned 1,189 545
Net (increase) decrease in repossessed
assets owned 378 498
Net cash provided (used) by
investing activities $ (132,418) $ (264,211)
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
<S> 1997 1996
Cash flows from financing activities: <C> <C>
Net increase (decrease ) in deposits $ (39,253) $ 150,289
Net increase (decrease) in securities
sold under repurchase agreements (1,020) (16,283)
Proceeds from Federal Home Loan Bank
of Boston borrowings 90,911 110,000
Payments on Federal Home Loan Bank of
Boston borrowings (96,318) (71,002)
Net increase (decrease) in other
borrowings (6,274) (765)
Proceeds from issuance of subsidiary
trust 98,406 ---
Sale of treasury stock 3,580 1,035
Cash dividends paid to shareholders (5,052) (3,455)
Net cash provided by financing
activities $ 44,980 $ 169,819
Increase (decrease) in cash and cash
equivalents $ (103,214) $ (95,941)
Cash and cash equivalents at beginning
of period 359,995 289,191
Cash and cash equivalents at end of
period $ 256,781 $ 193,250
Supplemental disclosures of information:
Interest paid on deposits and borrowings $ 45,129 $ 34,002
Income taxes paid 3,004 371
Income tax refunds 852 38
Noncash investing transactions:
Loans transferred to other real estate
owned 2,538 790
Loans originated to finance the sales of
other real estate owned 3,604 971
Increases (decreases) resulting from
SFAS No. 115:
Securities available for sale (7,429) (4,588)
Deferred income taxes - liabilities (2,717) (1,632)
Net unrealized gain (loss) on
securities available for sale (4,712) (2,956)
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles and predominant practices within the
banking industry. The Company has not changed its
accounting and reporting policies from those disclosed in
its 1996 Annual Report on Form 10-K.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation
of the consolidated financial statements have been included.
The results of operations and other data for the three
months ended March 31, 1997 are not necessarily indicative
of results that may be expected for any other interim period
or the entire year ending December 31, 1997. Certain
amounts in prior periods have been reclassified to conform
to the current presentation.
<PAGE>
PEOPLES HERITAGE FINANCIAL GROUP, INC. AND
SUBSIDIARIES
PART I - ITEM 2
Management's Discussion and Analysis
Results have been restated for the acquisition of Bank of
New Hampshire on April 2, 1996, which was accounted for as a
pooling of interests. The results of Family Bank
("Family"), which was accounted for as a purchase, have been
included from the date of acquisition, December 6, 1996.
On January 31, 1997, the Company issued, through a
subsidiary trust, $100 million of 9.06% of Company obligated
mandatorily redeemable securities (the Trust Capital
Securities). See Capital for further details.
SUMMARY
Peoples Heritage Financial Group (the "Company") reported
net income of $17.0 million, or $.60 per share, for the
first quarter of 1997. This compares with $12.6 million, or
$.50 per share, for the first quarter of 1996 and $15.5
million, or $.63 per share, for the fourth quarter of 1996.
First quarter return on equity was 15.55%, which compared to
14.06% in the first quarter of 1996 and 16.83% in the fourth
quarter of 1996. The first quarter return on assets was
1.28%, which compared to 1.24% for the same period in 1996
and 1.32% in the fourth quarter.
Earnings and profitability, when compared with the same
period last year, increased due to 29% revenue growth, which
was generated both internally and through acquisitions.
Related expenses increased only 25%, as the Company improved
efficiency. During the period, the Company's efficiency
ratio, which measures overhead as a percent of revenue,
improved from 63.08% in 1996 to 59.57% in 1997.
Compared to the fourth quarter, earnings increased 10%,
primarily due to the contribution of two additional months
resulting from the acquisition of Family. However, earnings
per share and return on equity declined somewhat. These
declines were due to higher average equity levels in the
first quarter as a result of the shares issued to acquire
Family late in the fourth quarter and the issuance of $100
million of Trust Capital Securities on January 31, 1997.
The Company expects that the $100 million share buyback
authorized in the second quarter of 1997 will reduce average
equity levels in future quarters. It is anticipated that
such repurchases will have a favorable impact on return on
equity and earnings per share.
Selected quarterly data is provided in Table 1.
<PAGE>
<TABLE>
<CAPTION>
TABLE 1 - Selected Quarterly Data
1997 1996
(Dollars in Thousands) First Fourth Third Second First
<S> <C> <C> <C> <C> <C>
Net interest income $ 57,713 $ 50,659 $ 47,944 $ 46,831 $ 45,139
Provision for loan losses --- --- --- 450 450
Net interest income after
loan loss provision 57,713 50,659 47,944 46,381 44,689
Non-interest income
(excluding securities
transactions) 12,331 9,975 9,805 9,196 8,965
Securities transactions 3 4 (1) --- 504
Non-interest expenses
(excluding SAIF assessment
and merger charges) 43,234 37,649 34,404 34,934 34,129
SAIF assessment and merger
charges --- --- 1,852 4,652 453
Income before income taxes 26,813 22,989 21,492 15,991 19,576
Income tax provision 9,803 7,450 7,300 5,848 6,970
Net income $ 17,010 $ 15,539 $ 14,192 $ 10,143 $ 12,606
Earnings per share $ 0.60 $ 0.63 $ 0.56 $ 0.40 $ 0.50
Return on average assets 1.28% 1.32% 1.29% 0.93% 1.24%
Return on average equity 15.55% 16.83% 15.21% 11.20% 14.06%
Efficiency ratio (1) 59.57% 62.09% 59.58% 62.35% 63.08%
(1) Excludes one-time SAIF assessment and merger charges and expenses related to company
obligated, mandatorily redeemable securities of subsidiary trust holding solely parent
junior subordinated debentures.
