UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ------------------------
Commission file number 1-10683
---------------------------------------------------------
MBNA Corporation
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1713008
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Wilmington, DE 19884
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(800) 362-6255
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
---------- ----------
Common Stock, $.01 Par Value -- 222,750,000 Shares
Outstanding as of September 30, 1996
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
Table of Contents
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition - 1
September 30, 1996 (unaudited) and December 31, 1995
Consolidated Statements of Income - 3
For the Three and Nine Months Ended September 30, 1996 and 1995
(unaudited)
Consolidated Statements of Changes in Stockholders' Equity - 5
For the Nine Months Ended September 30, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows - 7
For the Nine Months Ended September 30, 1996 and 1995 (unaudited)
Notes to the Consolidated Financial Statements (unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition 12
and Results of Operations
Supplemental Financial Information 34
Part II - Other Information
Item 1. Legal Proceedings 36
Item 6. Exhibits and Reports on Form 8-K 36
Signature 40
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(dollars in thousands)
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
ASSETS
Cash and due from banks.......................... $ 367,613 $ 291,856
Interest-earning time deposits in other banks.... 517,298 448,611
Federal funds sold and securities purchased
under resale agreements......................... 240,000 125,000
Investment securities:
Available-for-sale (at market value, amortized
cost of $1,332,874 and $911,877 at
September 30, 1996 and December 31, 1995,
respectively)................................. 1,333,873 912,064
Held-to-maturity (market value of $868,018
and $1,188,101 at September 30, 1996 and
December 31, 1995, respectively).............. 875,581 1,183,727
Loans held for securitization.................... 2,822,022 3,168,427
Loans:
Credit card.................................... 4,896,703 4,090,553
Other consumer................................. 1,406,324 876,938
------------- -------------
Total loans.................................. 6,303,027 4,967,491
Reserve for possible credit losses............. (117,788) (104,886)
------------- -------------
Net loans.................................... 6,185,239 4,862,605
Premises and equipment, net...................... 976,184 816,277
Accrued income receivable........................ 101,060 93,636
Accounts receivable from securitizations......... 1,504,948 951,568
Prepaid expenses and deferred charges............ 185,289 139,901
Other assets..................................... 453,128 235,217
------------- -------------
Total assets................................. $ 15,562,235 $ 13,228,889
============= =============
<PAGE>
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
LIABILITIES
Deposits:
Time deposits.................................. $ 6,762,918 $ 6,147,599
Money market deposit accounts.................. 2,624,945 2,257,565
Noninterest-bearing demand deposits............ 229,385 169,571
Interest-bearing transaction accounts.......... 22,079 24,514
Savings accounts............................... 10,221 9,665
------------- -------------
Total deposits............................... 9,649,548 8,608,914
Short-term borrowings............................ 408,260 289,543
Long-term debt and bank notes.................... 3,382,469 2,657,600
Accrued interest payable......................... 110,205 93,400
Accrued expenses and other liabilities........... 406,690 314,374
------------- -------------
Total liabilities............................ 13,957,172 11,963,831
STOCKHOLDERS' EQUITY
Preferred stock($.01 par value, 20,000,000
shares authorized, 12,000,000 shares and
6,000,000 shares issued and outstanding at
September 30, 1996 and December 31, 1995,
respectively)................................... 120 60
Common stock ($.01 par value, 700,000,000 shares
authorized, 222,750,000 shares issued and
outstanding at September 30, 1996 and
December 31, 1995).............................. 2,228 2,228
Additional paid-in capital....................... 621,839 491,735
Retained earnings................................ 980,876 771,035
------------- -------------
Total stockholders' equity................... 1,605,063 1,265,058
------------- -------------
Total liabilities and stockholders' equity... $ 15,562,235 $ 13,228,889
============= =============
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(dollars in thousands, except per share amounts)
(unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
INTEREST INCOME
Loans........................... $ 229,479 $ 179,876 $ 610,200 $ 468,438
Investment securities:
Taxable....................... 30,510 29,862 90,288 88,090
Tax-exempt.................... 815 804 2,477 2,440
Time deposits in other banks.... 5,939 6,183 20,996 8,442
Federal funds sold and
securities purchased under
resale agreements.............. 3,188 1,372 6,004 4,032
Loans held for securitization... 81,889 81,539 265,972 256,936
---------- ---------- ----------- -----------
Total interest income........ 351,820 299,636 995,937 828,378
INTEREST EXPENSE
Deposits........................ 132,958 117,261 381,257 318,702
Short-term borrowings........... 7,654 3,232 12,314 10,033
Long-term debt and bank notes... 50,303 40,724 140,136 103,678
---------- ---------- ----------- -----------
Total interest expense....... 190,915 161,217 533,707 432,413
---------- ---------- ----------- -----------
NET INTEREST INCOME............. 160,905 138,419 462,230 395,965
Provision for possible credit
losses......................... 35,273 37,361 133,873 99,462
---------- ---------- ----------- -----------
Net interest income after
provision for possible credit
losses......................... 125,632 101,058 328,357 296,503
OTHER OPERATING INCOME
Interchange..................... 24,001 23,129 66,367 66,485
Merchant discount............... 2,298 2,051 6,482 5,991
Credit card fees................ 26,617 22,795 78,697 61,642
Loan servicing fees............. 410,857 329,348 1,129,728 848,739
Processing fees................. 798 5,668 9,182 17,820
Gain on investments............. - 39 - 39
Other........................... 7,777 5,987 23,501 18,134
---------- ---------- ----------- -----------
Total other operating income. $ 472,348 $ 389,017 $ 1,313,957 $ 1,018,850
<PAGE>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
OTHER OPERATING EXPENSE
Salaries and employee benefits.. $ 195,558 $ 148,999 $ 536,684 $ 408,251
Occupancy expense of premises... 18,010 12,440 48,387 32,139
Furniture and equipment expense. 24,497 21,808 69,757 60,192
Other........................... 145,473 145,716 449,262 412,641
---------- ---------- ----------- -----------
Total other operating
expense..................... 383,538 328,963 1,104,090 913,223
---------- ---------- ----------- -----------
Income before income taxes and
special marketing program...... 214,442 161,112 538,224 402,130
Special marketing program....... - - 54,331 -
---------- ---------- ----------- -----------
Income before income taxes...... 214,442 161,112 483,893 402,130
Applicable income taxes......... 84,919 63,785 191,621 159,243
Tax benefit from Customer-based
intangible assets.............. - - (32,793) -
---------- ---------- ----------- -----------
NET INCOME...................... $ 129,523 $ 97,327 $ 325,065 $ 242,887
========== ========== =========== ===========
EARNINGS PER COMMON SHARE....... $ .55 $ .42 $ 1.38 $ 1.07
Weighted average common shares
outstanding and common stock
equivalents (000).............. 230,326 229,155 230,088 227,897
===============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(dollars in thousands, except per share amounts)
(unaudited)
Outstanding Shares
------------------
Preferred Common Preferred Common
(000) (000) Stock Stock
--------- -------- --------- --------
BALANCE, DECEMBER 31, 1995........... 6,000 222,750 $ 60 $ 2,228
Net income........................... - - - -
Cash dividends:
Common-$.48 per share.............. - - - -
Preferred.......................... - - - -
Exercise of stock options and other
awards.............................. - 1,529 - 15
Acquisition and retirement of common
stock............................... - (1,529) - (15)
Issuance of preferred stock, net of
issuance costs...................... 6,000 - 60 -
Foreign currency translation, net of
tax (accumulated amount of $271
at September 30, 1996).............. - - - -
Net unrealized gains on investment
securities available-for-sale, net
of tax (accumulated amount of $691
at September 30, 1996).............. - - - -
--------- -------- --------- --------
BALANCE, SEPTEMBER 30, 1996.......... 12,000 222,750 $ 120 $ 2,228
========= ======== ========= ========
BALANCE, DECEMBER 31, 1994........... - 222,750 $ - $ 2,228
Net income........................... - - - -
Cash dividends:
Common-$.42 per share.............. - - - -
Exercise of stock options and other
awards.............................. - 1,573 - 16
Acquisition and retirement of common
stock............................... - (1,573) - (16)
Foreign currency translation, net of
tax (accumulated amount of $705
at September 30, 1995).............. - - - -
Net unrealized gains on investment
securities available-for-sale, net
of tax (accumulated amount of $20
at September 30, 1995).............. - - - -
--------- -------- --------- --------
BALANCE, SEPTEMBER 30, 1995.......... - 222,750 $ - $ 2,228
========= ======== ========= ========
<PAGE>
Additional Total
Paid-in Retained Stockholders'
Capital Earnings Equity
---------- ---------- -------------
BALANCE, DECEMBER 31, 1995........... $ 491,735 $ 771,035 $ 1,265,058
Net income........................... - 325,065 325,065
Cash dividends:
Common-$.48 per share.............. - (106,935) (106,935)
Preferred.......................... - (8,671) (8,671)
Exercise of stock options and other
awards.............................. 29,187 - 29,202
Acquisition and retirement of common
stock............................... (45,230) - (45,245)
Issuance of preferred stock, net of
issuance costs....................... 146,147 - 146,207
Foreign currency translation, net of
tax (accumulated amount of $271
