32
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 June 30, 1997
-------------------------------------------------
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
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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 -- 334,125,000 Shares
Outstanding as of June 30, 1997
MBNA CORPORATION AND SUBSIDIARIES
Table of Contents
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition - 1
June 30, 1997 (unaudited) and December 31, 1996
Consolidated Statements of Income - 3
For the Three and Six Months Ended June 30, 1997 and 1996
(unaudited)
Consolidated Statements of Changes in Stockholders' Equity - 5
For the Six Months Ended June 30, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows - 7
For the Six Months Ended June 30, 1997 and 1996 (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 36
Part II - Other Information
Item 1. Legal Proceedings 37
Item 6. Exhibits and Reports on Form 8-K 37
Signature 40
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(dollars in thousands)
June 30, December 31,
1997 1996
------------ ------------
(unaudited)
ASSETS
Cash and due from banks.......................... $ 379,360 $ 225,063
Interest-earning time deposits in other banks.... 1,342,163 621,614
Federal funds sold and securities purchased
under resale agreements......................... 415,000 255,000
Investment securities:
Available-for-sale (at market value, amortized
cost of $2,127,456 and $1,718,643 at
June 30, 1997 and December 31, 1996,
respectively)................................. 2,128,508 1,719,730
Held-to-maturity (market value of $468,354
and $592,208 at June 30, 1997 and
December 31, 1996, respectively).............. 475,482 598,320
Loans held for securitization.................... 3,761,615 2,469,974
Loans:
Credit card.................................... 4,668,376 5,722,299
Other consumer................................. 1,996,323 1,936,779
------------ ------------
Total loans.................................. 6,664,699 7,659,078
Reserve for possible credit losses............. (151,719) (118,427)
------------ ------------
Net loans.................................... 6,512,980 7,540,651
Premises and equipment, net...................... 1,261,909 1,047,183
Accrued income receivable........................ 107,883 98,160
Accounts receivable from securitizations......... 2,369,453 1,777,323
Prepaid expenses and deferred charges............ 166,071 204,139
Other assets..................................... 550,593 478,185
------------ ------------
Total assets................................. $ 19,471,017 $ 17,035,342
============ ============
June 30, December 31,
1997 1996
------------ ------------
(unaudited)
LIABILITIES
Deposits:
Time deposits.................................. $ 8,680,471 $ 7,159,440
Money market deposit accounts.................. 2,855,409 2,719,545
Noninterest-bearing demand deposits............ 339,597 233,885
Interest-bearing transaction accounts.......... 29,673 27,995
Savings accounts............................... 11,828 10,821
------------ ------------
Total deposits............................... 11,916,978 10,151,686
Short-term borrowings............................ 358,230 693,387
Long-term debt and bank notes.................... 4,686,610 3,950,358
Accrued interest payable......................... 123,275 107,187
Accrued expenses and other liabilities........... 630,149 428,416
------------ ------------
Total liabilities............................ 17,715,242 15,331,034
STOCKHOLDERS' EQUITY
Preferred stock($.01 par value, 20,000,000
shares authorized, 8,573,882 and 12,000,000
shares issued and outstanding at June 30, 1997
and December 31, 1996, respectively)............ 86 120
Common stock ($.01 par value, 700,000,000 shares
authorized, 334,125,000 shares issued and
outstanding at June 30, 1997 and
December 31, 1996, respectively)................ 3,341 3,341
Additional paid-in capital....................... 483,166 603,902
Retained earnings................................ 1,269,182 1,096,945
------------ ------------
Total stockholders' equity................... 1,755,775 1,704,308
------------ ------------
Total liabilities and stockholders' equity... $ 19,471,017 $ 17,035,342
============ ============
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(dollars in thousands, except per share amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
(unaudited)
INTEREST INCOME
Loans........................... $ 244,065 $ 201,742 $ 503,306 $ 380,721
Investment securities:
Taxable....................... 34,361 30,219 65,966 59,778
Tax-exempt.................... 890 838 1,707 1,662
Time deposits in other banks.... 11,684 8,153 21,604 15,057
Federal funds sold and
securities purchased under
resale agreements.............. 5,626 2,073 9,399 2,816
Loans held for securitization... 138,642 78,789 238,574 184,083
---------- ---------- ----------- -----------
Total interest income........ 435,268 321,814 840,556 644,117
INTEREST EXPENSE
Deposits........................ 167,990 125,378 316,836 248,299
Short-term borrowings........... 8,706 1,859 17,051 4,660
Long-term debt and bank notes... 73,828 44,447 141,146 89,833
---------- ---------- ----------- -----------
Total interest expense....... 250,524 171,684 475,033 342,792
---------- ---------- ----------- -----------
NET INTEREST INCOME............. 184,744 150,130 365,523 301,325
Provision for possible credit
losses......................... 87,363 49,112 145,768 98,600
---------- ---------- ----------- -----------
Net interest income after
provision for possible credit
losses......................... 97,381 101,018 219,755 202,725
OTHER OPERATING INCOME
Interchange..................... 29,180 22,557 55,228 42,366
Credit card fees................ 29,693 26,530 58,697 52,080
Securitization income........... 618,915 381,807 1,195,653 718,871
Other........................... 17,046 13,167 27,876 28,292
---------- ---------- ----------- -----------
Total other operating income. $ 694,834 $ 444,061 $ 1,337,454 $ 841,609
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
(unaudited)
OTHER OPERATING EXPENSE
Salaries and employee benefits.. $ 252,420 $ 170,940 $ 477,877 $ 341,126
Occupancy expense of premises... 20,365 15,674 39,197 30,377
Furniture and equipment expense. 35,741 23,283 69,357 45,260
Other........................... 256,862 164,123 538,748 303,789
---------- ---------- ----------- -----------
Total other operating
expense..................... 565,388 374,020 1,125,179 720,552
---------- ---------- ----------- -----------
Income before income taxes and
special marketing program...... 226,827 171,059 432,030 323,782
Special marketing program....... - - - 54,331
---------- ---------- ----------- -----------
Income before income taxes...... 226,827 171,059 432,030 269,451
Applicable income taxes......... 88,394 67,739 169,655 106,702
Tax benefit from Customer-based
intangible assets.............. - - - (32,793)
---------- ---------- ----------- -----------
NET INCOME...................... $ 138,433 $ 103,320 $ 262,375 $ 195,542
========== ========== =========== ===========
EARNINGS PER COMMON SHARE....... $ .38 $ .29 $ .72 $ .55
Weighted average common shares
outstanding and common stock
equivalents (000).............. 349,950 345,058 350,068 344,951
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
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, 1996........... 12,000 334,125 $ 120 $ 3,341
Net income........................... - - - -
Cash dividends:
Common-$.24 per share.............. - - - -
Preferred.......................... - - - -
Exercise of stock options and other
awards.............................. - 2,254 - 23
Acquisition and retirement of common
stock............................... - (2,254) - (23)
Acquisition and retirement of
preferred stock..................... (3,426) - (34) -
Foreign currency translation, net of
tax (accumulated amount of $5,014
at June 30, 1997)................... - - - -
Net unrealized gains on investment
securities available-for-sale and
other financial instruments, net
of tax (accumulated amount of
$5,656 at June 30, 1997)............ - - - -
--------- --------- --------- --------
BALANCE, JUNE 30, 1997............... 8,574 334,125 $ 86 $ 3,341
========= ========= ========= ========
BALANCE, DECEMBER 31, 1995........... 6,000 334,125 $ 60 $ 3,341
Net income........................... - - - -
Cash dividends:
Common-$.21 per share.............. - - - -
Preferred.......................... - - - -
Exercise of stock options and other
awards.............................. - 2,014 - 20
Acquisition and retirement of common
stock............................... - (2,014) - (20)
Foreign currency translation, net of
tax (accumulated amount of ($92)
at June 30, 1996)................... - - - -
Net unrealized gains on investment
securities available-for-sale, net
of tax (accumulated amount of