</TABLE>
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<TABLE>
<CAPTION>
TABLE 2 - Average Balances, Yields and Rates
1997 1996
First Fourth
Average Yield/(1) Average Yield/(1)
Balance Interest Rate Balance Interest Rate
(Dollars in Thousands)
<S>
Loans and leases (2): <C> <C> <C> <C> <C> <C>
Residential real estate mortgages $1,327,467 $ 25,954 7.82% $1,180,109 $23,521 7.97%
Commercial real estate mortgages 966,083 22,870 9.60 858,009 20,767 9.63
Commercial loans and leases 479,822 11,467 9.69 445,582 10,581 9.45
Consumer loans and leases 1,026,128 23,553 9.31 955,172 22,343 9.31
Total loans and leases 3,799,500 83,844 8.91 3,438,872 77,212 8.93
Securities available for sale (3) 1,091,909 17,795 6.56 845,828 13,373 6.29
Federal funds sold 25,340 430 6.88 29,859 467 6.22
Total earning assets 4,916,749 102,069 8.38 4,314,559 91,052 8.40
Nonearning assets 471,757 368,153
Total assets $5,388,506 $4,682,712
Interest-bearing deposits:
Regular savings 760,705 5,013 2.67 642,188 4,351 2.70
NOW and money market accounts 980,957 6,166 2.55 902,006 5,899 2.60
Certificates of deposit 1,808,264 24,179 5.42 1,548,624 21,360 5.49
Total interest-bearing deposits 3,549,926 35,358 4.04 3,092,818 31,610 4.07
Borrowed funds 689,014 8,853 5.21 634,938 8,557 5.36
Total interest bearing liabilities 4,238,940 44,211 4.23 3,727,756 40,167 4.29
Demand deposits 549,552 509,547
Other liabilities (3) 105,182 79,146
Securities of subsidiary trust 50,806 ---
Shareholders' equity (3) 444,026 366,263
Total liabilities and shareholders'
equity $5,388,506 $4,682,712
Net earning assets $ 677,809 $ 586,803
Net interest income (fully-taxable
equivalent) 57,858 50,885
Less: fully-taxable equivalent adjustments (145) (226)
Net interest income $57,713 50,659
Net interest rate spread (fully-taxable
equivalent) 4.15% 4.11%
Net interest margin (fully-taxable equivalent) 4.73% 4.69%
(1) Annualized.
(2) Loans and leases includes loans held for sale.
(3) Excludes effect of unrealized gains or losses on securities available for sale.
<PAGE>
TABLE 2 - (Cont'd)
1996 1996
Third Second
Average Yield/(1) Average Yield/(1)
Balance Interest Rate Balance Interest Rate
(Dollars in Thousands)
Loans and leases (2):
Residential real estate mortgages $1,117,953 $ 22,105 7.91% $1,128,536 $ 22,272 7.89%
Commercial real estate mortgages 820,851 20,127 9.75 828,358 19,876 9.65
Commercial loans and leases 428,292 10,236 9.51 423,868 10,137 9.62
Consumer loans and leases 867,533 20,422 9.36 821,400 19,152 9.38
Total loans and leases 3,234,629 72,890 8.96 3,202,162 71,437 8.97
Securities available for sale (3) 799,857 12,668 6.30 794,510 12,418 6.29
Federal funds sold 16,129 186 4.59 39,622 452 4.59
Total earning assets 4,050,615 85,744 8.42 4,036,294 84,307 8.40
Nonearning assets 343,924 354,128
Total assets $4,394,539 $4,390,422
Interest-bearing deposits:
Regular savings 599,793 4,089 2.71 595,325 4,014 2.71
NOW and money market accounts 859,895 5,607 2.59 864,797 5,532 2.57
Certificates of deposit 1,430,091 19,781 5.50 1,462,168 20,242 5.57
Total interest-bearing deposits 2,889,779 29,477 4.06 2,922,290 29,788 4.10
Borrowed funds 602,873 8,085 5.34 584,974 7,466 5.13
Total interest bearing liabilities 3,492,652 37,562 4.28 3,507,264 37,254 4.27
Demand deposits 463,251 423,588
Other liabilities (3) 65,805 94,342
Securities of subsidiary trust --- ---
Shareholders' equity (3) 372,831 365,228
Total liabilities and shareholders'
equity $4,394,539 $4,390,422
Net earning assets $ 557,963 $ 529,030
Net interest income (fully-taxable
equivalent) 48,182 47,053
Less: fully-taxable equivalent adjustments (238) (222)
Net interest income $ 47,944 $ 46,831
Net interest rate spread (fully-taxable
equivalent) 4.14% 4.13%
Net interest margin (fully-taxable equivalent) 4.73% 4.69%
(1) Annualized.
(2) Loans and leases includes loans held for sale.
