30
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 March 31, 1998
-------------------------------------------------
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 19884-0141
- -------------------------------------------------------------------------------
(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 -- 501,187,500 Shares
Outstanding as of March 31, 1998
MBNA CORPORATION AND SUBSIDIARIES
Table of Contents
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition - 1
March 31, 1998 (unaudited) and December 31, 1997
Consolidated Statements of Income - 3
For the Three Months Ended March 31, 1998 and 1997 (unaudited)
Consolidated Statements of Changes in Stockholders' Equity - 5
For the Three Months Ended March 31, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows - 7
For the Three Months Ended March 31, 1998 and 1997 (unaudited)
Notes to the Consolidated Financial Statements (unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition 14
and Results of Operations
Supplemental Financial Information 34
Part II - Other Information
Item 2. Changes in Securities 35
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 6. Exhibits and Reports on Form 8-K 36
Signature 62
MBNA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(dollars in thousands, except per share amounts)
March 31, December 31,
1998 1997
------------- -------------
(unaudited)
ASSETS
Cash and due from banks.......................... $ 265,630 $ 263,064
Interest-earning time deposits in other banks.... 2,045,195 1,427,065
Federal funds sold and securities purchased
under resale agreements......................... 550,000 659,000
Investment securities:
Available-for-sale (at market value, amortized
cost of $2,030,713 and $2,160,869 at
March 31, 1998 and December 31, 1997,
respectively)................................. 2,032,102 2,162,464
Held-to-maturity (market value of $330,989
and $341,868 at March 31, 1998 and
December 31, 1997, respectively).............. 335,256 346,180
Loans held for securitization.................... 2,608,773 2,900,198
Loans:
Credit card.................................... 6,086,130 5,830,221
Other consumer................................. 2,378,921 2,431,655
------------- -------------
Total loans.................................. 8,465,051 8,261,876
Reserve for possible credit losses............. (178,297) (162,476)
------------- -------------
Net loans.................................... 8,286,754 8,099,400
Premises and equipment, net...................... 1,629,522 1,579,058
Accrued income receivable........................ 119,657 146,964
Accounts receivable from securitizations......... 3,047,238 2,835,831
Prepaid expenses and deferred charges............ 216,866 212,563
Other assets..................................... 723,759 673,726
------------- -------------
Total assets................................. $ 21,860,752 $ 21,305,513
============= =============
March 31, December 31,
1998 1997
------------- -------------
(unaudited)
LIABILITIES
Deposits:
Time deposits.................................. $ 9,247,954 $ 9,435,171
Money market deposit accounts.................. 3,334,246 3,122,385
Noninterest-bearing demand deposits............ 368,221 311,670
Interest-bearing transaction accounts.......... 29,062 31,669
Savings accounts............................... 8,626 12,318
------------- -------------
Total deposits............................... 12,988,109 12,913,213
Short-term borrowings............................ 167,170 192,623
Long-term debt and bank notes.................... 5,914,831 5,478,917
Accrued interest payable......................... 143,534 137,215
Accrued expenses and other liabilities........... 641,871 613,495
------------- -------------
Total liabilities............................ 19,855,515 19,335,463
STOCKHOLDERS' EQUITY
Preferred stock($.01 par value, 20,000,000
shares authorized, 8,573,882 shares issued
and outstanding at March 31, 1998 and
December 31, 1997, respectively)................ 86 86
Common stock ($.01 par value, 700,000,000 shares
authorized, 501,187,500 shares issued and
outstanding at March 31, 1998 and
December 31, 1997, respectively)................ 5,012 5,012
Additional paid-in capital....................... 362,228 424,377
Retained earnings and accumulated other
comprehensive income............................ 1,637,911 1,540,575
------------- -------------
Total stockholders' equity................... 2,005,237 1,970,050
------------- -------------
Total liabilities and stockholders' equity... $ 21,860,752 $ 21,305,513
============= =============
==============================================================================
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 Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
INTEREST INCOME
Loans............................................... $ 292,236 $ 259,241
Investment securities:
Taxable........................................... 32,013 31,605
Tax-exempt........................................ 786 817
Time deposits in other banks........................ 23,347 9,920
Federal funds sold and securities purchased
under resale agreements............................ 7,175 3,773
Loans held for securitization....................... 110,096 99,932
------------ ------------
Total interest income........................... 465,653 405,288
INTEREST EXPENSE
Deposits............................................ 195,661 148,846
Short-term borrowings............................... 4,024 8,345
Long-term debt and bank notes....................... 90,395 67,318
------------ ------------
Total interest expense.......................... 290,080 224,509
------------ ------------
NET INTEREST INCOME................................. 175,573 180,779
Provision for possible credit losses................ 88,598 58,405
------------ ------------
Net interest income after provision for
possible credit losses............................. 86,975 122,374
OTHER OPERATING INCOME
Interchange......................................... 30,572 26,048
Credit card fees.................................... 32,537 29,004
Securitization income............................... 617,365 576,738
Other............................................... 19,036 10,830
------------ ------------
Total other operating income.................... $ 699,510 $ 642,620
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
OTHER OPERATING EXPENSE
Salaries and employee benefits...................... $ 246,562 $ 225,457
Occupancy expense of premises....................... 26,476 18,832
Furniture and equipment expense..................... 44,107 33,616
Other............................................... 227,990 281,886
------------ ------------
Total other operating expense................... 545,135 559,791
------------ ------------
Income before income taxes.......................... 241,350 205,203
Applicable income taxes............................. 91,954 81,261
------------ ------------
NET INCOME.......................................... $ 149,396 $ 123,942
============ ============
EARNINGS PER COMMON SHARE........................... $ .29 $ .23
EARNINGS PER COMMON SHARE-ASSUMING DILUTION......... .28 .22
===============================================================================
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, 1997............ 8,574 501,188 $ 86 $ 5,012
Net income............................ - - - -
Cash dividends:
Common-$.09 per share............... - - - -
Preferred........................... - - - -
Exercise of stock options and other
awards............................... - 3,411 - 34
Acquisition and retirement of
common stock......................... - (3,411) - (34)
Foreign currency translation, net
of tax (accumulated amount of
$6,625 at March 31, 1998)............ - - - -
Net unrealized losses on investment
securities available-for-sale and
other financial instruments, net
of tax (accumulated amount of
$4,339 at March 31, 1998)............ - - - -
Minimum benefit plan liability
adjustment, net of tax
(accumulated amount of ($4,575)
at March 31, 1998)................... - - - -
--------- -------- --------- ---------
BALANCE, MARCH 31, 1998............... 8,574 501,188 $ 86 $ 5,012
========= ======== ========= =========
BALANCE, DECEMBER 31, 1996............ 12,000 501,188 $ 120 $ 5,012
Net income............................ - - - -
Cash dividends:
Common-$.08 per share............... - - - -
Preferred........................... - - - -
Exercise of stock options and other
awards............................... - 1,981 - 20
Acquisition and retirement of
common stock......................... - (1,981) - (20)
Acquisition and retirement of
preferred stock...................... (2,452) - (25) -
Foreign currency translation, net
of tax (accumulated amount of
$3,240 at March 31, 1997)............ - - - -
Net unrealized gains on investment
securities available-for-sale and
other financial instruments, net
of tax (accumulated amount of
$1,533 at March 31, 1997)............ - - - -
--------- -------- --------- ---------
BALANCE, MARCH 31, 1997............... 9,548 501,188 $ 95 $ 5,012
========= ======== ========= =========
Retained Earnings
and Accumulated
Additional Other Total
Paid-in Comprehensive Stockholders'
Capital Income Equity
---------- ----------------- ------------
BALANCE, DECEMBER 31, 1997.......... $ 424,377 $ 1,540,575 $ 1,970,050
Net income.......................... - 149,396 149,396
Cash dividends:
Common-$.09 per share............. - (45,120) (45,120)
Preferred......................... - (3,622) (3,622)
Exercise of stock options and other
awards............................. 48,440 - 48,474
Acquisition and retirement of
common stock....................... (110,589) - (110,623)
Foreign currency translation, net
of tax (accumulated amount of
$6,625 at March 31, 1998).......... - 3,701 3,701
Net unrealized losses on investment
securities available-for-sale and
other financial instruments, net
of tax (accumulated amount of
$4,339 at March 31, 1998).......... - (2,444) (2,444)
Minimum benefit plan liability
adjustment, net of tax
(accumulated amount of ($4,575)
at March 31, 1998)................. - (4,575) (4,575)
---------- ----------------- ------------
BALANCE, MARCH 31, 1998............. $ 362,228 $ 1,637,911 $ 2,005,237
========== ================= ============
BALANCE, DECEMBER 31, 1996.......... $ 602,231 $ 1,096,945 $ 1,704,308
Net income.......................... - 123,942 123,942
Cash dividends:
Common-$.08 per share............. - (40,097) (40,097)
Preferred......................... - (4,911) (4,911)
Exercise of stock options and other
awards............................. 23,629 - 23,649
Acquisition and retirement of
common stock... ................... (44,413) - (44,433)
Acquisition and retirement of
preferred stock.................... (61,278) (1,320) (62,623)
Foreign currency translation, net
of tax (accumulated amount of
$3,240 at March 31, 1997).......... - (4,670) (4,670)
Net unrealized gains on investment
securities available-for-sale and
other financial instruments, net
of tax (accumulated amount of
$1,533 at March 31, 1997).......... - 810 810
---------- ----------------- ------------
BALANCE, MARCH 31, 1997............. $ 520,169 $ 1,170,699 $ 1,695,975
========== ================= ============
==============================================================================
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 Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
OPERATING ACTIVITIES
Net income......................................... $ 149,396 $ 123,942
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses............. 88,598 58,405
Depreciation, amortization, and accretion........ 53,503 31,997
(Benefit) provision for deferred income taxes.... (1,623) 3,681
Decrease (increase) in accrued income receivable. 27,307 (2,996)
Increase in accounts receivable from
securitizations................................. (211,407) (284,362)
Increase in accrued interest payable............. 6,319 18,841
Decrease in other operating activities........... 2,464 91,429
------------ ------------
Net cash provided by operating activities...... 114,557 40,937
INVESTING ACTIVITIES
Net increase in money market instruments........... (509,130) (537,416)
Proceeds from maturities of investment securities
available-for-sale................................ 1,192,773 1,642,387
Purchases of investment securities
available-for-sale................................ (1,054,883) (1,754,460)
Proceeds from maturities of investment securities
held-to-maturity ................................. 23,809 22,061
Purchases of investment securities
held-to-maturity.................................. (12,782) (17,475)
Proceeds from securitization of loans.............. 1,163,293 2,358,542
Portfolio acquisitions............................. (178,247) (231,798)
Amortization of securitized loans.................. (395,833) (533,736)
Net loan originations.............................. (595,918) (1,508,802)
Net purchases of premises and equipment............ (91,306) (107,231)
------------ -----------
Net cash used in investing activities.......... $ (458,224) $ (667,928)
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
FINANCING ACTIVITIES
Net (decrease) increase in time deposits........... $ (187,217) $ 531,219
Net increase in money market deposit accounts,
noninterest-bearing demand deposits,
interest-bearing transaction accounts,
and savings accounts.............................. 262,113 225,742
Net decrease in short-term borrowings.............. (25,453) (146,380)
Proceeds from issuance of long-term debt
and bank notes.................................... 456,701 276,786
Maturity of long-term debt and bank notes.......... (26,267) (1,480)
Proceeds from exercise of stock options
and other awards.................................. 20,819 12,036
Acquisition and retirement of common stock......... (110,623) (44,433)
Acquisition and retirement of preferred stock...... - (26,320)
Dividends paid..................................... (43,840) (41,014)
------------ ------------
Net cash provided by financing activities...... 346,233 786,156
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS.............. 2,566 159,165
Cash and cash equivalents at beginning of period... 263,064 225,063
------------ ------------
Cash and cash equivalents at end of period......... $ 265,630 $ 384,228
============ ============
SUPPLEMENTAL DISCLOSURE
Interest expense paid.............................. $ 284,477 $ 205,023
============ ============
Income taxes paid.................................. $ 53,979 $ 32,077
============ ============
==============================================================================
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 months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. The notes to the consolidated financial statements
contained in the Annual Report on Form 10-K for the year ended December 31,
1997 should be read in conjunction with these consolidated financial
statements.
