SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
Commission File Number 0-17452
INTEGRA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF PENNSYLVANIA 25-1597793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Four PPG Place, Pittsburgh, Pennsylvania 15222-5408
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 644-7669
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1.00 per share New York Stock Exchange
(Title of Class) (Name of exchange on which
class is listed)
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 31, 1995, the Corporation had 33,012,695 shares of common
stock outstanding. The aggregate market value of common stock held by non-
affiliates on that date was approximately $1,667,930,584.
<PAGE>
INTEGRA FINANCIAL CORPORATION<PAGE>
FORM 10-K
For the Fiscal Year Ended December 31, 1995
INDEX
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
<PAGE>
PART I
ITEM 1 - BUSINESS<PAGE>
Description of Business
Integra Financial Corporation ("Integra" or the "Corporation") is a
regional multi-bank holding company headquartered in Pittsburgh,
Pennsylvania and registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). Integra was organized under the laws of the
Commonwealth of Pennsylvania on January 26, 1989 as the result of the
consolidation of two previously unaffiliated, publicly owned corporations,
Union National Corporation and Pennbancorp. Integra was the third largest
bank holding company headquartered in Pittsburgh and the fifth largest in
Pennsylvania based on total assets of
$14.35 billion at December 31, 1995.
Integra's principal activity consists of providing general retail and
commercial banking services through its subsidiary bank with branches in 23
counties of western Pennsylvania. In addition, Integra's non-retail
banking subsidiaries provide trust, mortgage banking, consumer financing,
commercial leasing, securities brokerage and credit life and disability
reinsurance services.
Integra entered into an Agreement and Plan of Merger ("the
Agreement") dated August 27, 1995 providing for the merger of Integra with
and into National City Corporation ("National City"). As of the effective
time of the merger, each outstanding share of Integra common stock will be
converted into two shares of National City common stock. Based on the
December 31, 1995 market price of National City stock, the transaction has
a value of $66.25 per share for a total of $2.19 billion. Consummation of
the merger is subject to a number of conditions including receipt of
approval of the Agreement by shareholders of Integra and National City,
receipt of all required regulatory approvals and receipt of opinions of
legal counsel and independent accountants. In January 1996, the required
regulatory approvals were received. Under the Agreement, Integra will
operate its business in the ordinary course and use its commercially
reasonable efforts to preserve intact its business organization. The
transaction is expected to close in the second quarter of 1996. The merger
will be accounted for using the pooling-of-interests method of accounting.
National City is a registered bank holding company with headquarters
in Cleveland, Ohio. At December 31, 1995, National City has total
consolidated assets of $36.20 billion and total consolidated deposits of
$25.20 billion. National City conducts a general retail and commercial
banking business through its bank subsidiaries, which operate in Ohio,
Indiana and Kentucky.
Recent Merger Activity
On January 5, 1995, Integra acquired Lincoln Savings Bank
("Lincoln"), a Pennsylvania chartered publicly-owned savings bank. At
December 31, 1994, Lincoln had total deposits of $159.6 million and
operated seven branch offices located in Integra's market area. Integra
paid $58.00 cash for each of the outstanding shares (other than shares held
by the Corporation) of Lincoln common stock for a total purchase price of
$50.5 million. The transaction was accounted for as a purchase. Upon
consummation of the transaction, Lincoln was merged into Integra
Bank/Pittsburgh ("Integra/Pittsburgh") and five branch offices were closed
and consolidated with nearby branch locations.
On January 15, 1993, Equimark Corporation ("Equimark"), a bank
holding company with total assets of $2.57 billion at December 31, 1992,<PAGE>
was merged into Integra. Equimark's principal subsidiary was Equibank, a
state-chartered bank that conducted general retail and commercial banking
business through 53 branch offices in western Pennsylvania. In the merger,
.20 of an Integra common share was issued in exchange for each outstanding
share of Equimark common stock for a total of 7,730,779 Integra common
shares. Each share of series preferred stock of Equimark was converted
into one share of series preferred stock of Integra having the same rights,
powers and preferences, for a total of 1,159,311 Integra series preferred
shares. During 1993, the series preferred stock was converted into common
stock and repurchased, or redeemed, such that there was no series preferred
stock outstanding as of December 31, 1993. The merger was accounted for
using the pooling-of-interests method in which historical financial
statements of Integra were restated retroactively to reflect the
consolidated operations of Integra and Equimark. Upon consummation of the
transaction, Equibank became a wholly-owned subsidiary of the Corporation
and operated as a separate bank until its merger with Integra/Pittsburgh on
April 23, 1993. In conjunction with the merger, eighteen branch offices
were closed and consolidated with nearby branch locations and four branch
offices were sold.
Subsidiary Banks
The Corporation's banking subsidiaries ("the Banks") include Integra
Bank and Integra Trust Company, National Association ("Integra Trust
Company"). Effective May 25, 1995, the Corporation merged
Integra/Pittsburgh, Integra Bank/North and Integra Bank/South into a single
state charter to form Integra Bank. In April 1993, the Corporation
converted its banking subsidiaries (other than Integra Trust Company) from
national banks to Pennsylvania-chartered banks.
Integra Bank operated 263 banking offices as of December 31, 1995 and
maintains its main office in Pittsburgh, Allegheny County.
Integra Trust Company was formed in November 1991 and, in January
1992, acquired from the Banks the trust businesses operated by those
entities. Some trust arrangements established pursuant to indentures and
certain individual trust accounts remain with Integra Bank. Integra Trust
Company is a national bank with full commercial banking powers.
The Corporation's banking subsidiaries are members of the Federal
Reserve System and are insured by the Federal Deposit Insurance Corporation
("FDIC") to the extent provided by law.
Business
Integra Bank conducted business through 263 full service branch
offices in 23 western Pennsylvania counties as of December 31, 1995. The
Bank offers a full range of loan and deposit products to individual and
business customers.
Deposits are obtained primarily from residents and businesses located
in western Pennsylvania through convenient branch locations offering
comprehensive
services and through a network of automated teller machines. Integra Bank
offers a variety of deposit products designed to attract and retain both
short-term and long-term deposits. These products include non-interest
bearing and interest bearing demand deposit accounts, savings accounts,
money market deposit accounts
and various time deposits. Deposit products are modified and new products
are developed when market conditions warrant in conjunction with the
Corporation's management of deposit levels and costs and its ability to<PAGE>
attract new funds. Deposit outflows that have occurred in recent years
resulted from merger related branch closings, consolidations and sales, as
well as customers seeking investment alternatives. The Corporation's
deposit levels and cost of deposits have been and will continue to be
significantly influenced by market conditions, competition, interest rates
and customer preferences.
Integra originates commercial loans primarily to small- and medium-
sized businesses across western Pennsylvania and closely neighboring areas.
The Corporation's commercial loans are to borrowers from various types of
businesses and industries. Integra originates real estate loans secured by
mortgages on residential and commercial properties and residential
construction loans within its primary market area. Residential mortgages
are also obtained by the Corporation's mortgage banking subsidiary's retail
and wholesale lending divisions throughout the eastern and midwestern
states. The Corporation sells a majority of its fixed rate residential
real estate loans in the secondary mortgage market as part of its mortgage
banking activities. Consumer loans are originated in the form of indirect,
home equity, lines of credit, education, credit card and direct loans.
Through a consumer finance subsidiary, Integra originates non-conforming
first and second residential mortgages. A majority of the Corporation's
residential real estate and consumer loans are to borrowers located in
Pennsylvania. Generally, except in conjunction with its mortgage banking
activities and consumer finance lending, the Corporation lends outside of
its traditional lending area only in very limited circumstances. Integra's
underwriting policies seek to limit lending to only creditworthy borrowers
and are subject to written, non-discriminatory standard underwriting
guidelines.
Integra Trust Company provides a variety of fiduciary, investment
advisory, employee benefit and custodian services to personal and corporate
trust customers. During the third quarter of 1994, Integra Trust Company
introduced its own family of mutual funds called The Inventor Funds. As of
December 31, 1995, the Inventor Funds had balances totalling approximately
$796.9 million which included the conversion of $614.6 million of trust
assets.
Non-Bank Subsidiaries
The Corporation engages in various non-banking activities that
complement its banking business through non-bank subsidiaries. Integra's
principal wholly-owned non-bank subsidiaries are Integra Mortgage Company,
Altegra Credit Company ("Altegra"), Integra Investment Company, Integra
Brokerage Services Company, Advent Insurance Company and Integra Business
Credit Company.
Integra Mortgage Company is a mortgage banking subsidiary
incorporated in Pennsylvania which began operations as a separate
subsidiary of Integra Bank on September 24, 1992. The mortgage banking
portfolio of loans serviced for others totalled $3.68 billion at December
31, 1995. Integra Mortgage Company has expanded the Corporation's loan
origination capacity throughout Pennsylvania, Virginia and Ohio through
retail production offices. The company operates a wholesale lending
division which acquires mortgages through loan correspondents, mortgage
brokers and other financial institutions. Wholesale loans are subject to
the same quality control and underwriting standards as loans which are
generated by the Corporation's loan originators. Integra sells a majority
of its fixed rate residential real estate loan production in the secondary
mortgage market and generally retains the right to service the loans which
provides a continuing source of non-interest income.<PAGE>
Altegra is a consumer finance subsidiary incorporated in Florida and
a former non-bank subsidiary of Equimark. On September 9, 1994, Altegra
changed its name from American Financial Corporation of Tampa and relocated
its headquarters to Pittsburgh. Altegra operates loan centers in Florida,
New Jersey and Pennsylvania. Altegra is expanding this line of business in
states generally east of the Mississippi River and opened ten direct
lending offices in 1995. Altegra originates residential first and second
mortgages that are not underwritten to Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation guidelines. The
typical variance is due to the credit history of the borrower. Such credit
risk is managed by lending a lower amount relative to the collateral value.
Higher servicing costs that result from increased credit risk are
compensated for by higher loan rates in comparison to conventional
residential real estate and home equity loans. Many of the loans are
purchased from brokers who originate such loans in accordance with
Altegra's underwriting standards. Loans in Altegra's portfolio were
located in approximately 37 states at December 31, 1995, with
approximately half in Ohio, New Jersey, Pennsylvania and New York.
Integra Investment Company is a Delaware corporation whose principal
activity is investing primarily in marketable equity securities to
complement the securities portfolio of Integra Bank. Integra Brokerage
Services Company is a Pennsylvania corporation which provides discount
brokerage services primarily to customers of the Banks. Advent Insurance
Company reinsures certain credit life and disability insurance offered to
retail consumer loan customers of Integra Bank. Integra Business Credit
Company engages in commercial leasing activities on both a national and
local basis and, to a lesser extent, asset-based lending to customers in
Integra's regional market area. In addition to these non-bank
subsidiaries, Integra owns a majority interest in Integra Life Insurance
Company, which is an Arizona corporation that reinsures credit life and
disability insurance offered by Integra Bank. Unaffiliated investors held
approximately 24% of the equity interest in Integra Life Insurance Company
as of December 31, 1995.
Employees
As of December 31, 1995, Integra and its subsidiaries had 5,041 full-
time equivalent employees. Qualifying employees are eligible to
participate in pension and profit sharing plans and are provided with group
life, health and medical insurance.
Competition
Bank holding companies and their subsidiaries are subject to intense
competition from various financial institutions and other companies or
firms which engage in similar activities. For example, Integra Bank
competes for deposits with other commercial banks, savings banks, thrifts,
insurance companies, brokerage houses and credit unions. The Bank also
competes with other commercial banks, savings banks, thrifts, consumer
finance companies, credit unions, leasing companies, mortgage banking
companies and other lenders in the origination and servicing of loans. In
providing trust, money management services and mutual funds, Integra Trust
Company competes with other commercial banks, trust companies, brokerage
houses, mutual fund managers and insurance companies. Many of the
Corporation's competitors have substantial resources and operations which
are national or international in scope and efforts to expand the products
and services offered by the Corporation and its subsidiaries will likely be
met with corresponding products and services from competitors.<PAGE>
Supervision and Regulation
Bank holding companies, banks and many of their non-bank affiliates
are extensively regulated under both federal and state law. To the extent
that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those
provisions. The following is not intended to be a complete description of
the statutes and regulations applicable to the Corporation's business.
Bank Holding Companies. The Corporation is a registered bank holding
company under the BHCA and, as such, is subject to supervision and
examination by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). The BHCA requires, among other things, the prior
approval of the Federal Reserve Board if a bank holding company proposes to
(i) acquire all or substantially all of the assets of any bank, (ii)
acquire direct or indirect ownership or control of more than 5% of the
voting shares of any bank or bank holding company, or (iii) merge or
consolidate with any other bank holding company. The BHCA further provides
that the Federal Reserve Board shall not approve any such acquisition,
merger or consolidation that would result in a monopoly or would be in
furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States, or the
effect of which may be substantially to lessen competition or to tend to
create a monopoly in any section of the country, or that in any other
manner would be in restraint of trade, unless the anti-competitive effects
of the proposed transactions are clearly outweighed, in the public
interest, by the probable effect of the transaction in meeting the
convenience and needs of the community to be served.
The BHCA prohibits a bank holding company, with certain exceptions,
from acquiring more than 5% of the voting shares of any company that is not
a bank and from engaging in any business other than banking or managing or
controlling banks and other subsidiaries authorized by the BHCA or
providing services to them without the prior approval of the Federal
Reserve Board. Under the BHCA, the Federal Reserve Board is authorized to
approve the ownership of shares by a bank holding company of any company
whose activities have been determined by the Federal Reserve Board to be so
closely related to banking or to managing or controlling banks as to be a
proper incident thereto. In making such determinations, the Federal
Reserve Board is required to weigh the expected benefit to the public, such
as greater convenience, increased competition and gains in efficiency,
against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest and
unsound banking practices.
The BHCA also generally prohibits the Federal Reserve Board from
approving a bank holding company's application to acquire a bank or bank
holding company located outside the state in which the operations of its
banking subsidiaries are principally located, unless such acquisition is
specifically authorized by a statute of the state in which the bank or bank
holding company to be acquired is located or the acquisition involves a
closed or failing bank and has been authorized under the Federal Deposit
Insurance Act (the "FDIA"). Pennsylvania law permits bank holding
companies located in any state to acquire Pennsylvania banks and bank
holding companies, provided that the home state of the acquiring company
has enacted "reciprocal" legislation. In this context, reciprocal
legislation is generally defined as legislation that expressly authorizes
Pennsylvania bank holding companies to acquire banks or bank holding
companies located in another state on terms and conditions substantially no<PAGE>
more restrictive than those applicable to such an acquisition in
Pennsylvania by a bank holding company located in the other state.
On September 29, 1994, the Riegle-Neal Interstate Banking and
Branching Efficiency Act was signed into law (the "IBBEA"). The IBBEA
provides for the repeal of restrictions on interstate bank acquisitions by
bank holding companies and restrictions on interstate branching by banks.
Subject primarily to deposit concentration limitations, bank holding
companies will be able to acquire banks that are located in any state
beginning one year after the enactment of the IBBEA. Subject primarily to
thresholds regarding adequate capitalization and sound management, banks
will be permitted to engage in interstate branching three years from the
date of enactment of the IBBEA. States will have limited powers to modify
the effect of the IBBEA within their borders.
In July 1995, Pennsylvania enacted various statutory amendments
harmonizing Pennsylvania banking laws with the IBBEA. As a result, and
subject to some restrictions, any national or state-chartered bank having
its principal office outside Pennsylvania may establish branch offices in
Pennsylvania for the conduct of its business. Among the restrictions
applicable to this power are that banks chartered by another state must
receive approval of the Pennsylvania Department of Banking ("PADOB") prior
to branching in Pennsylvania, and the home state of any national or state-
chartered bank must allow banks located in Pennsylvania to establish
branches in that other state. Additionally, the recent Pennsylvania
enactments also allow bank holding companies located in other states to own
and, with PADOB approval, acquire banks, bank and trust companies, and
national banks principally located in Pennsylvania.
Bank holding companies and their subsidiary banks are also subject to
the provisions of the Community Reinvestment Act of 1977 ("CRA"). Under
the CRA, the Federal Reserve Board (or other appropriate bank regulatory
agency) is required, in connection with its examination of a bank, to
assess such bank's record in meeting the credit needs of the communities
served by that bank, including low- and moderate-income neighborhoods.
Further, such assessment is also required of any bank holding company which
has applied to (i) charter a national bank, (ii) obtain deposit insurance
coverage for a newly chartered institution, (iii) establish a new branch
office that will accept deposits, (iv) relocate an office, or (v) merge or
consolidate with, or acquire the assets or assume the liabilities of, a
federally-regulated financial institution. In the case of a bank holding
company applying for approval to acquire a bank or other bank holding
company, the Federal Reserve Board will assess the record of each
subsidiary of the applicant bank holding company, and such records may be
the basis for denying the application or imposing conditions in connection
with approval of the application. On December 8, 1993, the federal bank
regulators jointly announced proposed regulations to simplify enforcement
of the CRA by substituting twelve assessment factors with three assessment
factors for use in calculating CRA ratings (the "December 1993 Proposal").
In response to comments received by the regulators regarding their December
1993 Proposal, the federal bank regulators issued revised CRA proposed
regulations on September 26, 1994 (the "Revised CRA Proposal"). The
Revised CRA Proposal, compared to the December 1993 Proposal, would
essentially broaden the scope of CRA performance examinations and more
explicitly consider community development activities. Moreover, in 1994,
the Justice Department became more actively involved in enforcing fair
lending laws. In April 1995, the federal bank regulators adopted new CRA
regulations which would be phased in over a year and a half, commencing in
January 1996. In November 1995, the federal bank regulators issued CRA
guidelines for bank examiners. The new CRA regulations attempt to<PAGE>
emphasize performance, instead of documentation or the process of
compliance, under CRA in the areas of community lending, service and
investment. The recent examiner's guidelines attempt to reduce paperwork
burdens for banks.
The Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA") was enacted by Congress on August 9, 1989. Among the more
significant consequences of FIRREA with respect to bank holding companies
is the impact of the "cross-guarantee" provision and the significantly
expanded enforcement powers of bank regulatory agencies. Under the cross-
guarantee provision, if one depository institution subsidiary of a multi-
unit holding company fails or requires FDIC assistance, the FDIC may assess
a commonly controlled depository institution for the estimated losses
suffered by the FDIC. While the FDIC's claim is junior to the claims of
non-affiliated depositors, holders of secured liabilities, general
creditors, and subordinated creditors, it is superior to the claims of
shareholders. Among the significantly expanded enforcement powers of the
bank regulatory agencies are the powers to (i) obtain cease and desist
orders, (ii) remove officers and directors, (iii) approve new directors and
senior executive officers of certain depository institutions, and (iv)
assess criminal and civil money penalties for violations of law,
regulations or conditions imposed by, or agreements with, regulatory
agencies.
Under Federal Reserve Board regulations, a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it has been the Federal Reserve Board's policy that
in serving as a source of strength to its subsidiary banks, a bank holding
company should stand ready to use available resources to provide adequate
capital funds to its subsidiary banks during periods of financial stress or
adversity and should maintain the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks.
A bank holding company's failure to meet its obligations to serve as a
source of strength to its subsidiary banks may be considered by the Federal
Reserve Board to be an unsafe and unsound banking practice or a violation
of the Federal Reserve Board regulations or both. This doctrine has become
known as the "source of strength" doctrine. Although the United States
Court of Appeals for the Fifth Circuit struck down the Federal Reserve
Board's source of strength doctrine in 1990, saying that the Federal
Reserve Board had no authority to assert the doctrine under the BHCA, the
decision was reversed by the United States Supreme Court on procedural
grounds. The validity of the source of strength doctrine is likely to
continue to be the subject of litigation until definitively resolved by the
courts or by Congress.
The Corporation is deemed to be a Pennsylvania Bank Holding Company
as that term is defined in the Pennsylvania Banking Code of 1965, as
amended (the "Banking Code"), and is, therefore, subject to the statutes
contained therein and the regulations promulgated thereunder by the PADOB.
Subsidiary Banks. Integra Bank is a Pennsylvania-chartered, FDIC
insured bank which is a member of the Federal Reserve System. As such, the
Bank is supervised and regulated by the PADOB, the Federal Reserve Board
and the FDIC. Integra Trust Company is a national bank. As such, it is
supervised and regulated by the Office of the Comptroller of the Currency
(the "Comptroller"), the Federal Reserve Board and the FDIC. Additionally,
the net income of the Banks may be significantly affected by federal
monetary policy as exercised by the Federal Reserve Board with respect to
the money supply and the availability of credit.<PAGE>
The parent company's principal assets are its investments in its
subsidiaries and the dividends from its subsidiary banks constitute an
important source of operating income. Dividends that may be paid by
Integra Bank to the Corporation are subject to certain regulatory
limitations. The dividends paid by a state bank under the Banking Code may
not exceed accumulated net earnings (essentially, undivided profits) of the
bank. Generally, the prior approval of the Federal Reserve Board is
required if the total of all dividends declared by a state member bank in
any calendar year exceeds its net profits (as defined) for that year
combined with its retained net profits for the preceding two calendar
years. Under the FDIA, no dividends may be paid by an insured bank if the
bank is in arrears in the payment of any insurance assessment due to the
FDIC. The FDIC and the Federal Reserve Board, and the PADOB, also have the
authority to disallow the payment of dividends if the payment of such
dividends is determined to constitute an unsafe and unsound practice.
With respect to Integra Trust Company, the approval of the
Comptroller is required if the total of all dividends declared in any
calendar year exceeds the company's net profits (as defined) for that year
combined with the company's retained net profits for the preceding two
calendar years. Additionally, Integra Trust Company may not declare
dividends in excess of net profits on hand, after deducting the amount by
which the principal amount of all loans on which interest is past due for a
period of six months or more exceeds the reserve for loan losses. Integra
Trust Company has no loans among its assets. The Comptroller also has the
authority to prohibit Integra Trust Company from engaging in what, in the
regulator's opinion, constitutes an unsafe or unsound practice for
conducting its business. Depending upon the financial condition of the
company, the payment of dividends could be deemed to constitute such an
unsafe or unsound practice. The Comptroller has indicated that generally
it would be an unsafe and unsound practice to pay dividends except out of
current operating earnings.
The ability of the Corporation's subsidiary banks to make funds
available to the Corporation is also subject to restrictions imposed by
federal law on the ability of any such bank to extend credit to the
Corporation and its non-bank subsidiaries, to purchase the assets thereof,
to issue a guarantee, acceptance, or letter of credit on their behalf
(including an endorsement or standby letter of credit) or to invest in the
stock or securities thereof, or to take such stock or securities as
collateral for loans to any borrower. Such extensions of credit and
issuances generally must be secured and are generally limited, with respect
to the Corporation and each subsidiary, to 10% of such bank's capital stock
and surplus and, with respect to the Corporation and all of such
subsidiaries, to an aggregate of 20% of such bank's capital stock and
surplus. Generally, no subsidiary bank may accept the stock of the
Corporation as collateral for a loan.
The payment of dividends by the Corporation and its bank subsidiaries
may also be affected or limited by other factors, such as the requirement
to maintain adequate capital above regulatory minimums. In 1989, the
Federal Reserve Board adopted final risk-based capital guidelines for bank
holding companies. These rules became fully phased in at the end of 1992.
The minimum guidelines for the
ratio of total capital to risk-weighted assets (including certain off-
balance-sheet activities, such as standby letters of credit) is 8%. At
least 4% of the total capital must be "Tier I Capital" or core capital,
which may be composed of common equity, retained earnings and a limited
amount of perpetual preferred stock, less goodwill and intangible assets
other than purchased mortgage servicing rights acquired after February 18,<PAGE>
1992. The remainder may consist of subordinated debt, cumulative preferred
stock and a limited amount of loan loss reserves ("Total Capital"). In
addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide a minimum
leverage ratio of tangible equity (shareholders' equity less disallowed
intangibles) to adjusted average quarterly assets equal to 3% for bank
holding companies that meet certain specified criteria.
<PAGE>
The following table sets forth capital ratios for Integra and its
principal bank subsidiary as of December 31, 1995:
<TABLE>
<CAPTION>
Total Capital Tier I
to Risk- Capital to
Weighted Risk-Weighted
Assets (A)(C) Assets (C) Leverage (B)(C)
<S> <C> <C> <C>
Integra Financial
Corporation 14.61% 11.13% 7.02%
Integra Bank 12.31% 11.05% 6.88%
(A) Tier I Capital plus reserve for loan losses (limited to 1.25% of total risk-weighted
assets) plus subordinated debt divided by risk-weighted assets.
(B) Tier I Capital divided by quarter-to-date average assets less goodwill and intangible
assets, with certain exceptions.
(C) In accordance with regulatory guidelines, these capital ratios do not include net
unrealized gains or losses on securities available for sale under Financial Accounting
Standards Board ("FASB") Statement 115 "Accounting for Certain Investments in Debt and
Equity Securities".
</TABLE>
In December 1991, the Federal Deposit Insurance Corporation
Improvement Act (the "FDICIA") became law. Section 131 of the FDICIA
creates a framework for supervisory actions regarding insured institutions
and their holding companies, in an effort to reduce the risks of possible
long-term losses to deposit insurance funds. Under the FDICIA, the federal
bank regulators are required to establish five levels of capital at which
insured depository institutions will be "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." The regulators adopted regulations to
implement the requirements of FDICIA, which became effective December 19,
1992. Integra Bank has been deemed "well capitalized". Under the
regulations, the required minimum capital ratios for each category of
institutions are, with certain exceptions, as follows:
<TABLE>
<CAPTION>
Tier I
Total Capital Capital to
to Risk-Weighted Risk-Weighted
Assets Assets Leverage
S> <C> <C> <C
<PAGE>
Well capitalized 10% or above and 6% or above and 5% or above
Adequately
capitalized 8% or above and 4% or above and 4% or above
Undercapitalized Under 8% or Under 4% or Under 4%
Significantly
undercapitalized Under 6% or Under 3% or Under 3%
Critically
undercapitalized 2% or Under
</TABLE>
The appropriate federal bank regulatory agency has authority to
downgrade an institution's capital designation by one category if it
determines that an institution is in an unsafe or unsound condition or is
engaging in unsafe or unsound practices.
The FDICIA provides for increased supervision for banks not rated in
one of the two highest categories under the "CAMEL" composite bank rating
system. Undercapitalized institutions are required to submit capital
restoration plans to the appropriate federal banking regulator and are
subject to restrictions on operations, including prohibitions on branching,
engaging in new activities, paying management fees, making capital
distributions such as dividends, and growing without regulatory approval.
Moreover, companies controlling undercapitalized depository institutions
are required to guarantee their subsidiaries' compliance with the capital
restoration plan until the institution has been adequately capitalized on
average during each of four consecutive quarters and to provide adequate
assurances of performance. Controlling companies have liability up to an
amount equal to the lesser of 5% of such an institution's assets at the
time it became undercapitalized or the amount of the capital deficiency
when such an institution first fails to meet the plan. Claims under such
guarantee would likely be entitled to priority over the claims of general
unsecured creditors of the controlling company in the event of such
company's bankruptcy. Two years after the date of enactment of the FDICIA,
restrictions on loans to undercapitalized institutions from the Federal
Reserve Banks generally apply.
Significantly or critically undercapitalized institutions and
undercapitalized institutions that do not submit and comply with capital
restoration plans acceptable to the applicable federal banking regulator
are subject to at least one of the following sanctions: (i) forced sale of
shares to raise capital or, where grounds exist for the appointment of a
receiver or conservator, a forced merger; (ii) restrictions on transactions
with affiliates; (iii) limitations on interest rates paid on deposits; (iv)
further restrictions on growth or required shrinkage; (v) replacement of
directors or senior executive officers, subject to certain grandfather
provisions for those elected prior to the enactment of the FDICIA; (vi)
prohibitions on the receipt of correspondent deposits; (vii) restrictions
on capital distributions by the holding companies of such institutions;
(viii) required divestiture of subsidiaries by the institution; (ix)
required alteration, reduction or termination by the institution or any of
its subsidiaries of any activity that the agency determines poses excessive
risk to the institution; (x) required divestiture of affiliates by holding
companies of such institutions; (xi) required divestiture of the
institution; or (xii) other restrictions as determined by the regulator.
In addition, the compensation of officers would be frozen at the level in
effect when the institution failed to meet the capital standards. A forced
sale of shares or merger, restrictions on affiliate transactions and
restrictions on rates paid on deposits is required to be imposed by the<PAGE>
regulator unless the regulator determines that they would not further
capital improvement.
In addition to the foregoing, a critically undercapitalized
institution may not, without FDIC approval: (i) enter into material
transactions outside of the ordinary course of business; (ii) extend credit
on highly leveraged transactions; (iii) amend its charter or by-laws; (iv)
make any material change in its accounting methods; (v) engage in any
covered transactions with affiliates; (vi) pay excessive compensation or
bonuses; or (vii) pay rates on liabilities significantly in excess of
market rates. A critically undercapitalized institution may not, beginning
60 days after becoming critically undercapitalized, make any payment of
principal or interest on the institution's
subordinated debt issued after July 15, 1991.
The FDICIA requires the appointment of a conservator or receiver
within 90 days after an institution becomes critically undercapitalized,
unless the FDIC and the primary federal regulator jointly determine that
another course of action would better protect the federal deposit insurance
fund. If the institution does not reach the critical capital level within
270 days of becoming critically undercapitalized, a receiver generally is
required to be appointed, notwithstanding any determination that another
course of action would be appropriate. The board of directors of an
insured depository institution is not liable to the institution's
shareholders or creditors for consenting in good faith to the appointment
of a receiver or conservator or to an acquisition or merger as required by
the regulators.
On February 22, 1994, the federal bank regulators proposed to
implement another provision of FDICIA that requires the regulators to
revise their risk-based capital standards for insured depository
institutions to take account of the concentration of credit risk and risks
associated with nontraditional activities. On September 14, 1993, the
federal bank regulators proposed FDICIA-based regulations to adjust risk-
based capital standards based upon interest rate risk. In August 1995, the
federal bank regulators issued a final rule which addresses interest rate
risk in the context of the regulator's risk-based capital rules. The final
rule establishes a method for assessing risk but does not establish a
regulatory maximum for interest rate risk exposure. The federal bank
regulators expect to establish such a threshold in future rulemaking after
they have collected sufficient information under the new rule for
assessment of interest rate risk. Until such a threshold is established,
the effect on Integra's capital requirements cannot be determined.
Under FIRREA, the FDIC is authorized to prescribe regulations to
prevent depository institutions from contracting for goods, products or
services in a manner that would adversely affect the safety or soundness of
the institution. A proposed regulation of the FDIC would prohibit certain
"adverse contracts" with unrelated third parties and would establish a
rebuttable presumption that certain contracts with related parties,
including contracts for loan processing or servicing, bookkeeping, data
processing and management services, are adverse. The regulation, if
adopted as proposed, could restrict the ability of the Corporation's bank
subsidiary to contract for goods, products and services with unrelated
third parties.
The FDIC has also proposed a regulation that would impose an arm's-
length standard and certain requirements on non-lending business dealings
between the Corporation's bank subsidiary and certain insiders, and would<PAGE>
prohibit certain real estate transactions between the Corporation's bank
subsidiary and their insiders.
In addition to the supervisory measures described above, the FDICIA
recapitalizes the Bank Insurance Fund ("BIF") and imposes certain
supervisory and regulatory reforms on the banking industry. In general,
the FDICIA recapitalizes the BIF by increasing authorized borrowings from
the U.S. Treasury for working capital purposes, which borrowings are to be
repaid from assessments (including special assessments) on BIF members.
The FDICIA authorizes the FDIC to charge for regular and special
examinations of depository institutions and the Comptroller and the Office
of Thrift Supervision to assess fees to cover the expenses of their
offices.
The FDICIA permits insured depository institutions to merge or engage
in a purchase and assumption transaction with any other insured depository
institution with the prior approval of the appropriate federal banking
regulator for the resulting entity. Insurance assessments may be levied on
the deposits of the resulting institution based on whether the deposits are
insured by BIF or the Savings Association Insurance Fund ("SAIF") prior to
the transaction. Exit and entrance fees will not be applied to these
transactions but the resulting institution must be able to meet all of the
applicable capital requirements upon consummation of the transaction.
The FDICIA increases from $5 billion to $30 billion the FDIC's
authorization to borrow from the U.S. Treasury for bank losses and
authorizes an additional $40 billion in borrowings from the U.S. Treasury
for working capital purposes. Borrowings would be repaid from deposit
insurance assessments, including special assessments on banks (including
the Corporation's bank subsidiaries), and the issuance of FDIC obligations
to BIF member banks.
The federal bank regulatory agencies are required by the FDICIA to
adopt uniform capital and accounting rules. The accounting rules must
require supplemental disclosure in reports to the banking agencies of all
assets and liabilities, including contingent assets and liabilities and, to
the extent feasible, of the estimated fair market valuation of assets and
liabilities.
Pursuant to FDICIA, the federal bank regulatory agencies were
required to prescribe minimum operational standards with respect to
internal controls, loan documentation, credit underwriting, asset quality,
earnings, compensation arrangements and minimum ratios of market to book
value for publicly traded companies. Institutions failing to meet the
operational standards will be required to submit corrective plans and will
be subject to sanctions for failure to submit or comply with a plan. On
November 16, 1993, the federal bank regulators issued proposed rules
addressing the foregoing. In 1994, Congress allowed federal regulators to
adopt guidelines, instead of regulations concerning safety and soundness.
In July 1995, the federal banking regulators jointly adopted safety and
soundness guidelines for banking institutions with respect to asset quality
and earnings, operational and management policies, and other issues.
However, in July 1995, the regulators also proposed more specific
guidelines concerning asset quality and earnings. Generally, the
guidelines that were adopted established general safety and soundness
objectives. If an institution is not found to be in compliance with such
objectives, the regulators may mandate the adoption of a compliance plan.
The FDICIA also provides for certain consumer and low- and moderate-
income lending and deposit programs.<PAGE>
Under FDICIA, the FDIC on December 8, 1993, made effective rules
generally prohibiting federally insured state banks from engaging directly
or indirectly in activities not permissible for national banks.
The Corporation's bank subsidiaries, together with all other FDIC
insured banking institutions, are subject to FDIC deposit insurance
premiums. Under FIRREA, the FDIC is authorized to set the annual premium
for banks and savings associations as high as determined necessary to
assure stability of the insurance funds, thus eliminating what was at one
time the maximum annual increase of 7.5 cents and an overall cap of 32.5
cents per $100 of deposits.