(3) Excludes effect of unrealized gains or losses on securities available for sale.
<PAGE>
TABLE 2 (Cont'd)
1996
First
Average Yield/(1)
Balance Interest Rate
(Dollars in Thousands)
Loans and leases (2):
Residential real estate mortgages $ 955,643 $ 19,459 8.14%
Commercial real estate mortgages 821,072 20,360 9.97
Commercial loans and leases 402,900 9,887 9.87
Consumer loans and leases 779,603 18,362 9.47
Total loans and leases 2,959,218 68,068 9.25
Securities available for sale (3) 752,285 11,646 6.23
Federal funds sold 93,232 1,235 5.33
Total earning assets 3,804,735 80,949 8.56
Nonearning assets 272,408
Total assets $4,077,143
Interest-bearing deposits:
Regular savings 575,680 3,979 2.78
NOW and money market accounts 847,984 5,745 2.72
Certificates of deposit 1,406,904 19,843 5.67
Total interest-bearing deposits 2,830,568 29,567 4.20
Borrowed funds 450,311 6,048 5.40
Total interest bearing liabilities 3,280,879 35,615 4.37
Demand deposits 395,453
Other liabilities (3) 43,838
Securities of subsidiary trust ---
Shareholders' equity (3) 356,973
Total liabilities and shareholders'
equity $4,077,143
Net earning assets $ 523,856
Net interest income (fully-taxable
equivalent) 45,334
Less: fully-taxable equivalent adjustments (195)
Net interest income $ 45,139
Net interest rate spread (fully-taxable
equivalent) 4.19%
Net interest margin (fully-taxable equivalent) 4.79%
(1) Annualized.
(2) Loans and leases includes loans held for sale.
(3) Excludes effect of unrealized gains or losses on securities available for sale.
</TABLE>
<PAGE>
EARNING ASSETS
The discussion and analysis that follows is based upon
information set forth in Table 2 regarding average balances,
yields and rates.
Loans
Average loans of $3.8 billion rose $840.3 million from a
year earlier and $360.6 million from the fourth quarter
primarily as a result of the Family acquisition and internal
growth in consumer and residential loans. Loans as a
percent of average earning assets fell from 79.7% at the end
of 1996 to 77.3%, due to the 54.4% ratio of Family at the
time of acquisition. The Company expects to increase
Family's percentage of loans to earning assets in the future
as this acquisition is assimilated.
Average residential real estate loans (which includes loans
held for sale) of $1.3 billion grew 38.9% from last year and
12.5% from the fourth quarter, primarily due to $189.6
million of Family loans included as of December 6, 1996 and
$216.4 million obtained as part of the acquisition on
February 16, 1996 of five branches from Fleet Bank NH (the
"Branch Acquisition"). Excluding these acquisitions, annual
growth was 8.7% and annualized growth from the fourth
quarter was 1.3%. The growth represents an increase in
originations from the retail and correspondent networks.
First quarter originations were $428.1 million, of which
$339.1 million represented correspondent production. This
compares to $268.4 million and $182.5 million, respectively,
in the first quarter of 1996 and $386.2 million and $268.4
million, respectively, in the fourth quarter. Mortgage
originations, particularly refinancings, are highly
dependent upon interest rates. At March 31, 1997, 46% of
portfolio loans were fixed rate and 54.0% were variable
rate. Portfolio adjustable rate loans are generally indexed
3.50% above the 1-year constant maturity treasury (CMT),
after an initial below market rate.
Average commercial loans of $479.8 million grew 19% from
last year and 8% from the fourth quarter, primarily due to
$49.9 million of Family loans included from December 6,
1996. Excluding Family, annual growth of 9% resulted from
the Company's focus on lending to sound, small and medium
size business customers within its geographic markets.
Excluding Family, outstanding commercial loans were
unchanged as compared with the fourth quarter, reflecting
normal seasonal activity in northern New England. The
average yield on commercial loans declined from 9.87% during
the first quarter of 1996 to 9.69% during the first quarter
of 1997 reflecting increased competition.
Average commercial real estate loans of $966.1 million
increased 18% from last year and 13% from the fourth
quarter, primarily due to $151.2 million of Family loans
included as of December 6, 1996. Excluding Family,
commercial real estate loans declined 2% from last year and
1% from the fourth quarter, as management continues to
reduce commercial real estate as a percent of total loans.
<PAGE>
The average yield on commercial real estate loans declined
from 9.97% during the first quarter of 1996 to 9.60% during
the first quarter of 1997 reflecting increased competition.
Average consumer loans grew 30% from last year and 6% from
the fourth quarter, primarily due to $79.1 million of Family
loans included from December 6, 1996. Excluding Family,
annual growth of 20% resulted primarily from an increase in
home equity and indirect installment loans. Mobile home
loan blanaces continue to decline as the Company has de-
emphasized this product. The average yield on consumer
loans declined from 9.47% during the first quarter of 1996
to 9.31% during the first quarter of 1997 reflecting both a
change in the mix of consumer loans and increased
competition.
Securities Available for Sale and Other Earning Assets
The Company's $1.2 billion securities portfolio at March 31,
1997 consisted of AAA rated securities, primarily mortgage-
backed securities and U.S. Treasury securities or equivalent
rated securities. Average securities increased 45% from
last year and 29% from the fourth quarter, primarily as a
result of $393.5 million of Family securities included as of
December 6, 1996. The average securities yield was 6.56%
for the first quarter of 1997, as compared to 6.23% for the
first quarter of 1996 and 6.29% for the fourth quarter. The
increased yield was due to reinvesting maturing U.S.