NOTE B: CORPORATION'S CHARTER AMENDMENT
On April 21, 1998, the stockholders of the Corporation approved an amendment to
the Corporation's charter to increase the number of authorized shares of common
stock from 700.0 million shares to 1.5 billion shares. The amendment became
effective April 28, 1998.
NOTE C: INTANGIBLE ASSETS
Intangible assets, including the value of acquired Customer accounts and
goodwill, are amortized over the periods the Corporation receives a benefit,
not exceeding fifteen years. Intangible assets, which are included in other
assets, had a net book value of $373.2 million and $366.1 million at March 31,
1998 and December 31, 1997, respectively.
The Corporation periodically reviews the carrying value of its intangible
assets for impairment. The intangible assets are carried at the lower of net
book value or fair value, with the fair value determined by discounting the
expected future cash flows from the use of the asset, using a discount rate not
less than the discount rate used at the time of acquisition. The Corporation
performs this valuation based on the size and nature of the intangible asset.
For intangible assets that are not considered material, the Corporation
performs this calculation by grouping the assets by year of acquisition.
NOTE D: EARNINGS PER COMMON SHARE
Earnings per common share ("basic") is computed using net income applicable to
common stock and weighted average common shares outstanding during the period.
Earnings per common share-assuming dilution ("diluted") is computed using net
income applicable to common stock and weighted average common shares
outstanding during the period after consideration of the potential dilutive
effect of common stock equivalents based on the treasury stock method using an
average market price for the period. The Corporation's common stock
equivalents are solely related to employee stock options. The Corporation does
not have any other common stock equivalents.
For comparative purposes, earnings per common share (basic and diluted) and
weighted average common shares outstanding and common stock equivalents have
been restated to reflect the adoption of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (Statement No. 128), and the three-for-
two stock split of the Corporation's Common Stock, effected in the form of a
dividend, issued October 1, 1997, to stockholders of record as of September 15,
1997.
Computation of Earnings Per Common Share
(dollars in thousands, except per share data)
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
BASIC
Net income......................................... $ 149,396 $ 123,942
Less: preferred stock dividend requirements........ 3,622 6,231
------------ ------------
Net income applicable to common stock.............. $ 145,774 $ 117,711
============ ============
Weighted average common shares outstanding (000)... 501,248 501,229
============ ============
Earnings per common share.......................... $ .29 $ .23
============ ============
DILUTED
Net income......................................... $ 149,396 $ 123,942
Less: preferred stock dividend requirements........ 3,622 6,231
------------ ------------
Net income applicable to common stock.............. $ 145,774 $ 117,711
============ ============
Weighted average common shares outstanding (000)... 501,248 501,229
Net effect of dilutive stock options-based on
the treasury stock method using average
market price (000)................................ 26,917 24,051
------------ ------------
Weighted average common shares outstanding and
common stock equivalents (000).................... 528,165 525,280
============ ============
Earnings per common share-assuming dilution........ $ .28 $ .22
============ ============
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 in the open market, or in privately
negotiated transactions, of the number of shares issued.
NOTE E: 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 three months ended March 31, 1998, 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
between 50 basis points and 66 basis points over
the three-month London Interbank Offered Rate
(LIBOR), payable quarterly, maturing in varying
amounts from 2001 through 2003..................... $210,000
6.75% Subordinated Notes, payable semiannually,
maturing in 2008................................... 250,000
The 6.75% Subordinated Notes are subordinated to the claims of depositors and
other creditors of MBNA America Bank, N.A., unsecured, and not subject to
redemption prior to maturity.
NOTE F: PREFERRED STOCK
The Board of Directors declared the following quarterly dividends for the
Corporation's Series A and Series B Preferred Stock:
Series A Series B
--------------------- ---------------------
Dividend Per Dividend Per
Dividend Preferred Dividend Preferred
Declaration Date Payment Date Rate Share Rate Share
- ---------------- -------------- -------- ------------ -------- ------------
January 13, 1998 April 15, 1998 7.50% $ .46875 5.86% $ .3660
April 14, 1998 July 15, 1998 7.50 .46875 5.85 .3654
NOTE G: COMPREHENSIVE INCOME
On January 1, 1998, the Corporation adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (Statement No. 130).
Statement No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components in the financial statements and had no
impact on the Corporation's consolidated financial statements. Statement
No. 130 requires unrealized gains or losses on the Corporation's investment
securities available-for-sale, foreign currency translation, and changes in
certain minimum benefit plan liabilities, to be included in other comprehensive
income.
The components of comprehensive income, net of tax, for the three months ended
March 31, 1998 and 1997 are as follows:
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
Net income...................................... $ 149,396 $ 123,942
Foreign currency translation.................... 3,701 (4,670)
Net unrealized (losses) gains on investment
securities available-for-sale and other
financial instruments.......................... (2,444) 810
Minimum benefit plan liability adjustment....... (4,575) -
------------ ------------
Comprehensive income............................ $ 146,078 $ 120,082
============ ============
The components of accumulated other comprehensive income, net of tax, at
March 31, 1998 and December 31, 1997 are as follows:
March 31, December 31,
1998 1997
------------ ------------
Foreign currency translation.................... $ 6,625 $ 2,924
Net unrealized gains on investment securities
available-for-sale and other financial
instruments.................................... 4,339 6,783
Minimum benefit plan liability adjustment....... (4,575) -
------------ ------------
Accumulated other comprehensive income.......... 6,389 9,707
Retained earnings............................... 1,631,522 1,530,868
------------ ------------
Retained earnings and accumulated other
comprehensive income........................... $ 1,637,911 $ 1,540,575
============ ============
NOTE H: NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits"
(Statement No. 132), was issued. This statement, effective for financial
statements issued for fiscal years beginning after December 15, 1997, revises
employers' disclosures about pension and other postretirement benefit plans.
It does not change the measurement or recognition of those plans. The adoption
of Statement No. 132 will not have an impact on the Corporation's consolidated
financial statements.
In March 1998, Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1), was
issued. This statement, effective for financial statements issued for fiscal
years beginning after December 15, 1998, provides guidance on accounting for
the costs of computer software developed or obtained for internal use. Earlier
application is encouraged. The Corporation adopted SOP 98-1 during the three
month period ending March 31, 1998, and it did not have a material impact on
the Corporation's consolidated financial statements.
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
the world's largest independent credit card lender 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 insurance
and deposit products.
The Corporation generates interest and other income through finance charges
assessed on outstanding loan receivables, interchange income, credit card and
other 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.
EARNINGS SUMMARY
Net income for the three months ended March 31, 1998 increased 20.5% to $149.4
million, from $123.9 million for the same period in 1997. Earnings per common
share increased 27.3% to $.28 per common share for the three months ended
March 31, 1998, compared to $.22 per common share for the three months ended
March 31, 1997. Earnings per common share amounts are presented assuming
dilution in accordance with Statement of Financial Accounting Standards
No. 128, "Earnings per Share".
The overall growth in earnings was primarily attributable to the growth in the
Corporation's managed loans outstanding. Total managed loans at March 31,
1998 were $50.2 billion, a $9.9 billion increase from March 31, 1997, and a
$811.8 million increase since December 31, 1997, as the Corporation acquired
110 new endorsements from organizations and added 1.7 million new accounts
during the three months ended March 31, 1998. The Corporation's average
managed loans increased 26.8% to $49.7 billion for the three months ended
March 31, 1998, compared to $39.2 billion for the same period in 1997.
The Corporation continues to be an active participant in the asset
securitization market. Asset 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 months
ended March 31, 1998, the Corporation securitized approximately $1.2 billion
of loan receivables, bringing the total amount of outstanding securitized
loans to $39.1 billion as of March 31, 1998.
Return on average total assets for the three months ended March 31, 1998, was
2.81%, compared to 2.88% for the same period during 1997. The decrease in the
return on average total assets for the three months ended March 31, 1998 is a
result of the Corporation's average total assets growing faster than its net
income when compared to the same period in 1997. The Corporation's return on
average stockholders' equity for the three months ended March 31, 1998 was
31.19%, compared to 29.89% for the same period in 1997. The higher return on
average stockholders' equity is primarily a result of the 20.5% increase in
net income for the three months ended March 31, 1998 which exceeded the 15.5%
increase in average stockholders' equity. The slower growth in average
stockholders' equity was primarily a result of the Corporation's acquisition
of its common stock. The Corporation repurchases common stock when it issues
shares upon exercise of stock options or restricted stock awards pursuant to
the Corporation's Long Term Incentive Plans.
NET INTEREST INCOME
Net interest income for the three months ended March 31, 1998, on a fully
taxable equivalent basis, was $176.0 million, compared to $181.2 million for
the same period in 1997. The decrease in net interest income for the three
months ended March 31, 1998 is primarily a result of an increase of $3.6
billion in average interest-bearing liabilities, offset by an increase of $2.3
billion in average interest-earning assets combined with a decline in the net
interest margin, compared to the same period in 1997. The increase in
interest-bearing liabilities during this period resulted primarily from
funding the increases in interest-earning assets and accounts receivable from
securitizations, which is included in other assets. The growth in interest-
earning assets during the three months ended March 31, 1998 was a result of an
increase in average investment securities and money market instruments of $1.0
billion and an increase in average loan receivables of $1.3 billion.
The net interest margin, on a fully taxable equivalent basis, was 4.49% for
the three months ended March 31, 1998, compared to 5.40% for the same period
in 1997. The decline of 91 basis points in the net interest margin for 1998
is primarily a result of an increase in average interest-bearing liabilities
that was partially used to fund the growth in accounts receivable from
securitizations, which is included in other assets, combined with a 25 basis
point increase in the average rate paid on interest-bearing liabilities and a
21 basis point decrease in the average yield earned on average interest-
earning assets. The decrease in the yield earned on average interest-earning
assets is a result of an increase in the percentage of lower yielding average
investment securities and money market instruments to interest-earning assets,
in addition to a 5 basis point decline in the average yield earned on loan
receivables, compared to the same period in 1997.
INVESTMENT SECURITIES AND MONEY MARKET INSTRUMENTS
Interest income on investment securities and money market instruments, on a
fully taxable equivalent basis, increased $17.2 million for the three months
ended March 31, 1998, as compared to the same period in 1997. The increase for
the three months ended March 31, 1998 is primarily a result of an increase of
$1.1 billion in average money market instruments when compared to the same
period in 1997. The increase is the result of the timing of receipt of funds
from asset securitizations. Funds received from these securitizations have
been invested in short-term, liquid money market instruments until they are
needed to fund loan growth. The yield earned on investment securities and
money market instruments increased 28 basis points for the three months ended
March 31, 1998, as compared to the same period in 1997.
LOAN RECEIVABLES
Interest income generated by the Corporation's loan receivables increased
$43.2 million to $402.3 million for the three months ended March 31, 1998,
compared to the same period in 1997. The increase is primarily attributable to
an increase in average loan receivables of $1.3 billion to $11.5 billion for
the three months ended March 31, 1998. Yields earned by the Corporation on
loan receivables declined 5 basis points to 14.19% as compared to the three
months ended March 31, 1997.