at September 30, 1996).............. - (120) (120)
Net unrealized gains on investment
securities available-for-sale, net
of tax (accumulated amount of $691
at September 30, 1996).............. - 502 502
---------- ---------- -------------
BALANCE, SEPTEMBER 30, 1996.......... $ 621,839 $ 980,876 $ 1,605,063
========== ========== =============
BALANCE, DECEMBER 31, 1994........... $ 374,345 $ 543,005 $ 919,578
Net income........................... - 242,887 242,887
Cash dividends:
Common-$.42 per share.............. - (93,582) (93,582)
Exercise of stock options and other
awards.............................. 20,023 - 20,039
Acquisition and retirement of common
stock............................... (33,713) - (33,729)
Foreign currency translation, net of
tax (accumulated amount of $705
at September 30, 1995).............. - 462 462
Net unrealized gains on investment
securities available-for-sale, net
of tax (accumulated amount of $20
at September 30, 1995).............. - 852 852
---------- ---------- -------------
BALANCE, SEPTEMBER 30, 1995.......... $ 360,655 $ 693,624 $ 1,056,507
========== ========== =============
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
For the Nine Months Ended
September 30,
--------------------------
1996 1995
----------- -----------
OPERATING ACTIVITIES
Net income......................................... $ 325,065 $ 242,887
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Provision for possible credit losses............ 133,873 99,462
Depreciation, amortization, and accretion....... 68,689 49,478
Gain on investment securities................... - (39)
Provision for deferred income taxes............. (51,427) 19,672
Increase in accrued income receivable........... (7,424) (23,803)
Increase in accrued interest payable............ 16,805 29,283
Increase in accounts receivable from
securitizations................................ (553,380) (203,886)
Decrease in other operating activities.......... 28,092 32,425
----------- -----------
Net cash (used for) provided by operating
activities................................... (39,707) 245,479
INVESTING ACTIVITIES
Proceeds from maturities of investment securities
available-for-sale................................ 2,979,329 2,390,108
Proceeds from sale of investment securities
available-for-sale................................ - 32,840
Purchases of investment securities
available-for-sale................................ (3,387,066) (2,696,633)
Proceeds from maturities of investment securities
held-to-maturity ................................. 315,851 214,746
Purchases of investment securities
held-to-maturity.................................. (7,563) (16,053)
Net increase in money market instruments........... (183,687) (682,726)
Proceeds from securitization of loans.............. 8,001,753 4,934,254
Portfolio acquisitions............................. (1,263,460) (14,919)
Amortization of securitized loans.................. (1,108,334) (562,500)
Net loan originations.............................. (6,902,517) (5,889,947)
Net purchases of premises and equipment............ (216,175) (252,986)
----------- -----------
Net cash used for investing activities........ $(1,771,869) $(2,543,816)
<PAGE>
For the Nine Months Ended
September 30,
--------------------------
1996 1995
----------- -----------
FINANCING ACTIVITIES
Net increase in money market deposit accounts,
noninterest-bearing demand deposits,
interest-bearing transaction accounts,
and savings accounts.............................. $ 425,315 $ 570,036
Net increase in time deposits...................... 615,319 1,026,451
Net increase in short-term borrowings.............. 118,717 146,115
Proceeds from issuance of long-term debt
and bank notes.................................... 812,341 890,410
Maturity of long-term debt and bank notes.......... (93,192) (70,000)
Proceeds from issuance of preferred stock.......... 146,207 -
Proceeds from exercise of stock options
and other awards.................................. 17,878 11,884
Acquisition and retirement of common stock......... (45,245) (33,729)
Dividends paid..................................... (110,007) (89,101)
----------- -----------
Net cash provided by financing activities..... 1,887,333 2,452,066
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS.............. 75,757 153,729
Cash and cash equivalents at beginning of period... 291,856 158,564
----------- -----------
Cash and cash equivalents at end of period......... $ 367,613 $ 312,293
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest expense paid.............................. $ 516,756 $ 404,775
=========== ===========
Income taxes paid.................................. $ 164,956 $ 131,329
=========== ===========
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of MBNA
Corporation ("the Corporation") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete consolidated financial statements.
For purposes of comparability, certain prior period amounts have been
reclassified. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended
September 30, 1996, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. The notes to the consolidated
financial statements contained in the Annual Report on Form 10-K for the year
ended December 31, 1995 should be read in conjunction with these consolidated
financial statements.
NOTE B: EARNINGS PER COMMON SHARE
Earnings per common share are computed using net income applicable to
common stock and the weighted average number of common shares outstanding
during the period after consideration of the dilutive effect of stock options.
On October 15, 1996, the Board of Directors approved a three-for-two split
of the Corporation's Common Stock, effected in the form of a dividend, to be
issued on January 1, 1997, to stockholders of record as of December 16, 1996.
Common shares and per common share data have not been restated to reflect this
stock split.
For comparative purposes, earnings per common share and weighted average
common shares outstanding and common stock equivalents have been restated to
reflect the three-for-two split of the Corporation's Common Stock, effected in
the form of a dividend, issued February 16, 1996, to stockholders of record as
of February 2, 1996.
NOTE C: CORPORATION'S CHARTER AMENDMENT
On April 22, 1996, the stockholders of the Corporation approved an
amendment to the Corporation's charter to increase the number of authorized
shares of Common Stock from 390 million shares to 700 million shares. This
amendment became effective May 3, 1996.
<PAGE>
NOTE D: LONG-TERM DEBT AND BANK NOTES
Long-term debt and bank notes consist of borrowings having an original
maturity of one year or more. During the nine months ended September 30, 1996,
the Corporation issued $710.0 million of long-term debt and bank notes
consisting of the following:
Par Value
---------
(dollars in thousands)
Floating-Rate Medium-Term Bank Notes, priced between
10 and 30 basis points over the three-month London
Interbank Offered Rate (LIBOR), payable quarterly,
maturing in varying amounts from 1999 to 2001......... $510,000
Floating-Rate Senior Medium-Term Notes, priced between
15 and 32 basis points over the three-month LIBOR,
payable quarterly, maturing from 1998 to 2001........ 200,000
In addition, the Corporation, through MBNA International Bank Limited, a
foreign bank subsidiary located in the United Kingdom, drew down 10.0 million
pounds sterling (approximately $15.3 million) from an existing bilateral credit
facility. This draw was priced at 22.5 basis points over the six-month
Sterling LIBOR, payable semi-annually, and is scheduled to mature in 1997.
MBNA International Bank Limited also drew down 60.0 million pounds sterling
(approximately $91.6 million) from an existing revolving credit facility which
was subsequently repaid.
NOTE E: PREFERRED STOCK
On September 23, 1996, the Corporation issued 6.0 million shares of
Adjustable Rate Cumulative Preferred Stock, Series B, with a $25 stated value
per share. Dividends on the Series B Preferred Stock are cumulative from the
date of original issue and are payable quarterly in arrears on January 15,
April 15, July 15, and October 15 of each year, commencing on October 15, 1996.
The dividend rate for the initial dividend period from September 23, 1996 to
October 15, 1996 was 7.0% per annum. Thereafter, the dividend rate for any
dividend period will be equal to 99.0% of the highest of the Treasury Bill
Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity
Rate, as determined in advance of such dividend period, but not less than 5.5%
per annum or more than 11.5% per annum. The amount of dividends payable in
respect of the Series B Preferred Stock will be adjusted in the event of
certain amendments to the Internal Revenue Code of 1986 (the "Code") with
respect to the dividends-received deduction. The shares of the Series B
Preferred Stock are redeemable, in whole or in part, solely at the option of
the Corporation on or after October 15, 2001, at a price of $25 per share, plus
accrued and unpaid dividends. The Series B Preferred Stock may also be
redeemed in whole, at the option of the Company, in the event of certain
amendments to the Code with respect to the dividends-received deduction.
Shares of series preferred stock are not convertible into any other
securities of the Corporation. The series preferred stock will not be entitled
to the benefits of any sinking fund. All preferred shares rank senior to
common shares both as to dividends and liquidation preference, but have no
general voting rights. In the event that the equivalent of six full quarterly
<PAGE>
dividend periods are in arrears, the holders of the outstanding shares of
preferred stock (voting as a single class) will be entitled to vote for the
election of two additional directors to serve until all dividends in arrears
have been paid in full.
On July 11, 1996, the Board of Directors declared a quarterly dividend of
$.46875 per share on the 7 1/2% Cumulative Preferred Stock, Series A. The
dividend is payable October 15, 1996 to stockholders of record as of
September 30, 1996. This brings the dividends per share for Series A for the
nine months ended September 30, 1996 to $1.40625.
On September 24, 1996, the Board of Directors declared a quarterly
dividend of $.1069 per share on the Adjustable Rate Cumulative Preferred Stock,
Series B payable on October 15, 1996, to stockholders of record as of
September 30, 1996.