$459 at June 30, 1996).............. - - - -
--------- --------- --------- --------
BALANCE, JUNE 30, 1996............... 6,000 334,125 $ 60 $ 3,341
========= ========= ========= ========
Additional Total
Paid-in Retained Stockholders'
Capital Earnings Equity
---------- ----------- -------------
BALANCE, DECEMBER 31, 1996........... $ 603,902 $ 1,096,945 $ 1,704,308
Net income........................... - 262,375 262,375
Cash dividends:
Common-$.24 per share.............. - (80,197) (80,197)
Preferred.......................... - (8,845) (8,845)
Exercise of stock options and other
awards.............................. 40,479 - 40,502
Acquisition and retirement of common
stock............................... (75,596) - (75,619)
Acquisition and retirement of
preferred stock..................... (85,619) (3,133) (88,786)
Foreign currency translation, net of
tax (accumulated amount of $5,014
at June 30, 1997)................... - (2,896) (2,896)
Net unrealized gains on investment
securities available-for-sale and
other financial instruments, net
of tax (accumulated amount of
$5,656 at June 30, 1997)............ - 4,933 4,933
---------- ----------- -------------
BALANCE, JUNE 30, 1997............... $ 483,166 $ 1,269,182 $ 1,755,775
========== =========== =============
BALANCE, DECEMBER 31, 1995........... $ 490,622 $ 771,035 $ 1,265,058
Net income........................... - 195,542 195,542
Cash dividends:
Common-$.21 per share.............. - (71,283) (71,283)
Preferred.......................... - (5,625) (5,625)
Exercise of stock options and other
awards.............................. 25,028 - 25,048
Acquisition and retirement of common
stock............................... (39,176) - (39,196)
Foreign currency translation, net of
tax (accumulated amount of ($92)
at June 30, 1996)................... - (483) (483)
Net unrealized gains on investment
securities available-for-sale, net
of tax (accumulated amount of
$459 at June 30, 1996).............. - 270 270
---------- ----------- -------------
BALANCE, JUNE 30, 1996............... $ 476,474 $ 889,456 $ 1,369,331
========== =========== =============
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Six Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
(unaudited)
OPERATING ACTIVITIES
Net income......................................... $ 262,375 $ 195,542
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses............ 145,768 98,600
Depreciation, amortization, and accretion....... 65,820 44,387
Provision (benefit) for deferred income taxes... 7,855 (56,481)
(Increase) decrease in accrued income
receivable..................................... (9,723) 9,465
Increase in accounts receivable from
securitizations................................ (592,130) (350,915)
Increase in accrued interest payable............ 16,088 868
Decrease in other operating activities.......... 220,134 71,313
----------- -----------
Net cash provided by operating activities..... 116,187 12,779
INVESTING ACTIVITIES
Net increase in money market instruments........... (880,549) (18,958)
Proceeds from maturities of investment securities
available-for-sale................................ 3,478,688 1,743,716
Purchases of investment securities
available-for-sale................................ (3,866,426) (2,118,815)
Proceeds from maturities of investment securities
held-to-maturity ................................. 151,407 282,295
Purchases of investment securities
held-to-maturity.................................. (28,672) (7,563)
Proceeds from securitization of loans.............. 5,052,592 4,327,562
Portfolio acquisitions............................. (454,716) (119,265)
Amortization of securitized loans.................. (879,770) (583,334)
Net loan originations.............................. (4,197,884) (3,781,828)
Net purchases of premises and equipment............ (270,748) (147,465)
----------- -----------
Net cash used in investing activities......... $(1,896,078) $ (423,655)
For the Six Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
(unaudited)
FINANCING ACTIVITIES
Net increase in time deposits...................... $ 1,521,031 $ 281,072
Net increase in money market deposit accounts,
noninterest-bearing demand deposits,
interest-bearing transaction accounts,
and savings accounts.............................. 244,261 317,277
Net decrease in short-term borrowings.............. (335,157) (180,763)
Proceeds from issuance of long-term debt
and bank notes.................................... 957,884 155,290
Maturity of long-term debt and bank notes.......... (260,045) (62,088)
Proceeds from exercise of stock options
and other awards.................................. 20,155 15,886
Acquisition and retirement of common stock......... (75,619) (39,196)
Acquisition and retirement of preferred stock...... (52,483) -
Dividends paid..................................... (85,839) (71,549)
----------- -----------
Net cash provided by financing activities..... 1,934,188 415,929
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS.............. 154,297 5,053
Cash and cash equivalents at beginning of period... 225,063 291,856
----------- -----------
Cash and cash equivalents at end of period......... $ 379,360 $ 296,909
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest expense paid.............................. $ 457,989 $ 342,056
=========== ===========
Income taxes paid.................................. $ 86,853 $ 96,132
=========== ===========
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
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 six months ended
June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. The notes to the consolidated
financial statements contained in the Annual Report on Form 10-K for the year
ended December 31, 1996 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 July 15, 1997, the Board of Directors approved a three-for-two split of the
Corporation's Common Stock, which will be effected in the form of a dividend,
to be issued on October 1, 1997, to stockholders of record as of
September 15, 1997. 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 January 1, 1997, to stockholders of record as of
December 16, 1996.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (Statement No. 128), was issued. This statement, effective
for financial statements issued for periods ending after December 15, 1997,
specifies the computation, presentation, and disclosure requirements for
earnings per share. Statement No. 128 replaces primary and fully diluted
earnings per share, under Accounting Principles Board Opinion No. 15, "Earnings
per Share," with basic and diluted earnings per share, respectively. The
adoption of Statement No. 128 will not have a material impact on the
Corporation's consolidated earnings per share for the periods ended
June 30, 1997 and 1996.
NOTE C: 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 six months ended June 30, 1997, the
Corporation issued long-term debt and bank notes consisting of the following:
(Par Value)
--------------------------
(dollars in thousands)
Floating-Rate Senior Medium-Term Notes, priced
at 35 basis points over the three-month London
Interbank Offered Rate (LIBOR), payable quarterly,
maturing in 2002................................... $150,000
Floating-Rate Medium-Term Bank Notes, priced
at 15 basis points and 30 basis points over
the three-month LIBOR, payable quarterly, maturing
in varying amounts from 2000 to 2004............... 412,000
Fixed-Rate Syndicated Credit Facility, with an
interest rate of 7.645%, payable quarterly,
maturing in 2001 (75 million pounds sterling)...... 121,823
Guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable
interest debentures, series B, with an
interest rate equal to 80 basis points above
the three-month LIBOR, maturing in 2027............ 280,000
Guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable
interest debentures, series C, with an
interest rate of 8.25%, maturing in 2027........... 36,303
The Corporation, through MBNA Capital B and MBNA Capital C, each a statutory
business trust created under the laws of the State of Delaware, issued
guaranteed preferred beneficial interests in Corporation's junior subordinated
deferrable interest debentures, series B and series C, respectively, as shown
above.
The Corporation owns all the common securities of the trusts. The junior
subordinated deferrable interest debentures are the sole assets of the trusts,
and the payments under the junior subordinated deferrable interest debentures
are the sole revenues of the trusts. The obligations of the Corporation, under
the relevant indenture, trust agreement, and guarantee, in the aggregate,
constitute a full and unconditional guarantee by the Corporation of all trust
obligations under the guaranteed preferred beneficial interests in
Corporation's junior subordinated deferrable interest debentures issued by the
trust.