Treasury securities into higher-yielding mortgage-backed
securities, higher market interest rates and the addition of
higher yielding securities at Family Bank.
At March 31, 1997, the available-for-sale portfolio had a
$5.3 million net unrealized loss, compared to a net
unrealized gain of $1.2 million and a net unrealized loss of
$1.1 million at March 31, 1996 and December 31, 1996,
respectively. The decline in market value was due to
increases in market interest rates in the first quarter.
The Company does not have any intention at this time to sell
these securities and believes that the declines are
temporary.
DEPOSITS AND OTHER FUNDING SOURCES
Deposits
Average deposits of $4.1 billion increased 27% from the
first quarter of last year and 14% from the fourth quarter
primarily as a result of $774.6 million of Family deposits
and $160.9 million of deposits acquired in conjunction with
the Branch Acquisition on February 16, 1996. At March 31,
1997, the ratio of loans to deposits stood at 88%, down from
90% at March 31, 1996 but up from 87% at December 31, 1996.
This is primarily the result of the acquisition of Family
which had a loan to deposit ratio of 60.6%.
Average transaction accounts (demand deposit, NOW and money
market accounts) of $1.5 billion were up 23% from last year
and 8% from the fourth quarter. Excluding Family and the
Branch Acquisition, annual growth in transaction accounts
was 3%, which was due to the Company's increased marketing
of these lower cost accounts. Excluding Family, transaction
<PAGE>
accounts declined 3% during the first quarter compared with
the fourth quarter of 1996 due to normal seasonal outflows.
The average rate paid on NOW and money market accounts
declined from 2.72% during the first quarter of 1996 to
2.55% during the first quarter of 1997 due to an increase in
lower yielding NOW accounts.
Average savings and time deposit balances of $2.6 billion
increased 29.6% from last year and 17.3% from the fourth
quarter primarily due to $685.9 million of Family deposits.
The average rate paid on savings accounts has remained
relatively flat, while the rate paid on time deposits has
slightly decreased.
Other Funding Sources
The Company's primary source of funding, other than
deposits, is the Federal Home Loan Bank ("FHLB"). Average
FHLB borrowings for the first quarter were $464.1 million,
compared with $256.1 for the first quarter of last year and
$431.0 for the fourth quarter. FHLB borrowings increased
from the first quarter of 1996 because growth in earning
assets exceeded growth in deposits, while the increase from
the fourth quarter of 1996 was attributable primarily to the
Family acquisition. FHLB borrowings are secured by a
blanket lien on qualified collateral consisting primarily of
loans with first mortgages secured by 1-4 family properties,
certain unencumbered securities and other qualified assets.
At March 31, 1997, FHLB borrowings amounted to at $464.7
million. The Company's estimated additional borrowing
capacity with the FHLB at March 31, 1997 was $803.4 million.
ASSET-LIABILITY MANAGEMENT
Net interest income, the Company's primary source of
revenue, is affected by changes in interest rates as well as
fluctuations in the level and duration of assets and
liabilities contained on the Company's balance sheet. The
impact of changes in interest rates on the Company's net
interest income represents its level of interest rate risk.
The Company analyzes the future impact on net interest
income as a result of changing interest rates based on
projections, including anticipated business activity,
anticipated changes in interest rates and other variables,
which are adjusted periodically. The results of this
analysis indicates that the Company is relatively rate
neutral within a twelve month period. Management estimates
that an instantaneous 2% change in interest rates would have
less than a 3% impact on net interest income over a twelve
month period. This assessment is based on management's
ability to exert some control with respect to the extent and
timing of the change in rates paid on the Company's
interest-bearing deposits. The Company's methods for
analyzing the effects of changes in interest rates on its
operations incorporate assumptions concerning, among other
things, the amortization and prepayment of assets and
liabilities. Management believes that these assumptions
approximate actual experience and considers them reasonable,
although the actual amortization and repayment of assets and
liabilities may vary substantially.
<PAGE>
The primary objective of the Company's asset-liability
management is to maximize net interest income while
maintaining acceptable levels of interest-rate sensitivity.
The Liquidity and Funds Management Committee sets specific
rate-sensitivity limits for the Company. The Committee
monitors and adjusts the Company's exposure to changes in
interest rates to achieve predetermined risk targets that it
believes are consistent with current and expected market
conditions. Management strives to minimize the negative
impact on net interest income caused by changes in interest
rates. At this time, management believes the Company's
asset-liability mix is sufficiently balanced within a broad
range of interest rate scenarios to minimize the impact of
significant rate movements.
The Company controls its interest rate risk by managing the
level and duration of certain on-balance-sheet assets and
liabilities. The Company does not currently use off-balance-
sheet instruments (derivatives) to manage its interest rate
sensitivity position.
The Company has, however, purchased interest rate floors
tied to the CMT index to mitigate the prepayment risk
associated with mortgage servicing rights (see " Non-
Interest Income" for further details). The value of the CMT
floors is inversely related to movements in interest rates,
while the value of the servicing rights is positively
related to movements in interest rates. When rates decline,
people are more likely to refinance their mortgages, which
reduces the value of the servicing rights to the Company.