Effective January 1, 1993, FDIC transitional deposit insurance
premium rates for FDIC insured banks were established based on the capital
rating (i.e.,--"undercapitalized," "adequately capitalized," "well
capitalized") assigned to the institution by the federal regulators and
certain other supervisory factors. Integra Bank pays the lowest insurance
premium. Based on the transitional rules, the FDIC established permanent
risk-based deposit insurance premiums effective as of January 1, 1994. The
premiums ranged from 23 cents to 31 cents per $100 of deposits. In August
1995, the FDIC lowered the BIF insurance rate for "well capitalized" banks
from 23 cents to 4 cents per $100 of eligible deposits retroactive to June
1, 1995. The SAIF premium rate remained at 23 cents. Approximately $1.64
billion of Integra's deposits are assessed the SAIF premium rate. Such
deposits were purchased from or obtained in acquisitions of savings
institutions. On November 14, 1995, the FDIC reduced the premiums on BIF
deposits for the first semiannual assessment period of 1996 by 4 cents per
$100 of eligible deposits so that the highest rated institutions will pay
the statutory annual minimum of $2,000. The SAIF deposit premium will
continue to be assessed at 23 cents for "well capitalized" institutions for
the first semiannual assessment period of 1996.
Potential Enforcement Actions. Banking organizations and their
institution-affiliated parties may be subject to potential enforcement
actions by the various banking regulators for unsafe or unsound practices
in conducting their businesses, or for violations of any law, rule or
regulation, any condition imposed in writing by the agency or any written
agreement with the agency. Enforcement actions may include the appointment
of a conservator or receiver, imposition of cease-and-desist orders, the
termination of insurance on deposits, the imposition of civil money
penalties and removal and prohibition orders against the institution-
affiliated parties.
FIRREA significantly expands the enforcement powers of bank
regulatory agencies, increases the penalties for violations of law and
substantially revises and codifies the powers of receivers and conservators
of depository institutions.
The Crime Control Act of 1990, enacted on November 29, 1990, also
contains a number of provisions which further enhance the enforcement
powers of the federal banking regulators, expand the scope of persons
potentially subject to enforcement actions and increase the penalties for
violations of law.
Proposed Legislation. Certain proposals affecting the banking
industry have been discussed from time to time. Such proposals include:
limitations on investments that an institution may make with insured funds;
regulation of all insured depository institutions by a single regulator;
repeal of all or portions of the Glass-Steagall Act which has limited the
ability of banks and their holding companies to fully engage in capital<PAGE>
markets activities; limitations on the number of accounts protected by the
federal deposit insurance funds; reduction of the application of the
$100,000 coverage limit on deposits; regulation of derivatives products;
and imposition of responsibility on bank holding companies for losses of
insured affiliates and subsidiaries. It is uncertain which, if any, of the
above proposals may become law and what effect they would have on the
Corporation and its banks and non-bank subsidiaries.
Non-Bank Subsidiaries. The Corporation's non-bank subsidiaries are
subject to regulatory restrictions imposed by the Federal Reserve Board and
other federal or state regulatory agencies. For example, Integra Brokerage
Services Company is a registered broker-dealer whose activities are subject
to supervision by the PADOB and by the Federal Reserve Board. It is also
subject to rules and regulations promulgated by the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc., the
Securities Investors Protection Corporation and the Pennsylvania Securities
Commission. Integra Life Insurance Company and Advent Insurance Company,
the Corporation's insurance company subsidiaries, which are incorporated in
Arizona, are subject to supervision and regulation by the Federal Reserve
Board and the Department of Insurance of the State of Arizona. Other non-
bank subsidiaries of the Corporation are regulated under federal and state
consumer finance laws, among others.
Governmental Policies
The operations of financial institutions may be affected by
legislative changes and by the monetary and fiscal policies of various
regulatory authorities, including the Federal Reserve Board. An important
function of the Federal Reserve Board is to promote orderly economic growth
by influencing interest rates and regulating the national supply of money
and credit. Among the instruments of monetary policy used by the Federal
Reserve Board to implement its objectives are open market operations in
U.S. Government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements on bank deposits.
These instruments of monetary policy are used in varying combinations
to influence the overall level of bank loans, investments and deposits and
the interest rates charged on loans and paid for deposits. Because its
actions strongly influence short-term movements in interest rates, the
monetary policies of the Federal Reserve Board have had a significant
effect on the operating results of banks in the past and are expected to
continue to do so in the future.
Statistical Data
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential. The information contained in
Part II, Item 7 under the following headings: "Rate/Volume Analysis",
"Nonperforming Assets and Past Due Loans", "Reserve for Loan Losses",
"Consolidated Average Balances and Net Interest Analysis" and Part II, Item
6 Selected Financial Data is incorporated herein by reference.
<PAGE>
Securities Portfolio. Information regarding the Corporation's
securities portfolio at December 31, 1995 and 1994 is included in Part II,
Item 8 in Notes 3 and 4 to the Consolidated Financial Statements hereof,
and is incorporated herein by reference. The amortized cost, gross
unrealized gains, gross unrealized losses and fair value of securities
available for sale at December 31, 1993 was as follows:<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $1,126,796 $41,952 $(4,070) $1,164,678
U.S. Government agency
securities 493,133 15,654 (63) 508,724
Mortgage-backed
securities 2,506,430 28,213 (8,953) 2,525,690
Collateralized mortgage
obligations 745,554 16,642 (523) 761,673
Corporate debt
securities 334,945 11,758 (86) 346,617
Marketable equity
securities 250,703 115,041 (2,071) 363,673
Asset-backed securities 217,041 5,857 -0- 222,898
Federal Home Loan Bank
and Federal Reserve
Bank stock 180,780 -0- -0- 180,780
State and political
subdivision
securities 77,067 4,076 (325) 80,818
Residual securities 726 559 -0- 1,285
Total Securities $5,933,175 $239,752 $(16,091) $6,156,836
</TABLE>
Loan Portfolio. A breakdown of the loan portfolio by major
categories at December 31 of each of the last five years follows. Certain
amounts have been reclassified for comparative purposes.
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Commercial $1,175,986 $1,452,438 $1,550,127 $1,650,487 $1,695,800
Real estate:
Construction 183,251 153,431 247,175 203,084 302,938
Commercial 919,897 721,470 729,483 809,621 638,460
Residential 2,260,478 1,985,344 1,643,137 1,619,594 1,102,804
Consumer 3,563,882 3,295,188 2,911,331 2,746,350 2,548,187
Lease finance 90,484 86,295 86,881 98,328 104,014
8,193,978 7,694,166 7,168,134 7,127,464 6,392,203
Unearned income (97,823) (96,110) (79,640) (76,635) (68,399)
Total, net of
unearned income $8,096,155 $7,598,056 $7,088,494 $7,050,829 $6,323,804
</TABLE>
<PAGE>
The maturity distribution of the loan portfolio by major categories based
on contractual terms as of December 31, 1995 follows:
<TABLE>
CAPTION
<PAGE>
Maturing Maturing Maturing
During From 1997 After
(Dollars in thousands) 1996 Through 2000 2000 Total
<S> <C> <C> <C> <C>
Commercial $407,822 $ 416,075 $ 352,089 $1,175,986
Real estate:
Construction 126,542 56,709 -0- 183,251
Commercial 106,332 328,933 484,632 919,897
Residential 5,018 102,539 2,152,921 2,260,478
Consumer 95,646 2,594,828 873,408 3,563,882
Lease finance 1,810 66,053 22,621 90,484
Total $743,170 $3,565,137 $3,885,671 $8,193,978
</TABLE>
The maturity distribution of the loan portfolio by fixed and variable
interest rates based on contractual terms as of December 31, 1995 follows:
<TABLE>
<CAPTION>
Maturing Maturing Maturing
During From 1997 After
(Dollars in thousands) 1996 Through 2000 2000 Total
<S> <C> <C> <C> <C>
Loans with fixed
interest rates $442,784 $2,175,125 $2,381,317 $4,999,226
Loans with variable
interest rates 300,386 1,390,012 1,504,354 3,194,752
Total $743,170 $3,565,137 $3,885,671 $8,193,978
</TABLE>
Loans are placed on nonaccrual status in accordance with regulatory
guidelines or when, in management's opinion, it is determined that the
collectibility of interest, but not necessarily principal, is doubtful.
Interest income of $2.3 million was recognized during 1995 on loans
on nonaccrual status as of December 31, 1995. Interest income of $5.0
million would have been recognized in 1995 if these loans had been current
at original contractual rates.
Management is not aware of any significant loans individually or in
the aggregate that were not classified as nonperforming or past due as of
December 31, 1995 for which there was serious doubt as to the ability of
the borrower to comply with existing loan repayment terms.
Allocation of the Reserve for Loan Losses. The Corporation adheres
to credit policies and utilizes a loan review function to ensure quality in
its lending activities. The credit policies stress conservatism, quality
in lending activities and strong relationships with customers possessing
adequate equity and cash flow backed by collateral and/or guarantees. The
assessment of risk factors and adequacy of the reserve for loan losses are
evaluated by the loan review function (which is independent from the
lending function), by external bank regulators and by independent
accountants. It is management's belief that the reserve for loan losses is
adequate to cover any potential problem loans that may arise in the loan
portfolio.<PAGE>
The following table presents an allocation of the reserve for loan
losses for the past five years. The allocation represents only an estimate
for each category of loans based upon historical loss experience and
management's judgment. As of December 31, 1995, approximately 34% of the
reserve for loan losses was unallocated, representing a general valuation
reserve for the entire portfolio to cover unpredictable variations from
historical experience in individual loan categories. Since the total
reserve is available to absorb loan losses from any loan category, the
amounts assigned do not necessarily indicate future losses within these
categories but rather management's overall assessment of the level of
credit risk in the loan portfolio.
<TABLE>
<CAPTION>
1995 1994 1993
Percent Percent Percent
of Loans of Loans of Loans
(Dollars in Reserve to Total Reserve to Total Reserve to Total
millions) Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 47 14% $71 19% $ 87 22%
Commercial
real estate 36 13 39 10 49 12
Residential 4 29 3 27 3 24
Consumer 50 43 53 43 50 41
Lease
finance 4 1 1 1 1 1
Unallocated 74 - 70 - 52 -
Total $215 100% $237 100% $242 100%
1992 1991
Percent Percent
of Loans of Loans
(Dollars in Reserve to Total Reserve to Total
millions) Amount Loans Amount Loans
<S> <C> <C> <C> <C>
Commercial $86 23% $67 26%
Commercial
real estate 45 13 38 13
Residential 3 24 2 19
Consumer 50 39 40 40
Lease
finance 1 1 -0- 2
Unallocated 54 - 36 -
Total $239 100% $183 100%
</TABLE>
Deposits. Average deposits and the average cost of deposits for the
past three years were as follows:
TABLE
<PAGE>
<CAPTION>
1995 1994 1993
Average Average Average Average Average Average
(Dollars in thousands) Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand $ 1,359,045 - $1,417,153 - $1,352,092 -
Interest bearing demand 903,098 1.31% 967,683 1.38% 955,535 1.86%
Savings 1,071,038 2.40 1,133,336 2.27 1,147,248 2.50
Money market 1,763,637 3.38 1,780,740 2.53 1,880,576 2.76
Time deposits 5,146,358 5.72 4,698,390 4.98 4,869,025 5.07
Total deposits $10,243,176 3.82% $9,997,302 3.18% $10,204,476 3.38%
</TABLE>
Time deposits of $100,000 or more which were outstanding at
December 31, 1995 mature as follows (dollars in thousands):
<TABLE>
<CAPTION>
Period of Maturity Amount
<S> <C>
Three months or less $259,286
Over three through six months 160,879
Over six through twelve months 145,713
Over twelve months 51,411
Total $617,289
</TABLE>
<PAGE>
Selected Financial Ratios. The following table shows the return on
assets, return on equity, dividend payout ratio and equity to assets ratio
for the past five years:
<TABLE>
<CAPTION>
1995 1994 1993(B) 1992 1991
<S> <C> <C> <C> <C> <C>
Return on assets (net income
divided by average total
assets (A) .90% 1.24% 1.13% .48% .55%
Return on equity (net income
divided by average equity)
(A) 12.69 18.05 18.41 8.31 10.26
Dividend payout ratio
(dividends declared per
share divided by net income
per share) 50.26 33.93 30.44 54.14 49.78
Equity to assets ratio
(average equity divided by
average total assets) 7.07 6.92 6.13 5.73 5.33 <PAGE>
(A) Excludes the effect of FASB Statement 115.
(B) Excludes the cumulative effect of accounting changes resulting from the adoption of FASB
Statements 106 and 109 in 1993.
</TABLE>
ITEM 2 - PROPERTIES
As of December 31, 1995, the principal real properties owned by
Integra are a complex in Pittsburgh, Pennsylvania, which also houses most
of the corporate departments, composed of: One Integra Bank at 306-312
Fourth Avenue, a 21-story office building with 117,000 square feet; Two
Integra Bank at 316 Fourth Avenue, a twenty-story office building
containing 113,000 square feet; Three Integra Bank at 324 Fourth Avenue, a
fourteen-story office building containing 58,000 square feet; Four Integra
Bank at 317 Third Avenue, a six-story office building containing 54,000
square feet. In addition, Integra owns a two-story office building with
31,000 square feet in Titusville, Pennsylvania and an eight-story office
building with 120,000 square feet in Uniontown, Pennsylvania. Of 263
branch offices operated by the Bank, 149 are owned and 114 are leased under
leases that expire from 1996 to 2024. In 1993, Integra entered into a
fifteen year agreement to lease an operations complex approximating
300,000 square feet in Allegheny Center on Pittsburgh's North Side.
Neither the location of any particular office nor the unexpired term of any
lease is deemed material to the business of the Corporation.
ITEM 3 - LEGAL PROCEEDINGS
The information contained in Part II, Item 8 in Note 19 to the
Consolidated Financial Statements hereof, regarding legal proceedings, is
incorporated herein by reference.
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in Part III, Item 10 hereof, regarding
executive officers of the registrant, is incorporated herein by reference.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of the close of business on December 31, 1995, the Corporation's
common stock was held by 15,633 shareholders of record. Integra common
stock began trading on the New York Stock Exchange under the symbol ITG on
January 18, 1993. Prior to that date, Integra common stock was quoted on
the NASDAQ National Market System.
Holders of the Corporation's common stock are entitled to receive
dividends out of funds legally available for such purpose, as and when
declared by the Board of Directors. In connection with the proposed merger
of Integra with and into National City, each outstanding share of Integra
common stock will be converted into two shares of National City common
stock at the effective time of the merger which is anticipated in the
second quarter of 1996. The market price of National City common stock at<PAGE>
December 31, 1995 was $33.13 per share and 1995 dividends paid were $1.30
per share.
Information regarding regulatory restrictions is included in Note 20
to the Consolidated Financial Statements in Part II, Item 8. Information
regarding dividends, capital resources and Integra stock prices is included
in Selected Financial Data in Part II, Item 6 and Management's Discussion
and Analysis of Financial Condition and Results of Operations in Part II,
Item 7. For additional information on the ability of the Corporation's
subsidiaries to pay dividends to the Corporation, see Business -
Supervision and Regulation - Subsidiary Banks in Part I, Item 1 of this
Form 10-K. All such information is incorporated herein by reference.
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
BALANCE SHEET
December 31 1995 1994 1993
(Dollars in thousands)
<S> <C> <C> <C>
Assets
Cash and due from banks $ 358,856 $ 428,771 $ 358,423
Short-term investments 64,786 13,740 86,499
Securities held to maturity -0- 1,546,295 -0-
Securities available for sale 5,395,334 3,695,504 6,156,836
Loans, net of unearned income 8,096,155 7,598,056 7,088,494
Reserve for loan losses (215,167) (237,433) (241,901)
Net loans 7,880,988 7,360,623 6,846,593
Other assets 646,008 710,427 648,219
Total assets $14,345,972 $13,755,360 $14,096,570
Liabilities and Shareholders' Equity
Deposits $10,380,459 $10,083,406 $10,081,466
Short-term borrowings 1,304,285 1,582,756 2,053,925
Long-term debt 1,268,120 1,056,649 751,122
Other liabilities 248,200 173,953 177,811
Total liabilities 13,201,064 12,896,764 13,064,324
Total shareholders' equity 1,144,908 858,596 1,032,246
Total liabilities and shareholders' equity $14,345,972 $13,755,360 $14,096,570
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
Years Ended December 31 1995 1994 1993
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Interest income $1,070,918 $960,778 $977,786
Interest expense 563,658 431,959 435,487
Net interest income 507,260 528,819 542,299
Provision for loan losses 16,000 30,000 50,000
Net interest income after provision for loan
losses 491,260 498,819 492,299 <PAGE>
Net securities gains 18,289 19,749 29,862
Non-interest income 131,239 118,302 105,894
Non-interest expense 462,224 395,236 407,564
Income before income taxes and cumulative
effect of accounting changes 178,564 241,634 220,491
Income tax expense 50,174 72,601 67,671
Income before cumulative effect of accounting
changes 128,390 169,033 152,820
Cumulative effect of accounting changes, net -0- -0- 60,000
Net income $ 128,390 $169,033 $212,820
Net income per common share
Before cumulative effect of accounting
changes $3.88 $5.01 $4.50
Cumulative effect of accounting changes,
net -0- -0- 1.78
Net income per common share $3.88 $5.01 $6.28
Dividends per common share $1.95 $1.70 $1.37
Average common shares outstanding (in
thousands) 33,123 33,735 33,815
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
December 31 1992 1991
(Dollars in thousands)
<S> <C> <C>
Assets
Cash and due from banks $ 404,323 $ 417,108
Short-term investments 121,732 197,619
Securities held to maturity -0- 675,063
Securities available for sale 5,399,379 4,020,536
Loans, net of unearned income 7,050,829 6,323,804
Reserve for loan losses (238,831) (182,553)
Net loans 6,811,998 6,141,251
Other assets 621,248 544,999
Total assets $13,358,680 $11,996,576
Liabilities and Shareholders' Equity
Deposits $10,607,191 $10,128,715
Short-term borrowings 971,737 896,598
Long-term debt 682,210 189,976
Other liabilities 352,216 148,402
Total liabilities 12,613,354 11,363,691
Total shareholders' equity 745,326 632,885
Total liabilities and shareholders' equity $13,358,680 $11,996,576
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME<PAGE>
Years Ended December 31 1992 1991
(Dollars in thousands except per share data)
<S> <C> <C>
Interest income $1,009,070 $1,028,077
Interest expense 501,279 595,048
Net interest income 507,791 433,029
Provision for loan losses 96,390 71,837
Net interest income after provision for loan
losses 411,401 361,192
Net securities gains 59,350 22,883
Non-interest income 113,915 98,024
Non-interest expense 476,394 400,956
Income before income taxes and cumulative
effect of accounting changes 108,272 81,143
Income tax expense 47,769 18,804
Income before cumulative effect of accounting
changes 60,503 62,339
Cumulative effect of accounting changes, net -0- -0-
Net income $ 60,503 $ 62,339
Net income per common share
Before cumulative effect of accounting
changes $1.81 $2.23
Cumulative effect of accounting changes,
net -0- -0-
Net income per common share $1.81 $2.23
Dividends per common share $0.98 $1.11
Average common shares outstanding (in
thousands) 32,030 26,670
Periods prior to 1993 have been restated to reflect the merger with Equimark Corporation,
a pooling-of-interest transaction consummated on January 15, 1993.
</TABLE>
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Integra entered into an Agreement and Plan of Merger (the Agreement)
dated August 27, 1995 providing for the merger of Integra with and into
National City Corporation (National City). As of the effective time of the
merger, each outstanding share of Integra common stock will be converted
into two shares of National City common stock. Based on the December 31,
1995 market price of National City stock, the transaction has a value of
$66.25 per share for a total of $2.19 billion. Consummation of the merger
is subject to a number of conditions including receipt of approval of the
Agreement by shareholders of Integra and National City, receipt of all
required regulatory approvals and receipt of opinions of legal counsel and
independent accountants. In January 1996, the required regulatory
approvals were received. Under the Agreement, Integra will operate its
business in the ordinary course and use its commercially reasonable efforts
to preserve intact its business organization. The transaction is expected
to close in the second quarter of 1996. The merger will be accounted for
using the pooling-of-interests method of accounting.<PAGE>
National City is a registered bank holding company with headquarters
in Cleveland, Ohio. At December 31, 1995, National City has total
consolidated assets of $36.20 billion and total consolidated deposits of
$25.20 billion. National City conducts a general retail and commercial
banking business through its bank subsidiaries, which operate in Ohio,
Indiana and Kentucky.
In January 1995, Integra completed an in-market acquisition with the
purchase of Lincoln Savings Bank (Lincoln) with total deposits of $159.6
million and seven branches. Five branch offices were closed and
consolidated with nearby branch locations in conjunction with the Lincoln
acquisition. The transaction was accounted for as a purchase. Integra's
consolidated statements reflect the operations of Lincoln from the date of
acquisition.
Net Income. Integra's net income for 1995 was $128.4 million or $3.88 per
common share which reflects non-recurring charges, restructuring expenses
and merger expenses totalling $40.9 million recorded in the fourth quarter.
Net income for 1994 was $169.0 million or $5.01 per common share. Also
impacting 1995 earnings were lower net interest income, a reduced provision
for loan losses, increased non-interest income and higher non-interest
expense compared to the prior year. See Non-Interest Income and Non-
Interest Expense for additional information on non-recurring charges,
restructuring expenses and merger expenses.
Net Interest Income. Net interest income, on a fully taxable equivalent
(FTE) basis, decreased $19.3 million or 4% to $525.3 million for 1995 from
$544.6 million for 1994. Net interest income in 1995 compared to 1994 was
negatively affected by a flattening yield curve with higher short-term
interest rates increasing funding costs but lower long-term rates limiting
the positive impact of asset repricing. A shift in the mix of deposits
from savings and money market accounts into relatively higher cost time
deposits also contributed to the higher cost of funds. Additionally,
competitive pressures influenced loan pricing and deposit mix. Integra's
net interest margin declined during 1995 to 3.86% from 4.20% for 1994.
Management anticipates that the net interest margin will improve in
1996 as a result of the shift in earning asset mix due to loan growth,
maturity of higher cost borrowings and lessening negative impact of the
interest rate swaps and caps.
The components of year-to-year changes in net interest income on an
FTE basis are as follows:
<TABLE>
<CAPTION>
Rate/Volume Analysis 1995 over 1994 1994 over 1993
Increase (decrease) in Increase (decrease) in
income/expense due to income/expense due to
changes in: changes in:
(Dollars in thousands) Volume Rate Total Volume Rate Total
EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Short-term investments $ 8,777 $ 644 $ 9,421 $ 54 $ 293 $ 347
U.S. Treasury securities (19,275) 357 (18,918) (17,698) 117 (17,581)
U.S. Government agency 16,197 1,816 18,013 2,170 (843) 1,327
securities
Mortgage-backed securities (14,642) 8,593 (6,049) 35,595 1,423 37,018 <PAGE>
Collateralized mortgage 10,874 (2,576) 8,298 (54,336) 4,739 (49,597)
obligations
Equity securities 3,481 (1,806) 1,675 14,961 (8,531) 6,430
Other 14,378 2,142 16,520 2,459 (3,034) (575)
Total securities 11,013 8,526 19,539 (16,849) (6,129) (22,978)
Trading securities (1,321) 327 (994) 1,081 640 1,721
Loans, net of unearned 43,942 44,339 88,281 22,046 (10,622) 11,424
income
Loans held for sale (2,348) (1,545) (3,893) (3,559) 160 (3,399)
Total earning assets 60,063 52,291 112,354 2,773 (15,658) (12,885)
INTEREST BEARING LIABILITIES
Interest bearing demand (857) (652) (1,509) 222 (4,665) (4,443)
Savings (1,483) 1,401 (82) (339) (2,577) (2,916)
Money market (435) 15,063 14,628 (2,715) (4,263) (6,978)
Time deposits 23,595 36,780 60,375 (8,667) (4,390) (13,057)
Total interest bearing
deposits 20,820 52,592 73,412 (11,499) (15,895) (27,394)
Short-term borrowings (2,231) 32,553 30,322 1,387 14,518 15,905
Long-term debt 24,226 3,724 27,950 6,275 1,683 7,958
Total interest bearing
liabilities 42,815 88,869 131,684 (3,837) 306 (3,531)
Change in net interest $ 17,248 $(36,578) $(19,330) $ 6,610 $(15,964) $ (9,354)
income
Tax-exempt income is on an FTE basis using the statutory federal income tax rate of 35% for 1995, 1994 and 1993.
Variances not specifically attributable to volume or rate were allocated proportionately between volume and rate
based on the absolute value of these changes.
Average balances of nonaccrual loans of approximately $65 million, $92 million and $131 million for 1995, 1994
and 1993, respectively, are included in the table.
</TABLE>
Interest Income. Total interest income increased $112.4 million or 12% to
$1.09 billion on an FTE basis for 1995 compared to the prior year. Higher
interest income in 1995 was attributable to increases in the average yield
and balance of earning assets. The yield on earning assets rose to 8.00%
in 1995 from 7.53% in 1994 due to increases in both loan and securities
yields due to a higher level of market interest rates. Average earning
assets increased $651.6 million or 5% during 1995 compared to the prior
year. Increases occurred in residential real estate and consumer loans
and, to a lesser extent, securities.
Interest income on securities increased $19.5 million or 6% to $366.9
million in 1995 on an FTE basis compared to the previous year. The
increase was due to growth in average securities of $74.1 million in 1995
over 1994 due mainly to purchases of asset-backed securities, agency
securities and collateralized mortgage obligations. Additionally, the
yield on securities increased to 6.64% during 1995 from 6.38% during 1994
and was positively impacted by changes in the securities mix, upward resets
of variable rate securities and lengthening the duration of the securities
portfolio.
Interest income on loans increased to $703.5 million on an FTE basis
in 1995 from $615.2 million in 1994. The increase was due to growth in
average loans of $507.2 million during 1995 and the impact of a higher
average yield on loans to 9.01% in 1995 from 8.42% in 1994. The growth in<PAGE>
the loan portfolio, occurred primarily in residential real estate and
consumer loans.
Interest Expense. Total interest expense increased $131.7 million to
$563.7 million on an FTE basis for 1995 from $432.0 million for 1994. This
increase resulted from an increase in the cost of interest bearing funds
and a higher average balance of interest bearing liabilities. The cost of
interest bearing funds rose to 4.82% in 1995 from 3.91% in the previous
year in connection with the higher level of market interest rates. A shift
from savings and money market accounts into more costly time and premium-
priced money market deposits contributed to the upward funding costs.
Additionally, steps to manage interest rate sensitivity with longer term
funding added to the higher cost of borrowings. Average interest bearing
liabilities increased $637.5 million or 6% in 1995 compared to the previous
year due largely to growth in average time deposits and long-term debt.
Provision for Loan Losses. The provision for loan losses was $16.0 million
in 1995 compared to $30.0 million in 1994. The reduction in the provision
was driven by continued improvement in measurements of asset quality.
Nonperforming assets decreased $21.9 million or 22% from year end 1994 to
$75.8 million at year end 1995. Integra's loan loss reserve at December
31, 1995 was $215.2 million or 2.66% of total loans compared to $237.4
million or 3.12% of total loans at December 31, 1994. The reserve provides
strong coverage with a ratio of 343% of nonperforming loans at December 31,
1995 compared to 363% at December 31, 1994. For additional information see
Nonperforming Assets and Reserve for Loan Losses.
Effective January 1, 1995, Integra adopted Financial Accounting
Standards Board (FASB) Statements 114 and 118 which address the accounting
by creditors for impairment of loans by specifying how reserves for credit
losses related to certain loans should be measured. The adoption of these
statements did not require an increase to the reserve for loan losses nor
did it have a material impact on net income or the financial condition of
the Corporation.
Net Securities Gains. Net securities gains were $18.3 million for 1995
compared to $19.8 million for 1994. The 1995 gains, all from the sale of
securities available for sale in the normal course of portfolio management,
were composed of $22.6 million net gains on equity securities and $4.3
million net losses on debt securities. Equity securities gains and losses
for 1995 were $23.6 million and $1.0 million, respectively. The gains
resulted primarily from a strong stock market and included $20.1 million
from bank stock issues sold or called. Debt securities gains and losses in
1995 were $6.1 million and $10.4 million, respectively. Net losses on debt
securities occurred on U.S. Treasury securities called under covered
options written by Integra, and sales of balloon and convertible variable
rate mortgage-backed securities and corporate debt securities. Proceeds
were reinvested in higher yielding securities.
Net securities and net trading gains (losses) for 1995, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
Net Securities and Trading Gains (Losses)
(Dollars in thousands) 1995 1994 1993
S> <C> <C> <C
<PAGE>
Net equity securities gains $22,554 $ 7,367 $ 2,680
Net debt securities gains (losses) (4,265) 12,382 27,182
Net securities gains $18,289 $19,749 $29,862
Net trading gains (losses) $ (726) $ (25) $ 97
</TABLE>
Non-Interest Income. Total non-interest income grew $12.9 million or
11% to $131.2 million for 1995 from $118.3 million for 1994. This
improvement was mainly attributable to increased mortgage banking income,
gains recognized on consumer finance loans sold and higher service charges
on deposit accounts and other service charges, primarily automated teller
machine, credit card and nonsufficient fund fees.
Non-interest income for 1995 was reduced by a non-recurring charge of
$3.4 million for the write-off of the excess servicing receivable relating
to the value assigned to consumer finance loan servicing acquired in the
merger with Equimark Corporation (Equimark). The remaining balance of this
asset was written off against other service charges and fees based on an
impairment evaluation. Consumer finance loans serviced for others totalled
$95.1 million at December 31, 1995, down from $128.6 million a year ago due
to loan repayments. During 1995, $37.3 million of consumer finance loans
were sold servicing released at gains totalling $3.2 million recorded in
other income compared to $2.6 million loans sold at gains of $.1 million in
1994.
Trust income increased $1.4 million or 5% in 1995 compared to the
prior year in conjunction with the positive impact of an increase in the
market value of trust assets under management to $9.28 billion at December
31, 1995 from $8.34 billion at December 31, 1994 and a change in 1995 to
accrual of management fees relating to employee benefit plans previously
accounted for on a cash basis.
Mortgage banking income totalled $17.1 million for 1995 compared to
$10.8 million for 1994. Included in mortgage banking income were $5.5
million of gains on $621.9 million of servicing sold in 1995 compared to a
gain of $2.3 million from $257.3 million of servicing sold in 1994.
Mortgage banking income in 1995 was also enhanced by the adoption of FASB
Statement 122 of which the impact was an increase of $3.9 million for the
capitalization of the cost of mortgage servicing rights partly offset by
$.8 million of impairment reserves. The mortgage banking portfolio of
loans serviced for others totalled $3.68 billion and $3.57 billion at
December 31, 1995 and 1994, respectively. Integra buys and sells servicing
periodically as part of its normal mortgage banking activities. Integra
purchased $435.4 million and $879.7 million of loan servicing in the
secondary mortgage market during 1995 and 1994, respectively, which
expanded the servicing portfolio.
Integra sells a majority of its fixed rate real estate loan
production in the secondary mortgage market and generally retains the right
to service the loans which provides a continuing source of non-interest
income. During 1995, retail and wholesale loan production totalling $556.9
million was sold in the secondary mortgage market compared to $631.9
million during 1994. In 1995, Integra sold loans on a flow basis with
servicing released totalling $157.3 million under a commitment to sell a
minimum of $150.0 million of loans which was fulfilled by the end of 1995.<PAGE>
During January 1996, Integra's mortgage subsidiary entered into off-
balance sheet transactions for the purpose of providing hedges on the value
of the mortgage servicing portfolio. The purpose of these hedges is to
protect the value of the servicing in various interest rate environments.
These transactions consisted of a five year interest rate swap based on a
notional amount of $140.0 million in which Integra will pay a floating rate
based on three month LIBOR and receive a fixed rate of 5.655%, a five year
Constant Maturity Treasury (CMT) floor based on a notional amount of $200.0
million with an underlying index of the ten year CMT with a strike rate of
5.125% and a five year CMT floor based on a notional amount of $50.0
million with an underlying index of the ten year CMT with a strike rate of
5.50%. Premiums totalling $2.7 million were paid for the CMT floors which
will be amortized over the terms of the hedges.
Other non-interest income increased $4.0 million to $19.4 million for
1995 compared to 1994 due mainly to $3.2 million of gains on consumer loans
sold and $1.2 million of non-recurring income relating to foreclosed assets
in 1995. During 1994, other non-interest income included $1.3 million of
one-time recoveries and settlements and $1.2 million of fees recognized in
connection with writing covered call options on U.S. Treasury securities
compared to $.4 million in 1995. In addition, other non-interest income
increased $1.5 million in 1995 over 1994 due to higher operating lease
income from expanded activity of a commercial leasing subsidiary.
Non-Interest Expense. Total non-interest expense was $462.2 million for
1995 compared to $395.2 million for 1994. The increase was largely
attributable to $15.3 million of restructuring expenses, $14.8 million of
non-recurring charges and $7.4 million of merger expenses recorded in the
final quarter of 1995. The restructuring expenses related mainly to
penalties incurred for the cancellation of leases and contracts, building
and lease write-offs and severance for staff eliminations resulting from
the bank realignment. Non-recurring charges included an amount for legal
settlements reached late in 1995, a special contribution to the Integra
Charitable Foundation, the write-off of goodwill related to a previously
acquired business that is being sold and one-time write-offs on several
foreclosed asset properties. Merger expenses were for professional fees
incurred in conjunction with the merger.
Total compensation and employee benefit costs increased $20.1 million
to $197.9 million for 1995 compared to the prior year. A restructuring
expense of $3.9 million relating to severance for staff eliminations was
recorded during the final quarter of 1995 upon determination of eliminated
positions and termination dates and notification of affected employees.
These staff eliminations will occur prior to May 1, 1996. Additionally,
costs of $3.6 million relating to an early retirement program offered early
in 1995 as part of corporate restructuring, a $3.6 million increase in
profit sharing expense from a higher corporate discretionary contribution
and normal employment and benefit cost increases were contributing factors
to the higher expense in 1995.
Higher furniture and equipment expenses in 1995 compared to 1994 of
$3.5 million resulted from increased depreciation expense due in part to a
larger balance of assets held by a commercial leasing subsidiary and higher
computer hardware and software maintenance costs.
During 1995, Integra recorded a facilities restructuring charge of
$6.2 million which included $3.7 million of building write-offs and $2.5
million of lease and leasehold improvement write-offs resulting from the
bank realignment. These write-offs related largely to former bank
headquarter locations, supporting operation centers and corporate office<PAGE>
leases that Integra maintained prior to consolidating into one retail
banking subsidiary. To further reduce redundant operations and eliminate
excess space, this consolidation plan was initiated during the fourth
quarter of 1995.