NOTE D: PREFERRED STOCK
During the six months ended June 30, 1997, the Corporation, through MBNA
Capital C issued 1.5 million shares of 8.25% Trust Originated Preferred
Securities (guaranteed preferred beneficial interests in Corporation's junior
subordinated deferrable interest debentures, series C) in exchange for 1.5
million shares of 7 1/2% Cumulative Preferred Stock, Series A. The value of
the shares exchanged was $36.3 million. After the exchange, the Corporation
has 4.5 million shares of 7 1/2% Cumulative Preferred Stock, Series A,
outstanding at June 30, 1997.
The Corporation also repurchased 2.0 million shares of Adjustable Rate
Cumulative Preferred Stock, Series B during the six months ended June 30, 1997
for the amount of $52.5 million. There are 4.0 million shares of Adjustable
Rate Cumulative Preferred Stock, Series B, outstanding at June 30, 1997.
The Board declared the following dividends for the Corporation's Series A and
Series B Preferred Stock:
Series A Series B
------------------------ ------------------------
Dividend Dividend Per Dividend Dividend Per
Declaration Date Rate Preferred Share Rate Preferred Share
- ----------------------------- -------- --------------- -------- ---------------
July 15, 1997 7.50% $ .46875 6.56% $ .40990
April 21, 1997 7.50 .46875 6.66 .41610
NOTE E: ASSET SECURITIZATION
On January 1, 1997, the Corporation adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (Statement No. 125), effective for all
transactions occurring after December 31, 1996. Under Statement No. 125, gains
are now recognized at the time of initial sale and each subsequent sale of loan
receivables in a securitization. As a result, the Corporation now recognizes
the gain from securitized loans in securitization income on the Corporation's
consolidated statements of income and the related receivable in accounts
receivable from securitization on the consolidated statements of financial
condition at the time of sale. Securitization income also includes the
additional earnings from the Corporation's securitized loans previously
reported as loan servicing fees. As a result of the adoption of Statement
No. 125, securitization income increased $121.3 million and $244.4 million for
the three and six months ended June 30, 1997, respectively. These increases are
not representative of future periods. Any future gains that will be recognized
by the Corporation in accordance with Statement No. 125 will be dependent upon
the timing and the amount of future securitizations. The increases in
securitization income from the adoption of Statement No. 125 were primarily
invested in additional business development efforts and therefore had no
material impact on consolidated net income. Previously, the Corporation
recognized this income over the life of the securitization. Prior years have
not been restated in accordance with Statement No. 125.
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 makes other consumer loans and offers various deposit
products.
The Corporation generates interest and other income through finance charges
assessed on outstanding loan receivables, interchange income, credit card fees,
securitization income, 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 July 15, 1997, the Board of Directors approved a three-for-two split of the
Corporation's Common Stock, which will be effected in the form of a dividend,
to be issued on October 1, 1997, to stockholders of record as of
September 15, 1997. Common shares and per common share data have not been
restated to reflect this stock split.
EARNINGS SUMMARY
Net income for the three and six months ended June 30, 1997 was $138.4 million
and $262.4 million, or $.38 per common share and $.72 per common share,
increasing 34.0% and 34.2% from $103.3 million and $195.5 million or $.29 per
common share and $.55 per common share for the same periods in 1996,
respectively. Earnings per common share are computed using net income
applicable to common stock and the weighted average number of common shares
outstanding, including common stock equivalents.
The growth in earnings was primarily attributable to the growth in managed
loans outstanding. Total managed loans at June 30, 1997 were $43.2 billion, a
$12.6 billion increase from June 30, 1996 and a $4.6 billion increase since
December 31, 1996. The Corporation's average managed loans increased 43.6% and
44.3% to $41.8 billion and $40.5 billion for the three and six months ended
June 30, 1997, compared to $29.1 billion and $28.0 billion for the same
periods in 1996, respectively. 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. Securitization converts interest income, interchange,
and other fees in excess of interest paid to Certificateholders; credit
losses; and other trust expenses into securitization income, while reducing
the Corporation's on-balance-sheet assets. During the three and six months
ended June 30, 1997, the Corporation securitized approximately $2.7 billion
and $5.1 billion of loan receivables, bringing the total amount of outstanding
securitized loans to $32.8 billion as of June 30, 1997.
Return on average total assets for the three and six months ended
June 30, 1997, was 2.96% and 2.92%, compared to 3.03% and 2.91% for the same
periods during 1996, respectively. The lower return for the three months
ended June 30, 1997 is a result of the 37.0% increase in average total assets.
This increase exceeded the 34.0% increase in net income for the three months
ended June 30, 1997. The increase in net income of 34.2% for the six months
ended June 30, 1997 was offset by the increase in the Corporation's average
total assets. Return on average stockholders' equity for the three and six
months ended June 30, 1997 was 33.02% and 31.46%, compared to 32.13% and
31.02% for the same periods in 1996, respectively. The higher returns for the
three and six months ended June 30, 1997 are primarily a result of the 34.0%
and 34.2% increase in net income which exceeded the 30.1% and 32.6% increases
in average stockholders' equity.
NET INTEREST INCOME
Net interest income for the three and six months ended June 30, 1997, on a
fully taxable equivalent basis, was $185.2 million and $366.4 million,
respectively, compared to $150.6 million and $302.2 million for the same
periods in 1996. The increase in net interest income for the three and six
months ended June 30, 1997 is primarily a result of an increase in average
interest-earning assets of $3.6 billion and $3.2 billion, respectively,
partially offset by a decline of 42 basis points and 34 basis points in the
net interest margin and an increase of $4.3 billion and $3.9 billion in
average interest-bearing liabilities for the same periods. The increase in
interest-earning assets during the three months ended June 30, 1997 was a
result of increases in average investment securities and money market
instruments of $809.4 million and average loan receivables of $2.8 billion,
while the increase for the six months ended June 30, 1997 was due to an
increase in average investments and money market instruments of $766.5 million
and average loan receivables of $2.4 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 5.10% and
5.24% for the three and six months ended June 30, 1997, compared to 5.52% and
5.58% for the same periods in 1996, respectively.
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
Interest income on investment securities and money market instruments, on a
fully taxable equivalent basis, increased $11.3 million and $19.4 million for
the three and six months ended June 30, 1997, as compared to the same periods
in 1996, respectively. The increase for the three and six months ended
June 30, 1997 is primarily a result of an increase of $809.4 million and $766.5
million in average investment securities and money market instruments when
compared to the same periods in 1996, respectively. The increases are the
result of the Corporation providing for additional liquidity in its investment
portfolio and 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 increase in interest income earned on investment
securities and money market instruments was partially offset by a decline of 4
basis points and 13 basis points in the yields earned on the Corporation's
investment securities and money market instruments for the three and six months
ended June 30, 1997, as compared to the same periods in 1996, respectively.
LOAN RECEIVABLES
Interest income generated by the Corporation's loan receivables increased
$102.2 million and $177.1 million to $382.7 million and $741.9 million for the
three and six months ended June 30, 1997 compared to the same periods in 1996,
respectively. The increase is primarily attributable to an increase in average
loan receivables of $2.8 billion and $2.4 billion to $10.8 billion and $10.5
billion for the three and six months ended June 30, 1997, compared to the same
periods in 1996, respectively. The yields earned on the Corporation's average
loan receivables increased by 15 basis points and 19 basis points for the three
and six months ended June 30, 1997 as compared to the same periods in 1996,
respectively.
At June 30, 1997, variable-rate credit cards and home equity loans were 29.3%
of total managed loans, compared to 42.1% at December 31, 1996. These variable-
rate loans are indexed to the U.S. Prime Rate published in The Wall Street
Journal and generally reprice quarterly. The decline in variable-rate loans
was primarily the result of the Corporation repricing their outstanding loan
balances from variable rate to fixed rate.