When rates increase, the opposite is true. While not
accorded hedge accounting treatment due to the uncertainty
of strict correlation, in the event that interest rates
fall, any resulting increase in the value of the CMT floors
are intended to offset, in part, the prospective impairment
of the servicing rights. The CMT floors are carried at
market value of $112 thousand and are included in other
assets. The CMT floors reduced mortgage banking income by
$166 thousand, $94 thousand, and $128 thousand in the first
quarter of 1997, the first quarter of 1996, and the fourth
quarter of 1996, respectively.
NET INTEREST INCOME
The Company's taxable-equivalent net interest income, which
represented 83% of revenues, was $57.9 million in the first
quarter, up 28% from the first quarter of 1996 and 14% from
the fourth quarter. The increases primarily reflect higher
earning assets as a result of the Family and Branch
acquisitions. Table 3 shows the changes from the first
quarter of 1996 to the first quarter of 1997 in tax
equivalent net interest income by category due to rate and
volume.
<PAGE>
<TABLE>
<CAPTION>
TABLE 3 - Rate Volume Analysis
Three Months Ended March 31, 1997 vs. Three Months Ended
March 31, 1996
Quarterly
Change from Previous year due to:
Total
Volume Rate (1) Change
(Dollars in Thousands)
<S>
Interest income: <C> <C> <C>
Loans and leases $19,168 $(3,392) $15,776
Securities available
for sale 5,214 935 6,149
Federal funds sold (892) 87 (805)
Total interest income 23,490 (2,370) 21,120
Interest expense:
Deposits
Regular savings 1,268 (234) 1,034
NOW and money market
accounts 893 (472) 421
Certificates of deposit 5,615 (1,279) 4,336
Total deposits 7,776 (1,985) 5,791
Borrowed funds 3,179 (374) 2,805
Total interest
expense 10,955 (2,359) 8,596
Net interest income (fully
taxable equivalent) $12,535 $ (11) $12,524
(1) Includes changes in interest income and expense not due
solely to volume or rate changes.
</TABLE>
<PAGE>
The first quarter of 1997 net interest margin was 4.73%
compared to 4.79% in the first quarter of 1996 and 4.69% in
the fourth quarter. The 6 basis point annual decline was
due primarily to the acquisition of Family, whose net
interest margin was significantly lower than the Company's.
Securities made up 41% of Family's earning assets at the
date of acquisition. It is anticipated that the Company's
net interest margin will benefit as the Company is able to
deploy those securities into higher yielding loans. In
addition, the Company 's net interest income benefited by
approximately $1.1 million from the issuance of $100.0
million of Trust Capital Securities on January 31, 1997.
NON-INTEREST INCOME
First quarter non-interest income of $12.3 million increased
30% from the first quarter of 1996 and 24% from the fourth
quarter. The increases were attributable to the Family and
Branch acquisitions, as well as internal initiatives to
increase non-interest income.
Customer services income of $5.3 million increased 63% from
the first quarter of last year and 20% from the fourth
quarter. Excluding Family, the 2% increase was attributable
to growth in the number of transaction accounts and an
increase in ATM charges. Growth from the fourth quarter was
primarily the result of the acquisition of Family.
Mortgage banking services income of $4.2 million increased
26% from last year and 37% from the fourth quarter. The
first quarter of 1997 included a $1.3 million gain from the
sale of servicing rights, compared to $200 thousand in the
first quarter of 1996 and $236 thousand in the fourth
quarter. The gain in the first quarter of 1997 resulted
from the sale of $11.3 million of mortgage servicing rights
related to $766.5 million of residential mortgages serviced
for investors. The Company expects to continue to sell
servicing rights periodically in the future in order to
manage the size of its servicing asset. Mortgage servicing
rights amounted to $27.1 million at March 31, 1997, which
was 17% higher than a year earlier, but 19% lower than at
year end. See Table 4 for details.
<PAGE>
<TABLE>
<CAPTION>
TABLE 4 - Mortgage Banking
At or for the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
1997 1996 1996 1996 1996
(Dollars in Thousands)
<S>
Residential mortgages <C> <C> <C> <C> <C>
serviced for
investors at end
of period $3,346,804 $3,227,659 $2,953,213 $2,819,545 $2,701,552
Residential mortgage
sales income $ 1,113 $ 1,722 $ 1,419 $ 1,550 $ 1,332
Residential mortgage
servicing income 1,865 1,132 1,247 1,621 1,832
Gain on sale of
mortgage servicing 1,253 236 649 --- 200
Total $ 4,231 $ 3,090 $ 3,315 $ 3,171 $ 3,364
</TABLE>
<PAGE>
Trust and investment advisory services income of $1.9 million
increased 15% from the first quarter of 1996 and 6% from the
fourth quarter. Assets under management amounted to $1.2
billion at March 31, 1997, an increase of $16.4 million from
December 31, 1996.
The Company recorded securities gains of $3 thousand during the
first quarter of 1997 as compared to $504 thousand in the first
quarter of 1996 and $4 thousand in the fourth quarter.