In addition, on October 15, 1996, the Board of Directors declared a
quarterly dividend of $.46875 per share on the 7 1/2% Cumulative Preferred
Stock, Series A and a quarterly dividend of $.4269 per share on the Adjustable
Rate Cumulative Preferred Stock, Series B. Both dividends are payable on
January 15, 1997, to stockholders of record as of December 31, 1996.
NOTE F: SPECIAL MARKETING PROGRAM
During the nine months ended September 30, 1996, the Corporation charged
$32.8 million net of tax ($54.3 million pre-tax) to earnings related to the
launch of the MBNA Platinum Plus Visa and Mastercard program. This item was
recognized by the Corporation during the three months ended March 31, 1996.
NOTE G: TAX BENEFIT FROM CUSTOMER-BASED INTANGIBLE ASSETS
Net income for the nine months ended September 30, 1996, includes a $32.8
million tax benefit. As previously described in the Corporation's annual
reports to stockholders, the Corporation acquired Customer-based intangible
assets in connection with its 1991 initial public offering. The Corporation
did not initially recognize, for financial statement purposes, any tax benefit
related to those assets because there were uncertainties concerning the tax
treatment of such assets. During the second quarter of 1993, the U.S. Supreme
Court in the "Newark Morning Ledger" case affirmed that Customer-based
intangible assets may be amortized for tax purposes and the Corporation
recognized $89.8 million of the tax benefit related to the Customer-based
intangible assets. During the first quarter of 1996, the Internal Revenue
Service completed an audit of the Corporation's 1991 and 1992 tax returns and
entered into a final agreement with the Corporation regarding the tax treatment
of the intangible assets. As a result, the Corporation recognized the
remaining amount of the tax benefit relating to the intangible assets in the
first quarter of $32.8 million.
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion is intended to further the reader's understanding of the
consolidated financial condition and results of operations of MBNA Corporation
("the Corporation"). It should be read in conjunction with the consolidated
financial statements, notes, and tables included elsewhere in this report.
INTRODUCTION
MBNA Corporation, a bank holding company, is the parent company of MBNA
America Bank, N.A. ("the Bank"), a national bank. Through the Bank, the
Corporation is one of the world's largest bank credit card lenders and is the
leading issuer of affinity credit cards marketed primarily to members of
associations and Customers of financial institutions. In addition to its
credit card lending, the Corporation also offers other consumer loans and
various deposit products.
The Corporation generates interest and other income through finance
charges assessed on outstanding loan receivables, interchange income, merchant
discount fees, credit card fees, loan servicing fees, processing fees, and
interest earned on investment securities and money market instruments. The
Corporation's primary costs are the costs of funding its loan receivables and
investment securities, which include interest paid on deposits, short-term
borrowings, and long-term debt and bank notes; credit losses; royalties paid to
affinity groups and financial institutions; business development and operating
expenses; and income taxes.
On October 15, 1996, the Board of Directors approved a three-for-two split
of the Corporation's Common Stock. This will be effected in the form of a
dividend, with one additional share of common stock to be issued on
January 1, 1997, for every two common shares held by stockholders of record as
of the close of business on December 16, 1996. Common share and per common
share data have not been restated to reflect this stock split.
On January 17, 1996, the Board of Directors approved a three-for-two split
of the Corporation's Common Stock effected in the form of a dividend. In
connection with this transaction, one additional share of common stock was
issued on February 16, 1996, for every two common shares held by stockholders
of record as of the close of business on February 2, 1996. Accordingly, all
common share and per common share data have been restated to reflect the stock
split.
EARNINGS SUMMARY
Net income for the three and nine months ended September 30, 1996 was
$129.5 million and $325.1 million, or $.55 per common share and $1.38 per
common share, increasing 33.1% and 33.8% from $97.3 million and $242.9 million
or $.42 per common share and $1.07 per common share for the same periods in
1995, respectively. Earnings per common share is computed using weighted
<PAGE>
average common shares outstanding, including common stock equivalents, of 230.3
million shares and 230.1 million shares for the three and nine months ended
September 30, 1996 and 229.2 million shares and 227.9 million shares for the
same periods in 1995, respectively.
The overall growth in earnings was primarily attributable to the growth in
managed loans outstanding. Total managed loans at September 30, 1996 were
$34.7 billion, a $4.2 billion increase from June 30, 1996 and an $8.0 billion
increase since December 31, 1995. The Corporation's average managed loans
increased 37.3% and 37.4% to $32.5 billion and $29.5 billion for the three and
nine months ended September 30, 1996, compared to $23.7 billion and $21.5
billion for the same periods in 1995, respectively. The increase in managed
loans also includes portfolio acquisitions. Included in managed loans are the
Corporation's loans held for securitization, loan portfolio, and securitized
loans.
The Corporation continues to be an active participant in the asset
securitization market. Securitizations leave net income substantially the same
by converting interest income, interchange, and other fees in excess of
interest paid to Certificateholders; credit losses; and other trust expenses
into loan servicing fees, while reducing the Corporation's on-balance-sheet
assets. During the three and nine months ended September 30, 1996, the
Corporation securitized approximately $3.7 billion and $8.0 billion of loan
receivables bringing the total amount of outstanding securitized loans to $25.6
billion as of September 30, 1996.
Return on average total assets for the three and nine months ended
September 30, 1996, was 3.44% and 3.10%, compared to 3.20% and 2.92% for the
same periods during 1995, respectively. The higher returns are primarily a
result of a 33.1% and 33.8% increase in net income. These increases in net
income exceeded the 24.2% and 26.1% increases in the Corporation's average
total assets for the three and nine months ended September 30, 1996,
respectively. Return on average stockholders' equity for the three and nine
months ended September 30, 1996, was 37.26% and 33.24%, compared to 38.78% and
34.00% for the same periods in 1995, respectively. The lower returns are
primarily a result of an increase in average stockholders' equity related to
the Corporation's issuance of $150.0 million of 7 1/2% Cumulative Preferred
Stock, Series A, in November 1995 and $150.0 million of Adjustable Rate
Cumulative Preferred Stock, Series B, in September 1996.
NET INTEREST INCOME
Net interest income for the three and nine months ended September 30,
1996, on a fully taxable equivalent basis, was $161.3 million and $463.6
million, respectively, compared to $138.9 million and $397.3 million for the
same periods in 1995. The increases in net interest income for the three and
nine months ended September 30, 1996 are primarily a result of an increase in
average interest-earning assets of $1.9 billion for both periods, partially
offset by an increase of $2.3 billion and $2.4 billion in average interest-
bearing liabilities for the same periods. The increase in interest-earning
assets during the three months ended September 30, 1996 was a result of
increases in average investment securities and money market instruments of
$284.2 million and average loan receivables of $1.6 billion, while the increase
in interest-earning assets for the nine months ended September 30, 1996 was due
<PAGE>
to an increase in average investment securities and money market instruments of
$485.0 million and average loan receivables of $1.5 billion, respectively. The
increase in interest-bearing liabilities during these periods resulted
primarily from funding the increases in interest-earning assets.
The net interest margin, on a fully taxable equivalent basis, was 5.39%
and 5.51% for the three and nine months ended September 30, 1996, compared to
5.48% and 5.71% for the same periods in 1995, respectively.
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
Interest income earned on investment securities and money market
instruments, on a fully taxable equivalent basis, increased $2.2 million and
$16.8 million for the three and nine months ended September 30, 1996, as
compared to the same periods in 1995, respectively. The increase for the three
months ended September 30, 1996 is a result of an increase of $180.7 million in
average money market instruments and an increase of $103.5 million in average
investment securities when compared to the same period in 1995. The increase
for the nine months ended September 30, 1996 is primarily the result of
increases of $377.3 million in average money market instruments and $107.7
million in average investment securities from the same period in 1995. The
increases are the result of the timing of receipt of funds from asset
securitizations. Funds received from these securitizations are typically
invested in money market instruments and investment securities available-for-
sale until they are needed to fund loan growth. The increases in interest
income earned on investment securities and money market instruments were
partially offset by a decline of 27 basis points and 24 basis points in the
yields earned on the Corporation's investment securities and money market
instruments for the three and nine months ended September 30, 1996, as compared
to the same periods in 1995, respectively.
LOAN RECEIVABLES
Interest income generated by the Corporation's loan receivables increased
$50.0 million and $150.8 million to $311.4 million and $876.2 million for the
three and nine months ended September 30, 1996, as compared to the same periods
in 1995, respectively. The increase is attributable to an increase in average
loan receivables of $1.6 billion and $1.5 billion for the three and nine months
ended September 30, 1996, compared to the same periods in 1995, respectively.
The yields earned on the Corporation's loan receivables decreased by 18 basis
points and 3 basis points for the three and nine months ended September 30,
1996 as compared to the same periods in 1995, respectively.
At September 30, 1996, variable-rate credit card and home equity loans
were 44.5% of total managed loans, compared to 39.9% at December 31, 1995.
These variable-rate loans are indexed to the U.S. Prime Rate published in The
Wall Street Journal and generally reprice quarterly.
<PAGE>
DEPOSITS
Total interest expense on deposits increased $15.7 million and $62.6
million to $133.0 million and $381.3 million for the three and nine months
ended September 30, 1996, respectively, compared to the same periods in 1995.