Outside data processing expenses increased $5.3 million to $32.2
million for 1995 compared to 1994 due to restructuring expenses totalling
$4.9 million. These expenses included a termination fee for the
cancellation of a contract for outside data processing services and a
contract buyout amount for termination of a processing agreement that will
be effective May 31, 1996.
Federal Deposit Insurance Corporation (FDIC) premium expense
increased $2.2 million to $24.2 million in 1995 compared to the prior year.
In August 1995, the FDIC lowered the Bank Insurance Fund (BIF) insurance
rate for healthy banks from 23 cents to 4 cents per hundred dollars of
eligible deposits retroactive to June 1, 1995. During the third quarter of
1995, a premium refund on deposits reflecting this rate reduction was
received totalling $5.3 million. The Savings Association Insurance Fund
(SAIF) premium rate remained at 23 cents and a one-time assessment on SAIF
deposits was expected to be levied by the FDIC for which Integra accrued 66
cents per hundred dollars of deposits or $10.5 million in the third quarter
of 1995. Approximately $1.64 billion of Integra's deposits are assessed
the SAIF premium rate. Such deposits were purchased from or obtained in
acquisitions of savings institutions. On November 14, 1995, the FDIC
reduced the premiums on BIF deposits for the first semiannual assessment
period of 1996 by 4 cents per hundred dollars of eligible deposits so that
the highest rated institutions will pay the statutory annual minimum of
$2,000. The SAIF deposit premiums will continue to be assessed at 23 cents
for "well capitalized" institutions. Integra's banking subsidiary pays the
lowest insurance premium based on its current capital levels and
supervisory ratings.
Foreclosed asset expense declined $.6 million to $2.7 million for
1995 compared to 1994 as holdings of other real estate owned declined.
Included in 1995 foreclosed asset expense was a non-recurring charge of
$1.1 million for the write-off of several foreclosed asset properties.
Amortization of intangible assets increased $3.1 million in 1995 due
to amortization of goodwill relating to the Lincoln acquisition and a non-
recurring charge of $1.1 million for the write-off of goodwill related to a
previously acquired mortgage banking company that is intended to be sold.
Based upon the expected sale proceeds and valuation of this company, the
related goodwill was determined to be impaired.
Other non-interest expense increased $26.7 million to $124.8 million
for 1995 due largely to $12.6 million of non-recurring charges, $7.4
million of merger expenses and $.3 million of restructuring expenses. The
1995 non-recurring charges were $7.6 million for legal settlements and $5.0
million for a special contribution to the Integra Charitable Foundation.
The legal settlements are more fully discussed in Note 19 to the
Consolidated Financial Statements. Merger expenses were for professional
advisory fees incurred in the fourth quarter of 1995 in conjunction with
the merger with National City. Other increases in 1995 compared to the
prior year included consulting fees related to revenue enhancement, human
resource and corporate reorganization projects and normal operating cost
increases.
With the consolidation of Integra's operations into National City and
elimination of redundant functions, merger related expenses are expected to<PAGE>
be recorded upon consummation of the merger. These merger expenses will
relate mainly to expected severance payments, employment contracts and
write-offs of computer, software, furniture and equipment. Approximately
20% of Integra's workforce will be eliminated as a result of the merger
with the majority of the terminations occurring at the end of May 1996.
Federal Income Taxes. The Corporation recognized federal income tax
expense of $50.2 million for 1995 compared to $72.6 million for 1994. The
decrease in the tax provision during 1995 resulted primarily from a lower
level of taxable earnings. The 1995 effective tax rate of 28.1% was below
the 35% statutory tax rate due mainly to the tax benefits resulting from
tax-exempt interest and excludable dividend income, and tax credits on low
income housing projects. The effective tax rate for 1996 is also expected
to be below the statutory tax rate of 35% for the same reasons.
Deferred tax assets totalled $114.3 million and $179.4 million at
December 31, 1995 and 1994, respectively. Integra does not anticipate
circumstances where future earnings would not be sufficient when combined
with its carryback capabilities to not fully utilize the deferred tax
assets. Since management concluded that it was more likely than not that
the deferred tax assets would be realized, no valuation allowance was
established as of December 31, 1995 or 1994.
Results of Operations for the Fourth Quarter. Integra recorded net income
of $8.4 million or $.25 per common share for the fourth quarter of 1995.
Excluding the impact of the restructuring, merger and one-time charges, net
income was $37.5 million or $1.13 per common share. Earnings for the
fourth quarter of 1994 were $39.1 million or $1.17 per common share. Also
impacting 1995 fourth quarter earnings compared to the prior year fourth
quarter were lower net interest income, a reduced provision for loan
losses, increased non-interest income and higher non-interest expense.
Net interest income for the fourth quarter of 1995 decreased $3.8
million or 3% to $130.5 million on an FTE basis from $134.3 million for the
fourth quarter of 1994. Net interest income for the fourth quarter of 1995
was reduced by $5.6 million on an FTE basis to adjust for a change in
estimate for amortization of premiums on various securities. Excluding
this adjustment, fourth quarter 1995 net interest income increased compared
to the prior quarter and the final quarter of 1994. The net interest
margin narrowed to 3.79% (3.95% as adjusted) during the fourth quarter of
1995 from 4.13% during the final quarter of 1994 largely attributable to a
flattening yield curve with higher short-term rates increasing funding
costs but lower long-term rates limiting the positive impact of asset
repricing and a shift in the mix of deposits from savings and money market
accounts into higher cost deposits. These negative effects were partly
offset by growth in earning assets of $791.6 million for the fourth quarter
of 1995 compared to the same period a year ago.
The provision for loan losses was $4.0 million for the fourth quarter
of 1995 compared to $6.0 million for the fourth quarter of 1994 reflecting
the continued improvement in credit quality.
Net securities gains totalled $1.3 million for the final quarter of
1995 compared to $.7 million for the same period of 1994. All sales
occurred in the normal course of portfolio management. Non-interest income
was $30.2 million for the fourth quarter of 1995 which was reduced by a
$3.4 million non-recurring charge for the write-off of the remaining
balance of the excess servicing receivable relating to certain consumer
finance loans. Excluding this write-off, non-interest income increased
$1.8 million during the final quarter of 1995 compared to the same period a<PAGE>
year ago due principally to higher service charges on deposit accounts and
other service charges and fees.
Non-interest expense increased $41.2 million to $143.1 million for
the fourth quarter of 1995 compared to $101.9 million for the fourth
quarter of 1994 due mainly to $37.5 million of restructuring expenses, non-
recurring charges and merger expenses recorded in the final quarter of
1995.
<PAGE>
Analysis of 1994 Compared to 1993
Net Income. Net income for 1994 was $169.0 million or $5.01 per common
share. Net income for 1993 was $152.8 million or $4.50 per common share,
excluding $60.0 million of income relating to the cumulative effects of
adopting two FASB statements. The increase in 1994 net income compared to
the prior year was attributable to a lower provision for loan losses,
higher non-interest income and lower non-interest expense, somewhat offset
by declines in net interest income and net securities gains.
Net Interest Income. Net interest income, on a FTE basis, decreased $9.4
million or 2% to $544.6 million for 1994 from $554.0 million for 1993. Net
interest income in 1994 was negatively impacted by the rise in market
interest rates. Throughout 1994, the Federal Reserve took action to slow
the economy and inflation by raising the federal funds rate six times for a
total of 250 basis points. The net interest margin declined to 4.20% for
1994 from 4.30% for 1993. This drop resulted primarily from the rapid rise
in interest rates which caused the cost of short-term borrowings to
increase while the yield on earning assets declined. Yields on variable
rate loans and securities, other than those based on prime rate, typically
lag in a rising rate environment due to repricing characteristics that
include periodic, not immediate, repricing and caps on the periodic rate
adjustments. Loan spreads narrowed in the increasingly competitive
environment. These negative factors affecting the 1994 margin were
somewhat offset by a decrease in the cost of deposits.
Provision for Loan Losses. The provision for loan losses was $30.0 million
in 1994 compared to $50.0 million in 1993. The decline in the provision
reflects the continued progress on asset quality improvement.
Nonperforming assets decreased $76.5 million or 44% from year end 1993 to
$97.7 million at year end 1994. Integra's loan loss reserve at December
31, 1994 was $237.4 million or 3.12% of total loans compared to $241.9
million or 3.41% of total loans at December 31, 1993. The reserve provides
strong coverage with a ratio of 363% of nonperforming loans at December 31,
1994 compared to 205% at December 31, 1993.
Net Securities Gains. Net securities gains decreased to $19.8 million for
1994 from $29.9 million for 1993. The 1994 gains, all from the sale of
securities available for sale, were composed of $12.4 million on debt
securities and $7.4 million on equity securities. Debt securities gains
and losses in 1994 of $20.1 million and $7.7 million, respectively,
occurred in the normal course of portfolio management. Gains on mortgage-
backed securities totalling $7.4 million in 1994 were derived mainly from
sales of nonconvertible variable rate securities, with reinvestment in
convertible issues. Mortgage-backed securities losses of $1.2 million were
incurred primarily on sales of issues with balloon maturities. U.S.
Treasury securities gains of $5.5 million and losses of $4.4 million were
generated upon reduction of the level of securities funded by short-term
borrowings for which spreads declined in the rising rate environment. In
addition, losses of $1.3 million were recognized on U.S. Treasury<PAGE>
securities called under covered call option contracts written. Sales of
corporate debt securities, the majority of which were bank issues, resulted
in gains of $3.0 million. Collateralized mortgage obligations with short
average lives were sold with resultant gains of $1.8 million. Gains on
U.S. government agency securities of $1.8 million were realized primarily
on issues that were called.
Equity securities gains and losses for 1994 were $9.7 million and
$2.3 million, respectively. The gains included $3.7 million from bank
stock issues exchanged for cash in business combinations, $2.2 million from
preferred stock issues called, a $1.2 million donation of common stock to
the Corporation's charitable foundation (with related contribution expense
reflected in non-interest expense) and $2.3 million from other common
stocks sold. Losses were incurred primarily on fourth quarter sales of
variable rate preferred stock issues.
Net securities gains were $10.1 million greater in 1993 compared to
1994 due to higher debt securities gains from portfolio restructuring that
occurred in a lower interest rate environment when fair values were
relatively higher.
Non-Interest Income. Total non-interest income grew $12.4 million or 12%
to $118.3 million for 1994 from $105.9 million for 1993. This improvement
was mainly attributable to higher mortgage banking income and service
charges and fees.
Mortgage banking income totalled $10.8 million for 1994 compared to
$2.7 million for 1993. Servicing fee revenues increased in 1994 due to a
larger loan servicing portfolio and a lower rate of amortization of
capitalized mortgage servicing rights as a result of decreased prepayments
caused by higher interest rates. During the fourth quarter of 1994, the
Corporation sold $257.3 million of mortgage servicing at a gain of $2.3
million which enhanced 1994 mortgage banking income. No mortgage servicing
rights were sold in 1993.
Service charges and fees increased $5.4 million or 21% to $30.8
million for 1994 compared to 1993. The increase related mainly to higher
servicing fees on consumer finance loans, fee income from the mutual funds
and annuities sales program that was fully initiated in 1994 through
Integra's retail branch network, higher credit card fees and increased loan
service charges from the implementation of new fee schedules.
Non-Interest Expense. Total non-interest expense decreased to $395.2
million for 1994 from $407.6 million for 1993 due primarily to a $14.0
million one-time charge recorded in 1993 to reflect a writedown in the
carrying value of Integra's headquarters facilities. Excluding this non-
recurring item, non-interest expense increased slightly by $1.6 million
during 1994.
Total compensation and employee benefit costs increased $10.5 million
or 6% to $177.8 million for 1994 compared to the prior year. Salaries and
wages expense increased 4% for 1994 compared to 1993 resulting from normal
salary increases. Employee benefits increased 14% in 1994 due to higher
pension and incentive plan expenses and normal benefit cost increases.
Net occupancy expense declined $4.8 million for 1994 compared to the
prior year due to cost savings from the Equimark merger relating primarily
to rent, depreciation, real estate taxes and insurance expense. Following
the merger with Equimark, eighteen branch offices were closed and
consolidated with nearby locations and four branches were sold in the<PAGE>
second quarter of 1993. Partially offsetting this decrease were higher
furniture and equipment expenses in 1994 of $3.0 million compared to the
prior year from depreciation expense primarily on a higher balance of
assets held by a commercial leasing subsidiary.
FDIC premium expense decreased $2.4 million to $22.0 million in 1994
compared to the prior year. A higher premium was paid on the former
Equimark deposits until the second half of 1993, following the merger of
Equibank, Equimark's principal subsidiary, into Integra's bank subsidiary
which is designated "well capitalized" for premium assessment purposes.
Foreclosed asset expense declined $1.5 million to $3.3 million for
1994 compared to 1993 as the balances of other real estate owned and in-
substance foreclosures declined. Amortization of intangibles declined $1.3
million in 1994 due mainly to lower scheduled amortization of core deposit
intangibles. A decrease of $1.5 million in the other category of non-
interest expense for 1994 compared to 1993 resulted from nonrecurring
expenses in 1993 which included a $.7 million penalty on the prepayment of
higher rate Federal Home Loan Bank (FHLB) advances and a $.5 million loss
on the sale of Equimark's Brazilian deposit facilities.
Federal Income Taxes. The Corporation recognized federal income tax
expense of $72.6 million for 1994 compared to $67.7 million for 1993. The
effective tax rates of 30.0% and 30.7% for 1994 and 1993, respectively,
were below the 35% statutory tax rate due to the tax benefits resulting
from tax-exempt interest and excludable dividend income.
Integra adopted FASB Statement 109 Accounting for Income Taxes as of
January 1, 1993. Such adoption increased 1993 earnings by $65.0 million
and was reported as part of the cumulative effect of accounting changes.
The deferred income tax benefit recorded consisted principally of the
benefit associated with Equimark's previously unrecognized net operating
loss carryforwards and unrecognized future deductions.
Interest Rate Sensitivity and Liquidity
The objective of asset/liability management at Integra is to maximize
current and future net interest income within acceptable levels of interest
rate risk while satisfying liquidity and capital requirements. The
Asset/Liability Management committee is responsible for managing interest
rate risk within tolerable limits as established in the Corporation's
policy. Interest rate risk is measured and managed based primarily on
information provided by an earnings simulation model that is used to
project the effect of upward and downward changes in interest rates on net
interest income and net income. Included in the simulations are such
variables as loan and deposit volume and mix, spreads, prepayments and
maturities, repricing and other balance sheet characteristics and
assumptions which might impact the Corporation's expected performance
results under various market conditions. The sensitivity of off-balance
sheet derivative financial instruments to changing interest rates is also
monitored in the model. One method to measure the sensitivity of net
interest income to interest rate changes is through comparison of a base
simulation that holds market interest rates constant to simulations of
upward and downward movements in market rates. As of December 31, 1995, in
gradually rising 100 and 200 basis point scenarios, net interest income
over a twelve month period would decrease by 1.5% and 3.3%, respectively.
The comparable estimates at December 31, 1994 were 2.0% and 4.1% for 100
and 200 basis point gradually rising rates, respectively.<PAGE>
The Corporation took steps in the first half of 1995 to reduce its
liability sensitive position through securities portfolio restructuring, a
shift to longer-term funding and the termination of $200.0 million of
interest rate swaps. Due to the low probability of rising rates, the
Corporation allowed its liability sensitive position to increase somewhat
during the latter half of 1995 by lengthening the duration of the
securities portfolio and through growth in new premium-priced money market
accounts. An increase in liability sensitivity enhances, and a reduction
in liability sensitivity limits, the potential benefit of declining
interest rates. Current expectations are for a relatively stable to
slightly lower interest rate environment in 1996.
Integra views derivative financial instruments, such as interest rate
swaps and caps and forward commitments, as alternatives, both on- and off-
balance sheet, to manage interest rate sensitivity and, to a lesser degree,
liquidity and capital adequacy. The Corporation uses derivatives for
interest rate risk management in accordance with its policy guidelines.
Integra assesses the effectiveness of interest rate swaps and caps, which
are entered into specifically to hedge/alter groups of assets or
liabilities, in conjunction with its overall interest rate sensitivity
analyses. These analyses are performed as part of strategy development as
well as to provide ongoing monthly evaluations. See Note 16 to the
Consolidated Financial Statements for additional information regarding
derivative financial instruments.
Interest rate swaps decreased $561.9 million in notional amount
during the year to $579.2 million at December 31, 1995. Maturities and
amortization totalled $60.0 million and $301.9 million, respectively. Also
in 1995, $200.0 million interest rate swaps that hedged/altered consumer
loans were terminated, resulting in an immaterial loss which was expensed.
Although the hedging strategy was effective, the swaps were terminated as
part of the asset/liability management process due to the change in
expectations about future levels of interest rates.
The Corporation had $479.2 million of index amortizing swaps included
in total swaps at year end 1995. Amortization of index amortizing swaps
depends on the level of three month LIBOR. Based on its interest rate
forecast, management expects the terms of index amortizing swaps to extend
beyond their quarterly reset dates; however, amortization is anticipated to
accelerate given expectations for a lower LIBOR level. At least quarterly,
the index amortizing swaps are stress tested for average life sensitivity
in up and down instantaneous interest rate movements of 100 basis point
increments up to 300 basis points. As of December 31, 1995, based on
Integra's interest rate sensitivity analysis, the estimated weighted
average expected life of the index amortizing swap portfolio was 1.1 years.
A 300 basis point upward movement in interest rates could extend the
expected average life to 2.3 years.
At December 31, 1995, Integra had $300.0 million notional amount of
interest rate caps which were purchased in the first quarter of 1995 to
reduce the impact of then-anticipated increases in the interest rates on
short-term borrowings compared to $1.00 billion notional amount of caps at
December 31, 1994. During 1995, Integra purchased $300.0 million notional
amount of caps and $1.00 billion of caps expired.
The fair value of derivatives fluctuates with shifts in market
interest rates and should be considered in the context of the entire
balance sheet. A mark to market evaluation is performed at least monthly
on interest rate swaps and caps. The estimated fair value of interest rate
swaps and caps, which represents the amount the Corporation would have to<PAGE>
pay to terminate the agreements, was a net unrealized loss of $1.7 million
at December 31, 1995 compared to $68.7 million at year end 1994. The
improvement in fair value reflected the financial market's expectation for
stable to declining interest rates.
Integra receives fixed and pays floating interest rates on all of its
swaps. The impact on net interest income of swaps will increase or be
positive during periods of declining rates and decrease or be negative in
periods of rising rates. Caps will contribute to net interest income in
periods of rising rates. Any negative effect of Integra's caps on net
interest income is limited to amortization of the upfront premiums paid.
During 1995, swaps and caps reduced the net interest margin by eight basis
points compared to 1994 when swaps and caps contributed four basis points
to the margin. Based on management's interest rate forecast, the effect of
interest rate swaps and caps on net interest income and the margin for 1996
is anticipated to be minimal and improve as index amortizing swaps continue
to amortize, the majority of the caps expire and the addition of the swaps
discussed below.
In January 1996, Integra entered into index amortizing swaps with
notional amounts totalling $350.0 million for the purpose of
hedging/altering variable rate commercial loans. Swaps with notional
amounts of $200.0 million have a two year lockout date and the remaining
swap has a one year lockout date. The final maturity of these swaps is
within five years and Integra will pay a floating rate based on three month
LIBOR and receive a 6.04% weighted average fixed rate. Additionally,
during January 1996, Integra entered into call and put options ("synthetic
short") to lock-in the market value of a portion of equity securities held
by Integra Investment Company at the date of these transactions. To
accomplish this, Integra sold a call and bought a put with the same price
and expiration date. The premium received for the call offset the premium
paid for the put. See the Non-Interest Income section for a description of
hedges relating to the mortgage servicing portfolio entered into in January
1996.
As measured by the one year cumulative sensitivity gap at December
31, 1995, the Corporation was liability sensitive such that the maturity
and repricing characteristics of interest bearing liabilities exceeded
those of earning assets. This static evaluation of interest rate
sensitivity is not indicative of the impact of fluctuating interest rates
on net interest income. The following table summarizes the Corporation's
interest rate sensitivity or gap position, which is the estimated aggregate
maturity and repricing of earning assets and interest bearing liabilities,
at December 31, 1995:
<TABLE>
<CAPTION>
Interest Rate Sensitivity
Total
(Dollars in Under 31 to 91 to 181 to Within After
thousands) 31 Days 90 Days 180 Days 365 Days One Year One Year Total
<S> <C> <C> <C> <C> <C> <C> <C>
Short-term
investments $ 62,311 $ 100 $ 100 $ 500 $ 63,011 $ 1,775 $ 64,786
Securities
available for 87,055 276,858 240,014 1,122,454 1,726,381 3,668,953 5,395,334
sale<PAGE>
Loans, held for 147,352 -0- -0- -0- 147,352 -0- 147,352
sale
Loans, net of
unearned income 2,707,145 344,034 430,478 736,018 4,217,675 3,878,480 8,096,155
Interest rate (81,700) (67,737) 24,790 37,793 (86,854) 86,854 -0-
swaps
Total earning $2,922,163 $553,255 $695,382 $1,896,765 $6,067,565 $7,636,062 $13,703,627
assets
Interest bearing
deposits $2,442,485 $692,439 $841,397 $922,027 $4,898,348 $4,052,607 $8,950,955
Short-term
borrowings 545,102 188,096 450,035 101,394 1,284,627 19,658 1,304,285
Long-term debt 108,260 4,014 110,553 269,427 492,254 775,866 1,268,120
Interest rate 197,223 77,765 (125,012) (61,086) 88,890 (88,890) -0-
swaps
Total interest
bearing
liabilities $3,293,070 $962,314 $1,276,973 $1,231,762 $6,764,119 $4,759,241 $11,523,360
Period rate
sensitivity gap $(370,907) $(409,059) $(581,591) $665,003 $2,876,821 $2,180,267
Cumulative rate
sensitivity gap (370,907) (779,966) (1,361,557) (696,554) 2,180,267
Cumulative gap
ratio .89 .82 .75 .90 1.19
Residential real estate loans, collateralized mortgage obligations, mortgage-backed securities and asset-backed
securities are assumed to have prepayments which factor in the difference between current market and portfolio
rates based on historical experience and current expectations. It is assumed that all interest bearing demand
deposits are stable core deposits based on historical experience and are included in the After One Year category.
Savings and money market accounts are divided evenly between the Under 31 Days and After One Year categories
to approximate the elasticity and anticipated pricing behavior of the accounts. The December 31, 1995 three
month LIBOR rate (held constant) was assumed in classifying index amortizinginterest rate swaps. Interest rate
caps are not included in the above table as the three month LIBOR rate was below the strike rate.
</TABLE>
Integra manages its liquidity position by continually evaluating its
funding needs and the costs and terms of funding sources. The Corporation
has sufficient sources of funds available at all times to meet its routine,
operational cash needs by virtue of its monetary assets and liabilities.
Long-term sources of funds include debt issued in the financial markets and
FHLB borrowing programs. Short-term borrowings in the form of securities
sold under agreements to repurchase and FHLB advances have been regular
financing sources for Integra. In 1995, a $2.00 billion bank note program
was established and $100.0 million in senior bank notes were issued. Also
in 1995, Integra became more active in the federal funds purchased and
broker repo markets and has the availability of other sources of funding
such as brokered certificates of deposit. The Corporation expects to have
sufficient funding sources available from financial institutions and the
financial markets should the need for additional funding develop.
Cash for operating activities is provided by net income adjusted for
noncash related items such as deprecation and amortization expense and
provision for loan losses. Cash was used for investing activities in 1995
largely to fund growth in loans and short-term investments. The securities<PAGE>
portfolio is a readily available source of liquidity due to the active
markets for the securities held. Repayments on mortgage-related and asset-
backed securities, callable bonds and loans provide an additional source of
liquidity. Additionally, investing activities consisted of the utilization
of $46.7 million to fund the purchase of Lincoln on January 5, 1995. In
1995, financing activities used cash to reduce short-term borrowings partly
offset by net increases in long-term debt and time deposits.
Financial Condition
Integra's total assets were $14.35 billion at December 31, 1995, an
increase of $590.6 million or 4% from December 31, 1994. The higher asset
level resulted from an increase in loans and securities and the Lincoln
acquisition on January 5, 1995.
<PAGE>
Lending Activity. Loans, net of unearned income, increased $498.1 million
to $8.10 billion at year end 1995 compared to year end 1994. Average loans
increased 7% during 1995. The mix of average loans by loan type and the
change between years is shown in the following table:
<TABLE>
<CAPTION>
Composition of Loans
Daily Average Balance
Increase %
(Dollars in thousands) 1995 1994 (Decrease) Change
<S> <C> <C> <C> <C>
Commercial $1,228,650 $1,510,895 $(282,245) (19)%
Real estate:
Construction 163,993 156,196 7,797 5
Commercial 920,461 761,457 159,004 21
Residential 2,139,464 1,770,998 368,466 21
Total real estate 3,223,918 2,688,651 535,267 20
Consumer:
Indirect 943,205 907,909 35,296 4
Home equity 863,388 776,556 86,832 11
Other lines of credit 213,771 219,754 (5,983) (3)
Education 396,290 331,369 64,921 20
Credit cards 138,850 104,079 34,771 33
Other direct 357,822 360,744 (2,922) (1)
Consumer finance 368,644 328,934 39,710 12
Total consumer 3,281,970 3,029,345 252,625 8
Lease finance 77,987 76,458 1,529 2
Total loans, net of unearned income $7,812,525 $7,305,349 $ 507,176 7 %
</TABLE>
Integra experienced loan growth during 1995 of $380.0 million or 5%
excluding loans acquired in the Lincoln acquisition. This loan growth
occurred primarily in residential real estate and consumer loans. The
Lincoln acquisition added $118.1 million of loans comprised of $67.7
million residential real estate, $36.4 million commercial real estate,
$10.5 million commercial and $3.5 million consumer.
The apparent fluctuation in commercial and commercial real estate
loans was in large measure due to reclassifications resulting from a
corporate-wide project to correct certain loan system coding
inconsistencies relating to various mergers in prior years. Commercial and
commercial real estate loans declined in total by $78.0 million during 1995
largely as a result of sales of nonstrategic out-of-market loans obtained<PAGE>
in a merger. During 1995, Integra sold $61.8 million of such loans which
essentially eliminated the portfolio of nonstrategic out-of-market loans.
Residential real estate loans grew $275.1 million or 14% and the
average balance increased $368.5 million or 21% during 1995 from a higher
volume of loan originations due to greater market demand. During 1995,
portfolio loans consisting of $68.9 million of permanent construction,
$76.1 million of variable rate and $22.7 million of fixed rate real estate
loans were sold servicing retained by the mortgage banking subsidiary at
gains of $1.7 million, which were included in mortgage banking income.
Total consumer loans increased during 1995 due mainly from
originations of home equity, consumer finance, education and indirect
automobile loans as a result of market demand and Integra's promotional
efforts and pricing decisions. This growth was somewhat offset by sales of
$37.3 million of consumer finance loans at gains totalling $3.2 million.
Consumer finance loans are comprised of residential first and second
mortgages that are not underwritten to Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation guidelines. The
typical variance is due to the credit history of the borrower. Such credit
risk is managed by lending a lower amount relative to the collateral value.
Higher servicing costs that result from increased credit risk are
compensated for by higher loan rates in comparison to conventional
residential real estate and home equity loans. Approximately 55% of
consumer finance loans were to borrowers located in Ohio, New Jersey,
Pennsylvania and Tennessee. Integra's consumer finance business is
conducted through a subsidiary, Altegra Credit Company. The Corporation is
expanding this line of business in states generally east of the Mississippi
River with ten direct lending offices opened in 1995. Sales of consumer
finance loans may occur from time to time to cover expansion costs.
Intense competition for loan volume, which has reduced the
profitability of certain types of loans, is expected to continue during
1996. Loan growth is anticipated in 1996 principally from commercial and
consumer loan originations based on expectations of market demand and
current business plans.
Integra's commercial loans consist primarily of loans to small- and
medium-sized businesses within the Corporation's market area. Geographical
coverage of the Corporation's commercial lending activity extends across
all of western Pennsylvania and closely neighboring areas and includes
borrowers from various types of businesses and industries. For additional
information regarding loan concentrations see Note 5 to the Consolidated
Financial Statements.
Nonperforming Assets. The composition of nonperforming assets and past due
loans at December 31 for the past five years is as follows:
<TABLE>
<CAPTION>
Nonperforming Assets and Past Due Loans
1995 1994 1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 62,727 $ 63,071 $114,992 $145,000 $206,915
Renegotiated debt 26 2,392 2,990 4,099 5,329
Total nonperforming loans 62,753 65,463 117,982 149,099 212,244<PAGE>
In-substance foreclosures (1) -0- 6,140 22,893 41,612 41,131
Other real estate owned 13,052 26,089 33,336 36,323 23,518
Total foreclosed assets 13,052 32,229 56,229 77,935 64,649
Total nonperforming assets 75,805 97,692 174,211 227,034 276,893
Loans past due 90 days or
more and still accruing 26,069 23,412 25,880 34,850 42,762
Total nonperforming assets
and past due loans $101,874 $121,104 $200,091 $261,884 $319,655
(1) In-substance foreclosures were reclassified to nonaccrual loans upon the adoption of FASB Statement 114
as of January 1, 1995.
</TABLE>
Nonperforming assets decreased $21.9 million or 22% as of
December 31, 1995 from the previous year end due in part to sales of
nonperforming assets consisting of $8.6 million of nonperforming loans
located outside of Integra's market area sold in the second quarter and
$10.8 million of other real estate owned sold in the first quarter. The
ratio of nonperforming assets to loans plus foreclosed assets was .93% at
year end 1995, down from 1.28% at year end 1994.
The composition of nonperforming loans and foreclosed assets by
category at December 31, 1995 was: Commercial - 28%, Commercial real
estate -37%, Construction and residential real estate - 23% and Consumer -
12%. Commercial and commercial real estate nonperforming assets with
customer balances over $.5 million totalled $24.3 million or 32% of total
nonperforming assets at December 31, 1995 and are shown in the following
table by type and location:
<TABLE>
<CAPTION>
Commercial and Commercial Real Estate Nonperforming Assets
(Dollars in millions) Pennsylvania New York Total % by Type
<S> <C> <C> <C> <C>
Multifamily and Land $ 3 $3 $ 6 26%
Office 3 1 4 17
Recreation 4 - 4 17
Contractor 3 - 3 12
Distributor 3 - 3 12
Manufacturer 2 - 2 8
Other 2 - 2 8
Total $20 $4 $24 100%
</TABLE>
Reserve for Loan Losses. The reserve for loan losses was $215.2 million or
2.66% of total loans at December 31, 1995 compared to $237.4 million or
3.12% of total loans at December 31, 1994. The reserve provides strong
coverage with a ratio of 343% of nonperforming loans at December 31, 1995
compared to 363% a year earlier. The reserve also represents 284% of
nonperforming assets at December 31, 1995 up from 243% at December 31,
1994. Loan charge-offs, net of recoveries, totalled $40.7 million during
1995 compared to $34.5 million during 1994. The 1995 charge-offs included
$16.1 million related to non-strategic, primarily out-of-market, loans
acquired through a previous merger. The remaining, normal charge-offs of
$24.6 million were above the year-to-date provision for loan losses of<PAGE>
$16.0 million. For both years, the majority of the loan charge-offs were
for consumer, commercial real estate and commercial loans. Determinations
of probable losses are made under the guidelines of a conservative charge-
off policy at the time a loan is first designated nonaccrual and
periodically thereafter. Net charge-offs for 1996 are expected to
approximate net charge-offs for 1995 and be proportionately similar by loan
category. The activity in the loan loss reserve and information regarding
the relationship of the reserve to loans, nonperforming loans and
nonperforming assets and the ratio of net charge-offs to average loans for
the past five years is shown in the following table:
<PAGE>
<TABLE>
<CAPTION>
Reserve for Loan Losses
(Dollars in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $237,433 $241,901 $238,831 $182,553 $211,820
Provision for loan losses 16,000 30,000 50,000 96,390 71,837
Loan charge-offs:
Commercial (12,342) (19,811) (26,473) (22,253) (38,696)
Real Estate:
Construction (220) (328) (1,121) (604) (8,513)
Commercial (17,891) (14,700) (12,017) (10,719) (24,003)
Residential (1,276) (1,133) (2,511) (2,630) (2,039)
Consumer (25,147) (23,923) (26,643) (38,058) (39,968)
Lease finance (78) (120) (177) (300) (666)
Total loan charge-offs (56,954) (60,015) (68,942) (74,564) (113,885)
Loan recoveries:
Commercial 8,253 17,420 13,968 8,898 6,705
Real estate:
Construction 1 -0- 22 371 32
Commercial 913 845 1,517 1,686 1,017
Residential 81 25 117 174 233
Consumer 6,969 7,173 6,360 6,128 5,851
Lease finance 21 84 28 123 144
Total loan recoveries 16,238 25,547 22,012 17,380 13,982
Net loan charge-offs (40,716) (34,468) (46,930) (57,184) (99,903)
Reserve of acquired
(divested) company 2,450 -0- -0- 17,072 (1,201)
Balance at end of period $215,167 $237,433 $241,901 $238,831 $182,553
Loan loss reserve to loans 2.66% 3.12% 3.41% 3.39% 2.89%
Loan loss reserve to
nonperforming loans 342.88 362.70 205.03 160.18 86.01
Loan loss reserve to
nonperforming assets 283.84 243.04 138.86 105.20 65.93
Net loan charge-offs to
average loans .52 .47 .67 .85 1.53
</TABLE>
The adequacy of the reserve for loan losses is assessed by the
Corporation through evaluation of the loss potential on individual
nonperforming, delinquent and high dollar loans, review of economic
conditions and business trends, historical loss experience, growth and
composition of the loan portfolio and other relevant factors. Integra's<PAGE>
management believes that the reserve for loan losses is adequate to absorb
reasonably foreseeable losses on loans.
Securities Activity. Securities at December 31, 1995, all of which were
classified as available for sale, totalled $5.39 billion compared to $5.24
billion of total securities available for sale and held to maturity at
December 31, 1994. The overall increase in 1995 was due to higher fair
values reflected in a $325.8 million increase in net unrealized gains on
securities available for sale partly offset by a $172.2 million decrease in
securities.
Effective December 1, 1995, Integra reclassified its entire $2.05
billion portfolio of securities held to maturity to the available for sale
category. The unrealized gain on these securities was $21.4 million on the
date of transfer which was recorded net of tax in shareholders' equity in
accordance with FASB Statement 115. This was the result of a reevaluation
of management's intentions to hold those securities to maturity. A window
of opportunity to reassess the appropriateness of all securities'
classifications was provided by the FASB concurrent with its issuance in
November 1995 of a Special Report - A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities.