Table 1 presents the Corporation's period-end loan receivables distribution by
loan type, excluding securitized loans.
TABLE 1: LOAN RECEIVABLES DISTRIBUTION
(dollars in thousands)
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
Loans held for securitization:
Domestic:
Credit card......................... $ 2,019,418 $ 2,297,400
Other consumer...................... 250,000 -
-------------- -----------------
Total domestic loans held for
securitization................... 2,269,418 2,297,400
Foreign............................... 339,355 602,798
-------------- -----------------
Total loans held for
securitization................... 2,608,773 2,900,198
Loan portfolio:
Domestic:
Credit card......................... 5,668,294 5,475,933
Other consumer...................... 2,095,566 2,187,216
-------------- -----------------
Total domestic loan portfolio..... 7,763,860 7,663,149
Foreign............................... 701,191 598,727
-------------- -----------------
Total loan portfolio.............. 8,465,051 8,261,876
-------------- -----------------
Total loan receivables............ $ 11,073,824 $ 11,162,074
============== =================
DEPOSITS
Total interest expense on deposits increased $46.8 million to $195.7 million
for the three months ended March 31, 1998, compared to the same period in 1997.
The increase is the result of an increase in average interest-bearing deposits
of $2.6 billion for the three months ended March 31, 1998, combined with a 30
basis point increase in the rate paid on average interest-bearing deposits,
compared with the same period in 1997. This increase is a result of the
Corporation's continued emphasis on marketing certificates of deposit and money
market deposit accounts to fund loan growth and diversify funding sources.
BORROWED FUNDS
Interest expense on short-term borrowings decreased $4.3 million to $4.0
million for the three months ended March 31, 1998, compared to the same period
in 1997. The decrease is primarily the result of a decrease in average short-
term borrowings of $366.4 million, offset by an increase of 156 basis points in
the rates paid on these average short-term borrowings compared to the same
period in 1997.
Total interest expense on long-term debt and bank notes increased $23.1 million
to $90.4 million for the three months ended March 31, 1998, compared to the
same period in 1997. 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 $1.4 billion for the
three months ended March 31, 1998, compared to the same period in 1997.
TABLE 2: 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
March 31, 1998
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
ASSETS
Interest-earning assets:
Interest-earning time deposits in other
banks:
Domestic.................................. $ 22,088 5.01% $ 273
Foreign................................... 1,570,361 5.96 23,074
------------ ----------
Total interest-earning time deposits
in other banks....................... 1,592,449 5.95 23,347
Federal funds sold and securities purchased
under resale agreements.................... 521,344 5.58 7,175
Investment securities(a):
Taxable................................... 2,211,116 5.87 32,013
Tax-exempt(b)............................. 85,730 5.72 1,209
------------ ----------
Total investment securities........... 2,296,846 5.87 33,222
Loans held for securitization:
Domestic.................................. 2,425,443 14.36 85,908
Foreign................................... 644,492 15.22 24,188
------------ ----------
Total loans held for securitization... 3,069,935 14.54 110,096
Loans:
Domestic:
Credit card............................. 5,670,233 14.03 196,191
Other consumer.......................... 2,117,000 14.17 73,979
------------ ----------
Total domestic loans.................. 7,787,233 14.07 270,170
Foreign................................... 643,050 13.92 22,066
------------ ----------
Total loans........................... 8,430,283 14.06 292,236
------------ ----------
Total interest-earning assets......... 15,910,857 11.88 $ 466,076
Cash and due from banks....................... 504,035
Premises and equipment, net................... 1,613,810
Other assets.................................. 3,731,188
Reserve for possible credit losses............ (168,646)
------------
Total assets.......................... $ 21,591,244
============
(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 March 31, 1998 was $423.
For the Three Months Ended
March 31, 1998
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic:
Time deposits........................... $ 8,916,450 6.36% $ 139,806
Money market deposit accounts........... 3,210,032 5.55 43,945
Interest-bearing transaction accounts... 31,630 4.82 376
Savings accounts........................ 10,869 4.78 128
------------ ----------
Total domestic interest-bearing
deposits............................. 12,168,981 6.14 184,255
Foreign:
Time deposits........................... 630,552 7.34 11,406
------------ ----------
Total interest-bearing deposits....... 12,799,533 6.20 195,661
Borrowed funds:
Short-term borrowings:
Domestic................................ 27,063 5.54 370
Foreign................................. 196,415 7.54 3,654
------------ ----------
Total short-term borrowings........... 223,478 7.30 4,024
Long-term debt and bank notes:
Domestic(c)............................. 5,346,657 6.56 86,434
Foreign................................. 221,882 7.24 3,961
------------ ----------
Total long-term debt and bank notes... 5,568,539 6.58 90,395
------------ ----------
Total borrowed funds.................. 5,792,017 6.61 94,419
------------ ----------
Total interest-bearing liabilities.... 18,591,550 6.33 290,080
Demand deposits............................... 385,046
Other liabilities............................. 671,981
------------
Total liabilities..................... 19,648,577
Stockholders' equity.......................... 1,942,667
------------
Total liabilities and stockholders'
equity............................... $ 21,591,244
============ ----------
Net interest income................... $ 175,996
==========
Net interest margin................... 4.49
Interest rate spread.................. 5.55
(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
March 31, 1997
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
ASSETS
Interest-earning assets:
Interest-earning time deposits in other
banks:
Domestic.................................. $ 2,699 4.21% $ 28
Foreign................................... 726,500 5.52 9,892
------------ ----------
Total interest-earning time deposits
in other banks....................... 729,199 5.52 9,920
Federal funds sold and securities purchased
under resale agreements.................... 282,822 5.41 3,773
Investment securities(a):
Taxable................................... 2,283,881 5.61 31,605
Tax-exempt(b)............................. 88,186 5.78 1,257
------------ ----------
Total investment securities........... 2,372,067 5.62 32,862
Loans held for securitization:
Domestic.................................. 2,534,489 14.18 88,599
Foreign................................... 308,014 14.92 11,333
------------ ----------
Total loans held for securitization... 2,842,503 14.26 99,932
Loans:
Domestic:
Credit card............................. 5,035,218 14.11 175,164
Other consumer.......................... 2,025,978 14.71 73,482
------------ ----------
Total domestic loans.................. 7,061,196 14.28 248,646
Foreign................................... 326,717 13.15 10,595
------------ ----------
Total loans........................... 7,387,913 14.23 259,241
------------ ----------
Total interest-earning assets......... 13,614,504 12.09 $ 405,728
Cash and due from banks....................... 433,476
Premises and equipment, net................... 1,085,398
Other assets.................................. 2,467,803
Reserve for possible credit losses............ (119,214)
------------
Total assets.......................... $ 17,481,967
============
(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 March 31, 1997 was $440.
For the Three Months Ended
March 31, 1997
--------------------------------
Average Yield/ Income
Amount Rate or Expense
------------ ------ ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic:
Time deposits(c)........................ $ 7,120,952 6.13% $ 107,601
Money market deposit accounts........... 2,759,597 5.30 36,075
Interest-bearing transaction accounts... 26,399 4.58 298
Savings accounts........................ 10,983 4.54 123
------------ ----------
Total domestic interest-bearing
deposits............................. 9,917,931 5.89 144,097
Foreign:
Time deposits........................... 311,289 6.19 4,749
------------ ----------
Total interest-bearing deposits....... 10,229,220 5.90 148,846
Borrowed funds:
Short-term borrowings:
Domestic ............................... 530,762 5.63 7,368
Foreign................................. 59,104 6.70 977
------------ ----------
Total short-term borrowings........... 589,866 5.74 8,345
Long-term debt and bank notes:
Domestic(c)............................. 4,054,288 6.52 65,196
Foreign................................. 102,044 8.43 2,122
------------ ----------
Total long-term debt and bank notes... 4,156,332 6.57 67,318
------------ ----------
Total borrowed funds.................. 4,746,198 6.47 75,663
------------ ----------
Total interest-bearing liabilities.... 14,975,418 6.08 224,509
Demand deposits............................... 304,640
Other liabilities............................. 520,224
------------
Total liabilities..................... 15,800,282
Stockholders' equity.......................... 1,681,685
------------
Total liabilities and stockholders'
equity............................... $ 17,481,967
============ ----------
Net interest income................... $ 181,219
==========
Net interest margin................... 5.40
Interest rate spread.................. 6.01
(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 8.9% to $699.5 million for the three
months ended March 31, 1998, from $642.6 million for the same period in 1997.
The increase in other operating income is primarily attributable to a 7.0%
increase in securitization income, which grew to $617.4 million for the three
months ended March 31, 1998 from $576.7 million for the same period in 1997.
Securitization income includes the gains recognized by the Corporation as a
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) on January 1, 1997, in addition to other
earnings by the Corporation for the servicing of previously securitized loans.
The gains recognized by the Corporation as a result of Statement No. 125 were
$4.1 million for the three months ended March 31, 1998, and $123.1 million for
the three months ended March 31, 1997. Without these gains, securitization
income would have increased 35.2% and other operating income would have
increased 33.9% for the three months ended March 31, 1998, as compared to the
same period in 1997. The increase in securitization income is primarily
attributable to the growth in average securitized loans, which increased $9.2
billion or 31.9% to $38.2 billion for the three months ended March 31, 1998,
compared to the same period in 1997.
Other income increased $8.2 million as a result of the growth in fee income
generated from the Corporation's insurance agency business.
OTHER OPERATING EXPENSE
Total other operating expense decreased 2.6% to $545.1 million for the three
months ended March 31, 1998 as compared to the same period in 1997. Total
other operating expense for these periods includes the Corporation's investment
in additional business development efforts of an amount equivalent to the gains
recognized by the Corporation as a result of the adoption of Statement No. 125.
Without these expenses, total other operating expense would have increased
23.9% for the three months ended March 31, 1998, as compared to the same period
in 1997, reflecting the Corporation's continued investment in business
development to enhance the ability of the Corporation to attract and retain
Customers. For the three months ended March 31, 1998, the Corporation added
1.7 million new accounts.
TABLE 3: OTHER EXPENSE COMPONENT OF OTHER OPERATING EXPENSE
(dollars in thousands)
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
Purchased services................................. $ 55,517 $ 79,231
Advertising........................................ 22,164 49,027
Collection......................................... 6,709 5,934
Stationery and supplies............................ 7,237 7,639
Service bureau..................................... 7,066 7,283
Postage and delivery............................... 45,168 55,636
Telephone usage.................................... 13,055 14,365
Credit card fraud losses........................... 20,426 15,033
Amortization of intangible assets.................. 10,332 6,848
Computer software.................................. 11,384 7,919
Other.............................................. 28,932 32,971
------------ ------------
Total other operating expense.................... $ 227,990 $ 281,886
============ ============
INCOME TAXES
Applicable income taxes increased $10.7 million to $92.0 million for the three
months ended March 31, 1998, from $81.3 million for the three months ended
March 31, 1997.
LOAN QUALITY
The Corporation's loan 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 3.49%
at March 31, 1998, compared with 3.93% at December 31, 1997. The Corporation's
managed delinquency, as a percentage of managed loans, was 4.66% at March 31,
1998, compared with 4.59% at December 31, 1997. Table 4 presents the stages of
delinquency of the Corporation's loan portfolio, excluding loans held for
securitization.