NON-INTEREST EXPENSE
Non-interest expense of $43.2 million increased 25% from the
first quarter of 1996 and 15% from the fourth quarter primarily
as a result of the Family acquisition and the issuance of the
Trust Capital Securities. Excluding these two items, non-
interest expense would have decreased 1% and 3%, respectively,
as a result of efficiencies created in the Bank of New Hampshire
transaction. Reflecting this, the first quarter efficiency
ratio, which excludes distributions on the Trust Capital
Securities, fell to 59.57%. This compares to 63.08% in the
first quarter of 1996 and 62.09% in the fourth quarter.
Salaries and benefits expense of $21.2 million increased 16%
from last year and 10% from the fourth quarter. Excluding
Family, salaries and benefits would have increased 2% from last
year and would have been unchanged as compared with the fourth
quarter. First quarter full-time equivalent employees were
2,365, compared to 2,003 for the same period last year and 2,307
for the fourth quarter.
Data processing expense increased 31% from last year. In
addition to Family, much of this increase was due to the fact
that Bank of New Hampshire data processing was outsourced in the
second quarter of 1996. Accordingly, the salaries, occupancy,
and other costs of those operations are now data processing
expense.
Occupancy expense increased 16% from the first quarter of last
year and was 28% higher than the fourth quarter, due primarily
to the acquisition of Family. At March 31, 1997, the Company
had 132 full-service banking offices, of which 7 were
supermarket branches. This compared to 111 and 2 at March 31,
1996, respectively, and 132 and 6 at December 31, 1996,
respectively.
Equipment expense increased 46% from the first quarter of last
year and was 28% higher than the fourth quarter, due primarily
to Family as well as the expansion of the Company's branch and
ATM networks and continued investments in computer-related
technology.
Amortization of goodwill and deposit premiums during the first
quarter of 1997 increased 103% from the first quarter of 1996
and 30% from the fourth quarter. The increases were directly
related to the Branch Acquisition during the first quarter of
1996 and the purchase of Family during the fourth quarter of
1996.
<PAGE>
Advertising and marketing expenses increased 53% from the first
quarter of 1996 and was 7% higher than the fourth quarter. The
increases were related in large part to the addition of Family
but also reflected the Company's efforts to promote its products
and services in an increasingly competitive market for financial
services.
<PAGE>
<TABLE>
<CAPTION>
TABLE 5 - Other Non-Interest Expenses
1997 1996 1996 1996 1996
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
(Dollars in Thousands)
<S> <S> <S> <S> <S> <C>
Postage and freight $1,070 $ 765 $ 825 $ 673 $ 815
Telephone 1,005 1,215 921 838 677
Office supplies 824 1,009 755 677 677
Deposits and other assessments 372 111 2,270 (1) 324 345
Collection and carrying costs
of non-performing assets 213 189 502 378 504
Other 3,262 3,284 2,191 4,339 2,852
$6,746 $6,573 $7,464 $7,229 $5,870
(1) Third quarter 1996 includes a $1.9 million one-time Savings Association Insurance Fund
("SAIF") assessment.
</TABLE>
<PAGE>
TAXES
The first quarter effective tax rate of 37% compares to 36% in
the first quarter of 1996 and 32% in the fourth quarter. The
most significant factors are the timing of Maine investment tax
credits and increased non-deductible goodwill as a result of the
Family acquisition.
ASSET QUALITY
As shown in Table 6, nonperforming assets were $51.1 million at
March 31, 1997, which represented 0.94% of total assets. This
compares favorably to $53.9 million or 1.27% at March 31, 1996
and $54.3 million or 1.01% at December 31, 1996. The declines
were due primarily to continued workout efforts on non-
performing loans, sales of other real estate owned ("OREO")
properties and fewer loans being placed on non-accrual status as
a result of the strong economy.
<PAGE>
<TABLE>
<CAPTION>
TABLE 6 -- Nonperforming Assets
March 31, Dec. 31, Sept.30, June 30, March 31,
1997 1996 1996 1996 1996
<S> (Dollars in Thousands)
Residential real estate loans: <C> <C> <C> <C> <C>
Nonaccrual loans $ 5,053 $ 3,867 $ 3,901 $ 5,032 $ 6,089
Accruing loans which are 90 days overdue 3,886 5,560 3,528 2,238 3,800
Total 8,939 9,427 7,429 7,270 9,889
Commercial real estate mortgages:
Nonaccrual loans 15,854 15,270 16,233 15,628 16,917
Accruing loans which are 90 days overdue --- --- --- --- 128
Troubled debt restructurings 1,473 1,581 1,691 1,878 1,793
Total 17,327 16,851 17,924 17,506 18,838
Commercial business loans and leases:
Nonaccrual loans 6,875 8,016 7,688 7,567 5,631
Accruing loans which are 90 days overdue --- --- --- --- 111
Troubled debt restructurings 199 579 614 1,114 1,349
Total 7,074 8,595 8,302 8,681 7,091
Consumer loans and leases:
Nonaccrual loans 6,439 5,097 4,505 4,368 4,099
Accruing loans which are 90 days overdue 1,934 2,478 1,595 602 1,051
Total 8,373 7,575 6,100 4,970 5,150
Total nonperforming loans:
Nonaccrual loans 34,221 32,250 32,327 32,595 32,736
Accruing loans which are 90 days overdue 5,820 8,038 5,123 2,840 5,090
Troubled debt restructurings 1,672 2,160 2,305 2,992 3,142
Total 41,713 42,448 39,755 38,427 40,968
Other nonperforming assets:
Other real estate owned, net of related
reserves 7,390 10,000 9,674 10,033 11,089
Repossessions, net of related reserves 1,964 1,819 1,572 1,316 1,865
Total other nonperforming assets 9,354 11,819 11,246 11,349 12,954
Total nonperforming assets $51,067 $54,267 $51,001 $49,776 $53,922
Total nonperforming loans as a percentage
of total loans (1) 1.14% 1.16% 1.25% 1.23% 1.36%
Total nonperforming assets as a percentage
of total assets 0.94% 1.01% 1.14% 1.14% 1.27%
Total nonperforming assets as a percentage
of total loans (1) and total other
nonperforming assets 1.39% 1.48% 1.60% 1.59% 1.67%
(1) Exclusive of loans held for sale.