The increase is primarily the result of an increase in average interest-bearing
deposits of $1.4 billion and $1.6 billion for the three and nine months ended
September 30, 1996, respectively, as the Corporation continues to emphasize
marketing certificates of deposits and money market deposit accounts to fund
loan growth and diversify funding sources. In addition, the average rates paid
on interest-bearing deposits for the three and nine months ended September 30,
1996 decreased from 1995 by 17 basis points and 7 basis points, respectively.
BORROWED FUNDS
Interest expense on short-term borrowings increased $4.4 million and $2.3
million to $7.7 million and $12.3 million for the three and nine months ended
September 30, 1996, respectively, compared to the same periods in 1995. These
increases are primarily the result of a $345.4 million and $83.4 million
increase in average short-term borrowings for the three and nine months ended
September 30, 1996, respectively, as compared to the same periods in 1995. In
addition, the average rates paid on short-term borrowings for the three and
nine months ended September 30, 1996 decreased from 1995 by 59 basis points and
69 basis points, respectively.
Total interest expense on long-term debt and bank notes increased $9.6
million and $36.5 million to $50.3 million and $140.1 million for the three and
nine months ended September 30, 1996, compared to the same periods in 1995,
respectively. The increase in interest expense reflects the issuance of
additional long-term debt and bank notes to fund loan growth, acquire premises
and equipment, and diversify funding sources. As a result, average long-term
debt and bank notes increased $645.3 million and $755.7 million from the same
periods in 1995, to $3.1 billion and $2.9 billion for the three and nine months
ended September 30, 1996, respectively.
<PAGE>
TABLE 1: STATEMENT OF AVERAGE BALANCES, YIELDS AND RATES, INCOME AND EXPENSE
(dollars in thousands; yields and rates on a fully taxable equivalent basis)
For the Three Months Ended
September 30, 1996
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks...................................... $ 426,079 5.55% $ 5,939
Federal funds sold and securities purchased
under resale agreements.................... 237,685 5.34 3,188
------------ -----------
Total money market instruments............ 663,764 5.47 9,127
Investment securities(a):
Taxable..................................... 2,093,007 5.80 30,510
Tax-exempt(b)............................... 84,653 5.89 1,254
------------ -----------
Total investment securities............... 2,177,660 5.80 31,764
Loans held for securitization................. 2,398,970 13.58 81,889
Loans:
Credit card................................. 5,144,692 13.58 175,673
Other consumer.............................. 1,523,954 14.05 53,806
------------ -----------
Total loans............................... 6,668,646 13.69 229,479
------------ -----------
Total interest-earning assets........... 11,909,040 11.77 $ 352,259
Cash and due from banks....................... 357,367
Premises and equipment, net................... 957,243
Other assets.................................. 1,868,905
Reserve for possible credit losses............ (112,553)
------------
Total assets............................ $ 14,980,002
============
<PAGE>
For the Three Months Ended
September 30, 1996
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits(c)............................ $ 6,640,622 5.87% $ 97,968
Money market deposit accounts............... 2,604,694 5.29 34,608
Interest-bearing transaction accounts....... 23,288 4.56 267
Savings accounts............................ 10,264 4.46 115
------------ -----------
Total interest-bearing deposits........... 9,278,868 5.70 132,958
Borrowed funds:
Federal funds purchased and securities sold
under repurchase agreements................ 76,761 5.45 1,052
Other short-term borrowings................. 480,704 5.46 6,602
Long-term debt and bank notes(c)............ 3,102,276 6.45 50,303
------------ -----------
Total borrowed funds...................... 3,659,741 6.30 57,957
------------ -----------
Total interest-bearing liabilities...... 12,938,609 5.87 190,915
Demand deposits............................... 199,508
Other liabilities............................. 459,094
------------
Total liabilities....................... 13,597,211
Stockholders' equity.......................... 1,382,791
------------
Total liabilities and stockholders'
equity................................. $ 14,980,002
============ -----------
Net interest income..................... $ 161,344
===========
Net interest margin..................... 5.39
Interest rate spread.................... 5.90
(a) Average amounts for investment securities available-for-sale are based on
market values; if these securities were carried at amortized cost, there
would be no impact on the net interest margin.
(b) The fully taxable equivalent (FTE) basis adjustment for the three months
ended September 30, 1996 was $439.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
<PAGE>
For the Three Months Ended
September 30, 1995
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks...................................... $ 394,321 6.22% $ 6,183
Federal funds sold and securities purchased
under resale agreements.................... 88,782 6.13 1,372
------------ -----------
Total money market instruments............ 483,103 6.20 7,555
Investment securities(a):
Taxable..................................... 1,995,597 5.94 29,862
Tax-exempt(b)............................... 78,529 6.25 1,237
------------ -----------
Total investment securities............... 2,074,126 5.95 31,099
Loans held for securitization................. 2,364,908 13.68 81,539
Loans:
Credit card................................. 4,475,644 13.95 157,360
Other consumer.............................. 653,519 13.67 22,516
------------ -----------
Total loans............................... 5,129,163 13.91 179,876
------------ -----------
Total interest-earning assets........... 10,051,300 11.84 $ 300,069
Cash and due from banks....................... 212,541
Premises and equipment, net................... 724,135
Other assets.................................. 1,176,073
Reserve for possible credit losses............ (104,565)
------------
Total assets............................ $ 12,059,484
============
<PAGE>
For the Three Months Ended
September 30, 1995
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits(c)............................ $ 5,894,596 5.90% $ 87,694
Money market deposit accounts............... 2,005,289 5.78 29,211
Interest-bearing transaction accounts....... 19,234 5.09 247
Savings accounts............................ 8,644 5.00 109
------------ -----------
Total interest-bearing deposits........... 7,927,763 5.87 117,261
Borrowed funds:
Federal funds purchased and securities sold
under repurchase agreements................ 66,989 5.83 984
Other short-term borrowings................. 145,030 6.15 2,248
Long-term debt and bank notes(c)............ 2,457,016 6.58 40,724
------------ -----------
Total borrowed funds...................... 2,669,035 6.53 43,956
------------ -----------
Total interest-bearing liabilities...... 10,596,798 6.04 161,217
Demand deposits............................... 132,329
Other liabilities............................. 334,658
------------
Total liabilities....................... 11,063,785
Stockholders' equity.......................... 995,699
------------
Total liabilities and stockholders'
equity................................. $ 12,059,484
============ -----------
Net interest income..................... $ 138,852
===========
Net interest margin..................... 5.48
Interest rate spread.................... 5.80
(a) Average amounts for investment securities available-for-sale are based on
market values; if these securities were carried at amortized cost, there
would be no impact on the net interest margin.
(b) The fully taxable equivalent (FTE) basis adjustment for the three months
ended September 30, 1995 was $433.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
<PAGE>
For the Nine Months Ended
September 30, 1996
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks...................................... $ 503,915 5.57% $ 20,996
Federal funds sold and securities purchased
under resale agreements.................... 149,394 5.37 6,004
------------ -----------
Total money market instruments............ 653,309 5.52 27,000
Investment securities(a):
Taxable..................................... 2,069,467 5.83 90,288
Tax-exempt(b)............................... 84,924 5.99 3,811
------------ -----------
Total investment securities............... 2,154,391 5.83 94,099
Loans held for securitization................. 2,558,674 13.89 265,972
Loans:
Credit card................................. 4,730,964 13.84 490,241
Other consumer.............................. 1,139,935 14.06 119,959
------------ -----------
Total loans............................... 5,870,899 13.88 610,200
------------ -----------
Total interest-earning assets........... 11,237,273 11.85 $ 997,271
Cash and due from banks....................... 333,289
Premises and equipment, net................... 901,687
Other assets.................................. 1,641,856
Reserve for possible credit losses............ (108,577)
------------
Total assets............................ $ 14,005,528
============
<PAGE>
For the Nine Months Ended
September 30, 1996
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits(c)............................ $ 6,440,875 5.83% $ 281,104
Money market deposit accounts............... 2,493,357 5.31 99,033
Interest-bearing transaction accounts....... 22,625 4.58 776
Savings accounts............................ 10,117 4.54 344
------------ -----------
Total interest-bearing deposits........... 8,966,974 5.68 381,257
Borrowed funds:
Federal funds purchased and securities sold
under repurchase agreements................ 80,610 5.39 3,254
Other short-term borrowings................. 221,244 5.47 9,060
Long-term debt and bank notes(c)............ 2,865,460 6.53 140,136
------------ -----------
Total borrowed funds...................... 3,167,314 6.43 152,450
------------ -----------
Total interest-bearing liabilities...... 12,134,288 5.88 533,707
Demand deposits............................... 177,505
Other liabilities............................. 387,300
------------
Total liabilities....................... 12,699,093
Stockholders' equity.......................... 1,306,435
------------
Total liabilities and stockholders'
equity................................. $ 14,005,528
============ -----------
Net interest income..................... $ 463,564
===========
Net interest margin..................... 5.51
Interest rate spread.................... 5.97
(a) Average amounts for investment securities available-for-sale are based on
market values; if these securities were carried at amortized cost, there
would be no impact on the net interest margin.