TABLE 4: DELINQUENT LOANS
(dollars in thousands)
March 31, 1998 December 31, 1997
------------------ -----------------
(unaudited)
Loan portfolio....................... $ 8,465,051 $ 8,261,876
Loans delinquent:
30 to 59 days...................... $ 108,828 1.29% $ 125,870 1.52%
60 to 89 days...................... 56,211 .66 64,275 .78
90 or more days.................... 130,169 1.54 134,865 1.63
----------- ----- ----------- -----
Total............................ $ 295,208 3.49% $ 325,010 3.93%
=========== ===== =========== =====
Loans delinquent by geographic area:
Domestic........................... $ 279,456 3.60% $ 313,467 4.09%
Foreign............................ 15,752 2.25 11,543 1.93
Net Credit Losses
Net credit losses for the three months ended March 31, 1998 were $73.9 million
compared to $50.8 million for the same period in 1997. 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 months ended March 31, 1998,
reflects increases in the Corporation's outstanding loans, the general
economic conditions, and the seasoning of the Corporation's accounts, offset
by recoveries from the sale of charged-off receivables.
The Corporation's policy is generally to charge off accounts when they become
180 days contractually past due. The Corporation sells previously charged-off
receivables and records the proceeds received from these sales as recoveries,
thereby reducing net credit losses.
Net credit losses as a percentage of average loan receivables were 2.57% for
the three months ended March 31, 1998, compared to 1.99% for the same period
ended March 31, 1997. For the full year ended December 31, 1997, net credit
losses were 2.14% of average loan receivables. The Corporation's managed
credit losses as a percentage of average managed loans for the three months
ended March 31, 1998 were 4.19%, compared to 3.75% for the same period last
year. For the full year ended December 31, 1997, managed credit losses were
3.97% of average managed loans.
Reserve and Provision for Possible Credit Losses
The loan portfolio is regularly reviewed to determine an appropriate 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. A provision is charged to
operating expense to maintain the reserve at an appropriate level. 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 months ended March 31, 1998
was $88.6 million compared to $58.4 million for the same period in 1997. Table
5 presents an analysis of the Corporation's reserve for possible credit losses.
TABLE 5: RESERVE FOR POSSIBLE CREDIT LOSSES
(dollars in thousands)
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
Reserve for possible credit losses, beginning of
period............................................ $ 162,476 $ 118,427
Reserves acquired................................ 997 2,030
Provision for possible credit losses............. 88,598 58,405
Foreign currency translation..................... 89 (204)
Credit losses:
Domestic:
Credit card.................................. (85,862) (77,163)
Other consumer............................... (20,188) (7,367)
------------ ------------
Total domestic credit losses............... (106,050) (84,530)
Foreign........................................ (4,225) (1,060)
------------ ------------
Total credit losses........................ (110,275) (85,590)
Recoveries:
Domestic:
Credit card.................................. 32,996 32,589
Other consumer............................... 2,335 1,836
------------ ------------
Total domestic recoveries.................. 35,331 34,425
Foreign........................................ 1,081 335
------------ ------------
Total recoveries........................... 36,412 34,760
------------ ------------
Net credit losses................................ (73,863) (50,830)
------------ ------------
Reserve for possible credit losses, end of period.. $ 178,297 $ 127,828
============ ============
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. In March 1998, the Corporation began offering other consumer loans
through MBNA America Bank (Delaware) (the "State Bank"), a state bank organized
under Delaware law. The State Bank is subject to capital requirements adopted
by the Federal Deposit Insurance Corporation. Under these requirements, the
federal bank regulatory agencies have established quantitative measures to
ensure that minimum thresholds for Tier 1 Capital, Total Capital, and Leverage
ratios are maintained. Failure to meet minimum capital requirements can
initiate certain mandatory-and possible additional discretionary-actions by the
federal bank regulators, that, if undertaken, could have a direct material
effect on the Corporation's, the Bank's, and the State Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Corporation, the Bank, and the State 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's, the Bank's, and the State
Bank's capital amounts and classification are also subject to qualitative
judgments by the federal bank regulators about components, risk weightings, and
other factors. At March 31, 1998, the Corporation's, the Bank's, and the State
Bank's capital exceeded all minimum regulatory requirements to which they are
subject, and the Bank and the State Bank were "well-capitalized" as defined
under the federal bank regulatory guidelines. The risk-based capital ratios,
shown in Table 6, have been computed in accordance with regulatory accounting
practices. The assets of the State Bank are not material and, therefore its
capital ratios are not included in the table below.
TABLE 6: REGULATORY CAPITAL RATIOS
March 31, 1998
-------------------------------------------
Minimum Well-Capitalized
Ratios Requirements Requirements
---------- ------------- ----------------
(unaudited)
MBNA Corporation
Tier 1............................ 11.12% 4.00% (a)
Total............................. 14.72 8.00 (a)
Leverage.......................... 10.85 4.00 (a)
MBNA America Bank, N.A.
Tier 1............................ 11.34% 4.00% 6.00%
Total............................. 14.41 8.00 10.00
Leverage.......................... 11.01 4.00 5.00
(a) Not applicable for bank holding companies.
During the three months ended March 31, 1998, the Corporation declared
dividends on its preferred and common stock of $48.7 million. 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 than 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
March 31, 1998, the amount of retained earnings available for declaration and
payment of dividends from the Bank to the Corporation was $849.5 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 March 31, 1998. If this facility was
drawn upon as of March 31, 1998, the amount of retained earnings available for
declaration of dividends would have been limited to $705.9 million.
On April 14, 1998, the Board of Directors declared a quarterly dividend of $.09
per common share, payable July 1, 1998 to stockholders of record as of June 16,
1998. Also, on April 14, 1998 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 $.3654 per share on the Adjustable Rate
Cumulative Preferred Stock, Series B. The preferred stock dividends are
payable July 15, 1998 to stockholders of record as of June 30, 1998.
LIQUIDITY AND RATE SENSITIVITY
The financial condition of the Corporation is managed with a focus on
maintaining high-quality credit standards and prudent levels of liquidity,
interest rate risk, and foreign currency exchange rate risk.
Liquidity Management
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 the
pricing and maturity of loans, deposits and other assets and liabilities. This
process is also 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. The Corporation also
uses securitization of the Bank's loan receivables as a major funding
alternative.
Deposits generated by the Bank are a major source of funds for the Corporation.
Total deposits at March 31, 1998 and December 31, 1997 were $13.0 billion and
$12.9 billion, respectively. Table 7 presents the maturities of the
Corporation's deposits as of March 31, 1998.
TABLE 7: MATURITIES OF DEPOSITS AT MARCH 31, 1998
(dollars in thousands)
Direct Other Total
Deposits Deposits Deposits
----------- ----------- -----------
(unaudited)
Three months or less(a)................. $ 4,935,626 $ 568,370 $ 5,503,996
Over three months through twelve months. 2,493,755 754,072 3,247,827
Over one year through five years........ 2,813,034 1,416,529 4,229,563
Over five years......................... 6,723 - 6,723
----------- ----------- -----------
Total deposits........................ $10,249,138 $ 2,738,971 $12,988,109
=========== =========== ===========
(a) Includes money market deposit accounts, noninterest-bearing demand
deposits, interest-bearing transaction accounts, and savings accounts of
$3.7 billion.
Funding sources are also available to the Corporation through debt programs
established by the Corporation and the Bank. During the three months ended
March 31, 1998, the Corporation issued $210.0 million of floating-rate senior
medium-term notes, while the Bank issued $250.0 million of fixed-rate
subordinated notes. The subordinated notes qualify as regulatory capital
under the Comptroller of the Currency's guidelines and enhance the Bank's
regulatory capital level, while providing a long-term source of funds. The
proceeds from these issuances were used for general corporate purposes.
The Corporation also held $2.4 billion in investment securities and $2.6
billion of money market instruments at March 31, 1998, compared with $2.5
billion in investment securities and $2.1 billion of money market instruments
at December 31, 1997. The investment securities primarily consisted of
unencumbered, high-quality, AAA-rated securities, most of which can be used as
collateral under repurchase agreements. Of the $2.4 billion in investment
securities at March 31, 1998, $1.1 billion is anticipated to mature within
twelve months. The Corporation's investment securities available-for-sale
portfolio, which consists primarily of short-term and variable-rate securities,
was $2.0 billion at March 31, 1998. 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 8.
TABLE 8 SUMMARY OF INVESTMENT SECURITIES AT MARCH 31, 1998
(dollars in thousands) (unaudited)
Estimated Maturity
--------------------------------------------
Within 1 Over
Year 1-5 Years 6-10 Years 10 Years
---------- ---------- ---------- --------
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S.
government agencies obligations.. $ 693,799 $ 201,125 $ - $ -
State and political subdivisions
of the United States............. 78,617 6,552 - -
Asset-backed and other securities. 156,469 810,139 76,985 8,416
---------- ---------- ---------- --------
Total investment securities
available-for-sale............. $ 928,885 $1,017,816 $ 76,985 $ 8,416
========== ========== ========== ========
HELD-TO-MATURITY
U.S. Treasury and other U.S.
government agencies obligations.. $ 155,498 $ 19,034 $ - $102,805
State and political subdivisions
of the United States............. - - - 1,630
Asset-backed and other securities. 37,958 1,414 - 16,917
---------- ---------- ---------- --------
Total investment securities
held-to-maturity............... $ 193,456 $ 20,448 $ - $121,352
========== ========== ========== ========
Book Market
Value Value
---------- ----------
AVAILABLE-FOR-SALE
U.S. Treasury and other U.S.
government agencies obligations.. $ 894,924 $ 894,924
State and political subdivisions
of the United States............. 85,169 85,169
Asset-backed and other securities. 1,052,009 1,052,009
---------- ----------
Total investment securities
available-for-sale............. $2,032,102 $2,032,102
========== ==========
HELD-TO-MATURITY
U.S. Treasury and other U.S.
government agencies obligations.. $ 277,337 $ 273,368
State and political subdivisions
of the United States............. 1,630 1,386
Asset-backed and other securities. 56,289 56,235
---------- ----------
Total investment securities
held-to-maturity............... $ 335,256 $ 330,989
========== ==========
Interest Rate Sensitivity
Interest rate sensitivity refers to the change in earnings resulting from
fluctuations in interest rates, variability in spread relationships, and the
differences in repricing intervals between assets and liabilities. The
management of interest rate sensitivity attempts to maximize earnings by
minimizing any negative impacts of changing market rates, asset and liability
mix, and prepayment trends.
In addition to its on-balance sheet activities, interest rate risk includes the
interest rate sensitivity of securitization income from securitized loans and
the impact of off-balance-sheet financial instruments. Off-balance-sheet
financial instruments include interest rate swap agreements, forward exchange
contracts, and foreign exchange swap agreements. The Corporation does not have
any other off-balance-sheet financial instruments. The Corporation has used
interest rate swap agreements to change fixed-rate funding sources to floating-
rate funding sources to better match the rate sensitivity of the Corporation's
assets. The Corporation analyzes its level of interest rate risk using several
analytical techniques which all include the impact of on-balance-sheet and off-
balance-sheet financial instruments.
An analytical technique that the Corporation uses to measure interest rate risk
is simulation analysis. The Corporation's simulation analysis uses key
assumptions which include cash flows and maturities of interest rate sensitive
instruments; changes in market conditions; loan volumes and pricing; consumer
preferences; fixed-rate credit card repricings as part of the Corporation's
normal planned business strategy; and management's capital plans. Also
included in the analysis are various actions which the Corporation would
undertake to minimize the impact of adverse movements in interest rates. The
Corporation has the contractual right to reprice fixed-rate credit card loans
at any time, by giving notice to the Customer. Accordingly, a key assumption
in the simulation analysis is the repricing of fixed-rate credit card loans in
response to an upward movement in interest rates, with a lag of approximately
45 days between interest rate movements and fixed-rate credit card loan
repricings. The Corporation has repriced its fixed-rate credit card loans on
numerous occasions in the past, and will continue to do so in the future in
response to changes in interest rates, market conditions, or other factors.
Based on the simulation analysis at March 31, 1998, the Corporation could
experience a decrease in projected net income during the next twelve months of
approximately $52 million if interest rates increased from current levels by
100 basis points over the twelve months.