DEPOSITS
Total interest expense on deposits increased $42.6 million and $68.5 million to
$168.0 million and $316.8 million for the three and six months ended
June 30, 1997 compared to the same periods in 1996, respectively. The increase
is the result of an increase in average interest-bearing deposits of $2.1
billion and $1.9 billion for the three and six months ended June 30, 1997,
respectively, as the Corporation continues to emphasize marketing certificates
of deposits and money market deposit accounts to fund loan growth and diversify
funding sources. Also, the rates paid on average interest-bearing deposits
increased 45 basis points and 32 basis points for the three and six months
ended June 30, 1997 as compared to the same periods in 1996, respectively.
BORROWED FUNDS
Interest expense on short-term borrowings increased $6.8 million and $12.4
million to $8.7 million and $17.1 million for the three and six months ended
June 30, 1997, compared to the same periods in 1996, respectively. The
increase is primarily a result of an increase in average short-term borrowings
of $456.5 million and $419.5 million for the three and six months ended June
30, 1997. The increase reflects the Corporation's utilization of the short-term
bank note program and other short-term borrowings to meet short-term funding
requirements.
Total interest expense on long-term debt and bank notes increased $29.4 million
and $51.3 million to $73.8 million and $141.1 million for the three and six
months ended June 30, 1997, compared to the same periods in 1996, respectively.
The increase in interest expense reflects the issuance of additional long-term
debt and bank notes to diversify funding sources, to fund loan growth, to
acquire premises and equipment, and for other general corporate purposes.
Average long-term debt and bank notes increased $1.7 billion and $1.6 billion
to $4.5 billion and $4.3 billion for the three and six months ended
June 30, 1997 compared to the same periods in 1996, respectively. Also, the
rates paid on average long-term debt and bank notes increased 14 basis points
and 1 basis point for the three and six months ended June 30, 1997, compared to
the same period in 1996, respectively.
TABLE 1: STATEMENT OF AVERAGE BALANCES, YIELDS AND RATES, INCOME OR EXPENSE
(dollars in thousands; yields and rates on a fully taxable equivalent basis)
For the Three Months Ended
June 30, 1997
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks..................................... $ 832,567 5.63% $ 11,684
Federal funds sold and securities
purchased under resale agreements......... 405,264 5.57 5,626
------------ ----------
Total money market instruments........... 1,237,831 5.61 17,310
Investment securities (a):
Taxable.................................... 2,402,576 5.74 34,361
Tax-exempt(b).............................. 87,954 6.24 1,369
------------ ----------
Total investment securities.............. 2,490,530 5.75 35,730
Loans held for securitization................ 3,868,738 14.37 138,642
Loans:
Credit card................................ 5,168,044 13.97 180,007
Other consumer............................. 1,801,436 14.26 64,058
------------ ----------
Total loans.............................. 6,969,480 14.05 244,065
------------ ----------
Total interest-earning assets.......... 14,566,579 12.00 $ 435,747
Cash and due from banks....................... 460,614
Premises and equipment, net................... 1,193,588
Other assets.................................. 2,694,262
Reserve for possible credit losses............ (132,484)
------------
Total assets........................... $ 18,782,559
============
For the Three Months Ended
June 30, 1997
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits (c).......................... $ 8,239,600 6.26% $ 128,679
Money market deposit accounts.............. 2,826,773 5.51 38,859
Interest-bearing transaction accounts...... 27,150 4.70 318
Savings accounts........................... 11,537 4.66 134
------------ ----------
Total interest-bearing deposits.......... 11,105,060 6.07 167,990
Borrowed funds:
Federal funds purchased and securities
sold under repurchase agreements.......... 43,668 5.64 614
Other short-term borrowings................ 550,702 5.89 8,092
Long-term debt and bank notes (c).......... 4,482,598 6.61 73,828
------------ ----------
Total borrowed funds..................... 5,076,968 6.52 82,534
------------ ----------
Total interest-bearing liabilities..... 16,182,028 6.21 250,524
Demand deposits............................... 303,883
Other liabilities............................. 614,856
------------
Total liabilities...................... 17,100,767
Stockholders' equity.......................... 1,681,792
------------
Total liabilities and stockholders'
equity................................ $ 18,782,559
============ ----------
Net interest income.................... $ 185,223
==========
Net interest margin.................... 5.10
Interest rate spread................... 5.79
(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 June 30, 1997 was $479.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
For the Three Months Ended
June 30, 1996
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks..................................... $ 600,037 5.46% $ 8,153
Federal funds sold and securities
purchased under resale agreements......... 155,758 5.35 2,073
------------ ----------
Total money market instruments........... 755,795 5.44 10,226
Investment securities (a):
Taxable.................................... 2,077,487 5.85 30,219
Tax-exempt(b).............................. 85,657 6.05 1,289
------------ ----------
Total investment securities.............. 2,163,144 5.86 31,508
Loans held for securitization................ 2,264,506 13.99 78,789
Loans:
Credit card................................ 4,809,870 14.05 168,075
Other consumer............................. 979,032 13.83 33,667
------------ ----------
Total loans.............................. 5,788,902 14.02 201,742
------------ ----------
Total interest-earning assets.......... 10,972,347 11.81 $ 322,265
Cash and due from banks....................... 317,623
Premises and equipment, net................... 901,957
Other assets.................................. 1,622,689
Reserve for possible credit losses............ (106,892)
------------
Total assets........................... $ 13,707,724
============
For the Three Months Ended
June 30, 1996
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits (c).......................... $ 6,424,094 5.78% $ 92,283
Money market deposit accounts.............. 2,516,701 5.23 32,723
Interest-bearing transaction accounts...... 22,961 4.50 257
Savings accounts........................... 10,374 4.46 115
------------ ----------
Total interest-bearing deposits.......... 8,974,130 5.62 125,378
Borrowed funds:
Federal funds purchased and securities
sold under repurchase agreements.......... 39,341 5.37 525
Other short-term borrowings................ 98,506 5.45 1,334
Long-term debt and bank notes (c).......... 2,763,801 6.47 44,447
------------ ----------
Total borrowed funds..................... 2,901,648 6.42 46,306
------------ ----------
Total interest-bearing liabilities..... 11,875,778 5.81 171,684
Demand deposits............................... 172,113
Other liabilities............................. 366,690
------------
Total liabilities...................... 12,414,581
Stockholders' equity.......................... 1,293,143
------------
Total liabilities and stockholders'
equity................................ $ 13,707,724
============ ----------
Net interest income.................... $ 150,581
==========
Net interest margin.................... 5.52
Interest rate spread................... 6.00
(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 basis adjustment for the three months ended
June 30, 1996 was $451.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
For the Six Months Ended
June 30, 1997
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks..................................... $ 781,169 5.58% $ 21,604
Federal funds sold and securities
purchased under resale agreements......... 344,381 5.50 9,399
------------ ----------
Total money market instruments........... 1,125,550 5.55 31,003
Investment securities (a):
Taxable.................................... 2,343,556 5.68 65,966
Tax-exempt(b).............................. 88,070 6.01 2,626
------------ ----------
Total investment securities.............. 2,431,626 5.69 68,592
Loans held for securitization................ 3,358,456 14.33 238,574
Loans:
Credit card................................ 5,210,498 14.02 362,189
Other consumer............................. 1,967,042 14.47 141,117
------------ ----------
Total loans.............................. 7,177,540 14.14 503,306
------------ ----------
Total interest-earning assets.......... 14,093,172 12.04 $ 841,475
Cash and due from banks....................... 447,120
Premises and equipment, net................... 1,139,792
Other assets.................................. 2,581,658
Reserve for possible credit losses............ (125,886)
------------
Total assets........................... $ 18,135,856
============
For the Six Months Ended
June 30, 1997
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits (c).......................... $ 7,838,151 6.20% $ 241,029