(b) The fully taxable equivalent (FTE) basis adjustment for the nine months
ended September 30, 1996 was $1,334.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
<PAGE>
For the Nine Months Ended
September 30, 1995
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks...................................... $ 186,461 6.05% $ 8,442
Federal funds sold and securities purchased
under resale agreements.................... 89,560 6.02 4,032
------------ -----------
Total money market instruments............ 276,021 6.04 12,474
Investment securities(a):
Taxable..................................... 1,968,424 5.98 88,090
Tax-exempt(b)............................... 78,276 6.41 3,754
------------ -----------
Total investment securities............... 2,046,700 6.00 91,844
Loans held for securitization................. 2,480,398 13.85 256,936
Loans:
Credit card................................. 3,900,265 13.98 407,780
Other consumer.............................. 591,231 13.72 60,658
------------ -----------
Total loans............................... 4,491,496 13.94 468,438
------------ -----------
Total interest-earning assets........... 9,294,615 11.93 $ 829,692
Cash and due from banks....................... 186,079
Premises and equipment, net................... 650,101
Other assets.................................. 1,081,977
Reserve for possible credit losses............ (103,106)
------------
Total assets............................ $ 11,109,666
============
<PAGE>
For the Nine Months Ended
September 30, 1995
--------------------------------
Average Yield/ Amount Paid
Amount Rate or Earned
------------ ------ -----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits(c)............................ $ 5,573,797 5.73% $ 238,922
Money market deposit accounts............... 1,804,151 5.84 78,771
Interest-bearing transaction accounts....... 18,142 5.14 698
Savings accounts............................ 8,157 5.10 311
------------ -----------
Total interest-bearing deposits........... 7,404,247 5.75 318,702
Borrowed funds:
Federal funds purchased and securities sold
under repurchase agreements................ 60,588 6.02 2,729
Other short-term borrowings................. 157,913 6.18 7,304
Long-term debt and bank notes(c)............ 2,109,778 6.57 103,678
------------ -----------
Total borrowed funds...................... 2,328,279 6.53 113,711
------------ -----------
Total interest-bearing liabilities...... 9,732,526 5.94 432,413
Demand deposits............................... 122,735
Other liabilities............................. 299,318
------------
Total liabilities....................... 10,154,579
Stockholders' equity.......................... 955,087
------------
Total liabilities and stockholders'
equity................................. $ 11,109,666
============ -----------
Net interest income..................... $ 397,279
===========
Net interest margin..................... 5.71
Interest rate spread.................... 5.99
(a) Average amounts for investment securities available-for-sale are based on
market values; if these securities were carried at amortized cost, there
would be no impact on the net interest margin.
(b) The fully taxable equivalent (FTE) basis adjustment for the nine months
ended September 30, 1995 was $1,314.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
<PAGE>
OTHER OPERATING INCOME
Total other operating income increased $83.3 million and $295.1 million or
21.4% and 29.0% to $472.3 million and $1.3 billion for the three and nine
months ended September 30, 1996, respectively as compared to the same periods
in 1995. These increases are primarily attributable to a 24.7% and 33.1%
increase in loan servicing fees, which grew $81.5 million and $281.0 million to
$410.9 million and $1.1 billion for the three and nine months ended September
30, 1996, as compared to the same periods for 1995, respectively. The
increases in loan servicing fees are primarily the result of a $7.2 billion and
$6.6 billion, or 44.8% and 45.3%, increase in average securitized loans to
$23.4 billion and $21.1 billion for the three and nine months ended September
30, 1996, respectively. Loan servicing fees, generated by securitized loans,
consist of interest income, interchange, and other fees in excess of interest
paid to Certificateholders; credit losses; and other trust expenses. In
addition, credit card fees increased $3.8 million and $17.1 million, while
processing fees decreased $4.9 million and $8.6 million during the three and
nine months ended September 30, 1996, as compared to the same periods for 1995,
respectively. The increases in credit card fees are primarily the result of
increases in overlimit and late fees in 1996. The decline in processing fees
is primarily a result of MBNA Hallmark Information Services, Inc. (formerly
known as MBNA Information Services, Inc.), the Corporation's information
processing subsidiary, not renewing existing contracts with external companies
in order to increase their focus on providing printing, data processing, and
mailing services to the Bank.
OTHER OPERATING EXPENSE
Total other operating expense increased 16.6% and 20.9% to $383.5 million
and $1.1 billion for the three and nine months ended September 30, 1996 from
$329.0 million and $913.2 million for the same periods in 1995, respectively.
The growth in other operating expense reflects the Corporation's continued
expansion of business development activities including regional marketing and
sales, account activation, Customer retention, and Customer service. During the
three and nine months ended September 30, 1996, the Corporation opened
approximately 2.2 million and 6.1 million new accounts, respectively. Table 2
presents the other expense component of other operating expense.
<PAGE>
TABLE 2: OTHER EXPENSE COMPONENT OF OTHER OPERATING EXPENSE
(dollars in thousands)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(unaudited)
Purchased services................. $ 32,220 $ 40,150 $ 113,426 $ 113,882
Advertising........................ 21,226 28,686 65,442 62,066
Collection......................... 5,235 5,031 17,854 14,856
Stationery and supplies............ 6,346 5,391 18,121 14,841
Service bureau..................... 7,163 5,273 17,025 14,603
Postage and delivery............... 21,755 21,812 74,989 73,362
Telephone usage.................... 12,999 10,369 33,804 27,713
Credit card fraud losses........... 12,032 8,606 35,143 29,074
Amortization of intangible assets.. 3,633 2,232 8,562 6,840
Computer software.................. 5,507 4,107 15,992 11,967
Other.............................. 17,357 14,059 48,904 43,437
--------- --------- --------- ---------
Total other expense.............. $ 145,473 $ 145,716 $ 449,262 $ 412,641
========= ========= ========= =========
SPECIAL MARKETING PROGRAM
During the nine months ended September 30, 1996, the Corporation charged
$32.8 million net of tax ($54.3 million pre-tax) to earnings related to the
launch of the MBNA Platinum Plus Visa and Mastercard program. This item was
recognized by the Corporation during the three months ended March 31, 1996.
TAX BENEFIT FROM CUSTOMER-BASED INTANGIBLE ASSETS
Net income for the nine months ended September 30, 1996, includes a $32.8
million tax benefit. As previously described in the Corporation's annual
reports to stockholders, the Corporation acquired Customer-based intangible
assets in connection with its 1991 initial public offering. The Corporation
did not initially recognize, for financial statement purposes, any tax benefit
related to those assets because there were uncertainties concerning the tax
treatment of such assets. During the second quarter of 1993, the U.S. Supreme
Court in the "Newark Morning Ledger" case affirmed that Customer-based
intangible assets may be amortized for tax purposes and the Corporation
recognized $89.8 million of the tax benefit related to the Customer-based
intangible assets. During the first quarter of 1996, the Internal Revenue
Service completed an audit of the Corporation's 1991 and 1992 tax returns and
entered into a final agreement with the Corporation regarding the tax treatment
of the intangible assets. As a result, the Corporation recognized the
remaining amount of the tax benefit relating to the intangible assets in the
first quarter of $32.8 million.
<PAGE>
ASSET QUALITY
Delinquencies
An account is contractually delinquent if the minimum payment is not
received by the specified date on the Customer's statement. However, the
Corporation generally continues to accrue interest until the loan is either
paid or charged off. Delinquency as a percentage of the Corporation's loan
portfolio was 3.16% at September 30, 1996, compared with 3.11% at December 31,
1995. The Corporation's delinquency, as a percentage of managed loans was
4.00% at September 30, 1996, compared to 3.70% at December 31, 1995. The
Corporation's loan delinquency has increased from December 31, 1995 to a level
that the Corporation believes is generally more consistent with its long-term
historical delinquency rate. The Corporation believes that several factors,
including general economic conditions, increased consumer debt levels, and the
seasoning or increase in the average age of the Corporation's loans,
contributed to the increase in delinquency. As new accounts season, the
delinquency rate on these accounts generally rises, then stabilizes. Table 3
presents the delinquency of the Corporation's loan portfolio, excluding loans
held for securitization.
TABLE 3: DELINQUENT LOANS
(dollars in thousands)
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
Loan portfolio..................... $ 6,303,027 $4,967,491
Loans delinquent:
30 to 59 days.................... $ 85,873 1.36% $ 65,651 1.32%
60 to 89 days.................... 38,924 .62 30,162 .61
90 or more days.................. 74,153 1.18 58,894 1.18
----------- ---- ---------- ----
Total.......................... $ 198,950 3.16% $ 154,707 3.11%
=========== ==== =========== ====
Net Credit Losses
Net credit losses for the three and nine months ended September 30, 1996
were $35.2 million and $128.3 million, compared to $36.6 million and $96.1
million for the same periods in 1995, respectively. Net credit losses as a
percentage of average loan receivables were 1.55% and 2.03% for the three and
nine months ended September 30, 1996, compared to 1.95% and 1.84% for the same
periods last year, respectively. For the full year ended December 31, 1995,
net credit losses were 1.91% of average loan receivables. Net credit losses do
not include credit losses from securitized loans, which are charged to the
related trusts, in accordance with their respective contractual agreements.