</TABLE>
<PAGE>
The Company has reduced its exposure to commercial real
estate from 33% of total loans at December 31, 1991 to 26%
at March 31, 1997 and anticipates maintaining this portfolio
at or below this level.
The commercial business portfolio, which represented 14% of
loans at March 31, 1997, is not concentrated in any single
industry, but reflects the broad-based economies of Maine,
New Hampshire and northeastern Massachusetts. The Company's
commercial business loans are generally to small and medium
size businesses located within its geographic market area.
The Company's residential loans are generally secured by 1-4
family homes, conform to federal agency underwriting
standards and have a maximum loan to value ratio of 80%,
unless they are protected by mortgage insurance. At March
31, 1997, 0.77% of the Company's residential loans were non-
performing, as compared with 1.00% at March 31, 1996 and
0.80% at December 31, 1996.
At March 31, 1997, the Company's consumer loan portfolio
included 36% home equity loans, 20% automobile loans, 20%
mobile home loans and 24% of other loan types. At March 31,
1997, 0.81% of consumer loans were non-performing. This
compares to 0.65% at March 31, 1996 and 0.50% at December
31, 1996.
Net Charge-offs
As shown in Table 7, first quarter net charge-offs were $887
thousand or nine basis points of average loans and leases
outstanding. This compares to $202 thousand or three basis
points for the first quarter of 1996 and $1.2 million or
fourteen basis points for the fourth quarter.
<PAGE>
<TABLE>
<CAPTION>
TABLE 7 - Allowance for Loan and Lease Losses
1997 1996 1996 1996 1996
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
<S> (Dollars in Thousands)
Average loans and leases outstanding<C> <C> <C> <C> <C>
during the period (1) $3,799,500 $3,438,872 $3,234,629 $3,202,162 $2,959,218
Allowance at beginning of period $ 67,488 $ 61,663 $ 63,654 $ 65,533 $ 60,975
Additions due to acquisitions
and purchases --- 7,055 --- --- 4,310
Charge-offs:
Residential real estate
mortgages 516 582 495 1,163 434
Commercial real estate mortgages 261 5,064 1,658 1,158 888
Commercial businesss loans
and leases 323 1,211 249 679 855
Consumer loans and leases 1,568 1,182 722 1,092 741
Total loans charged off 2,668 8,039 3,124 4,092 2,918
Recoveries:
Residential real estate
mortgages 90 97 93 248 62
Commercial real estate mortgages 890 5,721 591 1,169 2,060
Commercial business loans
and leases 574 780 245 92 420
Consumer loans and leases 227 211 204 254 174
Total loans recovered 1,781 6,809 1,133 1,763 2,716
Net charge-offs 887 1,230 1,991 2,329 202
Additions charged to operating
expenses --- --- --- 450 450
Allowance at end of period $ 66,601 $ 67,488 $ 61,663 $ 63,654 $ 65,533
Ratio of net charge-offs to average
loans and leases outstanding
during the period-annualized (1) 0.09% 0.14% 0.25% 0.29% 0.03%
Ratio of allowance to total loans
and leases at end of period (2) 1.82% 1.85% 1.94% 2.04% 2.17%
Ratio of allowance to nonperforming
loans at end of period 159.67% 158.99% 155.11% 165.65% 159.96%
(1) Average loans and leases include portfolio loans and loans held for sale.
(2) Excludes loans held for sale.
</TABLE>
<PAGE>
Provision/Allowance for Loan Losses
The Company did not record a division for loan losses for either
the first quarter of 1997 or the fourth quarter of 1996. The
provision for the first quarter of 1996 was $450 thousand.
At March 31, 1997, the allowance for loan and lease losses
amounted to $66.6 million or 1.82% of loans, as compared to
2.17% at March 31, 1996 and 1.85% at December 31, 1996.
Management considers the allowance appropriate and adequate to
cover potential losses inherent in the loan portfolio based on
the current economic environment.
The ratio of allowance for loan losses to non-performing loans
was 160% at March 31, 1997, which remained relatively unchanged
from year end and at the end of the first quarter 1996.
LIQUIDITY
For banks, liquidity represents the ability to meet both loan
commitments and deposit withdrawals. Funds to meet these needs
generally can be obtained by converting liquid assets to cash or
by attracting new deposits or other sources of funding. Many
factors affect a bank's ability to meet liquidity needs,
including variations in the markets served, its asset-liability
mix, its reputation and credit standing in the market and
general economic conditions.