These assumptions are inherently uncertain and as a result, the analysis cannot
precisely predict the impact of higher interest rates on net income. Actual
results would differ from simulated results due to timing, magnitude, and
frequency of interest rate changes, changes in market conditions, and
management strategies to offset its potential exposure, among other factors.
Foreign Currency Exchange Rate Sensitivity
Foreign currency exchange rate risk refers to the potential changes in current
and future earnings or capital arising from movements in foreign exchange rates
and occurs as a result of cross-currency investment and funding activities.
The Corporation's foreign currency exchange rate risk is limited to the
unhedged position of the Corporation's net investment in its foreign
subsidiaries. The Corporation uses forward exchange contracts and foreign
exchange swap agreements to reduce its exposure to foreign currency exchange
rate risk. Management reviews the foreign currency exchange rate risk of the
Corporation on a routine basis. During this review, management considers the
net impact to stockholders' equity under various foreign exchange rate
scenarios. At March 31, 1998, the Corporation would expect a decrease in
stockholders' equity, net of tax, of approximately $13 million as a result of a
10% depreciation of the Corporation's unhedged foreign currencies to the U.S.
dollar position.
SECURITIZATION
Securitization of the Bank's loan receivables continues to be a major funding
alternative for the Corporation. Securitization 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 sold by the trust to investors (Investor
Certificateholders), while the remaining undivided interest is retained by the
Bank as the seller. The Bank continues to service the accounts and receives a
fee for doing so.
During the revolving period, which generally ranges from 24 to 168 months, the
trust makes no principal payments to the Investor Certificateholders. Instead,
the trust uses payments received on the accounts to purchase new loan
receivables generated by these accounts, in accordance with the terms of the
transaction, 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 loan receivables increase by the amount of any
new purchases or cash advance activity on the accounts.
During the three months ended March 31, 1998, the Bank securitized credit card
loan receivables totaling $1.2 billion, including a securitization of $250.0
million pounds sterling by MBNA International Bank Limited. Amortization of
previously securitized credit card loan receivables totaled $395.8 million for
the three month period ended March 31, 1998. The total amount of outstanding
securitized loans was $39.1 billion or 77.9% of managed loans as of March 31,
1998, compared to $38.2 billion or 77.4% of managed loans at December 31, 1997.
An additional $2.7 billion of previously securitized loans is scheduled to
amortize during the remainder of 1998.
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 9 compares the average annualized yield for
the three month period ended March 31, 1998, 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 9: YIELDS ON SECURITIZED TRANSACTIONS (a)
Three-Month Average
----------------------- Yield in
Annualized Minimum Excess of
Yield Yield Minimum
---------- ----------- ---------
(unaudited)
MasterTrust 92-3(b).................. 23.37% 14.21% 9.16%
MasterTrust 93-1(b).................. 21.21 13.60 7.61
MasterTrust 93-3(b).................. 18.53 12.30 6.23
MasterTrust 93-4..................... 18.53 12.83 5.70
MasterTrust 94-1..................... 18.53 12.73 5.80
MasterTrust 94-2..................... 18.53 12.80 5.73
MasterTrust II 94-A.................. 17.71 12.69 5.02
MasterTrust II 94-B.................. 17.71 12.67 5.04
MasterTrust II 94-C.................. 17.71 12.78 4.93
MasterTrust II 94-E.................. 17.71 12.70 5.01
Gold Reserve......................... 17.80 13.96 3.84
MasterTrust II 95-A.................. 17.71 12.75 4.96
MasterTrust II 95-B.................. 17.71 12.63 5.08
MasterTrust II 95-C.................. 17.71 12.69 5.02
MasterTrust II 95-D.................. 17.71 12.55 5.16
MasterTrust II 95-E.................. 17.71 12.69 5.02
Cards No. 1.......................... 21.02 12.35 8.67
MasterTrust II 95-F.................. 17.71 13.38 4.33
MasterTrust II 95-G.................. 17.71 12.69 5.02
MasterTrust II 95-H.................. 17.71 12.54 5.17
MasterTrust II 95-I.................. 17.71 12.63 5.08
MasterTrust II 95-J.................. 17.71 12.70 5.01
MasterTrust II 96-A.................. 17.71 12.67 5.04
MasterTrust II 96-B.................. 17.71 12.74 4.97
MasterTrust II 96-C.................. 17.71 12.61 5.10
MasterTrust II 96-D.................. 17.71 12.62 5.09
Cards No. 2.......................... 21.02 12.32 8.70
MasterTrust II 96-E.................. 17.71 12.65 5.06
MasterTrust II 96-F.................. 17.71 12.65 5.06
MasterTrust II 96-G.................. 17.71 12.67 5.04
MasterTrust II 96-H.................. 17.73 12.64 5.09
MasterTrust II 96-I.................. 17.73 12.60 5.13
MasterTrust II 96-J.................. 17.71 12.63 5.08
MasterTrust II 96-K.................. 17.71 12.62 5.09
MasterTrust II 96-L.................. 17.73 12.58 5.15
MasterTrust II 96-M.................. 17.73 12.69 5.04
Cards No. 3.......................... 21.02 12.24 8.78
MasterTrust II 97-A.................. 17.73 12.49 5.24
MasterTrust II 97-B.................. 17.71 12.67 5.04
MasterTrust II 97-C.................. 17.71 12.59 5.12
MasterTrust II 97-D.................. 17.73 12.63 5.10
MasterTrust II 97-E.................. 17.73 12.51 5.22
Three-Month Average
----------------------- Yield in
Annualized Minimum Excess of
Yield Yield Minimum
---------- ----------- ---------
(unaudited)
MasterTrust II 97-F.................. 17.71% 12.54% 5.17%
MasterTrust II 97-G.................. 17.71 12.64 5.07
Cards No. 4.......................... 21.02 12.76 8.26
MasterTrust II 97-H.................. 17.73 12.83 4.90
MasterTrust II 97-I.................. 17.71 12.58 5.13
MasterTrust II 97-J.................. 17.71 12.60 5.11
Consumer Loan MasterTrust 97-1(c).... 16.76 12.49 4.27
MasterTrust II 97-K.................. 17.71 12.61 5.10
MasterTrust II 97-L.................. 17.73 12.52 5.21
MasterTrust II 97-M.................. 17.73 12.54 5.19
MasterTrust II 97-N.................. 17.59 13.03 4.56
MasterTrust II 97-O.................. 17.52 13.39 4.13
(a) MasterTrust II 98-A issued on March 18, 1998, and Cards No. 5 issued on
March 26, 1998, are excluded from the yields presented above as a result
of their recency.
(b) Represents a transaction that has entered its scheduled controlled
amortization period.
(c) Distribution to Investor Certificateholders may occur if the credit
enhancement amount falls below a predetermined contractual level. Yields
are provided for informational purposes only.
MBNA CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(unaudited)
The following supplemental financial 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)
March 31, 1998 December 31, 1997
----------------- -----------------
AT PERIOD END:
Loans held for securitization......... $ 2,608,773 $ 2,900,198
Loan portfolio........................ 8,465,051 8,261,876
Securitized loans..................... 39,117,821 38,217,786
----------------- -----------------
Total managed loans................. $ 50,191,645 $ 49,379,860
================= =================
Total managed interest-earning
assets............................. $ 55,154,198 $ 53,974,569
================= =================
Total managed assets................ $ 60,978,573 $ 59,523,299
================= =================
For the Three Months Ended
March 31,
-------------------------------------
1998 1997
----------------- -----------------
AVERAGE:
Loans held for securitization......... $ 3,069,935 $ 2,842,503
Loan portfolio........................ 8,430,283 7,387,913
Securitized loans..................... 38,191,753 28,948,853
----------------- -----------------
Total managed loans................. $ 49,691,971 $ 39,179,269
================= =================
Total managed interest-earning
assets............................. $ 54,102,610 $ 42,563,357
================= =================
Total managed assets................ $ 59,782,997 $ 46,430,820
================= =================
MANAGED RATIOS:
Delinquency........................... 4.66% 4.23%
Net credit losses..................... 4.19 3.75
Net interest margin (on an FTE basis). 7.37 7.54
PART II-OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Effective April 28, 1998, the Corporation's charter was amended to increase the
number of authorized shares of common stock from 700.0 million shares to
1.5 billion shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of the Stockholders of MBNA Corporation was held on
April 21, 1998.
The stockholders elected the following nominees to the Corporation's Board of
Directors to serve for the coming year and until their successors are elected
and qualify. The following shows the separate tabulation of votes for each
nominee:
Number of Votes
----------------------------------
For Withheld
------------- -------------
Alfred Lerner........................ 442,027,684 6,279,852
Charles M. Cawley.................... 442,034,143 6,273,393
James H. Berick, Esq................. 442,094,538 6,212,998
Benjamin R. Civiletti, Esq........... 442,065,716 6,241,820
Randolph D. Lerner, Esq.............. 442,049,824 6,257,712
Stuart L. Markowitz, M.D............. 443,194,414 5,113,122
Michael Rosenthal, Ph.D.............. 443,193,691 5,113,845
The stockholders approved an amendment to the Corporation's charter to increase
the number of authorized shares of common stock from 700.0 million shares to
1.5 billion shares. There were 419,280,620 affirmative votes, 28,393,423
negative votes, and 633,493 abstentions.
The shareholders approved an amendment to the 1997 Long Term Incentive Plan
(the "Plan"). The amendment to the Plan increases the number of shares of the
Corporation's common stock which may be issued pursuant to grants made under
the Plan from 16.5 million shares to 21.5 million shares. There were
371,512,887 affirmative votes, 75,795,383 negative votes, and 998,575
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Index of Exhibits
Exhibit Description of Exhibit
------- ----------------------
3(i) Charter, as amended
10.1 1997 Long Term Incentive Plan, as amended
12 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividend Requirements
27 Financial Data Schedule
Exhibit 3(i): Charter, as amended
ARTICLE I - NAME
The name of the corporation (hereinafter called the "Corporation") is
MBNA Corporation.
ARTICLE II - PURPOSE
The Corporation is formed to engage in the business of banking and
finance, directly and through subsidiaries. It may engage in any other
business permitted by law.
ARTICLE III - PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of
Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The resident agent of the Corporation in the State
of Maryland is The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The resident agent is a Maryland corporation.
ARTICLE IV - CAPITAL STOCK
(a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 1,520,000,000 shares, of which
1,500,000,000 shares are classified as Common Stock, par value $.01 per share,
and 20,000,000 shares are classified as Preferred Stock, par value $.01 per
share. The aggregate par value of all shares of all classes which the
Corporation is authorized to issue is $15,200,000.
(b) The Preferred Stock may be issued in series. Prior to issuance, the
Board of Directors shall set the terms of the Preferred Stock, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption.
(c) The Board of Directors shall have the power to classify or reclassify
any unissued stock, whether now or hereafter authorized, by setting or
changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such stock.
(d) Unless otherwise provided by the Board of Directors, no holder of
stock of any class shall be entitled to preemptive rights to subscribe for or
purchase or receive any stock of any class or securities convertible into
stock of any class of the Corporation.
ARTICLE V - BOARD OF DIRECTORS
(a) The Corporation shall initially have four directors. The initial
directors, who shall act as such until the first annual meeting or until their
successors are duly elected and qualify shall be Charles M. Cawley, John R.
Cochran, Bruce L. Hammonds and M. Scot Kaufman. The number of directors may be
increased or decreased as provided in the By-Laws of the Corporation.
(b) The Board of Directors may authorize the issuance from time to time
of stock of the Corporation of any class, now or hereafter authorized, and
securities convertible into stock of the Corporation of any class, now or
hereafter authorized, for such consideration and on such other terms as the
Board of Directors may deem advisable, without stockholder approval.