The Corporation's policy is generally to charge off accounts when they
become 180 days contractually past due. From time to time, beginning in 1996,
the Corporation sells previously charged off receivables. The proceeds
received by the Corporation from these sales are recorded as recoveries and
thus reduce net credit losses.
<PAGE>
Reserve and Provision for Possible Credit Losses
The loan portfolio is regularly reviewed to determine an appropriate range
for the reserve for possible credit losses based upon the impact of economic
conditions on the borrowers' ability to repay, past collection experience, the
risk characteristics of the portfolio, and other factors that deserve current
recognition. A provision is charged to operating expense to maintain the
reserve level within this range. The reserve for possible credit losses,
however, does not include an allocation for credit risk related to securitized
loans, which is absorbed directly by the related trusts under their respective
contractual agreements, thus reducing loan servicing fees rather than the
reserve for possible credit losses. The provision for possible credit losses
for the three and nine months ended September 30, 1996 was $35.3 million and
$133.9 million compared to $37.4 million and $99.5 million for the same periods
in 1995, respectively. The increase in the Corporation's provision for
possible credit losses for the nine months ending September 30, 1996, as
compared to the same period in 1995, primarily reflects the increase in the
Corporation's net credit losses for the same period. Table 4 presents the
change to the Corporation's reserve for possible credit losses.
TABLE 4: RESERVE FOR POSSIBLE CREDIT LOSSES
(dollars in thousands)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(unaudited)
Reserve balance, beginning of
period........................ $ 110,406 $ 104,101 $ 104,886 $ 101,519
Reserves acquired............ 7,293 - 7,319 -
Provision charged to
operating expense........... 35,273 37,361 133,873 99,462
Foreign currency translation. 40 (28) 50 -
Credit losses................ (68,419) (47,150) (189,865) (125,328)
Recoveries................... 33,195 10,548 61,525 29,179
---------- ---------- ---------- ----------
Net credit losses.......... (35,224) (36,602) (128,340) (96,149)
---------- ---------- ---------- ----------
Reserve balance, end of period. $ 117,788 $ 104,832 $ 117,788 $ 104,832
========== ========== ========== ==========
LIQUIDITY
The objective of liquidity management is to diversify the sources of funds
available to meet the Corporation's operating requirements. Also, as part of
the liquidity management process, the Corporation anticipates the level of
funds required for future periods and regularly reviews funding alternatives
based on its asset and liability mix. These requirements include funding new
loans, deposit withdrawals, long-term debt and bank note maturities and the
portion of loans previously securitized that need to be refinanced as the
underlying securitizations amortize. Funding is provided from a variety of
<PAGE>
sources, including deposits, debt issuance, equity, and securitizations. The
Corporation also borrows in the short-term and interbank funding markets.
Deposits generated by the Bank are a major source of funds for the
Corporation. Total deposits at September 30, 1996 and December 31, 1995 were
$9.6 billion and $8.6 billion, respectively. The Corporation continues to
increase its direct deposits primarily through offering competitive rates on
money market deposit accounts and certificates of deposits. Table 5 presents
the maturities of the Corporation's deposits as of September 30, 1996.
TABLE 5: MATURITIES OF DEPOSITS AT SEPTEMBER 30, 1996
(dollars in thousands)
Direct Other Total
Deposits Deposits Deposits
----------- ----------- -----------
(unaudited)
Three months or less.................... $ 3,659,082 $ 688,514 $ 4,347,596
Over three months through twelve months. 1,603,799 491,464 2,095,263
Over one year through five years........ 1,711,530 1,482,087 3,193,617
Over five years......................... 5,074 7,998 13,072
----------- ----------- -----------
Total deposits........................ $ 6,979,485 $ 2,670,063 $ 9,649,548
=========== =========== ===========
Funding sources are available to the Corporation through debt and equity
programs established by the Corporation and the Bank. During the nine months
ended September 30, 1996, the Corporation issued $510.0 million in floating
rate medium-term bank notes and $200.0 million in floating rate senior
medium-term notes. The Corporation also drew down 10.0 million pounds sterling
(approximately $15.3 million) from an existing bilateral credit facility. In
addition, the Corporation issued 6.0 million shares of Adjustable Rate
Cumulative Preferred Stock, Series B, with a $25 stated value per share. The
shares of the Series B Preferred Stock are redeemable, in whole or in part,
solely at the option of the Corporation on or after October 15, 2001, at a
price of $25 per share, plus accrued or unpaid dividends.
The Corporation also holds investment securities, which are generally
AAA-rated securities, of $2.2 billion at September 30, 1996, most of which can
be used as collateral under repurchase agreements. Also, the Corporation had
$757.3 million of money market instruments at September 30, 1996. Of the $2.2
billion in investment securities, $1.3 billion were classified as available-for-
sale. These investment securities, in addition to the money market
instruments, provide increased liquidity and flexibility to support the
Corporation's anticipated growth and funding needs. Table 6 presents estimated
maturities (including the impact of estimated prepayments) of the Corporation's
investment securities portfolio.
<PAGE>
TABLE 6: SUMMARY OF INVESTMENT SECURITIES AT SEPTEMBER 30, 1996
(dollars in thousands)
Estimated Maturity
-------------------------------------------
Within 1 After
Year 1-5 Years 5-10 Years 10 Years
--------- --------- ---------- ---------
(unaudited)
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S.
government agencies obligations.. $ 388,910 $ - $ - $ -
State and political subdivisions
of the United States............. 70,947 15,804 - -
Asset-backed and other securities. 41,971 766,555 49,686 -
--------- --------- ---------- ---------
Total investment securities
available-for-sale............. $ 501,828 $ 782,359 $ 49,686 $ -
========= ========= ========== =========
HELD-TO-MATURITY
U.S. Treasury and other U.S.
government agencies obligations.. $ 407,879 $ 323,754 $ - $ 37,808
State and political subdivisions
of the United States............. - - - 442
Asset-backed and other securities. 44,883 50,398 1,000 9,417
--------- --------- ---------- ---------
Total investment securities
held-to-maturity............... $ 452,762 $ 374,152 $ 1,000 $ 47,667
========= ========= ========== =========
Book Market
Value Value
----------- -----------
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S.
government agencies obligations.. $ 388,910 $ 388,910
State and political subdivisions
of the United States............. 86,751 86,751
Asset-backed and other securities. 858,212 858,212
----------- -----------
Total investment securities
available-for-sale............. $ 1,333,873 $ 1,333,873
=========== ===========
HELD-TO-MATURITY
U.S. Treasury and other U.S.
government agencies obligations.. $ 769,441 $ 762,249
State and political subdivisions
of the United States............. 442 417
Asset-backed and other securities. 105,698 105,352
----------- -----------
Total investment securities
held-to-maturity............... $ 875,581 $ 868,018
=========== ===========
<PAGE>
CAPITAL ADEQUACY
The Corporation is subject to risk-based capital guidelines adopted by the
Federal Reserve Board for bank holding companies. The Bank is also subject to
similar capital requirements adopted by the Office of the Comptroller of the
Currency. Under these requirements, the regulatory agencies have set minimum
thresholds for Tier 1 capital, Total capital, and Leverage ratios. At
September 30, 1996, both the Corporation's and the Bank's capital exceeded all
minimum regulatory requirements, and the Bank was "well capitalized" as defined
in the regulations issued pursuant to the FDIC Improvement Act of 1991. Both
the Corporation's and the Bank's risk-based capital ratios, shown in table 7,
have been computed in accordance with regulatory accounting policies.
TABLE 7: REGULATORY CAPITAL RATIOS
September 30, 1996
----------------------------------------
MBNA MBNA America Minimum
Corporation Bank, N.A. Requirements
----------- ------------ ------------
(unaudited)
Tier 1............................ 11.32% 8.32% 4.00%
Total............................. 13.65 10.91 8.00
Leverage.......................... 10.28 7.42 3.00
The $150.0 million of Adjustable Rate Cumulative Preferred Stock, Series
B, issued in September 1996 by the Corporation qualified as Tier 1 capital
under the risk-based guidelines for bank holding companies.
During the three and nine months ended September 30, 1996, the Corporation
declared dividends on its preferred and common stock of $38.7 million and
$115.6 million, respectively. The payment of preferred and common stock
dividends by the Corporation may be limited by certain factors including
regulatory capital requirements, broad enforcement powers of the federal bank
regulatory agencies, and tangible net worth maintenance requirements under the
Corporation's revolving credit facilities.