Money market deposit accounts.............. 2,793,371 5.41 74,934
Interest-bearing transaction accounts...... 26,777 4.64 616
Savings accounts........................... 11,261 4.60 257
------------ ----------
Total interest-bearing deposits.......... 10,669,560 5.99 316,836
Borrowed funds:
Federal funds purchased and securities
sold under repurchase agreements.......... 26,186 5.59 726
Other short-term borrowings................ 565,944 5.82 16,325
Long-term debt and bank notes (c).......... 4,320,366 6.59 141,146
------------ ----------
Total borrowed funds..................... 4,912,496 6.49 158,197
------------ ----------
Total interest-bearing liabilities..... 15,582,056 6.15 475,033
Demand deposits............................... 304,259
Other liabilities............................. 567,802
------------
Total liabilities...................... 16,454,117
Stockholders' equity.......................... 1,681,739
------------
Total liabilities and stockholders'
equity................................ $ 18,135,856
============ ----------
Net interest income.................... $ 366,442
==========
Net interest margin.................... 5.24
Interest rate spread................... 5.89
(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 basis adjustment for the six months ended
June 30, 1997 was $919.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
For the Six Months Ended
June 30, 1996
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
ASSETS
Interest-earning assets:
Money market instruments:
Interest-earning time deposits in other
banks..................................... $ 543,261 5.57% $ 15,057
Federal funds sold and securities
purchased under resale agreements......... 104,764 5.41 2,816
------------ ----------
Total money market instruments........... 648,025 5.55 17,873
Investment securities (a):
Taxable.................................... 2,057,567 5.84 59,778
Tax-exempt(b).............................. 85,060 6.05 2,557
------------ ----------
Total investment securities.............. 2,142,627 5.85 62,335
Loans held for securitization................ 2,639,403 14.03 184,083
Loans:
Credit card................................ 4,521,827 13.99 314,568
Other consumer............................. 945,816 14.07 66,153
------------ ----------
Total loans.............................. 5,467,643 14.00 380,721
------------ ----------
Total interest-earning assets.......... 10,897,698 11.90 $ 645,012
Cash and due from banks....................... 321,119
Premises and equipment, net................... 873,603
Other assets.................................. 1,527,085
Reserve for possible credit losses............ (106,568)
------------
Total assets........................... $ 13,512,937
============
For the Six Months Ended
June 30, 1996
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits (c).......................... $ 6,339,904 5.81% $ 183,136
Money market deposit accounts.............. 2,437,076 5.32 64,425
Interest-bearing transaction accounts...... 22,290 4.59 509
Savings accounts........................... 10,043 4.59 229
------------ ----------
Total interest-bearing deposits.......... 8,809,313 5.67 248,299
Borrowed funds:
Federal funds purchased and securities
sold under repurchase agreements.......... 82,556 5.36 2,202
Other short-term borrowings................ 90,087 5.49 2,458
Long-term debt and bank notes (c).......... 2,745,751 6.58 89,833
------------ ----------
Total borrowed funds..................... 2,918,394 6.51 94,493
------------ ----------
Total interest-bearing liabilities..... 11,727,707 5.88 342,792
Demand deposits............................... 166,383
Other liabilities............................. 351,009
------------
Total liabilities...................... 12,245,099
Stockholders' equity.......................... 1,267,838
------------
Total liabilities and stockholders'
equity................................ $ 13,512,937
============ ----------
Net interest income.................... $ 302,220
==========
Net interest margin.................... 5.58
Interest rate spread................... 6.02
(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 basis adjustment for the six months ended
June 30, 1996 was $895.
(c) Includes the impact of interest rate swap agreements used to change fixed-
rate funding sources to floating-rate funding sources.
OTHER OPERATING INCOME
Total other operating income increased 56.5% and 58.9% to $694.8 million and
$1.3 billion for the three and six months ended June 30, 1997, from $444.1
million and $841.6 million for the same periods in 1996, respectively. This
increase is primarily attributable to a 62.1% and 66.3% increase in
securitization income, which grew $237.1 million and $476.8 million to $618.9
million and $1.2 billion for the three and six months ended June 30, 1997, as
compared to the same periods for 1996, respectively. The increase in
securitization income is primarily the result of the adoption of Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (Statement No. 125) by
the Corporation combined with a $9.9 billion and $10.0 billion or 47.0% and
50.1% increase in average securitized loans to $30.9 billion and $29.9 billion
for the three and six months ended June 30, 1997, compared to the same periods
in 1996, respectively. Securitization income includes the gains recognized by
the Corporation in accordance with Statement No. 125, in addition to the
contractual specified loan servicing fees recognized by the Corporation for the
servicing of previously securitized loans. Interchange income has also
increased $6.6 million and $12.9 million for the three and six months ended
June 30, 1997, as compared to the same periods in 1996, as the Corporation's
sales volume increased.
On January 1, 1997, the Corporation adopted Statement No. 125, effective for
all transactions occurring after December 31, 1996. Under Statement No. 125,
gains are now recognized at the time of initial sale and each subsequent sale
of loan receivables in a securitization. As a result, the Corporation now
recognizes the gain from securitized loans in securitization income on the
Corporation's consolidated statements of income and the related receivable in
accounts receivable from securitization on the consolidated statements of
financial condition at the time of sale. Securitization income also includes
the additional earnings from the Corporation's securitized loans previously
reported as loan servicing fees. As a result of the adoption of Statement No.
125, securitization income increased $121.3 million and $244.4 million for the
three and six months ended June 30, 1997, respectively. These increases are not
representative of future periods. Any future gains that will be recognized by
the Corporation in accordance with Statement No. 125 will be dependent upon the
timing and the amount of future securitizations. The increases in
securitization income from the adoption of Statement No. 125 were primarily
invested in additional business development efforts and therefore had no
material impact on consolidated net income. Previously, the Corporation
recognized this income over the life of the securitization. Prior years have
not been restated in accordance with Statement No. 125.
OTHER OPERATING EXPENSE
Total other operating expense increased 51.2% and 56.2% to $565.4 million and
$1.1 billion for the three and six months ended June 30, 1997 from $374.0
million and $720.6 million for the same periods in 1996, respectively. The
growth in other operating expense reflects the Corporation's continued
investment in business development to enhance the ability of the Corporation to
attract and retain Customers. The Corporation opened approximately 4.9 million
new accounts during the six months ended June 30, 1997. The increase in other
operating expense also resulted from the Corporation investing the increase in
securitization income from the adoption of Statement No. 125 in additional
business development efforts. Table 2 presents the other expense component of
other operating expense.
TABLE 2: OTHER EXPENSE COMPONENT OF OTHER OPERATING EXPENSE
(dollars in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(unaudited)
Purchased services................. $ 70,090 $ 43,929 $ 149,321 $ 81,206
Advertising........................ 38,173 30,802 87,200 44,216
Collection......................... 7,232 6,333 13,166 12,619
Stationery and supplies............ 7,856 6,443 15,495 11,775
Service bureau..................... 6,759 5,052 14,042 9,862
Postage and delivery............... 48,150 28,267 103,786 53,234
Telephone usage.................... 14,173 11,050 28,538 20,805
Credit card fraud losses........... 16,088 12,107 31,121 23,111
Amortization of intangible assets.. 7,281 2,403 14,129 4,929
Computer software.................. 10,223 5,239 18,142 10,485
Other.............................. 30,837 12,498 63,808 31,547
--------- --------- --------- ---------
Total other expense.............. $ 256,862 $ 164,123 $ 538,748 $ 303,789
========= ========= ========= =========
SPECIAL MARKETING PROGRAM
During the six months ended June 30, 1996, the Corporation charged $32.8
million net of tax ($54.3 million pretax) to earnings related to the launch of
the MBNA Platinum Plus MasterCard and Visa program. This item was recognized by
the Corporation during the three months ended March 31, 1996.