ARTICLE VI - VOTING
Notwithstanding any provision of law requiring any action to be taken or
authorized by the affirmative vote of the holders of a greater proportion of
the votes of all classes or of any class of stock of the Corporation, such
action shall be effective and valid if taken or authorized by the affirmative
vote of a majority of the total number of votes entitled to be cast thereon,
except as otherwise provided in the charter.
ARTICLE VII - LIABILITY AND INDEMNIFICATION
(a) To the fullest extent that limitations on the liability of directors
and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(b) To the fullest extent permitted by the Maryland General Corporation
Law, the Corporation shall indemnify and advance expenses to its currently
acting and its former directors. The Corporation shall indemnify and advance
expenses to its officers to the same extent as its directors, and may do so to
such further extent as is consistent with law. The Board of Directors may by
bylaw, resolution or agreement make further provision for indemnification of
directors, officers, employees and agents to the fullest extent permitted by
the Maryland General Corporation Law.
(c) References to the Maryland General Corporation Law in this Article are to
that law as from time to time amended. No amendment to the charter of the
Corporation shall affect any right of any person under this Article based on
any event, omission or proceeding prior to the amendment.
ARTICLE VIII - CONTROL SHARE ACQUISITION STATUTE EXEMPTIONS
Any acquisition of shares of the Corporation on or after January 21, 1991
by Alfred Lerner (or his successor in interest) ("Lerner") or by The
Progressive Corporation (or its successors in interest) ("Progressive"), or by
any present or future affiliate or associate thereof so long as such affiliate
or associate is at the time in question such an affiliate or associate (or any
person acting in concert or in a group with any of the foregoing) is, pursuant
to Section 3-702(b) of the Maryland General Corporation Law (the "MGCL") (or
any successor or replacement provision or statute), hereby approved for
purposes of and exempted from the provisions of, Subtitle 7 of Title 3 of the
MGCL (or any successor or replacement provision or statute), with the result
that any shares acquired by any such person shall have all voting rights
otherwise appurtenant thereto, notwithstanding Subtitle 7 of Title 3 of the
MGCL (or any successor or replacement provision or statute).
Notwithstanding anything in the Charter or bylaws of the Corporation (as
each may be amended from time to time) to the contrary, this ARTICLE may not
be amended, altered or repealed except with the unanimous approval of all of
the members of the Board of Directors and the written consent of all persons
or entities then in existence and specified above that may be adversely
affected, or that may lose any privilege or right, as a result of such
amendment, alteration or repeal.
ARTICLE IX - AMENDMENTS
Except as set forth in this Article, the Corporation reserves the right
to make, from time to time, any amendments of its charter which may now or
hereafter be authorized by law, including any amendments which alter the
contract rights of any class of outstanding stock as expressly set forth in
the charter.
MBNA CORPORATION
ARTICLES SUPPLEMENTARY
MBNA CORPORATION, a Maryland corporation having its principal office
in Baltimore City, Maryland (the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: 10,000,000 shares of authorized but unissued common stock,
par value $.01 per share, of the Corporation, have been reclassified as
additional shares of Preferred Stock, par value $.01 per share, and
6,000,000 shares of authorized but unissued Preferred Stock of the
Corporation have been classified as 7-1/2% Cumulative Preferred Stock,
Series A, $.01 par value, of the Corporation (the "Series") with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, as follows:
1. Dividends. (a) Dividends shall be payable on the shares of
this Series: (i) for the period (the "Initial Dividend Period") from
the date of original issue of shares of this Series to and including
January 14, 1996 and (ii) for each quarterly dividend period thereafter
(the Initial Dividend Period and each quarterly dividend period
thereafter being hereinafter individually referred to as a "Dividend
Period" and collectively referred to as "Dividend Periods"), which
quarterly Dividend Periods shall commence on January 15, April 15,
July 15 and October 15 in each year, commencing January 15, 1996, and
shall end on and include the day next preceding the first day of the next
Dividend Period, in an amount equal to $.46875 per share per quarterly
Dividend Period. Dividends shall be cumulative from such date of
original issue and shall be payable, when, as and if declared by the
Board of Directors, on April 15, July 15, October 15 and January 15 of
each year (each, a "Dividend Payment Date"), commencing on January 15,
1996. Each dividend on the shares of this Series will be payable to the
holders of record of the shares of this Series as they appear on the
stock books of the Corporation on such record date as may be fixed by the
Board of Directors of the Corporation, which record date will not be more
than sixty (60) days prior to the applicable Dividend Payment Date.
(b) Dividends payable on this Series for any period greater or less
than a full Dividend Period, including the Initial Dividend Period, shall
be computed on the basis of a 360-day year consisting of twelve 30-day
months and the actual number of days included in the Dividend Period.
(c) Holders of shares of this Series shall not be entitled to any
dividend, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on this Series. No interest,
or sum of money in lieu of interest, shall be payable in respect of any
dividend payment or payments on this Series which may be in arrears.
(d) No full dividends shall be declared or paid or set apart for
payment on any series stock ranking, as to dividends, on a parity with
this Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on this Series for all
Dividend Periods terminating on or prior to the date of payment of such
full cumulative dividends. When dividends are not paid in full, as
aforesaid, upon the shares of this Series and any other stock ranking on
a parity as to dividends with this Series, all dividends declared upon
shares of this Series and any other series of stock ranking on a parity
as to dividends with this Series shall be declared pro rata so that the
amount of dividends declared per share on this Series and such other
stock shall in all cases bear to each other the same ratio that accrued
and unpaid dividends per share on the shares of this Series and such
other stock bear to each other.
(e) So long as any shares of this Series are outstanding, no
dividend (other than a dividend payable in common stock or in any other
stock ranking junior to this Series as to dividends and upon liquidation)
shall be declared or paid or set aside for payment or other distribution
declared or made upon the common stock or upon any other stock ranking
junior to this Series as to dividends or upon liquidation, nor shall any
common stock or any other stock of the Corporation ranking junior to this
Series as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or
made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to this Series as to dividends
and upon liquidation) unless, in each case, the full cumulative dividends
on all outstanding shares of this Series shall have been paid or declared
and set aside for payment for all past Dividend Periods.
2. Redemption. (a) The holders of the shares of this Series may
not require the Corporation to redeem any shares of this Series. The
Corporation, at its option, may redeem shares of this Series, as a whole
or in part, at any time on or after January 15, 2001, at a redemption
price of $25 per share, plus accrued and unpaid dividends thereon to the
date fixed for redemption.
(b) In the event that fewer than all the outstanding shares of this
Series are to be redeemed, the number of shares to be redeemed shall be
determined by lot or pro rata as may be determined by the Corporation or
by any other method as may be determined by the Board of Directors of the
Corporation in its sole discretion to be equitable, provided that such
method satisfies any applicable requirements of any securities exchange
on which this Series is listed.
(c) In the event the Corporation shall redeem shares of this
Series, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 or more than 60 days prior to
the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares of this Series to be redeemed
and, if fewer than all the shares held by such holder are to be redeemed,
the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v)
that dividends on the shares to be redeemed cease to accrue on the
redemption date.
(d) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price) dividends on the
shares of this Series so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding, and all rights
of the holders thereof as stockholders of the Corporation (except the
right to receive from the Corporation the redemption price) shall cease.
Upon surrender in accordance with said notice of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
(e) Any shares of this Series which shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued shares of Preferred Stock, without designation as to series.
(f) Notwithstanding the foregoing provisions of this Section 2, if
any dividends on this Series or any other series of cumulative Preferred
Stock ranking on a parity with this Series are in arrears, no shares of
this Series or any such parity series shall be redeemed unless all
outstanding shares of this Series or any such parity series are
simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire any shares of this Series or any such parity series;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of this Series or any such parity series pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding shares of this Series.
3. Conversion. The holders of shares of this Series shall
not have any rights to convert such shares into shares of any other class
or series of capital stock of the Corporation.
4. Liquidation Rights. (a) Upon the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive and
to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment or distribution
shall be made on the common stock or on any other class of stock ranking
junior to this Series upon liquidation, the amount of $25 per share, plus
accrued and unpaid dividends thereon.
(b) After the payment to the holders of the shares of this Series
of the full preferential amounts provided for in this Section 4, the
holders of this Series as such shall have no right or claim to any of the
remaining assets of the Corporation.
(c) If, upon any voluntary or involuntary dissolution, liquidation,
or winding up of the Corporation, the amounts payable with respect to the
shares of this Series and any other shares of stock of the Corporation
ranking as to any such distribution on a parity with the shares of this
Series are not paid in full, the holders of the shares of this Series and
of such other shares will share ratably in any such distribution of
assets of the Corporation in proportion to the full preferential amounts
to which they are entitled.
(d) Neither the sale of all or substantially all of the assets of
the Corporation, nor the merger or consolidation or share exchange of the
Corporation into or with any other corporation or the merger or
consolidation or share exchange of any other corporation into or with the
Corporation, shall be deemed to be a dissolution, liquidation or winding
up, voluntary or involuntary, for the purposes of this Section 4.
(e) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of this Series then outstanding shall
be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders all amounts to which such holders are
entitled pursuant to paragraph (a) of this Section 4 before any payment
shall be made to the holder of any class of capital stock of the
Corporation ranking junior to this Series upon liquidation.
5. Ranking. Any stock of any class or classes of the Corporation
shall be deemed to rank:
(a) prior to the shares of this Series, either as to dividends or
upon liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case
may be, in preference or priority to the holders of shares of this
Series;
(b) on a parity with shares of this Series, either as to dividends
or upon liquidation, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share or sinking fund
provisions, if any, be different from those of this Series, if the
holders of such stock shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, without preference or priority, one over
the other, as between the holders of such stock and the holders of shares
of this Series; and
(c) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be common stock or if the holders of
shares of this Series shall be entitled to receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders
of shares of such class or classes.
6. Voting Rights. (a) Except as indicated below, the shares
of this Series shall not be entitled to vote on any matter including, but
not limited to:
(i) Any merger, consolidation, share exchange or sale of
all or substantially all of the assets of the Corporation except to
the extent such action changes or alters the preferences, conversion
and other rights, voting powers, restrictions, limitation as to
dividends, qualifications and terms and conditions of redemption of
this Series as expressly set forth herein in a manner adverse to the
holders of this Series, or,
(ii) An increase in the authorized amount of this Series
or the creation, authorization or issuance of an additional series
ranking on a parity with the shares of this Series as to dividends
or upon liquidation, or to reclassify any authorized stock of the
Corporation into any such shares ranking on a parity with, or to
authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such pari passu shares.