The primary source of funds for payment of preferred and common stock
dividends by the Corporation is dividends received from the Bank. The amount
of dividends that a bank may declare in any year is subject to certain
regulatory restrictions. Generally, dividends declared in a given year by a
national bank are limited to its net profit, as defined by regulatory agencies,
for that year, combined with its retained net income for the preceding two
years. Also, a bank may not declare dividends if such declaration would leave
the bank inadequately capitalized. Therefore, the ability of the Bank to
declare dividends will depend on its future net income and capital
requirements. At September 30, 1996, the amount of retained earnings available
for declaration of dividends from the Bank to the Corporation was $353.8
million. Payment of dividends by the Bank to the Corporation, however, may be
limited by federal bank regulatory agencies.
The Bank's payment of dividends to the Corporation may also be limited by
a tangible net worth requirement under the Bank's revolving credit facility.
This facility was not drawn upon as of September 30, 1996. If this facility
were drawn upon as of September 30, 1996, the amount of retained earnings
<PAGE>
available for declaration of dividends would have been limited to $138.2
million.
SECURITIZATION
Securitization of the Bank's loan receivables continues to be another
major funding alternative for the Corporation. This is accomplished primarily
through the public and private issuance of asset-backed securities. As loan
receivables are securitized, the Corporation's on-balance sheet funding needs
are reduced by the amount of loans securitized.
Securitization involves the sale, generally to a trust, of a group of loan
receivables. These loan receivables arise from accounts whose ownership is
retained by the Bank. In addition to selling the existing loan receivables,
rights to new loan receivables, including most fees generated by and payments
made from these accounts, are sold. Certificates representing undivided
interests in the trust are issued. The Investor Certificates are sold by the
trust to investors, generally through a public offering. Interest is paid to
the Investor Certificateholders during the life of the transaction. The Seller
Certificate is retained by the Bank. The Bank continues to service the
accounts and receives a servicing fee for doing so.
During the revolving period, which generally ranges from 24 to 108 months,
no principal payments are made to the Investor Certificateholders. Payments
received on the accounts are used to pay interest to the Investor
Certificateholders and to purchase new loan receivables generated by the
accounts, so that the principal dollar amount of the Investor Certificates
remains unchanged. Once the revolving period ends, principal payments are
allocated for distribution to the Investor Certificateholders according to the
terms of the agreement. As principal payments are allocated to the Investor
Certificateholders, the Bank's loan receivables increase by the amount of the
principal allocation.
During the three and nine months ended September 30, 1996, the Bank
securitized loan receivables totaling $3.7 billion and $8.0 billion
respectively, through both public and private markets. These securitizations
bring the total amount of outstanding securitized loans to $25.6 billion or
73.7% of managed loans as of September 30, 1996. Amortization of previously
securitized loan receivables totaled $525.0 million and $1,108.3 million for
the three and nine months ended September 30, 1996. During the amortization
period, new charges and cash advances are for the account of the Bank, which
increases the Corporation's on-balance-sheet assets. Based on outstanding
principal amounts as of September 30, 1996, an additional $500.0 million of
previously securitized loans are expected to amortize into the Bank's loan
portfolio during the remainder of 1996.
Distribution of principal to the Investor Certificateholders may begin
sooner if the average annualized yield (generally including interest income,
interchange, and other fees) for three consecutive months drops below a minimum
yield (generally equal to the sum of the certificate rate payable to investors,
contractual servicing fees, and principal credit losses during the period) or
certain other events occur.
<PAGE>
Table 8 compares the average annualized yield for the three-month period
ended September 30, 1996, to the minimum yield for each transaction. The yield
for each of the transactions is presented on a cash basis and includes various
credit card or other fees as specified in the securitization agreements.
TABLE 8: YIELDS ON SECURITIZED TRANSACTIONS(a)
Three-Month Average
----------------------- Yield in
Annualized Minimum Excess of
Yield Yield Minimum
---------- ----------- ---------
(unaudited)
MasterTrust 91-1(b).................. 20.73% 14.81% 5.92%
MasterTrust 92-1..................... 18.42 13.79 4.63
MasterTrust 92-2..................... 18.42 12.74 5.68
MasterTrust 92-3..................... 18.42 12.50 5.92
MasterTrust 93-1..................... 18.42 12.45 5.97
MasterTrust 93-2(b).................. 22.17 13.12 9.05
MasterTrust 93-3..................... 18.42 11.94 6.48
MasterTrust 93-4..................... 18.42 12.40 6.02
MasterTrust 94-1..................... 18.42 12.29 6.13
MasterTrust 94-2..................... 18.42 12.35 6.07
MasterTrust II 94-A.................. 17.22 12.02 5.20
MasterTrust II 94-B.................. 17.22 12.00 5.22
MasterTrust II 94-C.................. 17.22 12.11 5.11
MasterTrust II 94-D.................. 17.22 12.02 5.20
MasterTrust II 94-E.................. 17.25 12.08 5.17
Gold Reserve......................... 19.98 14.04 5.94
MasterTrust II 95-A.................. 17.22 12.13 5.09
MasterTrust II 95-B.................. 17.22 12.00 5.22
MasterTrust II 95-C.................. 17.22 12.06 5.16
MasterTrust II 95-D.................. 17.22 11.92 5.30
MasterTrust II 95-E.................. 17.22 12.07 5.15
Cards No. 1.......................... 20.36 10.33 10.03
MasterTrust II 95-F.................. 17.22 12.79 4.43
MasterTrust II 95-G.................. 17.22 12.06 5.16
MasterTrust II 95-H.................. 17.22 11.91 5.31
MasterTrust II 95-I.................. 17.22 12.00 5.22
MasterTrust II 95-J.................. 17.22 12.08 5.14
MasterTrust II 96-A.................. 17.22 12.05 5.17
MasterTrust II 96-B.................. 17.22 12.11 5.11
MasterTrust II 96-C.................. 17.22 11.98 5.24
MasterTrust II 96-D.................. 17.22 11.99 5.23
Cards No. 2.......................... 19.65 10.99 8.66
MasterTrust II 96-E.................. 17.22 12.02 5.20
MasterTrust II 96-F.................. 17.06 11.96 5.10
(a) MasterTrust II 96-G issued on July 17, 1996, MasterTrust II 96-H issued on
August 14, 1996, MasterTrust II 96-J issued September 19, 1996, and
MasterTrust II 96-I issued September 25, 1996 are excluded from the yields
presented above as a result of their recency.
(b) Represents a maturing transaction that has entered its scheduled controlled
amortization period.
<PAGE>
Securitizations do not have a material impact on earnings reported for
each period. Due to the relatively short average life of loans, no gain or
loss is recorded at the time of sale. Rather, loan servicing fees (interest
income, interchange, and other fees in excess of interest paid to
Certificateholders; credit losses; and other trust expenses) are recognized
monthly over the life of the transaction when earned. The monthly pattern of
recording loan servicing fees is similar to the revenue recognition that the
Bank would have experienced if the loans had not been securitized.
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (Statement No. 125),
which provides new accounting and reporting standards for sales,
securitization, and servicing of receivables and other financial assets and
extinguishments of liabilities. As required, the Corporation will adopt
Statement No. 125 for transactions occurring after December 31, 1996 and is
presently evaluating the impact Statement No. 125 will have on the
Corporation's consolidated financial statements.
<PAGE>
MBNA CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited)
The following supplemental information illustrates the effects of
securitizations on selected line items of the Corporation's consolidated
statements of income and financial condition. This information is used to
evaluate the generation of revenue, as well as the impact that securitizations
have on the Corporation's consolidated financial statements.