INCOME TAXES
Applicable income taxes were $88.4 million and $169.7 million for the three and
six months ended June 30, 1997, compared to $67.7 million and $106.7 million
for the three and six months ended June 30, 1996, excluding the effect of the
tax benefit from Customer-based intangible assets.
Net income for the six months ended June 30, 1996, includes a $32.8 million tax
benefit related to the recognition of tax deductions for the amortization of
Customer-based intangible assets acquired in connection with the Corporation's
1991 initial public offering. The initial public offering resulted in certain
Customer-based intangible assets being recorded for income tax purposes only,
creating future tax deductions relating to these intangible assets. 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 tax benefit relating to the intangible assets, $32.8 million, during
the three month period ended March 31, 1996.
ASSET QUALITY
The Corporation's asset quality at any time reflects, among other factors, the
quality of the Corporation's credit card and other consumer loans, the general
economic conditions, the success of the Corporation's collection efforts, and
the average seasoning of the Corporation's accounts. As new accounts season,
the delinquency rate on these accounts generally rises and then stabilizes.
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 3.15%
at June 30, 1997, compared with 3.59% at December 31, 1996. The Corporation's
delinquency, as a percentage of managed loans, was 4.21% at June 30, 1997,
compared with 4.28% at December 31, 1996. Table 3 presents the delinquency of
the Corporation's loan portfolio, excluding loans held for securitization.
TABLE 3: DELINQUENT LOANS
(dollars in thousands)
June 30, 1997 December 31, 1996
----------------- -----------------
(unaudited)
Loan portfolio..................... $ 6,664,699 $ 7,659,078
Loans delinquent:
30 to 59 days.................... $ 80,357 1.21% $ 114,382 1.49%
60 to 89 days.................... 38,879 .58 52,857 .69
90 or more days.................. 90,486 1.36 107,679 1.41
----------- ---- ----------- ----
Total.......................... $ 209,722 3.15% $ 274,918 3.59%
=========== ==== =========== ====
Net Credit Losses
Net credit losses for the three and six months ended June 30, 1997 were $66.5
million and $117.4 million, compared to $45.7 million and $93.1 million for
the same periods in 1996, respectively. 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 increase in
net credit losses for the three and six months ended June 30, 1997 reflects
increases in the Corporation's outstanding loans, the general economic
conditions, and the seasoning of the Corporation's accounts, offset by sales
of charged-off receivables.
The Corporation's policy is generally to charge off accounts when they become
180 days contractually past due. From time to time, 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.
Net credit losses as a percentage of average loan receivables were 2.46% and
2.23% for the three and six months ended June 30, 1997, compared to 2.27% and
2.30% for the same periods last year. For the full year ended
December 31, 1996, net credit losses were 1.98% of average loan receivables.
The Corporation's managed credit losses as a percentage of average managed
loans for the three and six months ended June 30, 1997 were 3.96% and 3.86%,
compared to 3.46% and 3.37% for the same periods last year. For the full year
ended December 31, 1996, managed credit losses were 3.35% of average managed
loans.
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 securitization income rather than the
reserve for possible credit losses. The provision for possible credit losses
for the three and six months ended June 30, 1997 was $87.4 million and $145.8
million compared to $49.1 million and $98.6 million for the same periods in
1996, respectively. Table 4 presents the change in the Corporation's reserve
for possible credit losses.
TABLE 4: RESERVE FOR POSSIBLE CREDIT LOSSES
(dollars in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(unaudited)
Reserve balance, beginning
of period...................... $ 127,828 $ 106,904 $ 118,427 $ 104,886
Reserves acquired............. 2,996 26 5,026 26
Provision for possible
credit losses................ 87,363 49,112 145,768 98,600
Foreign currency translation.. 74 82 (130) 10
Credit losses................. (92,034) (62,338) (177,624) (121,446)
Recoveries.................... 25,492 16,620 60,252 28,330
--------- --------- --------- ---------
Net credit losses........... (66,542) (45,718) (117,372) (93,116)
--------- --------- --------- ---------
Reserve balance, end of period.. $ 151,719 $ 110,406 $ 151,719 $ 110,406
========= ========= ========= =========
CAPITAL ADEQUACY
The Corporation and Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory-and possible additional
discretionary-actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's and the Bank's consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Corporation and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off balance-sheet items as calculated under regulatory
accounting practices. The Corporation and the Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. Quantitative measures
established by regulation to ensure capital adequacy require the Corporation
and Bank to maintain minimum amounts and ratios (set forth in Table 5 below)
of Tier 1 and Total Capital to risk weighted assets and of Tier 1 Capital to
average assets (Leverage ratio). These guidelines provide for a minimum
leverage ratio of 3% for banks that meet certain specified criteria, including
that they have the highest regulatory rating. As of June 30, 1997, the
Corporation and the Bank exceeded all capital requirements to which they are
subject, and the Bank was "well capitalized" under the regulatory framework for
prompt corrective action. Both the Corporation's and the Bank's risk-based
capital ratios, shown in Table 5, have been computed in accordance with
regulatory accounting policies.
TABLE 5: REGULATORY CAPITAL RATIOS
June 30, 1997
----------------------------------------------------------
MBNA MBNA America Minimum Well-Capitalized
Corporation Bank, N.A. Requirements Requirements
----------- ------------ ------------ ----------------
(unaudited)
Tier 1............ 10.66% 10.25% 4.00% 6.00%
Total............. 13.90 12.28 8.00 10.00
Leverage.......... 10.63 10.16 3.00 5.00
During the three and six months ended June 30, 1997, the Corporation declared
dividends on its preferred and common stock of $44.0 million and $89.0 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. In addition, if the Corporation defers interest
payments for consecutive periods covering five years on the guaranteed
preferred beneficial interests in Corporation's junior subordinated deferrable
interest debentures, the Corporation may not be permitted to declare or pay any
cash dividends on the Corporation's capital stock or interest on debt
securities that have equal or lower priority over claims as the junior
subordinated deferrable interest debentures.
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
June 30, 1997, the amount of retained earnings available for declaration of
dividends from the Bank to the Corporation was $675.3 million. Payment of
dividends by the Bank to the Corporation, however, may be further 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 June 30, 1997. If this facility was
drawn upon as of June 30, 1997, the amount of retained earnings available for
declaration of dividends would have been limited to $658.4 million.
On July 15, 1997, the Board of Directors declared a quarterly dividend of $.12
per common share, payable October 1, 1997 to stockholders of record as of
September 9, 1997.
LIQUIDITY
Liquidity management is the process by which the Corporation manages its access
to various funding sources to meet its current and future operating needs.
These needs change as loans grow, deposits mature, and payments on obligations
are made. Because the characteristics of the Corporation's assets and
liabilities change, liquidity management is a dynamic process, affected by
changes in the relationship between short-term and long-term interest rates.
To facilitate liquidity management, the Corporation uses a variety of funding
sources to establish a maturity pattern that provides a prudent mixture of
short and long-term funds. Funding sources are available to the Corporation
through deposits, debt issuance, and equity programs.
Deposits generated by the Bank are a major source of funds for the Corporation.
Total deposits at June 30, 1997 and December 31, 1996 were $11.9 billion and
$10.2 billion, respectively. The increase in deposits is primarily the result
of the Corporation's continued emphasis on marketing certificate of deposits
and offering competitive rates. Table 6 presents the maturities of the
Corporation's deposits as of June 30, 1997.
TABLE 6: MATURITIES OF DEPOSITS AT JUNE 30, 1997
(dollars in thousands)
Direct Other Total
Deposits Deposits Deposits
----------- ----------- -----------
(unaudited)
Three months or less(a)................. $ 4,210,334 $ 717,633 $ 4,927,967
Over three months through twelve months. 2,284,299 650,881 2,935,180
Over one year through five years........ 2,395,853 1,649,204 4,045,057
Over five years......................... 6,294 2,480 8,774
----------- ----------- -----------
Total deposits........................ $ 8,896,780 $ 3,020,198 $11,916,978
=========== =========== ===========
(a) Includes money market deposit accounts, noninterest-bearing demand
deposits, interest-bearing transaction accounts, and savings accounts of
$3.2 billion.