(b) Notwithstanding the foregoing:
(i) The affirmative vote of at least two-thirds of the
votes entitled to be cast by holders of shares of this Series, shall
be necessary for any amendment, alteration or repeal, whether by
merger, consolidation, share exchange or otherwise, of the Charter
of the Corporation, any articles supplementary thereto or of the
resolutions contained in the articles supplementary thereto, which
changes or alters the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of this Series
as expressly set forth herein in a manner adverse to the holders of
this Series;
(ii) The affirmative vote of at least two-thirds of the
votes entitled to be cast by the holders of the shares of this
Series and all other series of Preferred Stock ranking on a parity
with shares of this Series as to dividends or upon liquidation upon
which like voting rights have been conferred and are exercisable,
voting together as a single class without regard to series, shall be
necessary to authorize or issue any shares of any class of stock of
the Corporation ranking prior to the shares of this Series as to
dividends or upon liquidation, or to reclassify any authorized stock
of the Corporation into any such prior shares, or authorize or issue
any obligation or security convertible into or evidencing the right
to purchase any such prior shares; and
(iii) If at the time of any annual meeting of the
Corporation's stockholders for the election of directors there is a
default in preference dividends (as hereinafter defined) on this
Series, the number of directors constituting the Board of Directors
of the Corporation shall be increased by two, and the holders of the
shares of this Series (together with the holders of the Preferred
Stock of all other series upon which like voting rights have been
conferred and are exercisable), shall have the right at such
meeting, voting together as a single class without regard to series,
to the exclusion of the holders of common stock, to elect two
directors of the Corporation (each a "Preferred Director") to fill
such newly created directorships. Each holder of shares of this
Series will have one vote for each share of stock held and each
holder of each other series of Preferred Stock with like voting
rights will have such number of rights, if any, for each share of
stock held as may be granted to such holder. Such right shall
continue until there are no dividends in arrears upon this Series,
subject to re-vesting in the event of each and every subsequent
default in preference dividends on this Series. Any Preferred
Director may be removed with or without cause by the vote of the
holders of record of the outstanding shares of Preferred Stock
entitled to elect such Preferred Director, voting together as a
single class without regard to series, at a meeting of the
Corporation's stockholders, or of the holders of such shares of
Preferred Stock, called for the purpose. Any Preferred Director may
be removed for cause by the vote of the holders of outstanding
shares of stock of the Corporation entitled to vote for the election
of directors. So long as a default in any preference dividends on
this Series shall exist, (a) any vacancy in the office of a
Preferred Director may be filled (except as provided in the
following clause (b)) by an instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and (b)
in the case of the removal of any Preferred Director, the vacancy
may be filled by the vote of the holders of the outstanding shares
of Preferred Stock, voting together as a single class without regard
to series, at the same meeting at which such removal shall be voted.
Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever a default in preference dividends shall no
longer exist, subject to the rights of the holders of any other
series of Preferred Stock, the number of directors constituting the
Board of Directors of the Corporation shall be reduced by two. For
the purposes hereof, a "default in preference dividends" on this
Series shall be deemed to have occurred whenever the amount of
accrued dividends upon this Series shall be equivalent to six full
quarterly dividends or more (whether or not consecutive), and,
having so occurred, such default shall be deemed to exist thereafter
until, but only until, all accrued dividends on all shares of this
Series shall have been paid to the end of the last preceding
dividend period.
SECOND: The shares of Common Stock have been reclassified as
Preferred Stock and the shares of this Series have been reclassified by
the Board of Directors of the Corporation under the authority contained
in the Charter of the Corporation. The terms of this Series have been
fixed by a committee of the Board of Directors pursuant to a general
formula adopted by the Board of Directors.
MBNA CORPORATION
ARTICLES SUPPLEMENTARY
MBNA CORPORATION, a Maryland corporation having its principal office
in Baltimore City, Maryland (the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: 6,000,000 shares of authorized but unissued Preferred Stock
of the Corporation have been classified as Adjustable Rate Cumulative
Preferred Stock, Series B, $.01 par value, of the Corporation (the
"Series") with the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, as follows:
Dividends. (a) Dividends shall be payable on the shares of the
Series for the period from September 23, 1996 to October 15, 1996 (the
"Initial Dividend Period") at the rate of 7.0% per annum ($.1069 per
share). For each quarterly dividend period after the Initial Dividend
Period (the Initial Dividend Period and each quarterly dividend period
thereafter being hereinafter individually referred to as a "Dividend
Period" and collectively referred to as "Dividend Periods"), which
Dividend Periods shall commence on January 15, April 15, July 15 and
October 15 of each year, commencing October 15, 1996, and shall end on
and include the day next preceding the first day of the next Dividend
Period, dividends payable on the shares of the Series shall be payable at
a rate per annum of the stated value thereof equal to the Applicable Rate
(as defined in Section 2) in respect of such Dividend Period, expressed
as a percentage to the nearest ten thousandth of a percentage point. The
amount of dividends per share for each Dividend Period shall be computed
by dividing the Applicable Rate for such quarterly Dividend Period by
four and applying the resulting rate to the stated value per share of the
Series. Dividends shall be fully cumulative from September 23, 1996 and
shall be payable, as, if and when declared by the Board of Directors, on
January 15, April 15, July 15 and October 15 of each year (each, a
"Dividend Payment Date"), commencing on October 15, 1996. If a Dividend
Payment Date is not a business day, dividends (if declared) on the shares
of the Series will be paid on the immediately succeeding business day,
without interest. Each dividend will be payable to holders of record as
they appear on the stock books of the Corporation on such record dates as
shall be fixed by the Board of Directors of the Corporation and shall be
not more than 60 days preceding the payment date of such dividend. The
right of the holders of the shares of the Series to receive dividends is
fully cumulative and, accordingly, all dividends not paid, whether or not
declared, will accumulate without interest until declared and paid, which
declaration and payment may be for all or part of the then accumulated
dividends. The Corporation's ability to pay dividends on its Preferred
Stock, including the Series, is subject to policies established by the
Federal Reserve Board.
(b) Dividends payable on the Series for any period greater or less
than a full Dividend Period, including the Initial Dividend Period, shall
be computed on the basis of a 360-day year consisting of twelve 30-day
months and the actual number of days elapsed in any period less than one
month.
(c) Holders of shares of the Series shall not be entitled to any
dividend, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on the Series. No interest, or
sum of money in lieu of interest, shall be payable in respect of any
dividend payment or payments on the Series which may be in arrears.
(d) No full dividends shall be declared or paid or set apart for
payment on any stock ranking, as to dividends, on a parity with the
Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series for all
Dividend Periods terminating on or prior to the date of payment of such
full cumulative dividends. When dividends are not paid in full, as
aforesaid, upon the shares of the Series and any other stock ranking on a
parity as to dividends with the Series, all dividends declared upon
shares of the Series and any other series of stock ranking on a parity as
to dividends with the Series shall be declared pro rata so that the
amount of dividends declared per share on the Series and such other stock
shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the shares of the Series and such other
stock bear to each other.
(e) So long as any shares of the Series are outstanding, no
dividend (other than a dividend payable in common stock or in any other
stock ranking junior to the Series as to dividends and upon liquidation)
shall be declared or paid or set aside for payment or other distribution
declared or made upon the common stock or upon any other stock ranking
junior to the Series as to dividends or upon liquidation, nor shall any
common stock or any other stock of the Corporation ranking junior to the
Series as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or
made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to the Series as to dividends and
upon liquidation) unless, in each case, the full cumulative dividends on
all outstanding shares of the Series shall have been paid or declared and
set aside for payment for all past Dividend Periods.
2. Definition of Applicable Rate, etc. (a) Except as provided
below in this paragraph, the "Applicable Rate" for any Dividend Period
(other than the Initial Dividend Period) will be equal to 99.0% of the
Effective Rate (as defined below), but not less than 5.5% per annum or
more than 11.5% per annum. The "Effective Rate" for any Dividend Period
will be equal to the highest of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Thirty Year Constant Maturity Rate (each
as defined below) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason:
(i) any one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate cannot be
determined for any Dividend Period, the Effective Rate for such
Dividend Period will be equal to the higher of whichever two of such
rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be
determined for any Dividend Period, the Effective Rate for such
Dividend Period will be equal to whichever such rate can be so
determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be
determined for any Dividend Period, the Effective Rate for the
preceding dividend period will be continued for such Dividend
Period.
(b) Except as described below in this paragraph, the "Treasury Bill
Rate" for each Dividend Period will be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate is published during the
relevant Calendar Period (as defined below)) for three-month U.S.
Treasury bills, as published weekly by the Federal Reserve Board (as
defined below) during the Calendar Period immediately preceding the last
ten calendar days preceding the Dividend Period for which the dividend
rate on the Series is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum market discount
rate during any such Calendar Period, the Treasury Bill Rate for such
Dividend Period will be the arithmetic average of the two most recent
weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the
relevant Calendar Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any Federal Reserve Bank
or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum market discount rate for
three-month U.S. Treasury bills is not published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S. Government department
or agency during such Calendar Period, the Treasury Bill Rate for such
Dividend Period will be the arithmetic average of the two most recent
weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the
relevant Calendar Period) for all of the U.S. Treasury bills then having
remaining maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board does not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by
the Corporation. In the event that the Corporation determines in good
faith that for any reason no such U.S. Treasury bill rates are published
as provided above during such Calendar Period, the Treasury Bill Rate for
such Dividend Period will be the arithmetic average of the per annum
market discount rates based upon the closing bids during such Calendar
Period for each of the issues of marketable non-interest-bearing U.S.
Treasury securities with a remaining maturity of not less than 80 nor
more than 100 days from the date of each such quotation, as chosen and
quoted daily for each business day in New York City (or less frequently
if daily quotations are not generally available) to the Corporation by at
least three recognized dealers in U.S. Government securities selected by
the Corporation. In the event that the Corporation determines in good
faith that for any reason the Corporation cannot determine the Treasury
Bill Rate for any Dividend Period as provided above in this paragraph,
the Treasury Bill Rate for such Dividend Period will be the arithmetic
average of the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a remaining maturity of
not less than 80 nor more than 100 days from the date of each such
quotation, as chosen and quoted daily for each business day in New York
City (or less frequently if daily quotations are not generally available)
to the Corporation by at least three recognized dealers in U.S.
Government securities selected by the Corporation.
(c) Except as described below in this paragraph, the "Ten Year
Constant Maturity Rate" for each Dividend Period will be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields
(as defined below) (or the one weekly per annum Ten Year Average Yield,
if only one such yield is published during the relevant Calendar Period),
as published weekly by the Federal Reserve Board during the Calendar
Period immediately preceding the last ten calendar days preceding the
Dividend Period for which the dividend rate on the Series is being
determined. In the event that the Federal Reserve Board does not publish
such a weekly per annum Ten Year Average Yield during any such Calendar
Period, the Ten Year Constant Maturity Rate for such Dividend Period will
be the arithmetic average of the two most recent weekly per annum Ten
Year Average Yields (or the one weekly per annum Ten Year Average Yield,
if only one such yield is published during the relevant Calendar Period),
as published weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum Ten Year Average Yield is not
published by the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such Calendar Period,
the Ten Year Constant Maturity Rate for such Dividend Period will be the
arithmetic average of the two most recent weekly per annum average yields
to maturity (or the one weekly per annum average yield to maturity, if
only one such yield is published during the relevant Calendar Period) for
all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities (as defined below)) then having
remaining maturities of not less than eight nor more than twelve years,
as published during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board does not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by
the Corporation. In the event that the Corporation determines in good
faith that for any reason the Corporation cannot determine the Ten Year
Constant Maturity Rate for any Dividend Period as provided above in this
paragraph, then the Ten Year Constant Maturity Rate for such Dividend
Period will be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each
of the issues of actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) with a final maturity
date not less than eight nor more than twelve years from the date of each
such quotation, as chosen and quoted daily for each business day in
New York City (or less frequently if daily quotations are not generally
available) to the Corporation by at least three recognized dealers in
U.S. Government securities selected by the Corporation.