IMPACT OF SECURITIZATIONS ON INCOME BEFORE INCOME TAXES AND SPECIAL MARKETING
PROGRAM
(dollars in thousands)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
Consolidated Statements of
Income (As Reported)
Net interest income........... $ 160,905 $ 138,419 $ 462,230 $ 395,965
Provision for possible credit
losses....................... 35,273 37,361 133,873 99,462
Other operating income........ 472,348 389,017 1,313,957 1,018,850
Other operating expense....... 383,538 328,963 1,104,090 913,223
---------- ---------- ----------- -----------
Income before income taxes and
special marketing program.... $ 214,442 $ 161,112 $ 538,224 $ 402,130
========== ========== =========== ===========
Adjustments for Securitizations
(Supplemental)
Net interest income........... $ 504,085 $ 353,396 $ 1,378,411 $ 919,394
Provision for possible credit
losses....................... 238,924 123,600 618,358 333,370
Other operating income........ (265,161) (229,796) (760,053) (586,024)
Other operating expense....... - - - -
---------- ---------- ----------- -----------
Income before income taxes and
special marketing program.... $ - $ - $ - $ -
========== ========== =========== ===========
Managed Income Statements
(Supplemental)
Net interest income........... $ 664,990 $ 491,815 $ 1,840,641 $ 1,315,359
Provision for possible credit
losses....................... 274,197 160,961 752,231 432,832
Other operating income........ 207,187 159,221 553,904 432,826
Other operating expense....... 383,538 328,963 1,104,090 913,223
---------- ---------- ----------- -----------
Income before income taxes and
special marketing program.... $ 214,442 $ 161,112 $ 538,224 $ 402,130
========== ========== =========== ===========
<PAGE>
MANAGED ASSET DATA
(dollars in thousands)
September 30, 1996 December 31, 1995
------------------ ------------------
AT PERIOD END:
Loans held for securitization....... $ 2,822,022 $ 3,168,427
Loan portfolio...................... 6,303,027 4,967,491
Securitized loans................... 25,614,114 18,575,786
------------------ ------------------
Total managed loans............... $ 34,739,163 $ 26,711,704
================== ==================
Total managed interest-earning
assets........................... $ 37,705,915 $ 29,381,106
================== ==================
Total managed assets.............. $ 41,176,349 $ 31,804,675
================== ==================
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
AVERAGE:
Loans held for
securitization......... $ 2,398,970 $ 2,364,908 $ 2,558,674 $ 2,480,398
Loan portfolio.......... 6,668,646 5,129,163 5,870,899 4,491,496
Securitized loans....... 23,392,536 16,156,117 21,099,223 14,520,210
------------ ------------ ------------ ------------
Total managed loans... $ 32,460,152 $ 23,650,188 $ 29,528,796 $ 21,492,104
============ ============ ============ ============
Total managed
interest-earning
assets............... $ 35,301,576 $ 26,207,417 $ 32,336,496 $ 23,814,825
============ ============ ============ ============
Total managed assets.. $ 38,372,538 $ 28,215,601 $ 35,104,751 $ 25,629,876
============ ============ ============ ============
MANAGED RATIOS:
Net interest margin
(on an FTE basis)..... 7.50% 7.45% 7.61% 7.39%
Delinquency............ 4.00 3.58
Net credit losses...... 3.38 2.71 3.37 2.66
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, MBNA America Bank, N.A. ("Bank") was a defendant in
purported class action suits alleging that it improperly collected late and/or
other fees under various state laws. Also as previously reported, after the
United States Supreme Court ruled in a similar case involving another national
bank that such fees were permissible under the National Bank Act, all but one
of the remaining suits against the Bank were formally terminated. The last
suit, Cooperman v. MBNA, was dismissed on October 18, 1996 by the Superior
Court for the State of California for the County of Los Angeles.
The Spark suit filed on May 3, 1996 and reported in the Corporation's Quarterly
Report on Form 10-Q for the period ended March 31, 1996, was transferred from
the United States District Court for the Middle District of Florida to the
United States District Court for the District of Delaware on October 16, 1996.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Index of Exhibits
Exhibit Description of Exhibit
------- ----------------------
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
b. Reports on Form 8-K
<PAGE>
Exhibit 11: Computation of Earnings Per Common Share
(dollars in thousands, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(unaudited)
PRIMARY
Average common shares outstanding... 222,755 222,761 222,758 222,760
Net effect of dilutive stock
options--based on the treasury
stock method using average
market price....................... 7,571 6,394 7,330 5,137
--------- --------- --------- ---------
Total............................. 230,326 229,155 230,088 227,897
========= ========= ========= =========
Net income.......................... $ 129,523 $ 97,327 $ 325,065 $ 242,887
Less: preferred stock dividend
requirements....................... 3,046 - 8,671 -
--------- --------- --------- ---------
Net income applicable to common
stock..... ........................ $ 126,477 $ 97,327 $ 316,394 $ 242,887
========= ========= ========= =========
Per common share amount............. $ .55 $ .42 $ 1.38 $ 1.07
========= ========= ========= =========
FULLY DILUTED
Average common shares outstanding... 222,755 222,761 222,758 222,760
Net effect of dilutive stock
options--based on the treasury
stock method using the higher of
ending or average market prices.... 8,780 7,468 8,780 7,468
--------- --------- --------- ---------
Total............................. 231,535 230,229 231,538 230,228
========= ========= ========= =========
Net income.......................... $ 129,523 $ 97,327 $ 325,065 $ 242,887
Less: preferred stock dividend
requirements....................... 3,046 - 8,671 -
--------- --------- --------- ---------
Net income applicable to common
stock..... ........................ $ 126,477 $ 97,327 $ 316,394 $ 242,887
========= ========= ========= =========
Per common share amount............. $ .55 $ .42 $ 1.37 $ 1.05
========= ========= ========= =========
<PAGE>
Earnings per common share is based on the weighted average number of
common shares outstanding during the period after consideration of the dilutive
effect of common stock options. Primary earnings per common share assumes the
maximum dilutive effect of common stock equivalents, using average market
prices. Fully diluted earnings per common share assumes the maximum dilutive
effect of common stock equivalents, using the higher of ending or average
market prices.
On October 15, 1996, the Board of Directors approved a three-for-two split
of the Corporation's Common Stock, effected in the form of a dividend, to be
issued on January 1, 1997, to stockholders of record as of December 16, 1996.
Common shares and per common share data have not been restated to reflect this
stock split.
For comparative purposes, earnings per common share and weighted average
common shares outstanding and common stock equivalents have been restated to
reflect the three-for-two split of the Corporation's Common Stock, effected in
the form of a dividend, issued February 16, 1996, to stockholders of record as
of February 2, 1996.
To the extent stock options are exercised or restricted shares are awarded
from time to time under the Corporation's 1991 Long-Term Incentive Plan, the
Board of Directors has approved the purchase on the open market or in privately
negotiated transactions of the number of shares issued.
<PAGE>
b. Reports on Form 8-K
1. Report dated July 11, 1996, reporting MBNA Corporation's earnings
release for the second quarter of 1996.
2. Report dated July 17, 1996, reporting the securitization of
approximately $500.0 million of credit card receivables by MBNA America
Bank, N.A.
3. Report dated July 31, 1996, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for July 1996.
4. Report dated August 14, 1996, reporting the securitization of
approximately $1.2 billion of credit card receivables by MBNA America
Bank, N.A.
5. Report dated August 31, 1996, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for August 1996.
6. Report dated September 19, 1996, reporting the securitization of
approximately $1.0 billion of credit card receivables by MBNA America
Bank, N.A.
7. Report dated September 23, 1996, reporting MBNA Corporation's issuance of
6,000,000 shares of Adjustable Rate Cumulative Preferred Stock, Series B.
8. Report dated September 25, 1996, reporting the securitization of
approximately $784.0 million of credit card receivables by MBNA America
Bank, N.A.
9. Report dated September 30, 1996, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for September 1996.
10. Report dated October 15, 1996, reporting MBNA Corporation's earnings
release for the third quarter of 1996.
11. Report dated October 24, 1996, reporting the securitization of
approximately $1.0 billion of credit card receivables by MBNA America
Bank, N.A.
12. Report dated October 31, 1996, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for October 1996.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MBNA CORPORATION
Date: November 14, 1996 By: /s/ M. Scot Kaufman
----------------------------
M. Scot Kaufman
Executive Vice President
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MBNA
CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 367,613
<INT-BEARING-DEPOSITS> 517,298
<FED-FUNDS-SOLD> 240,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,333,873
<INVESTMENTS-CARRYING> 875,581
<INVESTMENTS-MARKET> 868,018
<LOANS> 9,125,049<F1>
<ALLOWANCE> 117,788
<TOTAL-ASSETS> 15,562,235
<DEPOSITS> 9,649,548
<SHORT-TERM> 408,260
<LIABILITIES-OTHER> 516,895
<LONG-TERM> 3,382,469
0
120
<COMMON> 2,228
<OTHER-SE> 1,602,715
<TOTAL-LIABILITIES-AND-EQUITY> 15,562,235
<INTEREST-LOAN> 876,172<F1>
<INTEREST-INVEST> 92,765
<INTEREST-OTHER> 27,000
<INTEREST-TOTAL> 995,937
<INTEREST-DEPOSIT> 381,257
<INTEREST-EXPENSE> 533,707
<INTEREST-INCOME-NET> 462,230
<LOAN-LOSSES> 133,873
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,104,090
<INCOME-PRETAX> 483,893
<INCOME-PRE-EXTRAORDINARY> 483,893
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 325,065<F2>
<EPS-PRIMARY> 1.38<F3>
<EPS-DILUTED> 1.37<F3>
<YIELD-ACTUAL> 11.85<F4>
<LOANS-NON> 0
<LOANS-PAST> 74,153<F5>
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 104,886
<CHARGE-OFFS> 189,865
<RECOVERIES> 61,525
<ALLOWANCE-CLOSE> 117,788
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes Loans Held for Securitization.
<F2>Net income for the nine months ended September 30, 1996, includes a $32.8
million tax benefit related to deductions for the amortization of
Customer-based intangible assets acquired in connection with the 1991 initial
public offering of the Corporation's Common Stock, and a charge of $32.8
million net of tax ($54.3 million pre-tax) related to the launch of the MBNA
Platinum Plus Visa and Mastercard program.
<F3>EPS-Primary and EPS-Diluted have not been restated to reflect the
three-for-two split of the Corporation's Common Stock effected in the form of
a dividend, to be issued January 1, 1997, to stockholders of record as of the
close of business on December 16, 1996. EPS-Primary and EPS-Diluted have
been restated to reflect the three-for-two split of the Corporation's Common
Stock, effected in the form of a dividend, issued February 16, 1996, to
stockholders of record as of February 2, 1996.
<F4>On a fully taxable equivalent basis.
<F5>Excludes Loans Held for Securitization.
</FN>
</TABLE>