As a result of the decline in interest rates during 1995, the net
unrealized loss on securities available for sale at the end of 1994 of
$168.6 million improved to a net unrealized gain of $157.2 million at
December 31, 1995. Net unrealized gains on debt securities available for
sale of $40.1 million at December 31, 1995 increased from net unrealized
losses of $246.0 million at December 31, 1994. Net unrealized gains on
marketable equity securities were $117.1 million at December 31, 1995
compared to $77.4 million at December 31, 1994. As of year end 1995, no
securities had been specifically identified for sale in 1996 although
securities may be sold in the context of ongoing asset/liability
management.
During 1995, the debt securities portfolio was restructured through
purchases that included asset-backed securities, callable agency securities
and collateralized mortgage obligations, and sales of available for sale
securities consisting mainly of mortgage-backed securities, primarily
variable rate for which prepayment risk was a concern, and U.S. Treasury
securities. These transactions had the effect of lengthening the duration
of the securities portfolio and improving the yield on average securities
which rose 26 basis points in 1995 compared to 1994, excluding the impact
to the yield of net unrealized gains/losses on securities available for
sale.
Collateralized mortgage obligations and mortgage-backed securities in
total represented 52% of Integra's securities portfolio at December 31,
1995. These mortgage related securities are impacted by the effects that
changing interest rates have on the level of prepayments. Such
susceptibility to prepayment variations is factored into Integra's interest
rate sensitivity analysis. The weighted average expected lives of fixed
rate mortgage-backed securities and collateralized mortgage obligations
were 5.1 years and 2.8 years, respectively, as of December 31, 1995. A 300
basis point upward movement in interest rates could extend the expected
average lives to 6.4 years and 4.4 years for fixed rate mortgage-backed
securities and collateralized mortgage obligations, respectively. Stress
tests are performed at least quarterly in which 100, 200 and 300 basis
point instantaneous up and down interest rate movements are evaluated. At
December 31, 1995, variable rate securities constituted 49% of the
mortgage-backed portfolio compared to 61% at December 31, 1994. All<PAGE>
collateralized mortgage obligations were fixed rate at year-end 1995
compared to 84% fixed rate at year end 1994. The majority of mortgage-
backed securities and collateralized mortgage obligations were U.S.
government agency issues and no private placement issues were held.
Included in U.S. Government agency securities as of December 31,1995
was a $10.0 million structured note compared to $254.9 million of
structured notes at December 31, 1994. Structured notes have a series of
pre-established coupons that typically increase on specified future dates
until final maturity, which date may not be reached due to call option
features. A majority of these securities were called by the issuer
agencies during 1995 due to interest rate levels.
Marketable equity securities increased to $490.0 million at December
31, 1995 from $347.5 million a year earlier, with a net unrealized gain
component of $117.1 million and $77.4 million for each year, respectively.
Activity in marketable equity securities in 1995 included purchases of
variable rate preferred stock and money market preferred issues.
Approximately 46% of Integra's marketable equity securities at December 31,
1995 were common and preferred stocks of banks, thrifts and bank holding
companies compared to 52% at December 31, 1994. Investing in marketable
equity securities is the principal activity of Integra Investment Company,
a Delaware subsidiary. Integra Investment Company had marketable equity
securities of $360.4 million at December 31, 1995.
The composition of the average balance of the Corporation's
securities available for sale at fair value and securities held to maturity
at amortized cost during 1995 and 1994 is shown in the following table:
<TABLE>
<CAPTION>
Composition of Securities
Daily Average Balance % of Total
Average
1995 1994 Securities
Held to Available Held to Available Increase
(Dollars in millions) Maturity for Sale Maturity for Sale (Decrease) 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 122 $ 472 $ 72 $ 826 $(304) 11% 16%
U.S. Government agency securities 631 135 247 299 220 14 10
Mortgage-backed securities 244 1,750 196 2,045 (247) 36 41
Collateralized mortgage
obligations 378 376 302 295 157 14 11
Corporate debt securities 50 185 18 305 (88) 4 6
Marketable equity securities -0- 418 -0- 368 50 8 7
Asset-backed securities 337 210 203 83 261 10 5
Federal Home Loan Bank and
Federal Reserve Bank stock -0- 82 -0- 99 (17) 1 2
State and political subdivision
securities 118 14 68 21 43 2 2
Other -0- -0- -0- 1 (1) - -
Total securities $1,880 $3,642 $1,106 $4,342 $ 74 100% 100%
</TABLE>
The Corporation had no concentration (defined as 10% of shareholders'
equity) of credit risk in any single issuer, other than the U.S. government<PAGE>
and its agencies and corporations, in the securities portfolio at December
31, 1995. Integra had $175.6 million of collateralized mortgage
obligations at December 31, 1995 which qualified as "high risk" based on
the Federal Financial Institutions Examination Council's definition. These
securities are routinely monitored to assess the impact of changes in
interest rates and are classified as available for sale.
Trading activity, which is a separate and distinct activity, includes
the purchase and subsequent sale of securities for the specific purpose of
profiting from short-term changes in interest rates and market values. The
volume of transactions in the trading portfolio has not been significant
and such activities are not expected to become significant in the future.
No trading securities were held at December 31, 1995 and 1994.
Deposits. Total deposits increased $297.1 million to $10.38 billion at
December 31, 1995 from $10.08 billion at December 31, 1994. Integra
obtained $159.6 million of deposits in the Lincoln acquisition, including
$84.5 million of time deposits and $46.3 million of savings accounts.
During 1995, Integra experienced a shift in its deposit mix into time
deposits out of savings and demand accounts. This industry-wide trend
occurred as depositors were attracted by the higher rates which typically
impacts deposit pricing on a time lag. Growth in time deposits occurred
mainly in certificates with terms between twelve and 24 months. Non-
interest bearing demand deposits declined in 1995 due in part to the
reclassification to money market deposits of escrow accounts with limited
monthly transactions totalling $71.5 million at December 31, 1995 held in
conjunction with Integra's mortgage banking business. During the third
quarter of 1995, a new type of money market account linked to existing
interest bearing demand accounts was established. Balances of accounts
that do not exceed maximum transaction levels and which are in excess of
the amounts needed to cover each customer's historic activity level are
transferred from the demand accounts to the related money market accounts,
with the effect of lowering the requirement for reserves that must be
maintained by Federal Reserve member banks. Such balances, which are paid
the interest bearing demand account rate, totalled $717.9 million at
December 31, 1995 are included in the following table with interest bearing
demand. Integra's money market deposits increased in 1995 with the
promotion of a preferred investment account which offers customers a market
indexed rate on accounts with balances over $25,000. Integra considers its
retail funding base to be stable. Average deposits were 2% higher during
1995 compared to the previous year. The composition of deposits at
December 31, 1995 and 1994 and average deposits during 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Daily % of Total
Composition of Deposits December 31, Average Balance Average Deposits
(Dollars in millions) 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand $ 1,430 $ 1,488 $ 1,359 $1,417 13% 14%
Interest bearing demand 883 946 903 968 9 10
Savings 1,014 1,086 1,071 1,133 11 11
Money market 1,941 1,650 1,764 1,781 17 18
Time deposits under $100,000 4,495 4,342 4,515 4,162 44 42
Time deposits of $100,000 or more 617 571 631 536 6 5
Total deposits $10,380 $10,083 $10,243 $9,997 100% 100%
/TABLE
<PAGE>
Borrowings. During 1995, the Corporation extended the terms of wholesale
borrowings to manage its liability sensitivity. Average short-term
borrowings declined slightly and long term debt increased during 1995
compared to 1994.
Short-term borrowings decreased $278.5 million from December 31, 1994
to December 31, 1995 and the mix of short-term funds changed, with a
decrease of $441.7 million in securities sold to FHLBs under agreements to
repurchase partly offset by increases of $141.8 million in federal funds
purchased and $79.0 million in securities sold to brokers under agreements
to repurchase. Integra became more active in the term federal funds and
broker repo markets during 1995 as a part of its ongoing evaluations of
funding alternatives. The Corporation's banking subsidiary established a
brokered certificate of deposit program which had not been utilized as of
December 31, 1995. Securities sold under agreements to repurchase
comprised 61% and 74% of short-term borrowings at December 31, 1995 and
1994, respectively. The securities sold under agreements to repurchase
were U.S. Treasury and agency securities. The repurchase agreements at
December 31, 1995 were with brokers and bank customers.
Long-term debt increased $211.5 million or 20% from year end 1994 to
$1.27 billion at December 31, 1995. Securities sold to brokers under
agreements to repurchase increased $376.9 million somewhat offset by a
$263.2 million decrease in long-term FHLB advances. In the second quarter
of 1995, $100.0 million of five year, 6.55% senior bank notes were issued
under a $2.00 billion shelf registration.
Capital Resources. Shareholders' equity increased $286.3 million from
$858.6 million at December 31, 1994 to $1.14 billion at December 31, 1995
due to a $215.6 million improvement in the after-tax net unrealized gains
on securities available for sale and 1995 net income of $128.4 million.
Equity was reduced by cash dividends paid to shareholders of $64.0 million.
In January 1995, Integra's Board of Directors increased to two
million shares the total number of shares of the Corporation's outstanding
common stock authorized to be repurchased under an existing stock
repurchase program. One million shares were authorized in July 1993 under
the program. During 1995, 148,311 shares of common stock were repurchased
at an average price of $41.24. Since inception of the program in 1993,
1,099,518 shares have been purchased at an average cost of $41.93. During
1995, shares totalling 334,489, all from treasury, were issued under the
Corporation's employee stock option, employee stock purchase, and dividend
reinvestment and stock purchase plans for net proceeds of $12.5 million.
At December 31, 1995, 579,667 shares were held as treasury stock.
Integra paid dividends of $1.95 per common share in 1995 compared to
$1.70 per common share in 1994, representing a 15% increase. On April 26,
1995, Integra's Board of Directors increased the quarterly dividend from
$.45 to $.50 per share of common stock, marking the twentieth consecutive
year of increased annual dividend payouts. On January 24, 1996, the
quarterly dividend rate was increased to $.54 per common share with the
first quarter 1996 dividend payable on March 1, 1996 to shareholders of
record as of February 15, 1996. A second quarter 1996 dividend of $.54 per
common share was also declared which will be payable on May 1, 1996 to
shareholders of record as of April 15, 1996. This accelerated second
quarter dividend will bring the Integra quarterly dividend into conformity
with National City, which has payment dates for quarterly dividends on the
first day of February, May, August and November.<PAGE>
The book value of Integra's common stock was $34.68 per share at
December 31, 1995, which included $3.09 per share for net unrealized gains
on securities available for sale that increased shareholders' equity in
accordance with FASB Statement 115. Book value increased $8.52 per share
during 1995 of which $6.54 per share related to an improvement in the fair
value of securities available for sale. The market value of Integra's
common stock was $63.13 per share on December 31, 1995. The stock price
table shows the market price range of Integra common stock as quoted on the
New York Stock Exchange and dividends paid during each quarter of 1995 and
1994.
<TABLE>
<CAPTION>
Common Stock Prices and Dividends Paid
1995 1994
Dividends Dividends
Quarter High Low Close Paid High Low Close Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $43.75 $36.88 $43.00 $ .45 $47.88 $42.63 $46.00 $ .40
Second 50.63 42.38 48.63 .50 49.75 44.75 46.75 .40
Third 59.50 48.50 58.13 .50 48.88 44.88 45.13 .45
Fourth 64.63 57.63 63.13 .50 45.38 38.38 41.13 .45
$1.95 $1.70
</TABLE>
In connection with the proposed merger of Integra with and into
National City, each outstanding share of Integra common stock will be
converted into two shares of National City common stock at the effective
time of the merger which is anticipated in the second quarter of 1996. The
market price of National City common stock at December 31, 1995 was $33.13
per share and 1995 dividends paid were $1.30 per share.
Integra continues to maintain a strong capital position, with a
leverage ratio of 7.02%, a tangible leverage ratio of 6.77%, a core capital
to risk-weighted assets ratio of 11.13% and a total capital to risk-
weighted assets ratio of 14.61% at December 31, 1995. These capital ratios
decreased slightly in the early part of 1995 compared to December 31, 1994
due primarily to the Lincoln acquisition. In accordance with regulatory
guidelines, these ratios do not include net unrealized gains or losses on
securities available for sale under FASB Statement 115. All of the capital
ratios are in excess of the regulatory requirements. Under the Federal
Deposit Insurance Corporation Improvement Act (FDICIA), five capital level
designations have been established that, among other things, trigger
certain mandatory and discretionary supervisory responses for institutions
that fall below certain capital levels. Integra's banking subsidiary has
been deemed "well capitalized" which is the highest designation. As
required by FDICIA, the regulators are permitted to require additional
capital for interest rate risk when they believe it necessary. Effective
in 1996, the regulators will require expanded reporting of an institution's
interest rate risk exposure. The data collected will be used as the basis
for a new, separate rulemaking that could result in a specific capital
charge on institutions with high interest rate risk exposure. The effect
of this proposal, if any, on the Corporation's capital requirements cannot
be determined at this time. The following table shows Integra's capital
ratios at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Capital Ratios
(Dollars in thousands) 1995 1994 <PAGE>
<S> <C> <C>
Leverage ratio 7.02% 6.98%
Tangible leverage ratio 6.77 6.73
Risk-based capital:
Capital components:
Core capital $1,003,734 $ 959,254
Total risk-based capital 1,317,313 1,265,156
Risk-weighted assets and off-balance
sheet financial instruments 9,015,065 8,377,021
Risk-based capital ratios:
Core capital 11.13% 11.45%
Total capital 14.61 15.10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL DATA
1995 1994 1993 1992 1991
Profitability
<S> <C> <C> <C> <C> <C>
Return on average assets (1) .90% 1.24% 1.13% .48% .55%
Return on average total equity (1) 12.71 17.95 18.40 8.31 10.26
Net interest margin 3.86 4.20 4.30 4.28 4.10
Efficiency ratio 62.21 59.62 59.76 63.81 72.38
Average loans to deposits 76.27 73.07 69.06 65.49 67.31
Capital
Common dividends to net income 49.85% 33.64% 30.02% 52.43% 47.33%
Shareholders' equity to assets 7.98 6.24 7.32 5.58 5.28
Leverage ratio 7.02 6.98 6.19 5.38 5.27
Tangible leverage ratio 6.77 6.73 6.00 5.12 4.99
Core capital ratio 11.13 11.45 10.77 9.08 8.51
Total capital ratio 14.61 15.10 14.50 11.81 10.39
Asset Quality
Nonperforming assets to loans plus foreclosed
assets .93% 1.28% 2.44% 3.18% 4.33%
Loans past due 90 days or more, excluding
nonaccrual loans, to loans .32 .31 .37 .49 .68
Loan loss reserve to loans 2.66 3.12 3.41 3.39 2.89
Loan loss reserve to nonperforming loans 342.88 362.70 205.03 160.18 86.01
Net loan charge-offs to average loans .52 .47 .67 .85 1.53
Share Data
Common shares outstanding at period-end (in
thousands) 33,013 32,827 33,457 32,955 26,667
Average common shares outstanding (in thousands) 33,123 33,735 33,815 32,030 26,670
Net income before cumulative effect of
accounting changes $3.88 $5.01 $4.50 $1.81 $2.23
Net income 3.88 5.01 6.28 1.81 2.23
Common dividends 1.95 1.70 1.37 .98 1.11 <PAGE>
Book value 34.68 26.16 30.85 21.30 22.21
Excluding unrealized gains/losses on
securities 31.59 29.61 26.50 21.30 22.21
Market price:
High 64.63 49.75 50.75 42.00 30.50
Low 36.88 38.38 39.50 30.00 13.00
Close 63.13 41.13 43.00 41.63 30.00
Other Data
Number of employees (full-time equivalent) 5,041 5,222 5,175 5,400 5,418
Number of banking offices 263 260 260 281 268
Periods prior to 1993 have been restated to reflect the merger with Equimark Corporation,
a pooling-of-interests transaction consummated on January 15, 1993.
(1) Excludes cumulative effect of accounting changes to FASB Statements 106 and 109 in 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST ANALYSIS
Years ended December 31 1995 1994
Daily Interest Average Daily Interest Average
Average Income/ Annualized Average Income/ Annualized
(Dollars in thousands) Balance Expense Yield/Rate Balance Expense Yield/Rate
Assets
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Short-term investments $ 153,008 $ 10,504 6.87% $ 25,934 $ 1,083 4.18%
Debt securities 5,104,534 338,626 6.63 5,080,881 320,762 6.31
Equity securities 417,959 28,250 6.76 367,487 26,575 7.23
Total securities 5,522,493 366,876 6.64 5,448,368 347,337 6.38
Trading securities 26,910 1,602 5.95 49,783 2,596 5.21
Loans held for sale 100,570 6,471 6.43 134,437 10,364 7.71
Loans, net of unearned
income 7,812,525 703,524 9.01 7,305,349 615,243 8.42
Total earning assets 13,615,506 $1,088,977 8.00% 12,963,871 $976,623 7.53%
Cash and due from banks 312,114 367,693
Premises and equipment 171,534 163,379
Other assets 415,089 346,070
Reserve for loan losses (230,878) (243,975)
Total assets $14,283,365 $13,597,038
Liabilities and
Shareholders' Equity
Interest bearing
liabilities:
Interest bearing demand $ 903,098 $ 11,844 1.31% $ 967,683 $ 13,353 1.38%<PAGE>
Savings 1,071,038 25,680 2.40 1,133,336 25,762 2.27
Money market 1,763,637 59,608 3.38 1,780,740 44,980 2.53
Time deposits 5,146,358 294,147 5.72 4,698,390 233,772 4.98
Total interest
bearing deposits 8,884,131 391,279 4.40 8,580,149 317,867 3.71
Short-term borrowings 1,610,217 96,502 5.99 1,664,817 66,180 3.98
Long-term debt 1,204,009 75,881 6.30 815,890 47,931 5.87
Total interest
bearing liabilities 11,698,357 $ 563,662 4.82% 11,060,856 $431,978 3.91%
Non-interest bearing
deposits 1,359,045 1,417,153
Other liabilities 215,557 177,564
Total liabilities 13,272,959 12,655,573
Shareholders' equity 1,010,406 941,465
Total liabilities and
shareholders'
equity $14,283,365 $13,597,038
Net interest spread 3.18% 3.62%
Net interest income/Net
interest margin $525,315 3.86% $544,645 4.20%
Taxable equivalent
adjustment (18,055) (15,826)
Net interest income per
financial statements $507,260 $528,819
Interest bearing
liabilities to
earning assets 85.92% 85.32%
Tax-exempt income is on an FTE basis using the statutory federal income tax rate of 35% for 1995, 1994 and 1993.
For purposes of calculating loan yields, average loan balances include nonaccrual loans.
</TABLE>
<PAGE>
<TABLE>
CAPTION
<PAGE>
CONSOLIDATED AVERAGE BALANCES AND NET INTEREST ANALYSIS
Years ended December 31 1993
Daily Interest Average
Average Income/ Annualized
(Dollars in thousands) Balance Expense Yield/Rate
Assets
<S> <C> <C> <C>
Earning assets:
Short-term investments $ 24,429 $ 736 3.01%
Debt securities 5,435,027 350,170 6.44
Equity securities 184,224 20,145 10.93
Total securities 5,619,251 370,315 6.59
Trading securities 25,939 875 3.37
Loans held for sale 180,541 13,763 7.62
Loans, net of unearned income 7,046,791 603,819 8.57
Total earning assets 12,896,951 $989,508 7.67%
Cash and due from banks 393,068
Premises and equipment 153,889
Other assets 359,097
Reserve for loan losses (242,291)
Total assets $13,560,714
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Interest bearing demand $ 955,535 $ 17,796 1.86%
Savings 1,147,248 28,678 2.50
Money market 1,880,576 51,958 2.76
Time deposits 4,869,025 246,829 5.07
Total interest bearing deposits 8,852,384 345,261 3.90
Short-term borrowings 1,620,897 50,275 3.10
Long-term debt 708,263 39,973 5.64
Total interest bearing liabilities 11,181,544 $435,509 3.89%
Non-interest bearing deposits 1,352,092
Other liabilities 196,442
Total liabilities 12,730,078
Shareholders' equity 830,636
Total liabilities and shareholders' equity $13,560,714
Net interest spread 3.78%
Net interest income/Net interest margin $553,999 4.30%
Taxable equivalent adjustment (11,700)
Net interest income per financial statements $542,299
Interest bearing liabilities to earning assets 86.70%
Tax-exempt income is on an FTE basis using the statutory federal income tax rate of 35% for 1995, 1994 and 1993.
For purposes of calculating loan yields, average loan balances include nonaccrual loans.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED QUARTERLY RESULTS OF OPERATIONS
For the Year Ended December 31, 1995 First Second Third Fourth (1)
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
Interest income $256,828 $268,341 $275,813 $269,936
Interest expense 130,809 141,437 148,121 143,291
Net interest income 126,019 126,904 127,692 126,645 <PAGE>
Provision for loan losses 4,000 4,000 4,000 4,000
Net interest income after provision for loan losses 122,019 122,904 123,692 122,645
Net securities gains 3,661 4,486 8,809 1,333
Non-interest income 35,925 33,042 32,045 30,227
Non-interest expense 105,665 104,143 109,295 143,121
Income before income taxes 55,940 56,289 55,251 11,084
Income tax expense 15,786 16,297 2,687
15,404
Net income $ 40,154 $ 39,992 $ 39,847 $ 8,397
Net income per common share $1.22 $1.21 $1.20 $0.25
Average common shares outstanding (in thousands) 32,991 33,063 33,194 33,244
Return on average assets 1.16% 1.12% 1.09% 0.23%
Return on average equity 17.97 16.24 15.13 3.04
Net interest margin 3.97 3.88 3.81 3.79
For the Year Ended December 31, 1994 First Second Third Fourth
(Dollars in thousands except per share data)
Interest income $235,778 $232,880 $242,073 $250,047
Interest expense 102,849 101,331 107,832 119,947
Net interest income 132,929 131,549 134,241 130,100
Provision for loan losses 10,000 8,000 6,000 6,000
Net interest income after provision for loan losses 122,929 123,549 128,241 124,100
Net securities gains 13,330 4,983 737 699
Non-interest income 28,895 28,593 28,990 31,824
Non-interest expense 97,479 97,087 98,809 101,861
Income before income taxes 67,675 60,038 59,159 54,762
Income tax expense 20,887 18,282 17,723 15,709
Net income $ 46,788 $ 41,756 $ 41,436 $ 39,053
Net income per common share $1.38 $1.23 $1.22 $1.17
Average common shares outstanding (in thousands) 33,792 33,851 33,848 33,448
Return on average assets 1.35% 1.25% 1.23% 1.14%
Return on average equity 18.25 17.99 17.95 17.54
Net interest margin 4.11 4.27 4.30 4.13
(1) During the fourth quarter of 1995, Integra recorded non-recurring charges,
restructuring expenses and merger expenses totalling $40.9 million.
</TABLE>
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Integra Financial Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31 1995 1994
(Dollars in thousands)<PAGE>
Assets
<S> <C> <C>
Cash and due from banks $ 358,856 $ 428,771
Federal funds sold 10,000 -0-
Other short-term investments 54,786 13,740
Securities held to maturity (fair value of
$1,474,141 in 1994) -0- 1,546,295
Securities available for sale, at fair value 5,395,334 3,695,504
Loans held for sale 147,352 67,994
Loans, net of unearned income of $97,823 in
1995 and $96,110 in 1994 8,096,155 7,598,056
Reserve for loan losses (215,167) (237,433)
Net loans 7,880,988 7,360,623
Premises and equipment 169,027 169,509
Foreclosed assets 13,052 32,229
Other assets 316,577 440,695
Total assets $14,345,972 $13,755,360
Liabilities
Deposits:
Non-interest bearing $ 1,429,504 $ 1,488,106
Interest bearing 8,950,955 8,595,300
Total deposits 10,380,459 10,083,406
Short-term borrowings 1,304,285 1,582,756
Long-term debt 1,268,120 1,056,649
Other liabilities 248,200 173,953
Total liabilities 13,201,064 12,896,764
Shareholders' Equity
Preferred stock, no par value, 19,642,631
shares authorized -0- -0-
Common stock, $1.00 par value, 100,000,000
shares authorized 33,592 33,592
Capital surplus 451,680 451,769
Retained earnings 581,484 518,346
Net unrealized gains (losses) on securities 102,179 (113,402)
Treasury stock, at cost, 579,667 shares in 1995
and 765,845 shares in 1994 (24,027) (31,709)
Total shareholders' equity 1,144,908 858,596
Total liabilities and shareholders' equity $14,345,972 $13,755,360
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integra Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME<PAGE>
Years Ended December 31 1995 1994 1993
(Dollars in thousands except per share data)
<S> <C> <C> <C>
Interest Income
Loans, including fees $ 697,400 $609,520 $599,005
Loans held for sale 6,471 10,364 13,763
Securities:
Taxable interest 321,220 306,633 334,967
Tax-exempt interest 7,856 5,309 3,082
Dividends 25,865 25,273 25,358
Trading securities 1,602 2,596 875
Short-term investments 10,504 1,083 736
Total interest income 1,070,918 960,778 977,786
Interest Expense
Deposits 391,280 317,867 345,261
Short-term borrowings 96,501 66,180 50,275
Long-term debt 75,877 47,912 39,951
Total interest expense 563,658 431,959 435,487
Net interest income 507,260 528,819 542,299
Provision for loan losses 16,000 30,000 50,000
Net interest income after provision for loan
losses 491,260 498,819 492,299
Net securities gains 18,289 19,749 29,862
Non-Interest Income
Service charges on deposit accounts 36,008 33,545 33,142
Other service charges and fees 29,569 30,828 25,391
Trust income 29,196 27,763 26,829
Mortgage banking income 17,085 10,822 2,736
Other 19,381 15,344 17,796
Total non-interest income 131,239 118,302 105,894
Non-Interest Expense
Salaries and Wages 147,142 136,679 131,327
Employee benefits 50,751 41,110 35,950
Net occupancy 32,695 32,219 37,024
Furniture and equipment 32,431 28,933 25,950
Facilities restructuring charge 6,218 -0- 13,984
Outside data processing 32,228 26,950 27,262
FDIC premium 24,224 22,019 24,409
Foreclosed asset expense 2,650 3,266 4,735
Amortization of intangible assets 9,069 5,948 7,268
Other 124,816 98,112 99,655
Total non-interest expense 462,224 395,236 407,564
Income before income taxes and cumulative
effect of accounting changes 178,564 241,634 220,491
Income tax expense 50,174 72,601 67,671
Income before cumulative effect of accounting
changes 128,390 169,033 152,820
Cumulative effect of accounting changes, net -0- -0- 60,000
Net Income $ 128,390 $169,033 $212,820<PAGE>
Net Income Per Common Share
Before cumulative effect of accounting changes $3.88 $5.01 $4.50
Cumulative effect of accounting changes, net -0- -0- 1.78
Net income per common share $3.88 $5.01 $6.28
Average common shares outstanding 33,122,831 33,734,600 33,815,497
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integra Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands except per share data)
Net
Series Unrealized Total
Preferred Common Capital Retained Gains Treasury Shareholders'
Stock Stock Surplus Earnings (Losses) Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $1,159 $33,063 $468,391 $245,205 $ (2,492) $ 745,326
Net income for 1993 212,820 212,820
Common stock dividends,
$1.37 per share (45,882) (45,882)
Preferred stock dividends (5,861) (5,861)
Shares issued through
stock plans, 215,593
total shares, 112,061
shares from treasury 104 4,325 2,693 7,122
Treasury stock purchased,
at cost, 143,241 shares (6,458) (6,458)
Conversion into common
stock and repurchase of
series preferred stock (360) 429 (240) (25) (196)
Redemption of series
preferred stock (799) (19,205) (20,004)
Net unrealized gains on
securities $145,379 145,379
Balance, December 31, 1993 -0- 33,596 453,271 406,257 145,379 (6,257) 1,032,246
Net income for 1994 169,033 169,033
Common stock dividends,
$1.70 per share (56,865) (56,865)
Shares issued through
stock plans, 154,734
total shares, all from (844) 6,886 6,042
treasury
Treasury stock purchased,
at cost, 807,966 shares (33,532) (33,532)
Treasury stock sold to
profit sharing plan,
26,400 shares 10 1,180 1,190 <PAGE>
Change in net unrealized
gains (losses) on (258,781) (258,781)
securities
Other transactions (4) (668) (79) 14 (737)
Balance, December 31, 1994 -0- 33,592 451,769 518,346 (113,402) (31,709) 858,596
Net income for 1995 128,390 128,390
Common stock dividends,
$1.95 per share (64,006) (64,006)
Shares issued through
stock plans, 334,489
total shares, all shares
from treasury (89) (1,246) 13,799 12,464
Treasury stock purchased,
at cost, 148,311 shares (6,117) (6,117)
Change in net unrealized
gains (losses) on
securities 215,581 215,581
Balance, December 31, 1995 $ -0- $33,592 $451,680 $581,484 $ 102,179 $(24,027) $1,144,908
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integra Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31 1995 1994 1993
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 128,390 $ 169,033 $ 212,820
Adjustments to reconcile net income to net cash provided by
operating activities:
Cumulative effect of accounting changes, net -0- -0- (60,000)
Provision for loan losses 16,000 30,000 50,000
Deferred tax expense 1,115 7,543 20,775
Depreciation and amortization 41,734 34,484 32,994
Net securities gains (18,289) (19,749) (29,862)
(Increase) decrease in loans held for sale (79,358) 159,318 (64,715)
Writedown of foreclosed assets 1,899 3,086 5,311
(Increase) decrease in interest and other accounts
receivable (16,783) 1,531 (8,392)
Increase (decrease) in interest and other accounts payable 37,495 (5,175) (27,800)
Restructuring expenses, non-recurring charges
and merger expenses accrued 21,760 -0- -0-
Facilities restructuring charge 6,218 -0- 13,984
Write-off of excess servicing receivables 3,393 -0- -0-
Other, net 4,991 3,874 6,037
Net cash provided by operating activities 148,565 383,945 151,152
CASH FLOWS FROM INVESTING ACTIVITIES<PAGE>
Payments for purchases of:
Securities available for sale (1,386,026) (2,180,606) (4,343,965)
Securities held to maturity (1,191,690) (434,717) -0-
Proceeds from repayment and maturities of:
Securities available for sale 333,449 378,221 1,013,095
Securities held to maturity 727,317 164,365 -0-
Proceeds from sales of securities available for sale 1,904,222 2,567,438 2,664,398
Purchases of short-term investments (638,254) (385,983) (689,190)
Maturities of short-term investments 590,490 383,742 693,423
Net increase in loans, net of reserve (420,238) (559,008) (99,587)
Proceeds from collection and sale of foreclosed assets 29,605 39,833 43,505
Purchases of premises and equipment (31,194) (37,069) (61,717)
Payment for purchase of company, net of cash acquired (46,654) -0- -0-
Increase in other assets (15,459) (18,492) (11,257)
Net cash used by investing activities (144,432) (82,276) (791,295)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand and savings deposits 22,823 (286,912) 47,331
Net increase (decrease) in time deposits 114,586 288,852 (486,002)
Net payments on sales of deposits -0- -0- (85,814)
Increase (decrease) in short-term borrowings (371,074) (537,736) 1,082,188
Proceeds from long-term debt 903,608 493,466 250,720
Payments on long-term debt (691,851) (187,061) (182,112)
Increase in other liabilities 5,519 6,235 8,211
Common and preferred stock dividends paid (64,006) (56,865) (51,743)
Redemption of preferred stock -0- -0- (20,004)
Issuance of common stock 12,464 7,232 6,926
Treasury stock purchased (6,117) (33,532) (6,458)
Net cash provided (used) by financing activities (74,048) (306,321) 563,243
Decrease in cash and cash equivalents (69,915) (4,652) (76,900)
Cash and cash equivalents, beginning of year 428,771 433,423 510,323
Cash and cash equivalents, end of year $ 358,856 $ 428,771 $ 433,423
</TABLE>
<PAGE>
Integra Financial Corporation and Subsidiaries
Consolidated Statement of Cash Flows (continued)
Noncash investing activity consisted of $2.05 billion of securities
transferred to available for sale from the held to maturity portfolio on
December 1, 1995. In 1994, $1.28 billion of securities were transferred to
held to maturity from the available for sale portfolio. Noncash investing
activity also included transfers of loans in liquidation to foreclosed
assets of $8.3 million, $14.3 million and $17.4 million in 1995, 1994 and
1993, respectively, and in 1995, $6.1 million of foreclosed assets to
loans. Loans originated to facilitate the sale of other real estate owned
were not significant. Former branch office facilities transferred to other
real estate owned were minimal in both 1995 and 1994 and $5.1 million in
1993. Cash of $50.5 million was paid for net assets acquired in the
Lincoln Savings Bank (Lincoln) acquisition. The fair values of assets
acquired and liabilities assumed were $377.5 million and $327.0 million,
respectively.<PAGE>
Other supplementary information for the consolidated statement of
cash flows for 1995, 1994 and 1993 is set forth below:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
<S> <C> <C>
Cash received for interest $1,060 $963 $977
Cash paid for:
Interest $514 $431 $447
Taxes 49 59 53
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
Integra Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements include the
accounts of Integra Financial Corporation (Integra or the Corporation) and
its subsidiaries. The banking subsidiaries are Integra Bank and Integra
Trust Company, National Association (Integra Trust Company). Effective May
25, 1995, Integra Bank/North, Integra Bank/Pittsburgh and Integra
Bank/South were merged under a single state charter to form Integra Bank.
The significant non-banking subsidiaries include Integra Investment
Company, Integra Mortgage Company, Altegra Credit Company, Advent Insurance
Company, Integra Brokerage Services Company, Integra Business Credit
Company and Integra Life Insurance Company. All significant intercompany
transactions have been eliminated in consolidation. Certain amounts have
been reclassified for comparative purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expense during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash and cash equivalents include cash on hand,
amounts due from banks and federal funds sold for a one day period.
Securities. On December 31, 1993, the Corporation adopted Financial
Accounting Standards Board (FASB) Statement 115 Accounting for Certain
Investments in Debt and Equity Securities and, accordingly, recorded its
securities available for sale at estimated fair value. Statement 115
addresses the definition of, accounting for and disclosure of debt and
equity securities. In accordance with the statement, securities are
classified when purchased as either securities held to maturity, securities
available for sale or trading securities.
In November 1995, the FASB issued a Special Report A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities. Concurrent with the initial adoption of this
implementation guidance but no later than December 31, 1995, the FASB
permitted a one-time opportunity to reassess the appropriateness of the<PAGE>
classifications of all securities. Accordingly, Integra's reassessment
resulted in the reclassification, effective December 1, 1995, of all
securities held to maturity with an amortized cost of $2.05 billion as
securities available for sale.