Funding sources are also available to the Corporation through debt programs
established by the Corporation and the Bank. During the six months ended
June 30, 1997, the Corporation issued $150.0 million of floating-rate senior
medium-term notes and $412.0 million of floating-rate medium-term bank notes.
In addition, the Corporation, through MBNA International, drew 75.0 million
pounds sterling (approximately $121.8 million) from its fixed-rate syndicated
credit facility. In January 1997, the Corporation issued $280.0 million of
guaranteed preferred beneficial interests in Corporation's junior subordinated
deferrable interest debentures. The securities qualify as regulatory capital
for the Corporation. The proceeds from the debt issuances were used for
general corporate purposes.
At June 30, 1997, the Corporation, through MBNA International, had utilized
50.0 million pounds sterling (approximately $83.2 million) from its existing
300.0 million pounds sterling multi-currency committed syndicated revolving
credit facility. These borrowings, which are included as part of short-term
borrowings in the consolidated statements of financial condition, matured in
July 1997.
The Corporation also held $2.6 billion in investment securities and $1.8
billion of money market instruments at June 30, 1997, compared with $2.3
billion in investment securities and $876.6 million of money market instruments
at December 31, 1996. The investment securities primarily consisted of high-
quality, AAA-rated securities, most of which can be used as collateral under
repurchase agreements. Of the $2.6 billion in investment securities at
June 30, 1997, $1.2 billion is anticipated to mature within 12 months. The
Corporation continues to increase its investment securities available-for-sale
portfolio, which consists primarily of short-term and variable-rate securities.
At June 30, 1997, the Corporation had $2.1 billion of investment securities
available-for-sale. These investment securities, along with the money market
instruments, provide increased liquidity and flexibility to support the
Corporation's funding requirements. Estimated maturities (including the impact
of estimated prepayments) of the Corporation's investment securities portfolio
are presented in Table 7.
TABLE 7: SUMMARY OF INVESTMENT SECURITIES AT JUNE 30, 1997
(dollars in thousands)
Estimated Maturity
--------------------------------------------
Within 1 Over
Year 1-5 Years 6-10 Years 10 Years
---------- ---------- ---------- --------
(unaudited)
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S.
government agencies obligations.. $ 796,835 $ 200,297 $ - $ -
State and political subdivisions
of the United States............. 81,338 8,549 - -
Asset-backed and other securities. 141,630 825,116 65,879 8,864
---------- ---------- ---------- --------
Total investment securities
available-for-sale............. $1,019,803 $1,033,962 $ 65,879 $ 8,864
========== ========== ========== ========
HELD-TO-MATURITY
U.S. Treasury and other U.S.
government agencies obligations.. $ 174,232 $ 155,341 $ - $ 68,824
State and political subdivisions
of the United States............. - - - 608
Asset-backed and other securities. 21,468 37,092 1,000 16,917
---------- ---------- ---------- --------
Total investment securities
held-to-maturity............... $ 195,700 $ 192,433 $ 1,000 $ 86,349
========== ========== ========== ========
Book Market
Value Value
---------- ----------
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S.
government agencies obligations.. $ 997,132 $ 997,132
State and political subdivisions
of the United States............. 89,887 89,887
Asset-backed and other securities. 1,041,489 1,041,489
---------- ----------
Total investment securities
available-for-sale............. $2,128,508 $2,128,508
========== ==========
HELD-TO-MATURITY
U.S. Treasury and other U.S.
government agencies obligations.. $ 398,397 $ 391,510
State and political subdivisions
of the United States............. 608 538
Asset-backed and other securities. 76,477 76,306
---------- ----------
Total investment securities
held-to-maturity............... $ 475,482 $ 468,354
========== ==========
SECURITIZATION
Securitization of the Bank's loan receivables continues to be a 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 pool 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 168 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 Certificate
remains unchanged. Once the revolving period ends, principal payments are
allocated for distribution to the Investor Certificateholders according to the
terms of the transaction. As principal payments are allocated to the Investor
Certificateholders, the Bank's on-balance-sheet loan receivables increase by
the amount of any new purchases or cash advance activity on the accounts.
During the three and six months ended June 30, 1997, the Bank securitized loan
receivables totaling $2.7 billion and $5.1 billion respectively, through both
public and private markets. Amortization of previously securitized loan
receivables totaled $346.0 million and $879.8 million for the three and six
month periods ended June 30, 1997. This securitization activity brings the
total amount of outstanding securitized loans to $32.8 billion or 75.9% of
managed loans as of June 30, 1997, compared to $28.5 billion or 73.8% of
managed loans at December 31, 1996. An additional $2.0 billion of previously
securitized loans is scheduled to amortize into the Bank's loan portfolio
during the remainder of 1997.
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. Table 8 compares the average annualized yield for
the three-month period ended June 30, 1997, 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 92-1(b).................. 20.26% 14.90% 5.36%
MasterTrust 92-2(b).................. 19.69 13.71 5.98
MasterTrust 92-3(b).................. 17.71 13.09 4.62
MasterTrust 93-1..................... 17.71 13.04 4.67
MasterTrust 93-3..................... 17.86 12.41 5.45
MasterTrust 93-4..................... 17.86 13.02 4.84
MasterTrust 94-1..................... 17.86 12.92 4.94
MasterTrust 94-2..................... 17.86 12.98 4.88
MasterTrust II 94-A.................. 16.89 12.52 4.37
MasterTrust II 94-B.................. 16.89 12.52 4.37
MasterTrust II 94-C.................. 16.89 12.61 4.28
MasterTrust II 94-D.................. 16.89 12.55 4.34
MasterTrust II 94-E.................. 16.89 12.43 4.46
Gold Reserve......................... 18.84 15.08 3.76
MasterTrust II 95-A.................. 16.89 12.63 4.26
MasterTrust II 95-B.................. 16.89 12.51 4.38
MasterTrust II 95-C.................. 16.89 12.56 4.33
MasterTrust II 95-D.................. 16.89 12.43 4.46
MasterTrust II 95-E.................. 16.89 12.57 4.32
Cards No. 1.......................... 19.73 11.43 8.30
MasterTrust II 95-F.................. 16.89 13.14 3.75
MasterTrust II 95-G.................. 16.89 12.56 4.33
MasterTrust II 95-H.................. 16.89 12.42 4.47
MasterTrust II 95-I.................. 16.89 12.51 4.38
MasterTrust II 95-J.................. 16.89 12.58 4.31
MasterTrust II 96-A.................. 16.89 12.55 4.34
MasterTrust II 96-B.................. 16.89 12.62 4.27
MasterTrust II 96-C.................. 16.89 12.49 4.40
MasterTrust II 96-D.................. 16.89 12.49 4.40
Cards No. 2.......................... 19.73 11.29 8.44
MasterTrust II 96-E.................. 16.89 12.52 4.37
MasterTrust II 96-F.................. 16.86 12.40 4.46
MasterTrust II 96-G.................. 16.89 12.54 4.35
MasterTrust II 96-H.................. 16.91 12.47 4.44
MasterTrust II 96-I.................. 16.91 12.43 4.48
MasterTrust II 96-J.................. 16.89 12.51 4.38
MasterTrust II 96-K.................. 16.89 12.50 4.39
MasterTrust II 96-L.................. 16.91 12.40 4.51
MasterTrust II 96-M.................. 16.91 12.51 4.40
Gold Option.......................... 17.30 12.23 5.07
Cards No. 3.......................... 19.73 11.34 8.39
MasterTrust II 97-A.................. 16.92 12.34 4.58
MasterTrust II 97-B.................. 17.05 12.80 4.25
MasterTrust II 97-C.................. 17.02 13.10 3.92
(a) MasterTrust II 97-D issued on May 22, 1997, MasterTrust II 97-E issued on
May 8, 1997, MasterTrust II 97-F issued on June 18, 1997, and MasterTrust
II 97-G issued on June 18, 1997 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.