In addition to traditional in-market deposit sources, the
Company has many other sources of liquidity, including proceeds
from maturing securities and loans, the sale of securities,
asset securitizations and other non-relationship funding
sources, such as FHLB borrowings, senior or subordinated debt,
commercial paper and wholesale purchased funds.
Management believes that the high proportion of residential and
installment consumer loans in the Company's loan portfolio
provides it with an additional amount of contingent liquidity
through the conventional securitization programs that exist
today. Management believes that the level of liquidity is
sufficient to meet current and future funding requirements.
CAPITAL
At March 31, 1997, shareholders' equity totaled $448 million.
In addition, in January 1997, a subsidiary trust of the Company
issued $100 million of Trust Capital Securities which mature in
2027 and which qualify as Tier 1 Capital. The Company declared
an $.18 per share dividend for the first quarter, representing a
30% dividend payout ratio. On April 16, 1997, the Company's
Board of Directors approved the repurchase of up to $100 million
of its Common Stock on the open market.
The Company is subject to risk-based capital guidelines that
measure capital relative to risk-weighted assets. Capital
guidelines issued by the Federal Reserve Board require the
Company to maintain certain ratios, set forth in Table 8. As
indicated in such table, the Company's regulatory capital
currently substantially exceeds all applicable requirements.
<PAGE>
The Company's banking subsidiaries also are subject to federal
regulatory capital requirements. At March 31, 1997, each of the
Company's banking subsidiaries was deemed to be "well
capitalized" under the regulations of the applicable federal
banking agency.
<PAGE>
<TABLE>
<CAPTION>
TABLE 8 - Regulatory Capital Requirements
For Capital
Actual Adequacy Purposes Excess
Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
<S>
As of March 31, 1997:
Total capital (to risk weighted <C> <C> <C> <C> <C> <C>
assets) $523,149 15.36% $272,399 8.00% $250,750 7.36%
Tier 1 capital (to risk
weighted assets) $480,290 14.11% $136,199 4.00% $344,091 10.11%
Tier 1 leverage capital ratio
(to average assets) $480,290 9.05% $212,319 4.00% $267,971 5.05%
As of December 31, 1996:
Total capital (to risk weighted
assets) $409,144 12.24% $267,428 8.00% $141,716 4.24%
Tier 1 capital (to risk
weighted assets) $367,041 10.98% $133,714 4.00% $233,327 6.98%
Tier 1 leverage capital ratio
(to average assets) $367,041 7.96% $184,445 4.00% $182,596 3.96%
</TABLE>
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
In February, 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128
"Earnings per Share." This Statement requires disclosure of
"basic" and "diluted" earnings per share. The Statement is
required to be implemented retroactively in the fourth quarter
of 1997. The Company's current reported earnings per share is
the same as "basic." The Company estimates that diluted
earnings per share will be lower by less than 3% than the
current reported earnings per share.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings:
The Company is involved in routine legal proceedings occurring
in the ordinary course of business which in the aggregate are
believed by management to be immaterial to the financial
condition and results of operations of the Company.
Item 2. Changes in securities - not applicable.
Item 3. Defaults upon senior securities - not applicable.
Item 4. Submission of matters to a vote of security
holders - none.
Item 5. Other Information.
Item 6. Exhibits and reports on Form 8-K.
(a) On January 23, 1997, the Company filed a report on Form 8-K
regarding the press release for the 1996 earnings.
(b) On January 29, 1997, the Company filed a report on Form 8-K
regarding the sale of $100 million of 9.06% Capital Securities.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
Date May 14, 1997 By:
William J. Ryan
Chairman, President and
Chief Executive Officer
Date May 14, 1997 By:
Peter J. Verrill
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
(principal financial and
accounting officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
/s/ William J. Ryan
Date May 14, 1997 By:
William J. Ryan
Chairman, President and
Chief Executive Officer
/s/ Peter J. Verrill
Date May 14, 1997 By:
Peter J. Verrill
Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
(principal financial and
accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 249,781
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 24,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,172,472
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 3,653,128
<ALLOWANCE> 66,601
<TOTAL-ASSETS> 5,458,036
<DEPOSITS> 4,146,036
<SHORT-TERM> 695,268
<LIABILITIES-OTHER> 68,896
<LONG-TERM> 0
<COMMON> 286
0
0
<OTHER-SE> 447,550
<TOTAL-LIABILITIES-AND-EQUITY> 5,458,036
<INTEREST-LOAN> 83,742
<INTEREST-INVEST> 17,542
<INTEREST-OTHER> 639
<INTEREST-TOTAL> 101,923
<INTEREST-DEPOSIT> 35,358
<INTEREST-EXPENSE> 8,852
<INTEREST-INCOME-NET> 57,713
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 43,234
<INCOME-PRETAX> 26,813
<INCOME-PRE-EXTRAORDINARY> 26,813
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,010
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<YIELD-ACTUAL> 4.73
<LOANS-NON> 34,221
<LOANS-PAST> 5,820
<LOANS-TROUBLED> 1,672
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 67,488
<CHARGE-OFFS> 2,668
<RECOVERIES> 1,781
<ALLOWANCE-CLOSE> 66,601
<ALLOWANCE-DOMESTIC> 66,601
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