The Corporation classifies securities as held to maturity when it has
both the ability and positive intent to hold the securities to maturity.
Securities held to maturity are stated at cost adjusted for amortization of
premium and accretion of discount computed under the interest method.
The Corporation classifies securities as trading when its intent is
to sell them in the near term to maximize profit through short-term market
appreciation. Trading securities are carried at estimated fair value with
unrealized gains and losses included in non-interest income. Profits or
losses on trading securities are recorded in non-interest income. The
Corporation had no securities classified as trading at December 31, 1995 or
1994.
Securities not classified as held to maturity or trading are
designated as available for sale. Such securities may be sold in response
to changes in market interest rates, changes in prepayment risk, asset-
liability management decisions, income tax considerations or other
circumstances identified by management. Securities available for sale are
recorded at estimated fair value, with aggregate unrealized gains and
losses reported net of tax as a separate component of shareholders' equity.
The Corporation has a policy which prohibits the transfer of securities
between the trading portfolio and the securities available for sale or the
securities held to maturity portfolios, and the duties and responsibilities
associated with trading activity are segregated to ensure that the original
intent of each transaction is maintained.
On a periodic basis, management evaluates each security designated as
held to maturity or available for sale where amortized cost exceeds
estimated fair value. If the decline in estimated fair value is judged to
be other than temporary, the cost basis of the individual security is
written down to estimated net realizable value with the amount of the
writedown included in net income. Premiums are amortized and discounts are
accreted over contractual lives except for mortgage-backed securities,
collateralized mortgage obligations and asset-backed securities for which
expected lives, adjusted quarterly for anticipated prepayments, are used.
Realized gains and losses are computed principally under the specific
identification method.
Loans. Interest income is recognized in a manner that results in a level
yield on principal amounts outstanding. At the time a loan is placed on
nonaccrual or charged off, the accrual of interest is discontinued and
charged against the reserve for loan losses when, in management's judgment,
it is determined that the collectibility of interest, but not necessarily
principal, is doubtful. Prior to 1995, such accrued interest was reversed
against interest income. Interest receipts on nonaccrual loans are fully
applied to principal. A nonaccrual loan is not returned to accruing status
until all amounts due, both principal and interest, are current and a
sustained payment history has been demonstrated. Loan origination fees,
net of certain direct origination costs, are deferred and recognized over
the contractual life of the related loan as a yield adjustment.
Reserve for Loan Losses. The reserve for loan losses is based on
management's evaluation of potential losses in the loan portfolio, which
includes an assessment of economic conditions, changes in the nature of the
loan portfolio, loan loss experience and other relevant factors. Additions<PAGE>
are made to the reserve through periodic provisions charged to net income
and recovery of principal and interest on loans previously charged-off.
Losses of principal are charged directly to the reserve when a loss
actually occurs or when a determination is made that a loss is probable.
Effective January 1, 1995, Integra adopted FASB Statement 114
Accounting by Creditors for Impairment of a Loan and Statement 118
Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures. Statement 114 addresses the accounting by creditors for
impairment of loans by specifying how reserves for credit losses related to
certain loans should be measured. Statement 118 amends Statement 114 to
permit a creditor to use existing methods for recognizing interest income
on impaired loans and eliminates certain income recognition provisions of
Statement 114. Statement 114 amends FASB Statement 5 Accounting for
Contingencies to clarify that a creditor should evaluate the collectibility
of both contractual interest and principal when assessing the need for an
overall reserve for loan losses. The effect on the Corporation of the
adoption of Statement 114 as of January 1, 1995 was a reclassification of
$6.1 million to loans from foreclosed assets relating to the category of
in-substance foreclosures. The Statement requires that impaired loans for
which foreclosure is probable continue to be accounted for as loans. Prior
years amounts have not been reclassified, which does not significantly
affect comparability. To the extent that the Corporation had previously
measured loan impairment in accordance with the methods prescribed by
Statement 114, no additional loss provisions or changes to the overall
reserve for loan losses were required by adopting this Statement. The
adoption did affect, however, the Corporation's mix between specific and
general reserves for loan losses. No changes were made to previously
reported net income.
Under Statement 114, a loan is considered to be impaired when, based
upon current information and events, it is probable that the Corporation
will be unable to collect all amounts due for principal and interest
according to the contractual terms of the loan agreement. Impairment is
measured based on the present value of expected future cash flows
discounted at a loan's effective interest rate, or as a practical
expedient, the observable market price or, if the loan is collateral
dependent, the fair value of the underlying collateral. When the measure
of an impaired loan is less than the recorded investment in the loan, the
impairment is recorded in a specific valuation reserve through a charge to
provision for loan losses. This specific valuation reserve is periodically
adjusted for significant changes in the amount or timing of expected future
cash flows, observable market price or fair value of the collateral. The
reserve for impaired loan losses, is part of the total reserve for loan
losses. Upon disposition of an impaired loan, any related reserve is
reversed through a charge-off to the reserve for impaired loan losses.
Cash payments received on impaired loans are recorded as a direct reduction
of the recorded investment in the loan. When the recorded investment has
been fully collected, receipts are recorded as recoveries to the loan loss
reserve until the previously charged-off interest is fully recovered.
Subsequent amounts collected are recognized as interest income.
Mortgage Banking. The Corporation classifies loans which are intended to
be sold within a short period of time as held for sale. Such loans held
for sale are carried at the lower of aggregate cost or estimated market
value. The Corporation generally retains the right to service the loans
which it sells. Fees related to the servicing of loans for others are
recorded as non-interest income when received. Realized gains and losses
on loan sales which are recognized at the time of sale and recorded in non-
interest income, are determined by the difference between the net sale<PAGE>
proceeds and the carrying value of loans sold adjusted by excess servicing
receivables, capitalized mortgage servicing rights and gains and losses on
forward commitments and option contracts, if any.
Excess servicing receivables represent the present value of the cash
flows from future servicing fee income in excess of a normal servicing fee.
Resultant excess servicing receivables are deferred and reduced by monthly
adjustment to service fee income over the estimated life of the related
loans serviced for others using the interest method. Excess servicing
receivables, which are included in other assets, totalled $.8 million at
December 31, 1995 and $5.9 million at December 31, 1994. The
recoverability of excess servicing receivables is evaluated at least
quarterly based on discounted cash flows adjusted for changes in prepayment
assumptions, with adjustments to carrying values recorded as amortization.
Integra adopted FASB Statement 122 Accounting for Mortgage Servicing
Rights during the second quarter of 1995 effective as of January 1, 1995.
Statement 122 amends certain provisions of Statement 65 Accounting for
Certain Mortgage Banking Activities to require that rights to service
mortgage loans for others be recognized as separate assets, whether
acquired through purchase or origination of mortgage loans. Prior to
adoption, the cost of mortgage servicing rights acquired through loan
origination activities was not capitalized. Statement 122 requires that
capitalized mortgage servicing rights be evaluated for impairment based on
their fair value. Impairment is recognized through a valuation allowance
for each loan portfolio stratum for the amount that exceeds fair value.
Strata are defined based on predominant risk characteristics of the
underlying loans such as loan type and, within type, by loan rate
intervals. Capitalized mortgage servicing rights are deferred and
amortized in proportion to and over the period of estimated net service fee
income.
The effect on the Corporation from the adoption of Statement 122 for
1995 was an increase in pre-tax income of $3.9 million for the
capitalization of the cost of mortgage servicing rights acquired through
loan origination activities after December 31, 1994, and a reduction in
pre-tax income of $.8 million for the establishment of impairment reserves.
No changes were made to previously reported net income.
Premises and Equipment. Premises and equipment, including leasehold
improvements, are stated at cost less accumulated depreciation and
amortization. Depreciation charges are computed principally on the
straight-line method over the estimated useful lives of the properties.
Leasehold improvements are amortized over the lease term or the estimated
useful life, whichever is shorter. Integra periodically evaluates the
carrying value of premises and equipment for possible impairment and
writedowns are recorded when deemed appropriate. Maintenance and repairs
are charged to expense as incurred. Expenditures for renovations and major
improvements are capitalized and depreciated over their estimated useful
lives.
Foreclosed Assets. Foreclosed assets consist of property acquired in
settlement of real estate loan indebtedness and former branch office
facilities. Prior to adoption of Statement 114 on January 1, 1995, loans
identified as in-substance foreclosures were also included in foreclosed
assets. Such assets are carried at the lower of cost or estimated market
value less costs to sell. Net costs to maintain the assets, writedowns to
estimated market value during the holding period, and subsequent gains and
losses attributable to disposal are included in non-interest expense. <PAGE>
Goodwill and Core Deposit Acquisition Premiums. Goodwill and core deposit
acquisition premiums are intangible assets classified in other assets.
Goodwill ($37.3 million at December 31, 1995 and $9.0 million at December
31, 1994) is amortized using the straight-line method over periods not
exceeding twenty years. Goodwill amortization approximated $4.3 million in
1995 and $1.2 million in 1994 and 1993. Core deposit acquisition premiums
($12.7 million at December 31, 1995 and $14.8 million at December 31, 1994)
were developed by specific core deposit life studies and are amortized
generally using accelerated methods over periods ranging primarily from
seven to fifteen years. The amortization of core deposit acquisition
premiums was $4.7 million in 1995, $4.8 million in 1994 and $6.1 million in
1993. Integra periodically assesses the carrying values of intangible
assets for recoverability. Goodwill is evaluated for impairment based on
projections of undiscounted future operating income of the businesses
acquired over the expected remaining benefit periods. In addition,
adjustments are recorded when the benefit of the related asset to the
Corporation decreases due to disposition of branches or deposits.
Derivative Financial Instruments. Integra is an end user of derivative
financial instruments, including interest rate swaps, interest rate caps,
option contracts, forward commitments and other financial instruments with
similar characteristics. Integra uses derivative financial instruments in
connection with its interest rate risk management activities to hedge/alter
groups of assets or liabilities and, accordingly, accounts for derivatives
on the accrual basis.
Interest rate swaps are entered into specifically to hedge/alter
groups of assets or liabilities as designated by management. These
agreements generally involve the exchange of fixed and floating rate
interest payment obligations over the lives of the agreements without an
exchange of the underlying notional amount. Payments receivable or payable
under the terms of the contracts are accrued over the period to which the
payment relates and presented net in the balance sheet. Interest income
and interest expense on swaps are recorded in the same category as the
related hedged/altered balance sheet item. Gains or losses on early
termination of swaps, which have been immaterial, were recorded in net
income at the time of termination. Unrealized gains or losses related to
changes in the estimated fair value of swaps are recognized in the
financial statements only on swaps associated with securities carried at
fair value in accordance with FASB Statement 115.
Integra purchases interest rate caps to reduce the potential impact
of increases in market interest rates on variable rate positions. Premiums
paid, which are included in other assets, are amortized over the terms of
the caps as a yield adjustment and payments to be received under the
agreements are recognized in the same interest category as the hedged
balance sheet item. Integra utilizes forward commitments and option
contracts for the purpose of hedging sales of loans in conjunction with its
mortgage banking activities. Gains and losses on these derivative
financial instruments are deferred and are recognized in income as part of
the net gain or loss on the sale of the underlying hedged loans or as a
component of the adjustment to the carrying value of loans held for sale.
Premiums received on written covered call option contracts in connection
with management of the Corporation's securities portfolio are recorded in
non-interest income if the option is not called or as part of the gain or
loss on the sale of the security if the option is called.
Trust. Assets held in a fiduciary or agency capacity for customers by the
Corporation's bank subsidiary engaged in trust operations are not included
as assets on the Corporation's balance sheet. Commissions and fees for a<PAGE>
portion of trust services are recorded on the cash basis. The annual
results of operations would not be significantly different if such income
was accrued. Certain assets of trust customers are held on deposit in the
subsidiary bank.
Income Taxes. The Corporation accounts for income taxes in accordance with
FASB Statement 109 Accounting for Income Taxes which was prospectively
adopted effective January 1, 1993. Under Statement 109, current tax
liabilities or assets are recognized, through charges or credits to the
current tax provision, for the estimated taxes payable or refundable for
the current year. Net deferred tax liabilities or assets are recognized,
through charges or credits to the deferred tax provision, for the estimated
future tax effects, based on enacted tax rates, attributable to temporary
differences and tax benefit carryforwards. Deferred tax liabilities are
recognized for temporary differences that will result in amounts taxable in
the future and deferred tax assets are recognized for temporary differences
and tax benefit carryforwards that will result in amounts deductible or
creditable in the future. Investment tax credits were recorded using the
deferral method and are amortized over the useful lives of the related
assets.
Treasury Stock. Treasury stock is recorded at cost when purchased and at
average cost if subsequently reissued.
Net Income Per Common Share. Net income per common share is calculated by
dividing net income less the preferred stock dividends (applicable to 1993)
by the weighted average number of common shares outstanding during each
period including the number of shares exercisable for stock options using
the treasury stock method.
2. MERGERS AND ACQUISITIONS
Proposed Merger. On August 27, 1995, National City Corporation (National
City) and Integra entered into a definitive agreement providing for the
merger of Integra into National City. In the merger, Integra shareholders
will receive two shares of National City common stock for each share of
Integra common stock they own in a tax-free exchange, which will be
accounted for as a pooling-of-interests. Subject to regulatory and
shareholder approvals, the transaction is expected to close in the second
quarter of 1996. National City is a registered bank holding company with
headquarters in Cleveland, Ohio. At December 31, 1995, National City had
total consolidated assets of $36.20 billion and total consolidated deposits
of $25.20 billion. National City conducts a general retail and commercial
banking business through its bank subsidiaries and operates other financial
services subsidiaries principally in Ohio, Kentucky and Indiana.
Acquisitions. On January 5, 1995, Integra acquired Lincoln Savings Bank
(Lincoln), a Pennsylvania chartered publicly-owned savings bank. At
December 31, 1994, Lincoln had total deposits of $159.6 million and
operated seven branch offices located in Integra's market area. Integra
paid $58.00 cash for each outstanding share (other than shares held by the
Corporation) of Lincoln common stock for a total purchase price of $50.5
million. The transaction was accounted for as a purchase. Goodwill of
$32.9 million and core deposit acquisition premiums of $2.5 million were
recorded and are amortized on a straight-line method over fifteen years and
an accelerated method over ten years, respectively. Upon consummation of
the transaction, Lincoln was merged into Integra's retail banking
subsidiary and five branch offices were closed and consolidated with nearby<PAGE>
branch locations. The consolidated statements reflect the operations of
Lincoln from the date of acquisition.
On January 15, 1993, Equimark, a bank holding company with total
assets of $2.57 billion at December 31, 1992, was merged into Integra.
Equimark's principal subsidiary was Equibank, a state-chartered bank that
conducted general retail and commercial banking business through 53 branch
offices in western Pennsylvania. In the merger, each share of Equimark
common stock outstanding was converted into .20 shares of Integra common
stock. A total of 7,730,779 Integra common shares were issued in the
merger. Each share of preferred stock of Equimark was converted into one
share of preferred stock of Integra having the same rights, powers and
preferences. A total of 1,159,311 Integra preferred shares were issued in
the merger. The preferred shares were subsequently redeemed. The merger
was accounted for using the pooling-of-interests method in which historical
financial statements of Integra were restated retroactively to reflect the
consolidated operations of Integra and Equimark. Upon consummation of the
transaction, Equibank became a wholly-owned subsidiary of the Corporation
and operated as a separate bank until its merger with Integra
Bank/Pittsburgh on April 23, 1993. In conjunction with the merger,
eighteen branch offices were closed and consolidated with nearby branch
locations and four branch offices were sold.
3. SECURITIES HELD TO MATURITY
The Corporation had no securities held to maturity at December 31,
1995. In connection with a Special Report issued by the FASB in November
1995, Integra reclassified, effective December 1, 1995, all securities held
to maturity with an amortized cost of $2.05 billion as securities available
for sale. The unrealized gain on these securities was $21.4 million on the
date of transfer, which was recorded net of tax in shareholders' equity in
accordance with FASB Statement 115. There were no sales of securities
classified as held to maturity during 1995 and 1994. The fair value of
securities held to maturity at December 31, 1994 was based on quoted market
prices or bid quotations received from securities dealers.
The amortized cost, gross unrealized gains and losses and fair value
of securities held to maturity at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 125,233 -0- $ (3,478) $ 121,755
U.S. Government agency securities 424,648 -0- (25,454) 399,194
Mortgage-backed securities 242,138 -0- (9,745) 232,393
Collateralized mortgage obligations 383,514 -0- (21,120) 362,394
Corporate debt securities 17,188 -0- (292) 16,896
Asset-backed securities 258,083 $ 7 (8,176) 249,914
State and political subdivision securities 95,491 228 (4,124) 91,595
$1,546,295 $235 $(72,389) $1,474,141
</TABLE>
4. SECURITIES AVAILABLE FOR SALE
Securities available for sale at fair value, which is their<PAGE>
carrying value, gross unrealized gains and losses and amortized
cost at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
Gross Gross Gross Gross
(Dollars in Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
thousands) Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities $ 465,295 $ 9,426 $(1,739) $ 472,982 $ 618,792 $ 333 $ (42,378) $ 576,747
U.S. Government
agency 605,656 6,632 (1,866) 610,422 167,187 209 (3,007) 164,389
securities
Mortgage-backed
securities 2,072,054 14,239 (13,097) 2,073,196 2,022,831 75 (173,988) 1,848,918
Collateralized
mortgage
obligations 731,294 11,195 (1,743) 740,746 289,786 -0- (11,586) 278,200
Corporate debt
securities 235,895 3,199 (985) 238,109 240,822 189 (15,918) 225,093
Marketable
equity 372,883 124,570 (7,433) 490,020 270,025 94,793 (17,357) 347,461
securities
Asset-backed
securities 544,934 11,529 (313) 556,150 145,706 641 -0- 146,347
Federal Home
Loan Bank and
Federal
Reserve Bank 76,390 -0- -0- 76,390 106,571 -0- -0- 106,571
stock
State and
political
subdivision 133,735 4,247 (663) 137,319 1,335 5 (69) 1,271
securities
Residual -0- -0- -0- -0- 1,013 -0- (506) 507
securities
$5,238,136 $185,037 $(27,839) $5,395,334 $3,864,068 $96,245 $(264,809) $3,695,504
</TABLE>
The fair value of securities available for sale was based on quoted
market prices or bid quotations received from securities dealers. At
December 31, 1995, gross unrealized losses included $.8 million related to
the fair value of interest rate swaps with notional amounts totalling
$179.2 million that hedged/altered certain mortgage-related securities. At
December 31, 1994, gross unrealized losses included $47.7 million related
to the fair value of interest rate swaps with notional amounts of $481.1
million. Such swaps had the effect of decreasing the 1995 yield earned on
securities by six basis points and increasing the 1994 yield by three basis
points. See Note 16 Derivative Financial Instruments.
The fair value and yields, calculated using the average fair value,
of securities available for sale at December 31, 1995 by contractual
maturity are as follows:<PAGE>
<TABLE>
<CAPTION>
Under 1 1 to 5 5 to 10 After Fair
(Dollars in thousands) Year Years Years 10 Years Value
<S> <C> <C> <C> <C> <C>
U.S. Treasury and government agency
securities $503,509 $483,504 $96,391 $1,083,404
Yield 5.33% 5.71% 4.83% 5.46%
Corporate debt securities $2,000 160,141 75,968 -0- 238,109
Yield 6.74% 5.64% 6.19% - 5.83%
States and political subdivision
securities 668 19,923 60,108 56,620 137,319
Yield 5.90% 6.67% 6.88% 7.52% 7.11%
Fair value $2,668 $683,573 $619,580 $153,011 $1,458,832
Amortized cost $2,665 $676,402 $610,742 $150,772
Mortgage-backed securities 2,073,196
Yield 6.29%
Collateralized mortgage obligations 740,746
Yield 6.58%
Asset-backed securities 556,150
Yield 6.42%
Marketable equity securities 490,020
Yield 6.34%
Federal Home Loan Bank and Federal 76,390
Reserve Bank 5.89%
Yield $5,395,334
</TABLE>
Expected maturities will differ from contractual maturities because
issuers may have the right to call securities. Mortgage-backed securities,
collateralized mortgage obligations and asset-backed securities are subject
to monthly amortization and prepayment variability not determinable in
advance, which typically shortens the final contractual maturity.
Proceeds from sales of debt securities and gross realized gains and
losses for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
<S> <C> <C> <C>
Proceeds from sales $1,722 $2,274 $2,525
Gross realized gains 6 20 29
Gross realized losses 10 8 2
</TABLE>
PAGE
<PAGE>
Proceeds from sales of marketable equity securities and gross
realized gains and losses for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
<S> <C> <C> <C>
Proceeds from sales $182 $293 $139
Gross realized gains 23 10 5
Gross realized losses 1 2 2
</TABLE>
Securities with a fair value of $2.15 billion at December 31, 1995
were pledged as collateral for public deposits, short-term borrowings,
long-term debt and other purposes. A minimum amount of Federal Home Loan
Bank of Pittsburgh (FHLB) stock is required to be held based on the level
of assets, residential real estate loans and outstanding FHLB borrowings.
5. LOANS
Total loans at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Commercial $1,175,986 $1,452,438
Real estate:
Construction 183,251 153,431
Commercial 919,897 721,470
Residential 2,260,478 1,985,344
Consumer 3,563,882 3,295,188
Lease finance 90,484 86,295
8,193,978 7,694,166
Unearned income (97,823) (96,110)
Total, net of unearned income $8,096,155 $7,598,056
</TABLE>
Integra's commercial lending activity is principally to small- and
medium-sized businesses within the Corporation's market area. The
geographical coverage of Integra's lending activities extends across all of
western Pennsylvania and closely neighboring areas and includes borrowers
from various types of businesses and industries. As of December 31, 1995,
over 90% of the Corporation's commercial loans and 84% of commercial real
estate loans including construction loans were to businesses and/or on
properties located in Pennsylvania. The top three concentrations of
commercial loans by industry at the end of 1995 were: Finance, Insurance,
and Real Estate - 25%, Service Industries - 20%, and Manufacturing - 17%.
A majority of the Corporation's consumer and residential real estate loans
are to borrowers located in Pennsylvania. Repayment of Integra's loans is
largely dependent upon the economic conditions of Pennsylvania.
Significant loans to any single borrower are generally avoided in order to
minimize the Corporation's credit risk. The Corporation had no highly
leveraged transaction loans at December 31, 1995.
Interest rate swaps with notional amounts of $200.0 million at
December 31, 1994 hedged/altered certain variable rate consumer loans,<PAGE>
which had the effect of increasing the 1994 yield on consumer loans by
seven basis points with minimal impact on the total loan yield. In the
second quarter of 1995, these swaps were terminated resulting in an
immaterial loss which was expensed. See Note 16 Derivative Financial
Instruments.
<PAGE>
A summary of loan activity with related parties (corporate and bank
executives, directors and their affiliates) for 1995 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Loans at New Loan Loans at
December 31, 1994 Loans Payments Other (1) December 31, 1995
<C> <C> <C> <C> <C>
$153,783 $72,469 $(84,906) $(17,475) $123,871
(1) Represents the net change in loan balances resulting from changes in related parties
during the year.
</TABLE>
6. RESERVE FOR LOAN LOSSES
The activity in the reserve for loan losses for 1995, 1994 and 1993
is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in
thousands) 1995 1994 1993
Total
Reserve for Reserve
General Impaired for Loan General General
Reserve Loan Losses Losses Reserve Reserve
<S> <C> <C> <C> <C> <C>
Balance at
beginning
of year $237,433 $237,433 $241,901 $238,831
Transfer upon
adoption of
FASB
Statement
114 (3,057) $3,057 -0- -0- -0-
Provision for
loan losses 8,407 7,593 16,000 30,000 50,000
Loan charge-offs (49,884) (7,070) (56,954) (60,015) (68,942)
Loan recoveries 16,238 -0- 16,238 25,547 22,012
Net loan
charge-offs (33,646) (7,070) (40,716) (34,468) (46,930)
Reserve of
acquired
company 2,450 -0- 2,450 -0- -0-
Balance at end
of year $211,587 $3,580 $215,167 $237,433 $241,901
/TABLE
<PAGE>
<PAGE>
Effective January 1, 1995, Integra adopted FASB Statements
114 and 118. See Note 1 Summary of Significant Accounting Policies.
Generally, management considers all major nonaccrual loans and certain
renegotiated debt for impairment. The minimum period without payment that
typically can occur before a loan is considered for impairment is ninety
days. Statement 114 does not apply to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. The
Corporation collectively reviews for impairment residential real estate,
consumer, lease finance, and commercial real estate and commercial loans
under $.5 million. Integra's recorded investment in loans for which
impairment has been recognized in accordance with Statement 114 at December
31, 1995 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Impaired Loans
<S> <C>
Nonaccrual loans $16,063
Renegotiated debt -0-
Total impaired loans 16,063
Reserve for impaired loan losses (3,580)
Net impaired loans $12,483
</TABLE>
Undisbursed funds on impaired loans primarily under secured
letters of credit totalled $2.7 million at December 31, 1995. The reserve
for impaired loan losses of $3.6 million related to impaired loans and
undisbursed funds totalling $7.3 million, and the remaining $11.5 million
of impaired loans had no reserve. The average recorded investment in
impaired loans was $17.9 million for 1995. Impaired loans totalling $14.6
million were measured using the fair value of the underlying collateral and
a loan totalling $1.5 million was measured for impairment using the present
value of expected future cash flows.
7. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1995 and 1994 is summarized as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <S> <S>
Buildings $142,643 $141,495
Furniture and equipment 194,966 179,049
Leasehold improvements 35,153 31,982
372,762 352,526
Accumulated depreciation and amortization (222,262) (201,422)
Land 18,527 18,405
$169,027 $169,509
</TABLE>
Equipment with a net book value of $18.4 million and $9.5
million at December 31, 1995 and 1994, respectively, was leased to others
in conjunction with activities of a commercial leasing subsidiary.<PAGE>
Depreciation and amortization expense on premises and equipment was $27.6
million in 1995, $25.1 million in 1994 and $22.5 million in 1993. During
1995, a facilities restructuring charge totalling $6.2 million was recorded
for the cancellation of several lease commitments for excess space and for
the writedown of the carrying value of several buildings not intended to be
utilized resulting from bank realignment. Integra recorded a facilities
restructuring charge of $14.0 million in 1993 to reflect a writedown of the
carrying value of its Pittsburgh headquarters complex. At December 31,
1995, the Corporation had various operating lease commitments which
aggregate $87.4 million through 2024. Minimum annual rental payments under
operating lease commitments for each of the years 1996 through 2000 were
approximately $9.8 million, $8.7 million, $7.6 million, $7.1 million and
$6.4 million, respectively, as of December 31, 1995.
8. CAPITALIZED MORTGAGE SERVICING RIGHTS
The activity in the Corporation's capitalized mortgage servicing
rights, which are included in other assets, during 1995 and 1994 is
summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Balance at beginning of year $24,062 $11,702
Additions 15,039 17,211
Amortization (5,062) (3,462)
Sales (4,156) (1,389)
29,883 24,062
Impairment reserves (800) -0-
Balance at end of year $29,083 $24,062
</TABLE>
The estimated fair value of Integra's capitalized mortgage servicing
rights at December 31, 1995 was $37.0 million, based on the present value
of expected future cash flows using a discount rate commensurate with the
risks involved.
Impairment reserves totalling $.3 million were established upon
adoption of Statement 122 in the second quarter and additional reserves of
$.5 million were recorded in the third quarter of 1995 with no other
activity occurring in the aggregate reserves. Loans serviced for others
were $3.78 billion and $3.70 billion at December 31, 1995 and 1994,
respectively.
9. SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1995 and 1994 are summarized as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
S> <C> <C
<PAGE>
Securities sold under agreements to repurchase $ 801,446 $1,164,076
Federal Home Loan Bank advances 246,800 212,000
Federal funds purchased 174,900 33,100
Demand notes of the U.S. Treasury 37,059 70,579
Commercial paper 34,319 36,434
Short sale borrowings 9,761 66,567
$1,304,285 $1,582,756
</TABLE>
<PAGE>
Information regarding average rates and balances of certain short-term
borrowings, which are due in one year or less, at and for the years ended
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
Weighted Weighted
(Dollars in thousands) Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Securities sold under
agreements to repurchase
Balance at period end $ 801,446 5.41% $1,164,076 5.49%
Average during year 1,058,724 6.00 1,134,341 4.02
Maximum month-end 1,315,259 1,695,085
balance
Federal Home Loan Bank
advances
Balance at period end $246,800 5.80% $212,000 4.31%
Average during year 257,243 5.88 378,281 3.77
Maximum month-end 346,800 502,000
balance
Federal funds purchased
Balance at period end $174,900 5.74% $33,100 6.00%
Average during year 187,524 6.09 39,863 4.50
Maximum month-end 310,440 64,003
balance
</TABLE>
At December 31, 1995, securities sold under agreements to repurchase
were comprised of U.S. Treasury and government agency securities and the
majority mature within one month. FHLB advances mature within eight months
from the end of 1995 and were fully collateralized as specified by the
FHLB. Qualifying collateral includes U.S. Treasury, government agency and
mortgage-backed securities and residential real estate loans based upon the
amount of outstanding advances. At December 31, 1995 and 1994, short sale
borrowings represented liabilities for sales of securities sold short.
Interest rate caps with notional amounts of $300.0 million at December 31,
1995 and $1.00 billion at December 31, 1994 were purchased to hedge/alter
variable rate short-term borrowings and had the effect of increasing the
1995 and 1994 cost of short-term borrowings by 29 basis points and six
basis points, respectively. See Note 16 Derivative Financial Instruments.<PAGE>
The Corporation had available as of the end of 1995 a line of credit
with an unaffiliated commercial bank of $50.0 million which expires on July
31, 1997. The line was established to support the commercial paper issued
by the Corporation. A commitment fee is paid on the average daily
unborrowed amount at a rate per annum equal to .1875%. Under the terms of
the credit agreement, the Corporation is required, among other
restrictions, to maintain consolidated tangible net worth of at least
$750.0 million and to not exceed certain limitations on nonperforming
assets. The line of credit may be cancelled in the event the Corporation
defaults on any covenant contained in the agreement, unless waived by the
issuer. At December 31, 1995, there was no outstanding balance on the line
of credit nor were any draws on the line made during 1995 or 1994.
<PAGE>
10. LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
Weighted Weighted
Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
FHLB advances
due in: 1995 $ -0- - $ 674,620 5.74%
1996 462,490 5.64% 76,410 4.37
1997 1,750 6.92 1,750 6.92
1998 26,750 6.11 1,750 7.16
1999 2,358 6.83 2,358 6.83
2000 1,750 7.53 1,750 7.53
After 2000 57,109 8.26 56,809 8.26
552,207 5.94 815,447 5.80
Securities sold
under agreements
to repurchase
due in: 1996 27,507 5.91 34,687 5.29
1997 353,725 6.29 415 6.68
1998 31,078 5.76 317 6.65
1999 761 6.51 761 6.51
413,071 6.22 36,180 5.35
6.5% Subordinated notes due
in 2000 99,777 99,725
8.5% Subordinated
debentures due in 2002 99,849 99,826
6.55% Senior bank notes due
in 2000 100,000 -0-
Other 3,216 5,471
$1,268,120 $1,056,649
</TABLE>
Long-term debt maturities are summarized as follows (dollars in
thousands):
1996 1997 1998 1999 2000 Thereafter Total
$490,531 $356,017 $58,378 $3,678 $201,649 $157,867 $1,268,120
Advances from the FHLB are collateralized by qualifying securities and
loans. These advances are subject to restrictions or penalties related to
prepayment through 2014. Interest rate swaps with notional amounts of
$100.0 million at December 31, 1995 and $150.0 million at December 31, 1994
hedged/altered FHLB advances and had the effect of increasing the 1995 cost
of long-term debt by seven basis points and decreasing the 1994 cost by one
basis point. See Note 16 Derivative Financial Instruments. Securities
sold under agreements to repurchase were comprised of U.S. Treasury and
government agency securities. Subordinated notes, subordinated debentures
and senior bank notes are not collateralized, may not be redeemed by the
Corporation prior to their stated maturity and are not subject to sinking
fund requirements. The senior bank notes were issued under a $2.00 billion
shelf registration.
<PAGE>
11. PENSION AND PROFIT-SHARING PLANS
Integra maintains a defined benefit pension plan for its employees.
The Corporation's pension plan provides benefits to most of its salaried
employees and certain hourly employees based on years of service and
average earnings for the five highest years during the ten years
immediately preceding termination of employment. The Corporation's funding
policy is to contribute annually the amount recommended by its consulting
actuary, subject to statutory provisions.
The Corporation's pension expense for 1995, 1994 and 1993 is composed
of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost - benefits earned
during period $ 4,710 $ 5,445 $ 4,547
Interest cost on projected
benefit obligation 9,458 8,195 7,705
Actual return on plan assets (17,633) (143) (10,328)
Net amortization and deferral 6,429 (12,129) (1,899)
Net pension expense $ 2,964 $ 1,368 $ 25
</TABLE>
The funded status of the Corporation's pension plan is reconciled to
accrued pension expense on the balance sheet as of December 31, 1995 and
1994 as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
S> <C> <C
<PAGE>
Actuarial present value of benefit
obligation:
Accumulated benefit obligation:
Vested (based upon retirement date) $122,982 $ 94,359
Non-vested 1,553 1,348
Total accumulated benefit obligation 124,535 95,707
Effect of projected salary increases 25,118 18,262
Total projected benefit obligation 149,653 113,969
Plan assets at fair value 136,644 120,962
Excess (deficit) of plan assets over
projected benefit obligation (13,009) 6,993
Unrecognized net (gain) loss 5,893 (11,090)
Unrecognized prior service cost 8,258 9,125
Unamortized transition credit (5,851) (6,687)
Accrued pension expense included in other
liabilities $ 4,709 $ 1,659
</TABLE>
Included in accrued pension expense as of December 31, 1995 was a
liability relating to an early retirement program established in the first
quarter of 1995 for which an expense of $3.6 million was recognized.
<PAGE>
Pension expense is determined at the beginning of the year using the
funded status assumptions for the previous year end. The funded status is
determined using assumptions as of the end of the year, which for 1995,
1994 and 1993 are as follows:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Discount rate 7.50% 8.50% 7.50%
Expected long-term rate of
return on assets 10.00 9.50 9.50
Rate of increase in compensation
levels 4.75 4.75 4.75
</TABLE>
Changes in assumptions for 1995 were a decrease in the discount rate
and an increase in the expected long-term rate of return on assets which
had the effect of increasing the projected benefit obligation $19.6
million. An increase in the discount rate in 1994 lowered the projected
benefit obligation $17.1 million. Prior service cost and the transition
credit are being amortized on a straight-line basis over fifteen years and
seventeen years, respectively. At December 31, 1995 and 1994, plan assets
consisted primarily of money market investments, U.S. Government
obligations, corporate debt and marketable equity securities. Integra also
provides a supplemental executive retirement plan that covers 17 active
employees and 7 former employees in payment status as of December 31, 1995.