MBNA CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited)
The following supplemental information presents selected managed asset
data and managed ratios pertaining to the Corporation. This information is used
to evaluate the Corporation's financial condition as well as the impact
securitizations have on the Corporation's managed assets.
MANAGED ASSET DATA
(dollars in thousands)
June 30, 1997 December 31, 1996
----------------- -----------------
AT PERIOD END:
Loans held for securitization......... $ 3,761,615 $ 2,469,974
Loan portfolio........................ 6,664,699 7,659,078
Securitized loans..................... 32,756,985 28,494,481
----------------- -----------------
Total managed loans................. $ 43,183,299 $ 38,623,533
================= =================
Total managed interest-earning
assets............................. $ 47,544,452 $ 41,818,197
================= =================
Total managed assets................ $ 52,228,002 $ 45,529,823
================= =================
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
AVERAGE:
Loans held for
securitization......... $ 3,868,738 $ 2,264,506 $ 3,358,456 $ 2,639,403
Loan portfolio.......... 6,969,480 5,788,902 7,177,540 5,467,643
Securitized loans....... 30,916,249 21,029,887 29,937,986 19,939,966
------------ ------------ ------------ ------------
Total managed loans... $ 41,754,467 $ 29,083,295 $ 40,473,982 $ 28,047,012
============ ============ ============ ============
Total managed
interest-earning
assets............... $ 45,482,828 $ 32,002,234 $ 44,031,158 $ 30,837,664
============ ============ ============ ============
Total managed assets.. $ 49,698,808 $ 34,737,611 $ 48,073,842 $ 33,452,903
============ ============ ============ ============
MANAGED RATIOS:
Net interest margin
(on an FTE basis)..... 7.40% 7.66% 7.47% 7.67%
Delinquency............ 4.21 3.87
Net credit losses...... 3.96 3.46 3.86 3.37
PART II-OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
In May 1996, Andrew B. Spark filed a lawsuit against the Corporation, the Bank
and certain of its officers and its subsidiary MBNA Marketing Systems, Inc. in
the United States District Court for the Middle District of Florida. This suit
is a purported class action. The plaintiff alleges that the Bank's advertising
of its cash promotional annual percentage rate program was fraudulent and
deceptive. The plaintiff seeks unspecified damages including actual, treble
and punitive damages and attorneys' fees for an alleged breach of contract, and
violation of the Delaware Deceptive Trade Practices Act and the federal
Racketeer Influenced and Corrupt Organizations Act. In October 1996, this case
was transferred to the United States District Court for the District of
Delaware. In June 1997, the defendants' motion for summary judgment was
denied. The Corporation believes that its advertising practices are proper
under applicable federal and state law and intends to defend the action
vigorously.
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
Exhibit 11: Computation of Earnings Per Common Share
(dollars in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(unaudited)
PRIMARY
Average common shares outstanding.. 334,146 334,136 334,149 334,140
Net effect of dilutive stock
options--based on the treasury
stock method using average
market price...................... 15,804 10,922 15,919 10,811
--------- --------- --------- ---------
Total............................ 349,950 345,058 350,068 344,951
========= ========= ========= =========
Net income......................... $ 138,433 $ 103,320 $ 262,375 $ 195,542
Less: preferred stock dividend
requirements...................... 5,747 2,812 11,978 5,625
--------- --------- --------- ---------
Net income applicable to common
stock............................. $ 132,686 $ 100,508 $ 250,397 $ 189,917
========= ========= ========= =========
Per common share amount............ $ .38 $ .29 $ .72 $ .55
========= ========= ========= =========
FULLY DILUTED
Average common shares outstanding.. 334,146 334,136 334,149 334,140
Net effect of dilutive stock
options--based on the treasury
stock method using the higher of
ending or average market prices... 17,130 10,922 17,130 11,308
--------- --------- --------- ---------
Total............................ 351,276 345,058 351,279 345,448
========= ========= ========= =========
Net income......................... $ 138,433 $ 103,320 $ 262,375 $ 195,542
Less: preferred stock dividend
requirements...................... 5,747 2,812 11,978 5,625
--------- --------- --------- ---------
Net income applicable to common
stock............................. $ 132,686 $ 100,508 $ 250,397 $ 189,917
========= ========= ========= =========
Per common share amount............ $ .38 $ .29 $ .71 $ .55
========= ========= ========= =========
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.
To the extent stock options are exercised or restricted shares are awarded from
time to time under the Corporation's Long Term Incentive Plans, the Board of
Directors has approved the purchase on the open market or in privately
negotiated transactions of the number of shares issued.
b. Reports on Form 8-K
1. Report dated April 9, 1997, reporting MBNA Corporation's earnings
release for the first quarter of 1997.
2. Report dated April 30, 1997, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for April 1997.
3. Report dated May 8, 1997, reporting the securitization of
approximately $750.0 million of credit card receivables by MBNA America
Bank, N.A.
4. Report dated May 31, 1997, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for May 1997.
5. Report dated June 18, 1997, reporting the securitization of
approximately $706.0 million of credit card receivables by MBNA America
Bank, N.A.
6. Report dated June 30, 1997, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for June 1997.
7. Report dated July 15, 1997, reporting MBNA Corporation's earnings
release for the second quarter of 1997.
8. Report dated July 24, 1997, reporting the securitization of
approximately 250.0 million pounds sterling of credit card receivables by
MBNA International Bank Limited.
9. Report dated July 31, 1997, 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 1997.
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: August 14, 1997 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 JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 379,360
<INT-BEARING-DEPOSITS> 1,342,163
<FED-FUNDS-SOLD> 415,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,128,508
<INVESTMENTS-CARRYING> 475,482
<INVESTMENTS-MARKET> 468,354
<LOANS> 10,426,314<F1>
<ALLOWANCE> 151,719
<TOTAL-ASSETS> 19,471,017
<DEPOSITS> 11,916,978
<SHORT-TERM> 358,230
<LIABILITIES-OTHER> 753,424
<LONG-TERM> 4,686,610
0
86
<COMMON> 3,341
<OTHER-SE> 1,752,348
<TOTAL-LIABILITIES-AND-EQUITY> 19,471,017
<INTEREST-LOAN> 741,880<F1>
<INTEREST-INVEST> 67,673
<INTEREST-OTHER> 31,003
<INTEREST-TOTAL> 840,556
<INTEREST-DEPOSIT> 316,836
<INTEREST-EXPENSE> 475,033
<INTEREST-INCOME-NET> 365,523
<LOAN-LOSSES> 145,768
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,125,179
<INCOME-PRETAX> 432,030
<INCOME-PRE-EXTRAORDINARY> 432,030
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,375
<EPS-PRIMARY> .72<F2>
<EPS-DILUTED> .71<F2>
<YIELD-ACTUAL> 12.04<F3>
<LOANS-NON> 0
<LOANS-PAST> 90,486<F4>
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 118,427
<CHARGE-OFFS> 177,624
<RECOVERIES> 60,252
<ALLOWANCE-CLOSE> 151,719
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Includes Loans Held for Securitization.
<F2>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 October 1, 1997, to stockholders of record
as of the close of business on September 15, 1997. 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 January 1, 1997, to stockholders of record as of the close of
business on December 16, 1996.
<F3>On a fully taxable equivalent basis.
<F4>Excludes Loans Held for Securitization.
</FN>
</TABLE>