The plan is an unfunded non-qualified plan whose only contributions are the
benefits in payment status. Expense was $1.6 million for 1995, $1.2
million for 1994 and $.7 million for 1993 and the accrued liability on the
balance sheet was $5.1 million and $3.7 million at December 31, 1995 and
1994, respectively.
Integra's profit-sharing plan provides benefits to most of its
salaried employees. The Corporation makes discretionary contributions to<PAGE>
the plan as determined by the Board of Directors. Employees' contributions
to the plan are matched by the Corporation up to a maximum of 3% of such
employees' pre-tax salaries. Profit-sharing expense for the plan was $13.5
million for 1995 and $9.9 million for 1994 and 1993.
Integra adopted FASB Statement 106 Employers' Accounting for
Postretirement Benefits Other Than Pensions as of January 1, 1993.
Statement 106 requires that the expected cost of providing postretirement
benefits be recognized in the financial statements during the employees'
active service period. The adoption of Statement 106 resulted in a one-
time after-tax charge to net income of $5.2 million relative to accruing
for the entire accumulated postretirement benefit obligation at the date of
adoption (transition obligation) and was reported as part of the cumulative
effect of accounting changes for 1993. Integra's gross transition
obligation totalled $7.9 million less income tax benefit of $2.7 million.
Integra pays a portion of the cost for life insurance and medical benefits
for eligible retirees based on age and service at the time of retirement.
The Corporation has the right to amend or terminate these benefits.
<PAGE>Integra has maintained benefits for those eligible at the date of
adoption but has restricted participation thereafter. The Corporation's
transition obligation is not funded. The net periodic postretirement
benefit expense was $.5 million for 1995, 1994 and 1993 consisting
primarily of the interest cost of the accumulated benefit obligation. The
funded status of the Corporation's plan is reconciled to accrued expense on
the balance sheet as of December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 6,243 $ 6,260
Active employees 208 250
Total 6,451 6,510
Plan assets at fair value -0- -0-
Excess of benefit obligation over plan assets (6,451) (6,510)
Unrecognized net (gain) loss (640) (627)
Accrued postretirement benefit obligation
expense included in other liabilities $(7,091) $(7,137)
</TABLE>
Integra's liability for postretirement benefits relates primarily to
life insurance benefits. Discount rates of 7.75% for 1995, 8.50% for 1994
and 7.50% for 1993 compounded annually were assumed for the present value
of the accumulated postretirement benefit obligation. Compensation levels
were assumed to increase 5.00%, 4.75% and 5.00% per year for 1995, 1994 and
1993, respectively, for the projection of future life insurance benefits.
For medical benefits, the cost was projected to increase at an average rate
of 9.38% in 1996, thereafter decreasing ratably until a stable 4.25%
medical inflation rate is reached in 2002.
12. INCOME TAXES
The Corporation adopted FASB Statement 109 as of January 1, 1993.
Such adoption increased 1993 earnings by $65.0 million and was reported as
part of the cumulative effect of accounting changes. This amount included
$3.0 million of pretax income relating to the effect of adjustments for
prior purchase business combinations as a result of adopting the statement.<PAGE>
Financial statements prior to 1993 were not retroactively restated to apply
the provisions of Statement 109.
Federal income tax expense for 1995, 1994 and 1993 is composed of the
following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994 1993
<S> <C> <C> <C>
Current $49,059 $65,058 $46,896
Deferred 1,115 7,543 20,775
</TABLE> $50,174 $72,601 $67,671
The deferred tax expense for 1995, 1994 and 1993 consisted primarily
of previously accrued expenses for book purposes and, in addition, for 1994
and 1993, utilization of Equimark's net operating loss carryforward.
<PAGE>
Reconciliations of the federal statutory and effective tax rates for
1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
Tax-exempt interest income (3.1) (2.0) (1.8)
Dividends received exclusion (3.0) (1.7) (1.4)
Future tax benefits due to change
in tax law - - (1.7)
Other, including tentative and
actual settlements (.8) (1.3) .6
Effective tax rate 28.1% 30.0% 30.7%
</TABLE>
The Revenue Reconciliation Act of 1993 was signed into law during
August 1993. This law retroactively increased the highest marginal
corporate tax rate to 35% effective January 1, 1993. As a result of this
legislation, a net tax benefit of $2.3 million was recognized in 1993
composed of an increased deferred tax benefit of $3.8 million partially
offset by additional current tax expense from the rate change of $1.5
million.
The tax effects of deductible and taxable differences that give rise
to significant portions of the deferred tax assets and deferred tax
liabilities, respectively, at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
S> <C> <C
<PAGE>
Deferred tax assets:
Provision for loan losses $74,899 $ 84,966
Net unrealized losses on
securities -0- 60,828
Other 39,438 33,597
Gross deferred tax assets 114,337 179,391
Less valuation allowance -0- -0-
Deferred tax assets after allowance 114,337 179,391
Deferred tax liabilities:
Net unrealized gains on securities 48,019 -0-
Lease financing 10,750 10,234
Depreciation 2,260 6,006
Other 9,080 9,434
Gross deferred tax liabilities 70,109 25,674
Net deferred tax assets $44,228 $153,717
</TABLE>
No valuation allowance was established at December 31, 1995 or 1994 in
view of the Corporation's ability to carry back to taxes paid in previous
years, certain tax strategies and anticipated future taxable income as
evidenced by the Corporation's strong earnings potential.
Federal income tax expense related to net securities gains
approximated $6.4 million, $6.5 million and $10.0 million for 1995, 1994
and 1993, respectively.
<PAGE>
13. NET INCOME PER COMMON SHARE
Net income per common share for 1995, 1994 and 1993 is computed as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands except per
share data) 1995 1994 1993
<S> <C> <C> <C>
Net income $128,390 $169,033 $212,820
Less preferred dividends (1) -0- -0- 533
Net income applicable to common
shareholders $128,390 $169,033 $212,287
Average number of common shares
outstanding 32,840,205 33,416,572 33,453,713
Common stock equivalents - dilutive
effect of assumed exercise of
stock options 282,626 318,028 361,784
Average common shares outstanding -
including common stock
equivalent shares 33,122,831 33,734,600 33,815,497
Net income per common share $3.88 $5.01 $6.28
(1) No shares of series preferred stock remained outstanding following redemption on April 1,
1993.
/TABLE
<PAGE>
14. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Integra Dividend Reinvestment and Stock Purchase Plan enables
holders of the Corporation's common stock to invest cash dividends and make
optional cash payments for additional shares of common stock. The purchase
price for the shares is equal to the average of the high and low market
price of the common stock on the last business day before the dividend
payment date and does not include a brokerage fee, commission or other
service charge. Funds received by the Corporation from optional cash
payments are used for general corporate purposes. Shares are purchased
from the Corporation's authorized but unissued shares or from treasury
shares. Shareholders purchased 74,062 shares in 1995, 84,343 shares in
1994 and 71,708 shares in 1993 through the plans. All shares purchased in
1995 and 1994 and 36,329 shares purchased in 1993 were issued from treasury
shares.
15. EMPLOYEE STOCK PLANS
Under the Integra Management Incentive Plan, which was adopted by the
Board of Directors and approved by Integra's shareholders in 1994, the
Board of Directors is authorized to make stock-based and cash incentive
awards to officers and key employees of Integra and its subsidiaries. Such
awards may include incentive and non-qualified stock options, restricted
stock, performance restricted stock, annual cash bonus awards and other
awards. Up to 1,500,000 shares of common stock may be issued pursuant to
the plan, provided that no more than 300,000 shares may be in the form of
restricted stock and performance restricted stock awards. This plan
replaced the Integra Employee Stock Option Plan. Options issued under the
Integra Management Incentive Plan are granted at a price equal to the
average of the high and low market price on the date of the grant and are
exercisable within ten years from the date of the grant. The option prices
were determined in the same manner under the Integra Employee Stock Option
Plan and Integra's predecessors' Plans. Effective January 1993, new
vesting requirements were adopted for all future grants which provide that
half the options are exercisable after the first anniversary of the grant
date and the remainder exercisable after the second anniversary. Prior to
that date, all options were fully exercisable as of the grant date. All
unvested options become fully vested upon a change of control.
Activity in the Corporation's employee stock option plans during 1995,
1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares per Share
<S> <C> <C>
Options outstanding at December 31, 1992 838,167 $ 8.15 - 95.00
Granted in 1993 151,500 41.38
Exercised in 1993 (137,704) 8.15 - 40.63
Expired or cancelled in 1993 (2,413) 20.76 - 95.00
Options outstanding at December 31, 1993 849,550 $10.00 - 95.00
Granted in 1994 190,000 45.13
Exercised in 1994 (52,690) 10.00 - 41.38
Expired or cancelled in 1994 (5,846) 40.63 - 95.00
Options outstanding at December 31, 1994 981,014 $10.00 - 95.00
Granted in 1995 207,500 37.63
Exercised in 1995 (270,108) 10.63 - 45.13
Expired or cancelled in 1995 (5,838) 11.89 - 95.00<PAGE>
Options outstanding at December 31, 1995 912,568 $10.00 - 95.00
</TABLE>
Integra maintains an Employee Stock Purchase Plan through which
employees may purchase the Corporation's common stock by payroll deductions
at the average of the high and low market price of the stock on the last
business day of each month. Under the Corporation's Employee Stock
Purchase Plan, 10,678 shares were issued in 1995, 11,263 shares in 1994 and
8,126 shares in 1993. Shares were purchased from the Corporation's
authorized but unissued shares or from treasury shares. All shares issued
for this plan in 1995 and 1994 and 4,172 shares in 1993 were issued from
treasury shares.
16. DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation is an end user of off-balance sheet derivative
financial instruments in connection with its interest rate risk management
activities and does not use them for trading purposes. A summary of the
contract or notional amounts of derivative financial instruments at
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Interest rate swaps $579,248 $1,141,125
Interest rate caps 300,000 1,000,000
Mortgage banking activities:
Forward commitments to sell
mortgage-backed securities 178,944 38,488
</TABLE>
<PAGE>
Integra enters into off-balance sheet derivative transactions in
accordance with its policy guidelines to manage the Corporation's
sensitivity to changes in interest rates. Interest rate swaps are entered
into specifically to hedge/alter groups of designated assets or liabilities
by changing their interest rate repricing characteristics. Interest rate
swaps generally involve the exchange of fixed and floating rate interest
payment obligations without the exchange of the underlying principal or
notional amounts, which are used to express the volume of these
transactions. Future cash requirements of interest rate swaps are limited
to the net amounts payable under these agreements. Interest rate caps are
options whereby the buyer receives an amount, if any, by which the floating
rate exceeds the reference interest rate level on a specified notional
amount. The premium paid to purchase an interest rate cap represents the
maximum risk of loss to the buyer. The Corporation purchased caps to
reduce the impact of then-anticipated increases in interest rates on short-
term borrowings. The following table summarizes the change in notional
amount for each category of interest rate swaps and caps during 1995, 1994
and 1993:
<TABLE>
<CAPTION>
Interest Rate Swaps
Index Interest
(Dollars in millions) Amortizing Other Total Rate Caps
S> <C> <C> <C> <C
<PAGE>
Balance, December 31, 1992 $173 $173
New agreements $500 100 600
Maturities -0- (98) (98)
Balance, December 31, 1993 500 175 675
New agreements 500 -0- 500 $1,000
Amortization (19) (15) (34) -0-
Balance, December 31, 1994 981 160 1,141 1,000
New agreements -0- -0- -0- 300
Amortization (302) -0- (302) -0-
Terminations (200) -0- (200) -0-
Maturities -0- (60) (60) (1,000)
Balance, December 31, 1995 $479 $100 $ 579 $ 300
</TABLE>
For index amortizing swaps, the notional amount is unchanged for a
specified period after which, based on the level of the index at each
quarterly reset date, the contract will mature, amortize, or continue at
its full notional amount. As of December 31, 1995, index amortizing swaps
totalling $179.2 million had extended beyond their initial maturity dates.
At December 31, 1995, index amortizing swaps of $179.2 million
hedged/altered the interest rate reset feature of variable rate mortgage-
backed securities purchased in 1993 and prepayment susceptibility of
mortgage-related securities. The variable rate mortgage-backed securities
initially lowered the overall portfolio yield and contributed to a
declining net interest margin until their first rate reset date. The index
amortizing swaps provided incremental income until the variable rate
mortgage-backed securities' coupons reset substantially higher. The
extension features of the swaps are offset in a rising interest rate
environment by the fully indexed coupons of the securities. The inherent
prepayment risk on mortgage-related securities is counteracted by the
incremental income provided by the swaps in a declining rate environment.
The swaps' diminished or negative cash flow in a rising rate environment is
offset by an enhanced portfolio yield as prepayments slow. Other interest
rate swaps totalling $300.0 million and $100.0 million hedged/altered
deposits and fixed rate FHLB advances, respectively, at December 31, 1995.
Index amortizing swaps comprised $300.0 million of those relating to money
market deposits. The extension feature in a rising interest rate
environment is offset by the lagging nature of money market rates. For
FHLB advances, the swaps effectively changed fixed rates to floating rates.
In the second quarter of 1995, $200.0 million of interest rate swaps that
hedged/altered consumer loans were terminated, resulting in an immaterial
loss which was expensed.
The following table summarizes maturities, weighted average interest
rates received and paid and estimated fair value of interest rate swaps and
caps as of December 31, 1995:
<TABLE>
<CAPTION>
Reset/Maturity
Estimated
Fair
(Dollars in millions) 1996 1997 Total Value
S> <C> <C> <C> <C
<PAGE>
Index amortizing swaps
Notional amount by hedged/altered category:
Securities available for sale $179 $179 $ (.8)
Deposits 300 300 (.9)
$479 $479 $(1.7)
Reference rate (1) 4.85% 4.85%
Weighted average final maturity in years 2.7 2.7
Fixed receive rate 5.58% 5.58%
Floating pay rate 5.92% 5.92%
Other swaps
Notional amount by hedged/altered category:
Long-term debt $100 $100 -0-
Fixed receive rate 5.12% 5.12%
Floating pay rate 6.00% 6.00%
Interest rate caps
Notional amount $200 $100 $300 -0-
Reference rate (2) 7.00% 7.00% 7.00%
Floating index rate 5.63% 5.63% 5.63%
(1) When LIBOR is at or below this level on initial maturity or quarterly reset dates, swap experiences 100%
amortization.
(2) Interest is received based on differential of floating index rate over fixed reference rate; no payment
is received if index rate is below reference rate.
</TABLE>
Floating rates, which are based on LIBOR for all agreements, represent
rates in effect on December 31, 1995. Subsequent changes in LIBOR rates
will affect all floating rates and actual amortization and maturities of
index amortizing swaps. Maturity information reflects contractual terms
based on rates on December 31, 1995. Index amortizing swaps are included
in the table at their initial maturity dates or, if beyond, their next
quarterly reset dates. The estimated fair value represents the amount the
Corporation would pay, or receive if a gain, to terminate or otherwise
settle the agreements with counterparties. The estimated fair value of
swaps was a net unrealized loss of $1.7 million at December 31, 1995
compared to a net unrealized loss of $79.8 million at December 31, 1994.
Unrealized losses on swaps that hedge/alter securities available for sale
of $.8 million and $47.7 million at December 31, 1995 and 1994,
respectively, were recorded as part of the net unrealized gain/loss on the
underlying securities in accordance with FASB Statement 115. At December
31,
1995, the estimated fair value of interest rate caps was minimal and
unamortized premiums paid for the interest rate caps were $1.4 million
resulting in an unrealized loss of $1.4 million.
<PAGE>
The effect of interest rate swaps and caps on net interest income and
the margin for 1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
<S> <C> <C> <C>
Increase (decrease) in:
Interest income $ (5) $ 4 $ 2
Interest expense 7 (1) (4)
Net interest income $(12) $ 5 $ 6 <PAGE>
Net interest margin (.08)% .04% .05%
</TABLE>
The credit risk associated with interest rate swaps represents the
inability of counterparties to perform according to the terms of the
agreements and is limited to the estimated aggregate replacement cost of
swaps in a gain position represented by a positive fair value. Beginning
in 1994, Integra typically requires, through bilateral collateral
agreements, swap counterparties to provide collateral to cover amounts due
when such receivables reach specific thresholds. The Corporation deals
only with highly rated counterparties and does not expect any failure by
the counterparties to meet their obligations.
The Corporation utilizes off-balance sheet financial instruments in
the form of forward commitments and options in conjunction with its
mortgage banking activities. Forward commitments and options are used to
hedge the interest rate risk from the time residential real estate loans
are committed to until they are sold in the secondary mortgage market. The
Corporation typically exchanges a portion of its current production of
residential real estate loans for mortgage-backed securities through
secondary market securitization programs. Such securities are then
delivered into forward commitments, which are contracts entered into by the
Corporation to sell a specified quantity of mortgage-backed securities at a
specified price or yield with delivery and settlement at a specified future
date. The risk associated with such contracts arises from the possible
inability of counterparties to meet the terms of their contracts. Should
factors such as fluctuations in interest rates affect Integra's inability
to acquire loans to fulfill these contracts, the Corporation would normally
purchase mortgage-backed securities in the open market to deliver against
these contracts. The Corporation had outstanding forward commitments to
sell mortgage-backed securities of $178.9 million on December 31, 1995 and
$38.5 million on December 31, 1994. In conjunction with its mortgage-
banking activities, Integra may from time to time purchase put options,
which are contracts that give the buyer the right, not the obligation, to
sell mortgage-backed securities at a fixed price during a specific period.
If exercised, Integra typically does not deliver securities but rather
sells put options to offset the contracts. At December 31, 1995 and 1994,
the Corporation had no option contracts outstanding.
Call options are contracts that allow the holder of the option to
purchase a financial instrument at a specified price within a specified
period of time from the seller or writer of the option. Integra writes
covered call options primarily on U.S. Treasury securities in connection
with its securities activities. Integra receives a premium at the outset
and bears the market risk of an unfavorable change in the price of the
financial instrument underlying the option. The Corporation writes such
options with the objective of enhancing the performance on fixed income
securities when market conditions, such as anticipated periods of low
volatility, warrant such activities. Premium fee income of $.4 million,
$1.2 million and $1.6 million was recognized during 1995, 1994 and 1993,
respectively, in non-interest income on expired options. Options exercised
by holders due to market volatility resulted in a net loss of $3.0 million
included in net securities gains in 1995, a net loss of $1.3 million in
1994 and a net gain of $1.1 million in 1993. At December 31, 1995 and
1994, there were no covered call options outstanding.
17. CREDIT COMMITMENTS<PAGE>
The Corporation is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of
its customers. The Corporation's involvement in and exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit, standby letters of credit and
loans sold with recourse is represented by the contract amount of those
instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
financial instruments. Credit commitments at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
<S> <C> <C>
Commitments to extend credit $2,015,465 $1,795,768
Standby letters of credit 149,995 150,092
Loans sold with recourse 29,307 29,745
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Such commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The
Corporation evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the
Corporation upon extension of credit, is based on management's credit
evaluation of the customer. Collateral varies but may include accounts
receivable, inventory, premises and equipment, residential real estate and
income producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Corporation to support the obligation of a customer to a third party.
Standby letters of credit are primarily issued to support public and
private borrowing arrangements. The credit risk involved in issuing
standby letters of credit is essentially the same as that involved in
extending loans to customers. The Corporation requires collateral
supporting such commitments as deemed necessary.
Loans sold with recourse represent loans sold in the secondary
mortgage market where the Corporation retains the credit risk which is
considered equivalent to the credit risk associated with on-balance sheet
loans. These loans are primarily collateralized by residential dwellings.
It is Integra's current policy not to engage in such recourse sales, except
in limited circumstances which include certain community development
lending activities.
<PAGE>
18. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are generally defined as cash, equity
instruments or securities, or contractual obligations to pay or receive
cash or another financial instrument. Fair value estimates are made at a
specific point in time, based on relevant market data and information about
the financial instrument. Where quoted market prices of specific
instruments were not available, discounted cash flow or other valuation
techniques were used to estimate fair value. Certain fair value estimates
were necessarily based on judgments regarding future loss experience,
current economic conditions, risk characteristics of the financial<PAGE>
instrument, interest rate levels and other factors. Such estimates are
subjective in nature and involve uncertainties. Changes in assumptions
could significantly affect the estimates. Because actual markets do not
exist for all financial instruments, fair values may vary significantly
from amounts that would be realized in immediate settlement of the
instrument.
Fair value estimates are provided for on- and off-balance sheet
financial instruments without attempting to estimate anticipated future
business and the value of assets, liabilities, customer relationships and
loan servicing rights which are not considered financial instruments. In
addition, the tax ramifications related to the realization of unrealized
gains and losses can have a significant effect on fair value estimates and
have not been considered in the estimates.
<PAGE>
The carrying amount and estimated fair value of financial instruments
at December 31, 1995 and 1994, denoted as an asset or (liability), are as
follows:
<TABLE>
<CAPTION>
1995 1994
Carrying Estimated Carrying Estimated
(Dollars in millions) Amount Fair Value Amount Fair Value
Financial Assets
<S> <C> <C> <C> <C>
Cash and short-term
investments $ 424 $ 424 $ 443 $ 443
Securities held to
maturity -0- -0- 1,546 1,474
Securities available
for sale 5,395 5,396 3,696 3,744
Loans held for sale 147 147 68 68
Loans, net of reserve
for loan losses 7,881 8,046 7,361 7,376
Financial Liabilities
Deposits with no
stated maturities (5,268) (5,268) (5,170) (5,170)
Time deposits (5,112) (5,204) (4,913) (4,868)
Short-term borrowings (1,304) (1,307) (1,583) (1,580)
Long-term debt (1,268) (1,303) (1,057) (1,035)
Contract or Contract or
Notional Estimated Notional Estimated
Amount Fair Value Amount Fair Value
Off-Balance Sheet
Financial Instruments
Commitments to extend
credit $2,015 $(1) $1,796 $(1)
Standby letters of
credit 150 -0- 150 -0-
Loans sold with
recourse 29 (2) 30 (1)
Interest rate swaps 579 (2) 1,141 (80)
Interest rate caps 300 -0- 1,000 11 <PAGE>
Forward commitments
to sell mortgage-
backed securities 179 (2) 38 -0-
</TABLE>
<PAGE>
The following assumptions were used by the Corporation in estimating
the fair value of financial instruments:
Cash and Short-Term Investments. The carrying value of cash and cash
equivalents and other short-term investments approximated fair value.
Securities. The estimated fair value of securities was based on quoted
market prices or bid quotations received from securities dealers.
Loans Held for Sale. The carrying value of loans held for sale
approximated fair value.
Loans. Fair values were estimated for portfolios of loans with similar
financial characteristics by discounting contractual cash flows adjusted
for prepayment assumptions. Credit risk was factored into the discount
rates used for commercial and commercial real estate loans. The discount
rate of residential real estate loans was based on secondary market rates.
The carrying value of variable rate consumer loans approximated fair value,
while the fair value of fixed rate loans was calculated with discount rates
based on market rates for similar products. Assumptions regarding credit
risk, cash flows and discount rates were judgmentally determined using
available market and internal portfolio information which management
believes to be reasonable.
Deposits. The fair value of deposits with no stated maturities, which
include non-interest bearing demand, interest bearing demand, savings and
money market, was equal to the carrying value. The estimated fair value of
time deposits was based on the discounted value of contractual cash flows.
The discount rates were estimated using market rates offered for deposits
of similar remaining terms. The fair value estimates do not include the
value of depositor relationships or the value of the low-cost funding
provided by deposits.
Short-Term Borrowings. The carrying value of short-term borrowings
generally approximated fair value except for borrowings with remaining
terms beyond three months for which the estimated fair value was based on
current rates available for borrowings with the same remaining terms.
Long-Term Debt. The estimated fair value of debt with fixed rates was
established based on quoted market prices for debt with similar credit
ratings or on current rates available for debt with the same remaining
terms. The carrying value of variable rate debt approximated fair value.
Commitments to Extend Credit. Fair value was estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the creditworthiness of the
counterparties. A majority of the commitments had floating rates at
December 31, 1995 and 1994. For fixed rate commitments, the difference
between interest rates at the end of a reporting period and the committed
rates was also considered for fair value estimates.
Standby Letters of Credit, Loans Sold with Recourse and Derivative
Financial Instruments. Fair value was estimated based on the cost to<PAGE>
terminate or otherwise settle the obligations with the counterparties. The
estimated fair value of certain interest rate swaps that hedged/altered
mortgage-related securities has been recognized in the financial
statements.
<PAGE>19. LITIGATION
Class Action Suits. In 1990, Equimark was named as a defendant, along with
five of its former officers and/or directors, in three purported federal
class action suits filed in the United States District Court for the
Western District of Pennsylvania under the captions: Fox v. Equimark
Corporation et al., Tuckfelt v. Equimark Corporation et al., and Hatcher v.
Equimark Corporation et al. These three actions have been consolidated as
a single action (hereafter, the Consolidated Federal Class Action),
pursuant to a Consolidated Amended Class Action Complaint (the Amended
Complaint) filed on or about December 6, 1990 on behalf of all persons who
purchased Equimark's securities between September 12, 1987 and September
12, 1990. A Second Consolidated Amended Class Action Complaint (the Second
Amended Complaint) was filed by plaintiffs on or about July 8, 1991, on
behalf of purchasers of Equimark's common stock during the period January
17, 1989 through October 25, 1990. The Second Amended Complaint alleges a
claim under the federal securities laws and claims under state common law
for alleged fraudulent concealment, fraudulent non-disclosure and negligent
misrepresentation. On July 18, 1994, the class was certified by the court.
Both Complaints allege that defendants violated various provisions of both
the federal securities laws and state common law by failing to disclose
material facts relating to the alleged deterioration of Equimark's loan
portfolio, the alleged likelihood of high increases in its nonperforming
assets, and the alleged failure to establish adequate loan loss reserves or
to charge off loans on a timely basis, and by misrepresenting or failing to
disclose Equimark's allegedly inadequate management, acquisition, credit
and lending policies and/or practices, and seek unspecified monetary
damages as well as declaratory and injunctive relief. The case had been in
discovery since September 1993. Trial was scheduled to begin in April
1996. To avoid additional costs associated with trial preparation and the
risks inherent in any litigation, Integra and plaintiffs have tentatively
agreed to a settlement, subject to court approval, whereby Integra will pay
the class and their attorneys $6.5 million. The Corporation has accrued
for such settlement costs, net of insurance reimbursement.
Equimark has also been named as a defendant, along with four of its
former officers and/or directors, in a state court action filed in the
Court of Common Pleas of Allegheny County, Pennsylvania, which action is a
companion action to the Consolidated Federal Class Action in all material
respects. This action, captioned Hatcher v. Equimark Corporation et al.,
has been stayed indefinitely pending resolution of the Consolidated Federal
Class Action. This case will be settled as part of the settlement in the
Consolidated Federal Class Action.
Equimark was also named as a nominal defendant, along with up to
nineteen of its former officers and/or directors, in two stockholder
derivative actions which were filed in the third quarter of 1990. One was
filed in the United States District Court for the Western District of
Pennsylvania (Duffy v. Fellheimer et al.) and the other in the Court of
Common Pleas of Allegheny County, Pennsylvania (Snider v. Fellheimer et
al.). The Complaint filed in each such action, as amended, seeks
unspecified monetary damages on behalf of Equimark for alleged violations
by defendants of Pennsylvania common law, including breach of fiduciary
duty, breach of duty of loyalty and waste of corporate assets, improper
dividends, mismanagement, misrepresentations and wrongful actions relating<PAGE>
to Equimark's disclosure, accounting, acquisition, compensation and lending
policies and procedures. In the Snider action, the Court has dismissed
plaintiffs' Complaint and the action was terminated. Defendants' motions
to dismiss the Duffy action were granted by order dated December 18, 1995
and that action has terminated.
Stock Ownership Plan Litigation. In October 1988, a former employee of
Equibank initiated in the Court of Common Pleas of Allegheny County,
Pennsylvania, a purported class action against Equibank on behalf of
approximately 1,200 to 1,300 present and former employees. The suit,
captioned Lash v. Equibank et al., is based on a November 1984 letter to
employees issued by Equimark's then Chairman of the Board, which letter
discussed the possibility of establishing an employee stock ownership plan
(ESOP). The plan was never established. In general, the action alleges
that the 1984 letter constituted a contract between Equibank and its
employees whereby Equibank was obligated to establish the ESOP and that
failure to do so constituted a breach of contract with attendant damages
estimated by plaintiffs at $8.0 million. Discovery in the case commenced
in early 1993. By order dated October 26, 1994, the Court certified a
class consisting of all former full-time Equibank employees or regular
part-time employees who were employees on November 8, 1984 and continued to
work through December 31, 1984. To avoid additional costs associated with
trial preparation and the risks inherent in any litigation, Integra and
plaintiffs have tentatively agreed to a settlement, subject to court
approval, whereby Integra will pay the class and their attorneys $1.8
million. The Corporation has accrued for such settlement costs.
Truth-in-Lending Act Class Action Suit. In September 1994, Altegra Credit
Company (Altegra), a subsidiary of Integra and formerly known as American
Financial Corporation of Tampa, was named as the defendant in an action,
entitled Stone v. American Financial Corporation of Tampa, filed in the
United States District Court for the Middle District of Florida. The
Complaint alleges that it is filed on behalf of the named plaintiffs and
all persons whose claims are timely (meaning no more than three years old)
who entered into a consumer credit transaction directly or indirectly with
Altegra wherein charges for overnight mail delivery were excluded from the
finance charge and included in the amount financed. Plaintiffs allege that
Altegra engaged in a pattern and practice of buying consumer loans wherein
overnight messenger fees were improperly included in the amount financed
instead of in the finance charge as required by the Truth-in-Lending Act
and Federal Reserve Board Regulation Z. Plaintiffs seek unspecified
compensatory damages, statutory damages, attorneys' fees, loan rescission
and costs. The case was transferred to the United States District Court
for the District of Massachusetts in January 1995. Legislation was enacted
which prevented plaintiffs other than the named plaintiffs from receiving
any relief. As a result, all class claims were dismissed by order dated
November 29, 1995. However, plaintiffs have the right to appeal.
Truth-in-Lending Act Class Action Suits: Hall, et al v. Altegra, et al and
AFC v. Jones. Altegra is also a defendant and a counterclaim defendant in
the above putative class actions alleging that Altegra, through and in
conjunction with its correspondents, so-called "pass through lenders", has
engaged in a pattern and practice of "predatory" lending that in numerous
ways violate federal and state consumer protection laws. At this time,
Altegra has moved to dismiss the complaint and counterclaim and classes
have not been certified.
At December 31, 1995, other legal proceedings were pending against the
Corporation and its subsidiaries; however, in the opinion of management,
the liabilities, if any, arising from such legal proceedings will not have<PAGE>
a material adverse effect on the Corporation's consolidated financial
condition, results of operations or cash flows.
<PAGE>
20. REGULATORY RESTRICTIONS
An important source of the parent company's operating income is
dividends from its subsidiaries. Dividends that may be paid by the banking
subsidiaries to the Corporation are subject to certain regulatory
limitations. Generally, the prior approval of the Federal Reserve Board is
required if the total of all dividends declared by a state member bank in
any calendar year exceeds its net profits (as defined) for that year
combined with its retained net profits for the preceding two calendar
years. Further, under Pennsylvania law, dividends paid by a state member
bank may not exceed accumulated net earnings (essentially undivided
profits) of the bank. In April 1993, the Corporation converted its banking
subsidiaries (other than Integra Trust Company) from national banks to
Pennsylvania-chartered banks that are members of the Federal Reserve
System. Effective May 25, 1995, Integra combined by merger the three
banking subsidiary charters into one charter.
Also, under current Federal Reserve Board regulations, the banking
subsidiaries of the Corporation are limited in the amount they may lend to
non-bank affiliates, including the Corporation. Such loans must be
collateralized at specified percentages of collateral value relative to the
outstanding loan amount. In addition, any such loans to a single non-bank
affiliate may not exceed 10% of any banking subsidiary's capital (as
defined) and the aggregate of loans to all such affiliates may not exceed
20%. At December 31, 1995, the maximum amount available in the form of
dividends and loans from the subsidiary banks to the Corporation
approximated $208.8 million and $95.0 million, respectively. In addition,
the subsidiary bank is required to maintain certain balances in reserve
with the Federal Reserve Bank, which requirement at December 31, 1995 was a
minimum amount of $25,000.
<PAGE>
21. CONDENSED FINANCIAL INFORMATION OF INTEGRA FINANCIAL CORPORATION
(PARENT ONLY)
<TABLE>
<CAPTION>
Balance Sheet
December 31 1995 1994
(Dollars in thousands)
Assets
<S> <C> <C>
Cash and due from banks $ 3 $ 2,999
Other short-term investments 3,328 -0-
Securities available for sale,
at fair value -0- 48,461
Investments in and advances to
subsidiaries:
Banks 1,047,462 826,318
Other subsidiaries 333,384 198,757
Total investments in and
advances to subsidiaries 1,380,846 1,025,075
Other assets 45,965 58,224
Total assets $1,430,142 $1,134,759
Liabilities<PAGE>
Short-term borrowings from bank
subsidiaries $ -0- $ 5,000
Commercial paper 34,319 36,434
Long-term debt 199,626 199,606
Other liabilities 51,289 35,123
Total liabilities 285,234 276,163
Shareholders' Equity 1,144,908 858,596
Total liabilities and
shareholders' equity $1,430,142 $1,134,759
</TABLE>
<PAGE>
21. CONDENSED FINANCIAL INFORMATION OF INTEGRA FINANCIAL CORPORATION
(PARENT ONLY) (continued)
<TABLE>
<CAPTION>
Statement of Income
Years Ended December 31 1995 1994 1993
(Dollars in thousands)
Operating Income
<S> <C> <C> <C>
Investment income $ 3,814 $ 3,713 $ 2,006
Cash dividends from bank
subsidiaries 108,380 124,500 80,583
Cash dividends from other
subsidiaries 2,676 2,000 18,800
Other income (105) 80 158
Net securities gains (losses) 281 (1,519) (429)
Total operating income 115,046 128,774 101,118
Operating Expense
Interest expense 17,376 17,930 16,497
Other expense 44,065 18,580 20,617
Total operating expense 61,441 36,510 37,114
Income before income taxes 53,605 92,264 64,004
Income tax benefit (21,496) (15,569) (12,234)
Income before equity in
undistributed income of
subsidiaries 75,101 107,833 76,238
Equity in undistributed income
of subsidiaries (1):
Banks 27,965 43,957 81,194
Other subsidiaries 25,324 17,243 (4,612)
Cumulative effect of
accounting changes, net -0- -0- 66,234
Total equity in undistributed
income of subsidiaries 53,289 61,200 142,816
Income before parent only
cumulative effect of
accounting changes 128,390 169,033 219,054
Parent only cumulative effect
of accounting changes, net -0- -0- (6,234)
Net income $128,390 $169,033 $212,820
(1) Amounts in parentheses represent the excess of dividends declared over net income of
subsidiaries.<PAGE>
</TABLE>
<PAGE>
21. CONDENSED FINANCIAL INFORMATION OF INTEGRA FINANCIAL CORPORATION
(PARENT ONLY) (continued)
<TABLE>
<CAPTION>
Statement of Cash Flows
Years Ended December 31 1995 1994 1993
(Dollars in thousands)
Cash Flows from Operating Activities
<S> <C> <C> <C>
Net income $128,390 $169,033 $212,820
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed income
of subsidiaries after dividends (53,289) (61,200) (142,816)
Parent only cumulative effect
of accounting changes, net -0- -0- 6,234
Depreciation and amortization
on premises and equipment 4,339 7,750 6,149
Net (gain) loss on disposition of other assets (185) 2,106 100
(Increase) decrease in interest and other accounts
receivable (7,159) 10,382 (1,955)
Increase (decrease) in interest and other accounts payable (4,128) 2,664 (5,192)
Restructuring expenses, non-recurring charges and merger
expenses accrued 20,760 -0- -0-
Other, net 2,347 663 3,127
Net cash provided by operating activities 91,075 131,398 78,467
Cash Flows from Investing Activities
Additional investments in subsidiaries (500) -0- (33,036)
Payments for purchases of securities available for sale (54,212) (58,105) (48,236)
Proceeds from sales of securities available for sale 18,167 51,743 -0-
Net sales (purchases) of premises and equipment 19,266 (10,221) (24,314)
Increase in other assets (11,497) (6,762) (4,379)
Net cash used by investing activities (28,776) (23,345) (109,965)
Cash Flows from Financing Activities
Increase (decrease) in short-term borrowings from bank
subsidiaries (5,000) (31,000) 18,500
Increase (decrease) in commercial paper (2,115) 4,852 (303)
Increase (decrease) in other liabilities (466) 279 (177)
Proceeds from long-term debt -0- -0- 99,697
Payments on long-term debt (55) (81) (24,393)
Common and preferred stock dividends paid (64,006) (56,865) (51,743)
Redemption of preferred stock -0- -0- (20,004)
Issuance of common stock 12,464 7,232 6,926
Treasury stock purchased (6,117) (33,532) (6,458)
Net cash provided (used) by financing activities (65,295) (109,115) 22,045
Decrease in cash and cash equivalents (2,996) (1,062) (9,453)
Cash and cash equivalents, beginning of year 2,999 4,061 13,514
Cash and cash equivalents, end of year $ 3 $ 2,999 $ 4,061
</TABLE>
<PAGE>
Investment income received amounted to $3.8 million in 1995, $3.7
million in 1994 and $2.0 million in 1993. Interest paid and income taxes
paid were $17.2 million and $49.4 million, respectively, in 1995, $16.7
million and $59.2 million, respectively, in 1994 and $14.4 million and
$52.8 million, respectively, in 1993. Noncash activity in 1995 consisted
of the transfer of $89.4 million of securities available for sale to a
subsidiary as an additional investment in that subsidiary. There were no
significant noncash transactions in 1994 and 1993.
< p a g e >
Report of Independent Accountants
To The Board of Directors and Shareholders
of Integra Financial Corporation:
We have audited the accompanying consolidated balance sheet of Integra
Financial Corporation and subsidiaries (the Corporation) as of December 31,
1995 and 1994, and the related consolidated statements of income, changes
in shareholders' equity and cash flows for each of the years in the three
year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Integra Financial Corporation and subsidiaries as of December
31, 1995 and 1994, and the consolidated results of their operations and
their cash flows for each of the years in the three year period ended
December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Notes 1, 6 and 8 to the consolidated financial statements,
in 1995 the Corporation changed its method of accounting for loan
impairment by adopting Financial Accounting Standards Board (FASB)
Statement 114 Accounting by Creditors for Impairment of a Loan and
Statement 118 Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures and its accounting for mortgage servicing
rights by adopting FASB Statement 122 Accounting for Mortgage Servicing
Rights. Also, as discussed in Notes 1, 11 and 12 to the consolidated
financial statements, in 1993 the Corporation changed its method of
computing income taxes by adopting FASB Statement 109 Accounting for Income
Taxes and its accounting for non-pension benefit plans by adopting FASB
Statement 106 Employers' Accounting for Postretirement Benefits Other Than
Pensions as well as its accounting for investments by adopting FASB
Statement 115 Accounting for Certain Investments in Debt and Equity
Securities.<PAGE>
/s/ Coopers & Lybrand L.L.P.
Pittsburgh, Pennsylvania
January 17, 1996
<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
DIRECTORS
YEAR FIRST PRINCIPAL OCCUPATION FOR PAST
BECAME A FIVE YEARS AND PUBLIC
NAME1 DIRECTOR 2 AGE DIRECTORSHIPS3
<S> <C> <C> <C>
James S. Beckwith, III 1973 63 Chairman, Beckwith Machinery
Company (construction and
material handling equipment)
James S. Broadhurst 1990 52 Chairman and Chief Executive
Officer, EPRH, Inc. and Eat 'n
Park Restaurants, a
Pennsylvania Business Trust
Leonard M. Carroll 1991 53 President and Chief Operating
Officer, Integra (February 1,
1991 to present); formerly
Executive Vice President,
Integra (January 26, 1989 to
January 31, 1991); Director,
Quaker State Corporation
Carl D. Doverspike 1973 64 Partner, J. C. Enterprises
(natural gas and farming)
James E. Feeney 1973 60 Senior Vice President,
Wheatland Tube Company (pipe
and tube manufacturer)
William A. Freeman 1989 52 Former President, Zurn
Industries, Inc. (manufacturer
of plumbing, industrial and
consumer products and
designer/constructor of
electric power plants)
Walter J. Greenleaf, Jr. 1980 67 Chairman and Chief Executive
Officer, formerly President and
Chief Executive Officer,
Greenleaf Corporation
(manufacturer of carbide
cutting tools and advanced
ceramics)<PAGE>
Stanley R. Gumberg 1982 68 Chairman, J. J. Gumberg Co.
(real estate development and
management)
John G. Koedel, Jr. 1976 58 Vice Chairman, The RCR Group,
Inc. and Director, National
Forge Company; formerly
President, National Forge
Company (finish machined steel
forgings)
Robert F. Patton 1977 68 Chairman, Bank Consulting
Associates (bank consulting);
Director, Armstrong World
Industries, Inc.
Robert A. Paul 1977 58 President and Chief Executive
Officer (since 1994), formerly
President and Chief Operating
Officer, Ampco-Pittsburgh
Corporation (manufacturer of
engineered equipment and steel
products)
William F. Roemer 1970 62 Chairman (January 1, 1991 to
present) and Chief Executive
Officer (January 26, 1989 to
present), Integra; formerly
President, Integra (January 26,
1989 to January 31, 1991)
Michael A. Shuler 1988 45 Chairman, President and Chief
Executive Officer, Zippo
Manufacturing Company
(manufacturer of lighters and
metal products)
Henry B. Suhr, Jr. 1963 63 Retired President, Red Valley
Oil Company (oil producer)
Robert K. Wagner 1981 64 Chairman and Chief Executive
Officer, Koppers Industries,
Inc. (manufacturing); formerly
Director, Trion, Inc.
Phillips Wiegand 1983 56 President and Chief Executive
Officer, T. W. Phillips Gas and
Oil Co. (Pennsylvania natural
gas public utility)
Margot B. Woodwell 1986 59 Executive Producer/Community
Outreach, QED Pittsburgh
(public broadcasting)
--------
1 F. William Hirt retired from the Board of Directors on October 25, 1995.
2
Includes any prior service with any corporation or bank which has been acquired by, or merged
with, Integra, either of its predecessors or any subsidiary thereof. Each director has served
continuously since he or she was first elected or appointed.<PAGE>
3
The principal occupations shown in the Table have been such for the past five years.
</TABLE>
<PAGE>
EXECUTIVE MANAGEMENT
Information concerning executive management of Integra is set forth below.
Each of the individuals listed below has been employed in an executive
capacity by Integra during the past five years.
<TABLE>
<CAPTION>
NAME AGE POSITION; OFFICES HELD
<S> <C> <C>
William F. Roemer 62 Chairman (January 1, 1991 to present) and
Chief Executive Officer (January 26, 1989
to present), Integra; formerly President,
Integra (January 26, 1989 to January 31,
1991)
Leonard M. Carroll 53 President and Chief Operating Officer,
Integra (February 1, 1991 to present);
formerly Executive Vice President,
Integra (January 26, 1989 to January 31,
1991); Director, Quaker State Corporation
John R. Echement 60 Vice Chairman, Integra (February 1, 1991
to present); formerly Executive Vice
President, Integra (January 26, 1989 to
January 31, 1991)
Charles R. Skillington 49 Vice Chairman (February 1, 1991 to
present) and Treasurer (January 26, 1989
to present), Integra; formerly Executive
Vice President, Integra (January 26, 1989
to January 31, 1991)
Thomas W. Golonski 52 President, Integra Bank (May 25, 1995 to
present); formerly Executive Vice
President, Commercial Banking, Integra
(January 1, 1994 to May 24, 1995);
formerly Chairman and Chief Executive
Officer, Integra Bank/North (1991 to
December 31, 1993); formerly President
and Chief Executive Officer of First
Seneca Bank (1987 to 1991)
Robert H. Stevenson 53 Senior Vice President and General
Counsel, Integra (January 26, 1989 to
present)<PAGE>
Gary E. Wolbert 45 Executive Vice President and Chief
Financial Officer, Integra (July 27, 1995
to present); formerly Senior Vice
President and Chief Financial Officer,
Integra (October 30, 1991 to July 26,
1995); formerly Senior Vice President--
Corporate Planning and Development,
Integra (January 26, 1989 to October 29,
1991)
Kenneth C. Thiess 43 Vice President, Secretary and Assistant
General Counsel, Integra (January 26,
1989 to present)
Stephen G. Hartle 45 President, Integra Trust Company (October
1994 to present); formerly Executive Vice
President, Integra Trust Company (October
1993 to October 1994); formerly Senior
Vice President, Marketing, Integra
(January 26, 1989 to October 1994)
Richard B. Mahany 48 Executive Vice President, Integra (July
27, 1995 to present); formerly Senior
Vice President, Investments, Integra
(January 26, 1989 to July 26, 1995)
Paul N. Smocer 43 Senior Vice President and Chief Auditor,
Integra (October 30, 1991 to present);
Vice President and Chief Auditor, Integra
(January 26, 1989 to October 29, 1991)
Mary A. York 46 Senior Vice President, Human Resources,
Integra (April 1, 1993 to present); Vice
President, Planning and Development,
Integra (1990 to March 31, 1993); Human
Resources Planning Manager, Integra,
(November 1, 1988 to 1990)
</TABLE>
ITEM 11 - EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The directors of Integra are compensated for their services by payment of a
retainer and a fixed fee for attendance at meetings of the Board of
Directors and committees thereof. In 1995, directors received a retainer
of $15,000, plus $1,000 for each Board of Directors meeting, and $500 for
each committee meeting on the same day as a Board of Directors meeting or
$1,000 for each committee meeting held on another day. In addition, each
director is permitted to annually elect to defer these fees until the
director ceases to be a director. Under the Integra Non-Employee Directors
Stock Option Plan, each non-employee director of Integra receives at the
first regular Board meeting of each year an option to purchase 1,000 shares
of Integra Common Stock, subject to the following vesting schedule: 50% of
the option vests and becomes exercisable on the first anniversary of the
grant date and the remaining 50% vests and becomes exercisable on the
second anniversary of the grant. The options become fully vested upon a
change of control of Integra. The exercise price of the option is equal to
the fair market price of Integra's Common Stock on the grant date and each
option has a ten-year term. Directors who are also officers of Integra<PAGE>
receive no remuneration for services as a director while also serving as an
officer.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following Table sets forth information concerning compensation paid by
Integra during its last three fiscal years to its Chief Executive Officer
and each of its other four highest paid executive officers whose aggregate
direct
remuneration exceeded $100,000 during 1995 ("Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Name and Other Restricted Securities All Other
Principal Annual Stock Underlying LTIP Compensa-
Position Year Salary Bonus1 Compensa- Award(s) Options/ Payouts tion
tion($)2 ($)3 SARs (#) ($) ($)4
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William F. Roemer 1995 $621,252 $375,001 --- --- 40,000 --- $123,939
Chairman and Chief 1994 576,669 302,636 --- 75,664 40,000 --- 106,577
Executive Officer 1993 536,667 322,000 --- --- 30,000 --- 101,898
Leonard M. Carroll 1995 402,565 213,151 --- --- 24,000 --- 71,756
President & Chief 1994 361,671 166,079 57,820 41,538 24,000 --- 60,558
Operating Officer 1993 322,502 177,376 --- --- 17,000 --- 56,400
Charles R. 1995 279,921 126,452 --- --- 20,000 --- 51,958
Skillington
Vice Chairman and 1994 267,002 105,092 --- 26,300 16,000 --- 44,725
Treasurer 1993 254,252 127,126 --- --- 12,000 --- 43,043
John R. Echement 1995 250,002 96,525 --- --- 16,000 --- 47,597
Vice Chairman 1994 250,002 90,201 --- 22,575 16,000 --- 42,146
1993 248,752 111,938 --- --- 12,000 --- 41,485
Thomas W. Golonski 1995 208,000 78,750 44,331 --- 7,000 --- 45,254
President, Integra 1994 184,000 62,976 99,458 15,765 5,000 --- 41,161
Bank 1993 161,250 64,500 --- --- 4,000 --- 41,742<PAGE>
_________________
1
Amounts awarded under Integra's incentive plan for the respective fiscal years, even though
paid in or deferred to subsequent years. In 1995, the Management Incentive Awards that were
earned in 1995 were paid in December 1995. For 1994, 20% of each named executive officer's
annual incentive award was paid in the form of restricted stock. Such awards are reflected in
the Restricted Stock Award column under the caption "Long-Term Compensation".
2
The aggregate amount of payments made to or on behalf of each Named Executive Officer
attributable to club memberships, automobile allowances, payments under Integra's flexible
benefits program and other personal benefits did not exceed the lesser of $50,000 or 10% of his
salary and bonus in each year shown, except in 1995 Mr. Golonski received $26,952 pursuant to
the Integra relocation policy and in 1994 Integra paid club initiation and dues for Mr. Carroll
of $37,639 and Mr. Golonski received $79,291 pursuant to Integra's relocation policy.
3
For 1995, no restricted stock awards were made. For 1994, 20% of each named executive
officer's annual incentive award was paid in the form of restricted stock. The number of
restricted shares awarded to Messrs. Roemer, Carroll, Skillington, Echement and Golonski were
2,011, 1,104, 699, 600 and 419, respectively. These restricted shares were awarded in 1995 for
1994 performance. As of December 31, 1994, the named executive officers did not own any
restricted shares. The restricted stock vests and becomes nonforfeitable two years from the
date of grant provided that the officer is then still employed by Integra, and provided that,
upon a change of control of Integra, the restricted stock fully vests. The values shown in the
table were determined by multiplying the closing sale price on the date of the grant by the
number of shares awarded. Dividends will be paid on restricted stock.
4
For 1995, Messrs. Roemer, Carroll, Skillington, Echement and Golonski received approximately
$68,338, $44,284, $30,791, $27,500 and $18,380, respectively, pursuant to Integra's profit
sharing plans. For 1994, Messrs. Roemer, Carroll, Skillington, Echement and Golonski received
$50,726, $31,814, $23,487, $21,991 and $13,125, respectively, pursuant to the profit sharing
plans. For 1993, Messrs. Roemer, Carroll, Skillington, Echement and Golonski received $45,898,
$27,582, $21,745, $21,274 and $13,706, respectively, pursuant to the profit sharing plans. The
remaining portions of the amounts in this column represent the current dollar value of split
dollar life insurance premiums paid by Integra for the benefit of the executive officers.
</TABLE>
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following Table sets forth information with respect to grants of stock
options pursuant to Integra's Management Incentive Plan during 1995 to the
Named Executive Officers reflected in the Summary Compensation Table above.
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
PERCENT OF
TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#)1,2 YEAR ($/SHARE)3 DATE VALUE ($)4<PAGE>
<S> <C> <C> <C> <C> <C>
William F. 40,000 19.28% $37.63 1/25/05 $366,000
Roemer
Leonard M. 24,000 11.57% $37.63 1/25/05 $219,600
Carroll
Charles R. 20,000 9.64% $37.63 1/25/05 $183,000
Skillington
John R. 16,000 7.71% $37.63 1/25/05 $146,400
Echement
Thomas W. 7,000 3.37% $37.63 1/25/05 $ 64,050
Golonski
--------
1
Options granted in 1995 are exercisable as follows: one-half of the grant will become
exercisable on January 25, 1996 and one-half of the grant will become exercisable on January
25, 1997; provided that upon a change of control of Integra, the options fully vest and become
immediately exercisable.
2
The options were granted for a term of ten years, subject to earlier termination in certain
events related to termination of employment.
3
The exercise price and tax withholding obligations related to exercise may be paid, in the
discretion of the committee administering the plan, by delivery of previously owned Integra
shares or by withholding a portion of the shares otherwise distributable upon exercise of the
option, subject to certain conditions.
4
Integra used the Black-Scholes Option Valuation model adjusted for dividends to determine grant
date present value of the options. Integra does not advocate or necessarily agree that the
Black-Scholes model properly reflects the value of an option. The assumptions used in
calculating the option value are as follows: a risk-free interest rate of 7.74%, the rate
applicable to a ten-year U. S. Treasury security at the time of the award; a dividend yield of
4.13%, the yield at the conclusion of the most recently completed fiscal year prior to the date
of grant (1994 dividends divided by the 1994 closing stock price); volatility of 0.168,
calculated using daily stock returns for the twelve month period preceding the option award; a
stock price at date of grant of $37.63; the price at which the option can be exercised is fair
market value ($37.63); and a ten-year stock option term. No adjustments were made for
forfeitures or vesting restrictions on exercise. The value of an option on Integra's stock
under the Black-Scholes model of option valuation applying the preceding assumptions is $9.15
per optioned share.
</TABLE>
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
The following Table sets forth information concerning options exercised in
1995 and unexercised options to purchase Integra's Common Stock granted to
the Named Executive Officers in 1995 under Integra's Management Incentive
Plan and in prior years under Integra's Employee Stock Option Plan and
plans maintained by Integra's predecessors.<PAGE>
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
SHARES NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT
ACQUIRED ON OPTIONS AT 12/31/95 (#) 12/31/95 1($)
EXERCISE VALUE REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME (#) ($) UNEXERCISABLE) UNEXERCISABLE)
<S> <C> <C> <C> <C>
William F. Roemer 19,134 $ 578,361 179,879/60,000 $6,213,609/$1,409,700
Leonard M. Carroll 45,506 $1,507,185 56,000/36,000 $1,560,450/$ 845,820
Charles R. 27,328 $ 714,614 20,000/28,000 $ 414,900/$ 667,860
Skillington
John R. Echement 23,076 $ 631,250 42,000/24,000 $1,206,520/$ 563,880
Thomas W. Golonski 4,059 $ 127,716 18,500/ 9,500 $ 628,241/$ 228,203
--------
1
Average of the high and low sales prices of the underlying securities on the last trading day
of the year minus the exercise price of "in-the-money" options.
</TABLE>
<PAGE> PENSION PLANS
The following Table shows the estimated annual basic retirement benefit
that is payable upon retirement to the Named Executive Officers, in the
remuneration and years of service classifications indicated, under
Integra's Defined Benefit Pension Plan (the "Pension Plan"), Supplemental
Defined Benefit Pension Plan (the "Supplemental Plan") and Supplemental
Executive Retirement Plan (the "SERP"). For purposes of illustration, the
Table assumes that normal retirement under those plans occurred during
1995.
<TABLE>
<CAPTION>
PENSION PLAN TABLE 1
Years of Service2
BASE SALARY 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$150,000 $104,442 $128,325 $128,325 $128,325 $128,325
180,000 128,325 156,985 156,985 156,985 156,985
240,000 176,092 214,306 214,306 214,306 214,306
270,000 199,976 242,966 242,966 242,966 242,966
300,000 223,859 271,626 271,626 271,626 271,626
360,000 271,626 328,946 328,946 328,946 328,946
420,000 319,393 386,267 386,267 386,267 386,267
480,000 367,160 443,587 443,587 443,587 443,587<PAGE>
540,000 414,927 500,908 500,908 500,908 500,908
600,000 462,694 558,228 558,228 558,228 558,228
680,000 526,384 634,655 634,655 634,655 634,655
760,000 590,073 711,082 711,082 711,082 722,082
-----------
1
Benefits shown are computed on the basis of a straight life annuity and represent the combined
benefits from the Pension Plan, the Supplemental Plan and the SERP. Benefits under the Pension
Plan and Supplemental Plan are based on the employee's highest five-year average annual base
salary (as reported under the column captioned "Salary" in the Summary Compensation Table)
during the employee's last ten years of employment. Retirement benefits in excess of the
maximum annual pension benefit limits under the Pension Plan would be paid pursuant to the
Supplemental Plan. Amounts payable under Integra's SERP equal a target benefit percentage (40%
minimum and 60% maximum) of (i) an employee's average base salary (highest consecutive three of
the last ten years), reduced by certain offsets, plus (ii) the average of the employee's three
highest consecutive bonus awards in the last ten years ("Bonus Amount"), each as reported under
the column captioned "Salary" or "Bonus" in the Summary Compensation Table. The offset amounts
are anticipated Social Security, benefits payable under the Pension Plan and the Supplemental
Plan and benefits paid from the plans of prior employers, to the extent not derived from the
employee's contributions, assuming retirement during 1995. For purposes of calculating the
SERP portion of the benefit amounts shown in the Table, it was assumed that the employee's
Bonus Amount was equal to two-thirds of the employee's base salary.
2
The credited years of service under the Integra Pension Plan for Messrs. Roemer, Carroll,
Skillington, Echement and Golonski are 26, 22, 27, 42 and 32, respectively.
</TABLE>
EMPLOYMENT CONTRACTS
Messrs. Roemer, Carroll, Skillington and Echement are parties to employment
agreements dated as of November 1, 1990, as amended effective January 25,
1995. The agreements currently expire on March 31, 1998. On April 1 of
each year, beginning April 1, 1996, the agreements are automatically
extended for an additional year unless prior notice of termination has been
given by either party. Under the agreements, Integra may terminate an
employee without cause upon 30 days' notice, or the employee may terminate
his employment for good reason, as defined in the agreement, in either of
which events the employee is entitled for the remainder of the term of the
agreement to annual compensation equal to the employee's highest base
salary in the current or any one of the three preceding calendar years plus
an amount equal to the sum of the employee's highest awards from all of
Integra's profit sharing, bonus and short term compensation plans in which
the employee participated, if any, in any one of the three preceding years
(the aggregate amount referred to as "Annual Compensation"), and to
continuing coverage under Integra's other benefit plans for the then
remaining term of the employment agreement. The employee may terminate his
employment without cause upon 30 days' notice, in which case the employee
is not entitled to receive further salary or other benefits. Integra may
terminate the employee for cause, as defined in the agreement, at which
time all salary and other benefits to the employee would cease.
Upon a change of control of Integra, as defined in the agreement, either
the employee or Integra may terminate the employee's employment, at which
time the employee would become entitled to (except in the case of a
termination by Integra for cause) up to three years' Annual Compensation.<PAGE>
The amount that the employee is entitled to receive upon a change of
control declines proportionately for each month the employee is older than
62 at the time of the change of control to zero at age 65. The employee
will also receive an additional payment (a "Gross-Up Payment") equal to the
amount of any excise tax imposed on any payments or distributions in excess
of specified amounts under the Internal Revenue Code which are paid to the
employee in connection with a change in control.
The agreement also terminates upon the death of the employee, at which time
the employee's beneficiaries would become entitled to the employee's salary
for a period of one year, less any proceeds (excluding life insurance)
received by the employee from Integra, and certain other benefits. If the
employee is disabled for a period of one year, Integra may terminate the
employee's employment, at which time the employee would become entitled to
one year's salary, less any proceeds received by the employee from Social
Security and disability insurance provided by Integra to the employee, and
certain other benefits. In any event, employment under the agreement
terminates when the employee reaches age 65 and all compensation (other
than vested benefits) ceases to be paid at that time. In the event the
agreement is terminated for any reason, other than by Integra without
cause, the employee will be prohibited from rendering services to any
competitor of Integra within the geographic area in which Integra currently
conducts business or proposes to conduct business for a period of one year
after such termination.
Upon termination of the employee's employment other than for cause, the
employee is entitled to receive his full, accrued benefits under the SERP
at or after age 55 as if it were his normal retirement age.
Integra is also a party to change of control agreements with 15 other
senior officers of Integra. These agreements provide for continuation of
salary and other benefits for 24 months following termination of employment
by Integra without "cause" or by the employee for "good reason", as defined
under the agreements, in connection with a change of control of Integra.
On August 27, 1995, Integra entered into an Agreement and Plan of Merger
with National City Corporation ("National City") providing for the merger
of Integra with and into National City. The merger will constitute a
change in control of Integra under the employment agreements and the change
of control agreements. In connection with the merger, Integra entered into
a consulting agreement with Mr. Roemer pursuant to which Mr. Roemer will
provide consulting services to National City upon consummation of the
merger and until Mr. Roemer attains age 65. Under the consulting
agreement, Mr. Roemer will receive an annual fee of $225,000. The
consulting agreement also provides that Mr. Roemer will receive the change
in control payments under his employment agreement and an additional
payment equal to the taxes paid by him as a result of his receipt of the
Gross-Up Payment. The consulting agreement provides that in the event
Integra or its successor terminates Mr. Roemer without cause or without Mr.
Roemer's consent, Mr. Roemer will be entitled to receive the balance of the
consulting fees due under the consulting agreement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1995, Integra had issued and outstanding 33,012,695
shares of Common Stock. The following Table sets forth the beneficial
ownership of Integra's Common Stock by (i) each person or group known to
Integra to be the beneficial owner of more than five percent of Integra's
Common Stock; (ii) each director; (iii) each of the Named Executive
Officers, and (iv) all directors and executive officers as a group as of<PAGE>
December 31, 1995. The information provided in connection with this Table
has been obtained from Integra's records and a review of statements filed
with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP1 PERCENT OF CLASS 2
Principal Shareholder
---------------------
<S> <C> <C>
Integra Trust Company 4,164,1383 12.61%
McCune Foundation 1,838,7264 5.57%
Delaware Management Company, Inc. 2,128,9255 6.45%
Directors and Named Executive Officers
--------------------------------------
James S. Beckwith, III 15,5156 *
James S. Broadhurst 1,9507 *
Leonard M. Carroll 79,8988 *
Carl D. Doverspike 37,5169 *
John R. Echement 61,47510 *
James E. Feeney 3,70911 *
William A. Freeman 1,50012 *
Thomas W. Golonski 20,31513 *
Walter J. Greenleaf, Jr. 3,54414 *
Stanley R. Gumberg 100,86915 *
John G. Koedel, Jr. 9,77916 *
Robert F. Patton 22,96517 *
Robert A. Paul 412,16718 1.25%
William F. Roemer 202,05719 *
Michael A. Schuler 1,30020 *
Charles R. Skillington 30,00121 *
Henry B. Suhr, Jr. 17,55022 *
Robert K. Wagner 8,44823 *
Phillips Wiegand 51,42724 *
Margot B. Woodwell 64,78825 *
Directors and Executive Officers 1,217,22526 3.69%
as a Group
--------
1
All share amounts, including those in the Notes to the Table, have been rounded to the nearest<PAGE>
whole share. Each person named in the Table has sole voting and investment power with respect
to the shares shown except as noted herein.
2
An asterisk (*) indicates less than one percent.
3
The business address of Integra Trust Company is 300 Fourth Avenue, Pittsburgh, PA 15278. All
of the shares held by Integra Trust Company are held in a fiduciary capacity for various trust,
estate or agency accounts. Integra Trust Company exercises sole voting power with respect to
2,611,653 shares, shared voting power with respect to 857,813 shares, sole investment power
with respect to 2,416,919 shares and shared investment power with respect to 528,186 shares.
The amount shown in the Table excludes all shares which are beneficially owned by the McCune
Foundation. While Integra Trust Company has sole or shared voting or investment power with
respect to the shares shown, a person or entity other than Integra Trust Company is entitled to
receive dividends thereon and to receive proceeds upon the disposition of the shares. Thus,
Integra Trust Company disclaims beneficial ownership of these shares.
4
The business address of the McCune Foundation is 1104 Commonwealth Building, 316 Fourth Avenue,
Pittsburgh, PA 15222. Integra Trust Company is Trustee of the McCune Foundation. The
Distribution Committee of the McCune Foundation has historically been involved in the voting of
shares of Integra held by the McCune Foundation in the election of directors.
5
The business address of Delaware Management Company, Inc. is One Commerce Square, Philadelphia,
PA 19103. Delaware Management Company, Inc. exercises sole voting power with respect to
1,743,400 shares, sole dispositive power with respect to 2,087,125 shares and shared
dispositive power with respect to 41,800 shares.
6
This amount includes currently exercisable options covering a total of 500 shares.
7
This amount includes currently exercisable options covering a total of 500 shares and 700
shares owned jointly by Mr. Broadhurst and his wife with shared voting and investment power.
8
This amount includes 1,063 shares held in trust by Integra Trust Company, as trustee, with sole
voting and sole investment power, pursuant to a revocable trust of which Mr. Carroll is grantor
and principal beneficiary, as well as currently exercisable options covering a total of 56,000
shares.
9
This amount includes 36,896 shares held by Integra Trust Company as sole trustee with sole
voting and investment power pursuant to revocable trusts of which Mr. Doverspike is grantor and
principal beneficiary and currently exercisable options covering a total of 500 shares.
10
This amount includes currently exercisable options covering a total of 42,000 shares, 2,441
shares held jointly with Mr. Echement's wife and 451 shares held by Mr. Echement's children.
Mr. Echement disclaims beneficial ownership of the shares held by his children.
11
This amount includes currently exercisable options covering a total of 500 shares, 160 shares
held by Mr. Feeney's wife as to which Mr. Feeney disclaims beneficial ownership and 609 shares
held jointly with his wife with shared voting and investment power.
12
These shares consist of currently exercisable options covering a total of 500 shares and 1,000
shares owned jointly by Mr. Freeman and his wife with shared voting and investment power.<PAGE>
13
This amount includes 152 shares held by Mr. Golonski's wife as to which Mr. Golonski disclaims
beneficial ownership, 1,511 shares held in trust by Integra Trust Company, as trustee, with
sole voting and investment power pursuant to a revocable trust of which Mr. Golonski is grantor
and principal beneficiary and currently exercisable options covering a total of 18,500 shares.
14
This amount includes currently exercisable options covering a total of 500 shares.
15
This amount consists of currently exercisable options covering a total of 500 shares and
100,369 shares owned jointly by Mr. Gumberg and his wife with shared voting and investment
power.
16
This amount includes currently exercisable options covering a total of 500 shares, 167 shares
owned jointly by Mr. Koedel and his wife, 2,400 shares held in a custodial account of which Mr.
Koedel is beneficiary and over which Mr. Koedel has sole voting and investment power and 6,553
shares owned solely by Mr. Koedel's wife.
17
This amount consists of currently exercisable options covering a total of 500 shares, 18,465
shares owned by the Patton Family Partnership, of which Mr. Patton is managing partner and has
shared voting and investment power, and 4,000 shares held by a trust of which Mr. Patton is
sole beneficiary and as to which he has sole voting and investment power.
18
This amount includes currently exercisable options covering a total of 500 shares, 37,678
shares held by Mr. Paul's wife, 178,800 shares held in various trusts, of which Mr. Paul is a
co-trustee and shares voting power, and 174,800 shares owned by The Louis Berkman Company, of
which Mr. Paul is Executive Vice President and Director and of which Mr. Paul's wife is a
shareholder. Mr. Paul disclaims beneficial ownership of the shares held by his wife, the
trusts and The Louis Berkman Company.
19
This amount includes currently exercisable options covering a total of 179,879 shares, 10,000
shares owned by Mr. Roemer's wife and 4,178 shares held by Mr. Roemer's daughter. Mr. Roemer
disclaims beneficial ownership of the shares held by his wife and his daughter.
20
This amount includes currently exercisable options covering a total of 500 shares.
21
This amount consists of currently exercisable options covering a total of 20,000 shares and
10,001 shares held jointly with Mr. Skillington's wife.
22
This amount includes currently exercisable options covering a total of 500 shares and 4,872
shares held by a trust of which Mr. Suhr is sole beneficiary with no voting or investment
power.
23
This amount includes currently exercisable options covering a total of 500 shares, 4,279 shares
owned jointly by Mr. Wagner and his wife and 100 shares held solely by his wife.
24
This amount includes currently exercisable options covering a total of 500 shares and 2,729
shares beneficially owned by Mr. Wiegand's children with respect to which Mr. Wiegand has sole
voting and investment power.<PAGE>
25
This amount includes currently exercisable options covering a total of 500 shares and 63,700
shares owned solely by Mrs. Woodwell's husband.
<PAGE>
26
As of December 31, 1995, directors and executive officers of Integra as a group beneficially
owned 3.69% of the outstanding shares of Common Stock. The group includes twenty-seven
persons, consisting of all directors, the Named Executive Officers and seven other executive
officers. The amount shown includes currently exercisable options covering a total of 378,529
shares for directors and executive officers as a group. The group amount includes 206,450
shares held by family members, 47,884 shares held by Integra Trust Company as trustee of
revocable trusts for directors and executive officers with sole voting and investment power,
130,113 shares held jointly with spouses with shared voting and investment power, 108,191
shares owned by spouses and 174,800 shares held by The Louis Berkman Company (described in Note
18 above).
</TABLE>
COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES
Section 16(a) of the Securities Exchange Act of 1934 requires Integra's
directors, executive officers and persons who own more then ten percent of
a registered class of Integra's equity securities to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership of Integra equity securities on Form 3 and reports of
changes therein on Forms 4 and 5. Based on a review of copies of reports
filed with the Securities and Exchange Commission since January 1, 1995 and
of written representations by certain directors and executive officers, all
persons subject to the reporting requirements of Section 16(a) filed the
required reports on a timely basis in 1995 except Ms. York. In August
1995, Ms. York inadvertently failed to report on Form 4 a cashless stock
option exercise. A Form 4 was filed when this omission was discovered. No
short-swing liability occurred as a result of this event.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of its banking and trust business, Integra's banking
subsidiary may have had and anticipates that it may continue to have
transactions with principal shareholders of Integra, as well as various
directors and executive officers of Integra, members of their immediate
families, and their associates, including corporations in which such
directors and executive officers own beneficial interests. To the extent
such transactions consisted of extensions of credit, such transactions were
made in the ordinary course of business of Integra's bank subsidiary, on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with its other
customers and did not involve more than the normal risk of collectibility
or present other unfavorable features.
Integra's trust subsidiary also acts or may act as fiduciary under trusts
and other instruments for certain directors, executive officers and
principal shareholders of Integra, their related companies and members of
their immediate families.
During 1995, Integra Bank leased space for seven existing and former branch
offices from Stanley R. Gumberg, a director of Integra, or his affiliates
for an aggregate annual rental amount of $428,820 under leases expiring
from 1997 to 2015. In addition, Integra Bank is a party to separate
property management agreements with J.J. Gumberg Co. covering the rental,
lease, operation, management and sale of various properties which were<PAGE>
taken over by the bank in connection with delinquent loans. Fees in the
aggregate amount of approximately $96,750 were paid to J.J. Gumberg Co. in
1995 for services rendered in connection with these agreements. In
addition, J. J. Gumberg Co. was paid a commission of $3,250 in connection
with a sublease of certain property that had been leased by Integra.
Integra considers the lease terms and management contracts to be fair and
comparable to agreements for equivalent space or services as those that
would exist with unaffiliated parties. Stanley R. Gumberg is Chairman of
the Board of Directors and a principal shareholder of J.J. Gumberg Co.
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following financial statements and report of independent
accountants thereon are included in Item 8:
Report of Independent Accountants
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Income for the years ended
ended December 31, 1995, 1994 and 1993
Consolidated Statement of Changes in Shareholders' Equity for
the years ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(a)(2) Financial statement schedules required by Item 8 of this report:
All schedules are omitted since the Corporation does not meet the
requirements for filing such schedules or the required
information is provided in the consolidated financial
statements or notes thereto.
(a)(3) Exhibits required by Item 601 of Regulation S-K:
The index to Exhibits included in this filing is incorporated
herein by reference.
(b) Reports on Form 8-K:
None.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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.
Integra Financial Corporation
(Registrant)
By: /s/ William F. Roemer
William F. Roemer
Chairman of the Board and Chief
Executive Officer<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ William F. Roemer January 26, 1996
William F. Roemer, Chairman of the Board
and Chief Executive Officer, Director
(Principal Executive Officer)
/s/ Gary E. Wolbert January 26, 1996
Gary E. Wolbert, Senior Vice President
and Chief Financial Officer (Principal
Financial and Accounting Officer)
James S. Beckwith, III, Director
James S. Broadhurst, Director
Leonard M. Carroll, Director
Carl D. Doverspike, Director
/s/ Robert H. Stevenson January 26, 1996
James E. Feeney, Director Robert H. Stevenson
Attorney-in-fact
William A. Freeman, Director
Walter J. Greenleaf, Jr., Director
Stanley R. Gumberg, Director
<PAGE>
/s/ Robert H. Stevenson January 26, 1996
John G. Koedel, Jr., Director Robert H. Stevenson
Attorney-in-fact
Robert F. Patton, Director
Robert A. Paul, Director<PAGE>
Michael A. Schuler, Director
Henry B. Suhr, Jr., Director
Robert K. Wagner, Director
Phillips Wiegand, Director
Margot B. Woodwell, Director
<PAGE>
Integra Financial Corporation
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1995
Exhibits Index
Exhibit
Number Description and Reference
2 An Agreement and Plan of Merger ("Agreement") dated as of August 27,
1995 providing for the merger of Integra Financial Corporation
("Integra") with and into National City Corporation ("National
City"), along with Stock Option Agreements entered into between
Integra and National City, each dated August 27, 1995, which are
Exhibits 99(a), 99(b) and 99(c) to Integra's Report on Form 8-K filed
September 1, 1995, are incorporated herein by reference.
3(a) Amended and Restated Articles of Incorporation of Integra Financial
Corporation, which is Exhibit 3(a) to Integra Financial Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993, is
incorporated herein by reference.
3(b) Bylaws of Integra Financial Corporation, which is Exhibit 3(b) to
Integra Financial Corporation's Annual Report on Form 10-K for the
year ended December 31, 1991, is incorporated herein by reference.
4 None of the instruments with respect to long-term debt of the
Corporation or its subsidiaries individually amounts to 10% of the
total assets of the Corporation and its consolidated subsidiaries.
The Corporation hereby agrees to furnish a copy of any such
instrument upon the request of the Securities and Exchange
Commission.
10(a) Integra Financial Corporation Employee Stock Option Plan, as amended,
which is Exhibit 10(a) to Integra Financial Corporation's Annual
Report on Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.+
10(b) Integra Financial Corporation Employee Stock Purchase Plan, which is
Exhibit V to the Prospectus/Joint Proxy Statement which is Part I of
the Registration Statement on Form S-4 filed by Union National
Corporation and Pennbancorp (File No. 33-20844) (the "Registration
Statement"), is incorporated herein by reference.+
10(c) Deferred Compensation Plan for outside Directors of Integra Financial
Corporation, which is Exhibit 10(d) to Integra Financial<PAGE>
Corporation's Annual Report on Form 10-K for the year ended December
31, 1989, is incorporated herein by reference.+
10(d) Integra Financial Corporation Relocation Policy, which is Exhibit
10(e) to Integra Financial Corporation's Annual Report on Form 10-K
for the year ended December 31, 1989, is incorporated herein by
reference.+
10(e) Deferred Compensation Plan for outside Union National Corporation
Directors, which is Exhibit (10)(iii)(b) of Union National
Corporation's Annual Report on Form 10-K for the year ended December
31, 1983, is incorporated herein by reference.+
+ Management contract or compensation plan or arrangement.
<PAGE>
Exhibits index (continued)
Exhibit
Number Description and Reference
10(f) Union National Corporation Employee Stock Option Plan of 1984, which
is Exhibit (10)(iii)(g) of Union National Corporation's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1984, is
incorporated herein by reference.+
10(g) Integra Financial Corporation Supplemental Executive Retirement Plan,
which is Exhibit 10(g) to Integra Financial Corporation's Annual
Report on Form 10-K for the year ended December 31, 1994, is
incorporated herein by reference.+
10(h) Integra Financial Corporation Supplemental Profit Sharing Plan, which
is Exhibit 10(j) to Integra Financial Corporation's Annual Report on
Form 10-K for the year ended December 31, 1990, is incorporated
herein by reference.+
10(i) Integra Financial Corporation Supplemental Defined Benefit Pension
Plan, which is Exhibit 10(k) to Integra Financial Corporation's
Annual Report on Form 10-K for the year ended December 31, 1990, is
incorporated herein by reference.+
10(j) Pennbancorp Key Employee Stock Option Plan, as amended, which is
Exhibit 10(a) and Exhibit 10(b) of Pennbancorp's Registration
Statement on Form S-4 filed August 16, 1985 (File No. 2-99721), is
incorporated herein by reference.+
10(k) Form of Employment Agreement, as amended, between Integra Financial
Corporation and Messrs. Roemer, Carroll, Skillington and Echement
dated November 1, 1990, which is Exhibit 10(k) to Integra Financial
Corporation's Annual Report on Form 10-K for the year ended December
31, 1994 is incorporated herein by reference.+
10(l) Form of Change of Control Agreement, as amended, between Integra
Financial Corporation and Messrs. Golonski, Stevenson, Wolbert,
Hartle, Mahany, Smocer and Ms. York and certain other senior officers
dated November 1, 1990.+*
10(m) Integra Financial Corporation Management Incentive Plan, which is
Exhibit A of Integra Financial Corporation's Registration Statement
on Form S-8 filed January 26, 1995, is incorporated herein by
reference.+
<PAGE>
10(n) Integra Financial Corporation Non-Employee Directors Stock Option
Plan, which is Exhibit B of Integra Financial Corporation's
Registration Statement on Form S-8 filed January 26, 1995, is
incorporated herein by reference.+
10(o) Consulting agreement dated August 27, 1995, between Integra Financial
Corporation and William F. Roemer.+*
21 Subsidiaries of the Registrant.*
23 Consent of Coopers & Lybrand L.L.P.*
24 Powers of Attorney.*
27 Financial Data Schedule.*
* Filed herewith.
+ Management contract or compensation plan or arrangement.<PAGE>
Exhibit 10 (l)
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT dated as of the 1st day of November, 1990 (the
"Effective Date") as amended and restated as of January 25, 1995 (the
"Agreement") by and between INTEGRA FINANCIAL CORPORATION, a Pennsylvania
corporation with its principal place of business at Pittsburgh,
Pennsylvania (the "Company"), and _________________________ (the
"Employee");
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interest of the Company and its
shareholders to assure that the Company will have the continued dedication
of the Employee, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board believes it
is imperative to diminish the inevitable distraction of the Employee by
virtue of the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Employee's full attention
and dedication to the Company currently and in the event of any threatened
or pending Change of Control, and to provide the Employee with compensation
and benefits arrangements upon a Change of Control which ensure that the
compensation and benefits expectations of the Employee will be satisfied
and which are competitive with those of other corporations. Therefore, in
order to accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties
hereto agree as follows:
* Term. The term of this Agreement shall commence on the
Effective Date hereof and expire on March 31, 1997, provided, however,
that, unless Employee's employment as been terminated, on April 1, 1996 and<PAGE>
on each subsequent annual anniversary thereof, the expiration date of this
Agreement shall be automatically extended for one additional year, provided
that neither party hereto has given written notice to the other party at
least thirty (30) days prior to such annual anniversary date of the desire
of that party not to have the Agreement so extended, and provided further
that if a Change of Control occurs during the term of this Agreement, the
expiration date of this Agreement shall be extended to the second
anniversary of the date of the consummation of the Change of Control.
Notwithstanding the foregoing, the Employee shall serve in said office(s)
at the pleasure of the Board, and the Employee may be removed from said
office(s) at any time with or without Cause (as hereinafter defined);
provided that such removal shall be without prejudice to any rights the
Employee may have to Salary and Benefits Continuation (as hereinafter
defined) hereunder.
* Change of Control. Change of Control shall mean any of
the following events (each of such events being herein referred to as a
"Change of Control"):
(a) The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a group
of purchasers, other than to a corporation with respect to which,
following such sale or disposition, more than eighty percent (80%)
of, respectively, the then outstanding shares of Company common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the Board is
then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Company common
stock and the combined voting power of the then outstanding voting
securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the<PAGE>
outstanding Company common stock and voting power immediately prior
to such sale or disposition;
(b) The acquisition in one or more transactions by any person
or group, directly or indirectly, of beneficial ownership of twenty
percent (20%) or more of the outstanding shares of Company common
stock or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of the Board; provided however, that any acquisition by (x) the
Company or any of its subsidiaries, or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
subsidiaries or (y) any person that is eligible, pursuant to Rule
13d-1(b) under the Exchange Act (as such rule is in effect as of
January 1, 1995), to file a statement on Schedule 13G with respect to
its beneficial ownership of Company common stock and other voting
securities whether or not such person shall have filed a statement on
Schedule 13G, unless such person shall have filed a statement on
Schedule 13D with respect to beneficial ownership of fifteen percent
(15%) or more of the Company's voting securities, shall not
constitute a Change of Control;
(c) The Company's termination of its business and liquidation
of its assets;
(d) The reorganization, merger or consolidation of the
Company into or with another person or entity, by which
reorganization, merger or consolidation the persons who held one
hundred percent (100%) of the voting securities of the company prior
to such reorganization, merger or consolidation receive or continue
to hold less than fifty percent (50%) of the outstanding voting
shares of the new or continuing corporation; or
(e) If, during any two-year period, less than a majority of
3<PAGE>
the members of the Board of Directors are persons who were either (i)
nominated or recommended for election by at least two-thirds vote of
the persons who were members of the Board of Directors or Nominating
Committee of the Board of Directors at the beginning of the period,
or (ii) elected by at least a two-thirds vote of the persons who were
members of the Board of Directors at the beginning of the period.
* Salary and Benefits Continuation. "Salary and Benefits
Continuation" shall be defined to mean the continued payment of salary and
medical and dental (if applicable) benefits (not including applicable
Employee co-payments, if any, existing immediately prior to the Change of
Control) for the Employee and his/her eligible dependents in effect
immediately before the Change of Control for the twenty-four (24) month
period following Employee's termination of employment in connection with a
Change of Control as described above. (In the event that medical and
dental benefits cannot be provided under appropriate group insurance
policies, an amount equal to the premium necessary for the Employee to
purchase directly the same level of coverage in effect immediately prior to
the Change of Control will be added to the monthly salary payment.) If
there is a Change of Control as defined above, the Company will provide
Salary and Benefits Continuation if at any time during the first twenty-
four (24) months following the consummation of a Change of Control, either
(i) the Company terminates the Employee's employment other than for Cause
as defined in Section 4 below or (ii) the Employee terminates his/her
employment for Good Reason, which is defined as:
Material breach of any provision of this Agreement by the
Company, which breach shall not have been cured by the Company within
thirty (30) days of the Company's receipt from the Employee or
his/her agent of written notice specifying in reasonable detail the
nature of the Company's breach;
4<PAGE>
(a) Change in the Employee's location outside of the
Pittsburgh metropolitan area without the Employee's prior written
consent;
(b) The assignment to the Employee of any duties inconsistent
in any material respect with the Employee's position (including
status and reporting requirements), authority, duties, powers or
responsibilities or any other action by the Company which results in
a material diminution of such position, authority, duties, powers or
responsibilities, excluding for this purpose any isolated,
insubstantial action by the Company not taken in bad faith and which
is remedied by the Company within thirty (30) days after receipt of
written notice from the Employee to the Company; provided, however,
that any diminution in the Employee's position, authority, duties,
powers or responsibilities solely as a result of a change in the
Company's relative position in an overall organization (e.g.,
Employee's position changes from executive of parent corporation to
executive with substantially similar duties, powers and
responsibilities within a corporation which is only one of multiple
subsidiaries in a larger organization) following a Change of Control
shall not constitute Good Reason; or
(c) Reduction in the Employee's salary or a material
reduction in the overall level of Employee's benefits and other
compensation.
The Employee's right to Salary and Benefits Continuation shall accrue upon
the occurrence of either of the events specified in (i) or (ii) of the
preceding sentence and shall continue as provided, notwithstanding the
subsequent expiration of this Agreement pursuant to Section 1 hereof. The
Employee's subsequent death or disability within the twenty-four month
period following the Employee's termination of employment in connection
5<PAGE>
with a Change of Control shall not affect the Company's obligation to
continue making Salary and Benefits Continuation payments. The Employee
shall not be required to mitigate the amount of any payment provided for in
this Section 3 by seeking employment or otherwise. The rights to Salary
and Benefits Continuation shall be in addition to whatever other benefits
the Employee may be entitled to under any other agreement or employee
benefit plan of the Company. The Company shall be authorized to withhold
from any payment to the Employee, his estate or his beneficiaries hereunder
all such amounts, if any, that the Company may reasonably determine it is
required to withhold pursuant to any applicable law or regulation.
* Termination of Employee for Cause. Upon or following a
Change of Control, the Company may at any time terminate the Employee's
employment for Cause. In such event, the Company shall give to the
Employee prompt notice specifying in reasonable detail the basis for such
termination. For purposes of this Agreement, "Cause" shall mean any of the
following by the Employee:
(a) Material breach of any material provision of this
Agreement, which breach Employee shall have failed to cure within
thirty (30) days after Employee's receipt of written notice from the
Company specifying in reasonable detail the specific nature of
Employee's breach;
(b) Willful misconduct of the Employee that is materially
inimical to the best interests, monetary or otherwise, of the
Company;
(c) Conviction of a felony or conviction of any crime
involving moral turpitude, fraud or deceit; or
(d) Adjudication as a bankrupt under the Federal Bankruptcy
Code.
For purposes of this definition of "Cause, no act, or failure to act, on
6<PAGE>
the Employee's part shall be considered "willful" unless done, or omitted
to be done, by the Employee not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
* Prior Termination. Anything in this Agreement to the
contrary notwithstanding, if the Employee's employment with the Company is
terminated prior to the date on which a Change of Control occurs either
(i) by the Company other than for Cause or (ii) by the Employee for Good
Reason, and it is reasonably demonstrated that such termination of
employment (a) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (b) otherwise
arose in connection with or anticipation of the Change of Control, then for
all purposes of this Agreement the termination shall deemed to have
occurred upon a Change of Control and the Employee will be entitled to
Salary and Benefits Continuation as provided for in Section 3 hereof.
* Employment at Will. This Agreement contains the entire
understanding of the Company and the Employee with respect to the subject
matter hereof and, subject to the provisions of any other agreement between
the Employee and the Company, the Employee shall remain an employee at will
and nothing herein shall confer upon the Employee any right to continued
employment and shall not affect the right of the Company to terminate the
Employee for any reason not prohibited by law; provided, however, that any
such removal shall be without prejudice to any rights the Employee may have
to Salary and Benefits Continuation hereunder. Limitations Based on Age.
This Agreement shall expire, and the payment of Salary and Benefits
Continuation shall terminate on the last day of the month in which the
Employee reaches age 65; provided, however, that this Agreement shall not
expire and the Employee's right to Salary and Benefits Continuation shall
continue if such expiration or termination would violate any age or
employment discrimination law or regulation then in effect.
7<PAGE>
* Construction of Agreement
(a) Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of
reference only and shall not constitute a part of this Agreement.
* Covenant as to Confidential Information.
(a) Preamble. The Employee hereby acknowledges and agrees as
follows: (i) this Section 9 is necessary for the protection of the
legitimate business interests of the Company; (ii) the restrictions
contained in this Section 9 with regard to length of term and types
of restricted activities are reasonable; and (iii) the Employee's
expertise and capabilities are such that this obligation hereunder
and the enforcement hereof by injunction or otherwise will not
adversely affect the Employee's ability to earn a livelihood.
(b) Confidentiality of Information and Nondisclosure. The
Employee acknowledges and agrees that his employment by the Company
under this Agreement necessarily involves his knowledge of and access
to confidential and proprietary information pertaining to the
business of the Company and its subsidiaries. Accordingly, the
Employee agrees that at all times during the term of this Agreement
and for a period of two (2) years after the termination of the
Employee's employment hereunder, he will not, directly or indirectly,
without the express written authority of the Company, unless directed
8<PAGE>
by applicable legal authority having jurisdiction over the Employee,
disclose to or use, or knowingly permit to be so disclosed or used,
for the benefit of himself, any person, corporation or other entity
other than the Company, (i) any information concerning any financial
matters, customer relationships, competitive status, supplier
matters, internal organizational matters, current or future plans, or
other business affairs of or relating to the Company and its
subsidiaries, (ii) any management, operational, trade, technical or
other secrets or any other proprietary information or other data of
the Company or its subsidiaries, or (iii) any other information
related to the Company or its subsidiaries or which the Employee
should reasonably believe will be damaging to the Company or its
subsidiaries which has not been published and is not generally known
outside of the Company. The Employee acknowledges that all of the
foregoing constitutes confidential and proprietary information, which
is the exclusive property of the Company.
(c) Company Remedies. The Employee acknowledges and agrees
that any breach of this Agreement by him will result in immediate and
irreparable harm to the Company, and that the Company cannot be
reasonably or adequately compensated by damages in an action at law.
In the event of an actual or threatened breach by the Employee of the
provisions of this Section 9, the Company shall be entitled, to the
extent permissible by law, immediately to cease to pay or provide the
Employee or his dependents any compensation or benefit being, or to
be, paid or provided to him pursuant to Section 3 of this Agreement,
and also to obtain immediate injunctive relief restraining the
Employee from conduct in breach or threatened breach of the covenants
contained in this Section 9. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to
9<PAGE>
it for such breach or threatened breach, including the recovery of
damages from the Employee.
* Resolution of Differences Over Breaches of Agreement.
Except as otherwise provided herein, in the event of any controversy,
dispute or claim arising out of, or relating to this Agreement, or the
breach thereof, or arising out of any other matter relating to the
Employee's employment with the Company or the termination of such
employment, the parties may seek recourse only for temporary or preliminary
injunctive relief to the courts having jurisdiction thereof and if any
relief other than injunctive relief is sought, the Company and the Employee
agree that such underlying controversy, dispute or claim shall be settled
by arbitration conducted in Pittsburgh, Pennsylvania in accordance with
this Section 10 of the Agreement and the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"). The matter shall be heard
and decided, and awards rendered by a panel of three (3) arbitrators (the
"Arbitration Panel"). The Company and the Employee shall each select one
arbitrator from the AAA National Panel of Commercial Arbitrators (the
"Commercial Panel") and the AAA shall select a third arbitrator from the
Commercial Panel. The award rendered by the Arbitration Panel shall be
final and binding as between the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment on the award may be
entered by any court having jurisdiction thereof.
* Release. The Employee hereby acknowledges and agrees
that prior to the occurrence of the Employee's or his dependents' right to
receive from the Company or any of its representatives or agents any
compensation or benefit to be paid or provided to him/her or his/her
dependents pursuant to Section 3 of this Agreement, the Employee may be
required by the Company, in its sole discretion, to execute a release in a
form reasonably acceptable to the Company, which releases any and all
10<PAGE>
claims the Employee has or may have against the Company or its
subsidiaries, agents, officers, directors, successors or assigns with
respect to matters relating to his or her employment and termination of
employment.
* Waiver. The waiver by a party hereto of any breach by
the other party hereto of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach by a party hereto.
* Assignment. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company, and the
Company shall be obligated to require any successor to expressly
acknowledge and assume its obligations hereunder. This Agreement shall
inure to the extent provided hereunder to the benefit of and be enforceable
by the Employee or his/her legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
The Employee may not delegate any of his/her duties, responsibilities,
obligations or positions hereunder to any person and any such purported
delegation by him/her shall be void and of no force and effect with respect
to matters relating to his/her employment and termination of employment.
* Notices. Any notices required or permitted to be given
under this Agreement shall be sufficient if in writing, and if personally
delivered or when sent by first-class certified or registered mail, postage
prepaid, return receipt requested -- in the case of the Employee, to
his/her residence address as set forth below, and in the case of the
Company, to the address of its principal place of business as set forth
below, in care of the Chairman of the Board -- or to such other person or
at such other address with respect to each party as such party shall notify
the other in writing.
* Entire Agreement. This Agreement contains the entire
agreement of the parties concerning the matters set forth herein and all
11<PAGE>
promises, representations, understandings, arrangements and prior
agreements on such subject are merged herein and superseded hereby. The
provisions of this Agreement may not be amended, modified, repealed,
waived, extended or discharged except by an agreement in writing signed by
the party against whom enforcement of any amendment, modification, repeal,
waiver, extension or discharge is sought. No person acting other than
pursuant to a resolution of the Board of Directors shall have authority on
behalf of the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference thereto
or to exercise any of the Company's rights to terminate or to fail to
extend this Agreement.
[SIGNATURES ON NEXT PAGE]
12<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his/her hand, all as of the day and year first above written.
ATTEST: INTEGRA FINANCIAL CORPORATION
By:
Address: Four PPG Place
Pittsburgh, PA 15222-5408
WITNESS:
(SEAL)
Address
13<PAGE>
LIST OF PERSONS WITH CHANGE IN CONTROL AGREEMENTS
W.J. Burt
G.B. Cook
G.W. Deschamps
T.L. Doolin
T.W. Golonski
J.T. McGregor
S.G. Hartle
R.B. Mahany
R.C. Mercer
P.N. Smocer
R.H. Stevenson
D.K. Stuart
J.D. Walsh
G.E. Wolbert
M.A. York
14<PAGE>
Exhibit 10(o)
CONSULTING AGREEMENT
THIS AGREEMENT, made by and between Integra Financial Corporation, a
Pennsylvania corporation (the "Corporation"), and William F. Roemer (the
"Executive") dated the ____ day of August, 1995.
WHEREAS, the Corporation has entered into an Agreement and Plan of
Merger (the "Merger Agreement") with National City Corporation, a Delaware
corporation of even date herewith;
WHEREAS, the Executive has served as Chairman and Chief Executive
Officer of the Corporation, and has gained significant and valuable
knowledge and experience with respect to the Corporation in such
capacities; and
WHEREAS, the Executive and the Corporation have entered into an
Employment Agreement dated as of the 25th day of January, 1995 (the "Prior
Agreement"); and
WHEREAS, the Corporation wishes to provide for the continued
involvement of the Executive in the business of the Corporation following
the consummation of the Merger (as such term is defined in the Merger
Agreement) and the Executive desires to perform such services;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
provisions herein contained, the Executive and the Corporation agree with
each other as follows:
(i) Consulting Period. The Corporation hereby retains the Executive
as a consultant for the period commencing on the Effective Date (as such
term is defined in the Merger Agreement) and ending on the date on which
the Executive attains the age of 65 (the "Consulting Period") during which
time the Executive shall be available to aid the Corporation in the
transition period following the acquisition of the Corporation with respect<PAGE>
to (a) general corporate and personnel organizational matters; (b) the
retention of employees and employee relations; (c) the retention of
customers; and (d) cost reduction and organizational efficiencies. For
purposes of the Prior Agreement, the Executive shall be deemed to have
terminated his employment with the Corporation immediately after the Merger
in a manner qualifying him for the benefits set forth in Section 6(d) of
the Prior Agreement. Except as specifically provided herein, this
Agreement shall not affect the Executive's rights under the Prior
Agreement.
(ii) Consulting Fee and Office Space. In consideration of the
services and duties agreed to be rendered and performed by the Executive
hereunder, the Corporation hereby covenants and agrees to pay the Executive
a monthly consulting fee at the rate of one-twelfth of two hundred twenty-
five thousand dollars ($225,000). The Corporation shall provide the
Executive with office space and secretarial assistance in Pittsburgh,
Pennsylvania reasonably acceptable to the Executive for the duration of the
Consulting Period. Further, the Executive shall be entitled to post-
retirement welfare benefits no less favorable than those in effect, in his
capacity as Chief Executive Officer of the Corporation, as of the date
hereof.
(iii) Change in Control Payment. Upon consummation of the Merger,
the Corporation shall immediately pay to the Executive the termination
benefits, including the continuation of the benefits described in Section
6(a)(3), provided by the Prior Agreement as if the Executive had been
terminated by the Corporation as a result of a Change in Control pursuant
to Section 6(d) and Section 8 thereof whether or not the Executive is then
employed by the Corporation and regardless of the reason for any such
cessation of employment.<PAGE>
(iv) Termination.
* Subject to Section 4(b), during the Consulting Period the
Corporation may not terminate the Executive's consulting services other
than for "Cause." For purposes of this Agreement, Cause means either:
* Conviction of a felony involving moral turpitude; or
* Conduct willfully injurious to the Corporation.
* In addition to the foregoing, in the event that, during the
Consulting Period, the Corporation shall terminate the Executive's
consulting services (other than for Cause) without the Executive's written
consent, the Executive shall be entitled to receive a termination payment
equal to the balance of his consulting fees that would be payable if his
services had continued through the end of the Consulting Period.
(v) Full Settlement. The Corporation's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Corporation
may have against the Executive or others. In no event shall the Executive
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Corporation agrees to
pay as incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Corporation, the
Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the<PAGE>
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided for
in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended
(the "Code").
(vi) Certain Additional Payments. In the event it shall be
determined that any payment (within the meaning of Section 280G of the
Code) or distribution to or for the benefit of the Executive (determined
without regard to any additional payments required under this Section 6) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive from the
Corporation an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. All determinations under this Section 6 shall
be made by a nationally recognized accounting firm selected by the
Executive.
(vii) Non-exclusivity of Rights. Nothing in this Agreement shall
limit or otherwise affect such rights as the Executive may have under any
other agreements with, or plans or programs of, the Corporation or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the<PAGE>
Corporation or any of their affiliated companies at or subsequent to the
Effective Date, including, but not limited to, the Executive's entitlement
to severance under the Prior Agreement shall by payable in accordance with
such plan or program, except as otherwise expressly provided herein.
(viii) Successors.
* This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
* This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors.
* The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if
no such succession had taken place. As used in this Agreement,
"Corporation" shall mean the Corporation as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(ix) Miscellaneous.
* This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to the principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed<PAGE>
by the parties hereto or their respective successors and legal
representatives.
* All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
If to the Corporation:
Chief Executive Officer
Integra Financial Corporation
Four PPG Place
Pittsburgh, Pennsylvania 15222
with a copy to: General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
* The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
* The Corporation may withhold from any amounts payable under
this Agreement such amounts as shall be required to be withheld pursuant to
any applicable law or regulation.
* The Executive's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Corporation
has caused these presents to be executed in its name on its behalf, all as
of the day and year first above written.<PAGE>
William F. Roemer
INTEGRA FINANCIAL CORPORATION
By:<PAGE>
Exhibit 21
Subsidiaries of the Registrant
As of December 31, 1995
Name Jurisdiction of
Incorporation
Advent Guaranty Corporation Vermont
Advent Insurance Company Arizona
Altegra Credit Company Florida
Beaver County Insurance Agency, Inc. Pennsylvania
EQK Realty Holdings, Inc. Pennsylvania
Great Cascade Development Company, Inc. Pennsylvania
Hampton-Penn, Inc. Pennsylvania
Harva, Inc. Delaware
Herron Land Company Pennsylvania
Horsham Penn, Inc. Delaware
Integra Bank Pennsylvania
Integra Brokerage Services Company Pennsylvania
Integra Business Credit Company Pennsylvania
Integra Community Development Corp. Pennsylvania
Integra Holding Company Delaware
Integra Holdings Limited (Dormant) Delaware
Integra Investment Company Delaware
Integra Life Insurance Company Arizona
Integra Mortgage Company Pennsylvania
Integra Trust Company, National
Association United States
LBCC Properties, Inc. Delaware
Liberty Business Credit Corp. Pennsylvania
LSB Properties, Inc. Delaware
LTL Acquisition Corp. Delaware
Motor Garden, Inc. Delaware
New England AFC Massachusetts
Nottingham Corporation Pennsylvania
Palm Beach Hampton Corporation Florida
Perry's Landing Yacht Club, Inc. Pennsylvania
Pier West, Inc. Pennsylvania
Western Properties, Inc. Pennsylvania
Western Reserve Company Pennsylvania<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the
registration statements of Integra Financial Corporation and
subsidiaries on Forms S-8 (File No.'s 33-20844, 33-57232, 33-
88820 and 33-88822) and S-3 (File 33-20844) of our report
dated January 17, 1996, on our audit of the consolidated
financial statements of Integra Financial Corporation and
subsidiaries as of December 31, 1995 and 1994, and for the
years ended December 31, 1995, 1994 and 1993, which is
incorporated by reference in this Annual Report on the Form
10-K.
/s/ Coopers & Lybrand L.L.P.
Pittsburgh, Pennsylvania
January 26, 1996<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Integra Financial Corporation
and each person whose signature appears below constitutes and appoints
Charles R. Skillington and Robert H. Stevenson, jointly and severally, his
or her attorneys-in-fact, each with power of substitution, for him or her
in any and all capacities, to sign an Annual Report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal
year ended December 31, 1995, and any amendments thereto, and to file the
same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitutes, may
do or cause to be done by virtue hereof.
SIGNATURES TITLE
INTEGRA FINANCIAL CORPORATION Registrant
By: /s/ William F. Roemer
William F. Roemer
Chairman of the Board and
Chief Executive Officer
/s/ William F. Roemer Chairman of the Board and
William F. Roemer Chief Executive Officer
(Principal Executive Officer)
/s/ Gary E. Wolbert Executive Vice President
and
Gary E. Wolbert Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ James S. Beckwith, III Director
James S. Beckwith, III
/s/ James S. Broadhurst Director
James S. Broadhurst
/s/ Leonard M. Carroll Director
Leonard M. Carroll
/s/ Carl D. Doverspike Director
Carl D. Doverspike<PAGE>
/s/ James E. Feeney Director
James E. Feeney
/s/ William A. Freeman Director
William A. Freeman
/s/ Walter J. Greenleaf, Jr. Director
Walter J. Greenleaf, Jr.
/s/ Stanley R. Gumberg Director
Stanley R. Gumberg
/s/ John G. Koedel, Jr. Director
John G. Koedel, Jr.
/s/ Robert F. Patton Director
Robert F. Patton
/s/ Robert A. Paul Director
Robert A. Paul
/s/ Michael A. Schuler Director
Michael A. Schuler
/s/ Henry B. Suhr, Jr. Director
Henry B. Suhr, Jr.
/s/ Robert K. Wagner Director
Robert K. Wagner
/s/ Phillips Wiegand Director
Phillips Wiegand
/s/ Margot B. Woodwell Director
Margot B. Woodwell
Dated: January 24, 1996<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 358,856
<INT-BEARING-DEPOSITS> 54,786
<FED-FUNDS-SOLD> 10,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,395,334
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 8,096,155
<ALLOWANCE> (215,167)
<TOTAL-ASSETS> 14,345,972
<DEPOSITS> 10,380,459
<SHORT-TERM> 1,034,285
<LIABILITIES-OTHER> 248,200
<LONG-TERM> 1,268,120
0
0
<COMMON> 33,592
<OTHER-SE> 1,111,316
<TOTAL-LIABILITIES-AND-EQUITY> 14,345,972
<INTEREST-LOAN> 697,400
<INTEREST-INVEST> 354,941
<INTEREST-OTHER> 18,577
<INTEREST-TOTAL> 1,070,918
<INTEREST-DEPOSIT> 391,280
<INTEREST-EXPENSE> 563,658
<INTEREST-INCOME-NET> 507,260
<LOAN-LOSSES> 16,000
<SECURITIES-GAINS> 18,289
<EXPENSE-OTHER> 462,224
<INCOME-PRETAX> 178,564
<INCOME-PRE-EXTRAORDINARY> 178,564
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,390
<EPS-PRIMARY> 3.88
<EPS-DILUTED> 3.88
<YIELD-ACTUAL> 3.86
<LOANS-NON> 62,727
<LOANS-PAST> 26,069
<LOANS-TROUBLED> 26
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 237,433
<CHARGE-OFFS> (56,954)
<RECOVERIES> 16,238
<ALLOWANCE-CLOSE> 215,167
<ALLOWANCE-DOMESTIC> 215,167
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 73,740
</TABLE>