(d) Except as described below in this paragraph, the "Thirty Year
Constant Maturity Rate" for each Dividend Period will be the arithmetic
average of the two most recent weekly per annum Thirty Year Average
Yields (as defined below) (or the one weekly per annum Thirty Year
Average yield, if only one such yield is published during the relevant
Calendar Period), as published weekly by the Federal Reserve Board during
the Calendar Period immediately preceding the last ten calendar days
preceding the Dividend Period for which the dividend rate on the
Series is being determined. In the event that the Federal Reserve Board
does not publish such a weekly per annum Thirty Year Average Yield during
any such Calendar Period, the Thirty Year Constant Maturity Rate for such
Dividend Period will be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields (or the one weekly per annum
Thirty Year Average Yield, if only one such yield is published during the
relevant Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department
or agency selected by the Corporation. In the event that a per annum
Thirty Year Average Yield is not published by the Federal Reserve Board
or by any Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, the Thirty Year Constant Maturity
Rate for such Dividend Period will be the arithmetic average of the two
most recent weekly per annum average yields to maturity (or the one
weekly per annum average yield to maturity, if only one such yield is
published during the relevant Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having remaining maturities of not less
than 28 nor more than 30 years, as published during such Calendar Period
by the Federal Reserve Board or, if the Federal Reserve Board does not
publish such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the
event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Thirty Year Constant Maturity Rate
for any Dividend Period as provided above in this paragraph, then the
Thirty Year Constant Maturity Rate for such Dividend Period will be the
arithmetic average of the per annum average yields to maturity based upon
the closing bids during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than
28 nor more than 30 years from the date of each such quotation, as chosen
and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the
Corporation by at least three recognized dealers in U.S. Government
securities selected by the Corporation.
(e) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and
the Thirty Year Constant Maturity Rate shall each be rounded to the
nearest five hundredths of a percent.
(f) The Applicable Rate with respect to each Dividend Period (other
than the Initial Dividend Period) will be calculated as promptly as
practicable by the Corporation according to the appropriate method
described above. The Corporation will cause each Applicable Rate to be
published in a newspaper of general circulation in New York City before
the commencement of the Dividend Period to which it applies and will
cause notice of such Applicable Rate to be enclosed with the dividend
payment checks next mailed to the holders of the shares of the Series.
(g) For purposes of this Section,
(i) "Calendar Period" means a period of fourteen calendar days;
(ii) "Federal Reserve Board" means the Board of Governors of the
Federal Reserve System;
(iii) "Special Securities" means securities which can, at the
option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and
are priced to reflect such tax benefits or which were originally
issued at a deep or substantial discount;
(iv) "Ten Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of ten years); and
(v) "Thirty Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of thirty years).
3. Changes in the Dividends-Received Percentage. (a) If one or
more amendments to the Internal Revenue Code of 1986, as amended (the
"Code") are enacted that reduce the percentage of the dividends-received
deduction (currently 70%) as specified in Section 243(a)(1) of the Code
or any successor provision (the "Dividends-Received Percentage"), certain
adjustments may be made in respect of the dividends payable by the
Corporation and Post Declaration Date Dividends (as defined below) may
become payable, as described below.
(b) The amount of each dividend payable (if declared) per share of
the Series for dividend payments made on or after the effective date of
enactment of such change in the Code will be adjusted by multiplying the
amount of the dividend payable determined as described in Section 1 above
(before adjustment) by a factor which shall be the number determined in
accordance with the following formula (the "DRD Formula"), and rounding
the result to the nearest cent (with one-half cent rounded up):
1-.35(1-.70)
-----------
1-.35(1-DRP)
(c) For the purposes of the DRD Formula, "DRP" means the Dividends-
Received Percentage (expressed as a decimal) applicable to the dividend
in question. No amendment to the Code, other than a change in the
percentage of the dividends-received deduction set forth in Section
243(a)(1) of the Code or any successor provision thereto, will give rise
to an adjustment. Notwithstanding the foregoing provisions, if, with
respect to any such amendment, the Corporation receives either an
unqualified opinion of nationally recognized independent tax counsel
selected by the Corporation or a private letter ruling or similar form of
authorization from the Internal Revenue Service (the "IRS") to the effect
that such an amendment would not apply to a dividend payable on the
shares of the Series, then such amendment will not result in the
adjustment provided for pursuant to the DRD Formula with respect to such
dividend. The opinion referenced in the previous sentence shall be based
upon the legislation amending or establishing the DRP or upon a published
pronouncement of the IRS addressing such legislation. The Corporation's
calculation of the dividends payable as so adjusted shall be final and
not subject to review.
(d) Notwithstanding the foregoing, if any amendment to the Code is
enacted and effected after a dividend payable on a Dividend Payment Date
has been declared but not paid, the amount of the dividend payable on
such Dividend Payment Date will not be increased; instead, additional
dividends (the "Post Declaration Date Dividends"), equal to the excess,
if any, of (x) the product of the dividend paid by the Corporation on
such Dividend Payment Date and the DRD Formula over (y) the dividend paid
by the Corporation on such Dividend Payment Date, will be payable (if
declared) to holders of shares of the Series on the record date
applicable to the next succeeding Dividend Payment Date or, if the Series
is called for redemption prior to such record date, to holders of shares
of the Series on the applicable redemption date, as the case may be, in
addition to any other amounts payable on such date.
(e) In the event that the amount of dividends payable per share of
the Series is adjusted pursuant to the DRD Formula and/or Post
Declaration Date Dividends are to be paid, the Corporation will give
notice of each such adjustment and, if applicable, any Post Declaration
Date Dividends to the holders of the shares of the Series.
4. Redemption. (a) The holders of the shares of the Series may
not require the Corporation to redeem any shares of the Series. The
Corporation, at its option, may redeem shares of the Series, in whole or
in part, at any time and from time to time, on or after October 15, 2001,
at a redemption price of $25 per share, plus accrued and unpaid dividends
thereon (whether or not declared) to the date fixed for redemption.
(b) In the event that fewer than all the outstanding shares of the
Series are to be redeemed, the number of shares to be redeemed shall be
determined by lot or pro rata as may be determined by the Corporation or
by any other method as may be determined by the Corporation in its sole
discretion to be equitable, provided that such method satisfies any
applicable requirements of any securities exchange on which the Series is
listed.
(c) In the event the Corporation shall redeem shares of the Series,
notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
redemption date, to each holder of record of the shares of the Series to
be redeemed, at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state: (i) the
redemption date; (ii) the number of shares of the Series to be redeemed
and, if fewer than all the shares held by such holder are to be redeemed,
the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares of the Series to be redeemed cease to
accrue on the redemption date.
(d) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price) dividends on the
shares of the Series so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding, and all rights
of the holders thereof as stockholders of the Corporation (except the
right to receive from the Corporation the redemption price) shall cease.
Upon surrender in accordance with said notice of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
(e) Any shares of the Series which shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued shares of Preferred Stock, without designation as to series.
(f) Notwithstanding the foregoing provisions of this Section 4, if
any dividends on the shares of the Series or any other series of
cumulative Preferred Stock ranking on a parity with the Series are in
arrears, no shares of the Series or any such parity series shall be
redeemed unless all outstanding shares of the Series or any such parity
series are simultaneously redeemed, and the Corporation shall not
purchase or otherwise acquire any shares of the Series or any such parity
series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Series or any such parity series
pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of the Series.
(g) Notwithstanding the foregoing provisions of this Section 4, if
the Dividends-Received Percentage is less than 50% and, as a result, the
amount of dividends on the Series payable on any Dividend Payment Date
will be or is adjusted upwards as described in Section 3 above, the
Corporation, at its option, may redeem all, but not less than all, of the
outstanding shares of the Series, provided, that within 60 days of the
date on which an amendment to the Code is enacted which reduces the
Dividends-Received Percentage to less than 50%, the Corporation sends
notice to holders of the Series of such redemption pursuant to paragraph
(c) of this Section 4. Any redemption of the Series pursuant to this
paragraph will take place on the date specified in the notice, which
shall not be less than 30 nor more than 60 days from the date such notice
is sent to holders of the Series. Any redemption of the Series in
accordance with this paragraph shall be on notice as aforesaid at the
applicable redemption price set forth in the following table, in each
case plus accrued and unpaid dividends (whether or not declared) thereon
to the date fixed for the redemption, including any changes in dividends
payable due to changes in the Dividends-Received Percentage and Post
Declaration Date Dividends, if any:
Redemption Period Redemption Price
September 23, 1996 to October 14, 1997 $26.25
October 15, 1997 to October 14, 1998.............................$26.00
October 15, 1998 to October 14, 1999.............................$25.75
October 15, 1999 to October 14, 2000.............................$25.50
October 15, 2000 to October 14, 2001.............................$25.25
On or after October 15, 2001.....................................$25.00
5. Conversion. The holders of shares of the Series shall not have
any rights to convert such shares into shares of any other class or
series of capital stock of the Corporation.
6. Liquidation Rights. (a) Upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of
the shares of the Series shall be entitled to receive and to be paid out
of the assets of the Corporation available for distribution to its
stockholders, before any payment or distribution shall be made on the
common stock or on any other class of stock ranking junior to the Series,
a liquidating distribution in the amount of $25 per share plus an amount
equal to accrued and unpaid dividends thereon (whether or not declared).
(b) After the payment to the holders of the shares of the Series of
the full preferential amounts provided for in this Section 6, the holders
of the Series as such shall have no right or claim to any of the
remaining assets of the Corporation.
(c) If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the amounts payable with respect to the
shares of the Series and any other shares of stock of the Corporation
ranking as to any such distribution on a parity with the shares of the
Series are not paid in full, the holders of the shares of the Series and
of such other shares will share ratably in any such distribution of
assets of the Corporation in proportion to the full preferential amounts
to which they are entitled.
(d) Neither the sale of all or substantially all of the assets of
the Corporation, nor the merger or consolidation or share exchange of the
Corporation into or with any other corporation or the merger or
consolidation or share exchange of any other corporation into or with the
Corporation, shall be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, for the purposes of this Section 6.
7. Ranking. Any stock of any class or classes of the Corporation
shall be deemed to rank:
(a) senior to the shares of the Series, either as to dividends or
upon liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up of the Corporation, as the case
may be, in preference or priority to the holders of shares of the Series;
(b) on a parity with shares of the Series, either as to dividends
or upon liquidation, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share or sinking fund
provisions, if any, be different from those of the Series, if the holders
of such stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up of the
Corporation, as the case may be, without preference or priority, one over
the other, as between the holders of such stock and the holders of shares
of the Series; and
(c) junior to shares of the Series, either as to dividends or upon
liquidation, if such class shall be common stock or if the holders of
shares of the Series shall be entitled to receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up of the
Corporation, as the case may be, in preference or priority to the holders
of shares of such class or classes.
8. Voting Rights. (a) Except as indicated below, the shares of
the Series shall not be entitled to vote on any matter including, but not
limited to:
(i) Any merger, consolidation, share exchange or sale of all or
substantially all of the assets of the Corporation except to the
extent such action amends, alters or repeals the preferences,
conversion and other rights, voting powers, restrictions, limitation
as to dividends, qualifications and terms and conditions of the
redemption of the Series as expressly set forth herein in a manner
adverse to the holders of the Series, or,
(ii) An increase in the authorized amount of the Series or the
creation, authorization or issuance of an additional series ranking
on a parity with the shares of the Series as to dividends or upon
liquidation, or to reclassify any authorized stock of the
Corporation into any such shares ranking on a parity with, or to
authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such pari passu shares.
(b) Notwithstanding the foregoing:
(i) The affirmative vote of at least two-thirds of the votes
entitled to be cast by holders of shares of the Series and all other
series of Preferred Stock ranking on a parity with shares of the
Series as to dividends or upon liquidation upon which like voting
rights have been conferred and are exercisable, voting together as a
single class without regard to series, shall be necessary for any
amendment, alteration or repeal, whether by merger, consolidation,
share exchange or otherwise, of the Charter of the Corporation,
including any articles supplementary thereto, which adversely
affects the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of the redemption of the Series as expressly set
forth herein in a manner adverse to the holders of the Series;
(ii) The affirmative vote of at least two-thirds of the votes
entitled to be cast by the holders of the shares of the Series and
all other series of Preferred Stock ranking on a parity with shares
of the Series as to dividends or upon liquidation upon which like
voting rights have been conferred and are exercisable, voting
together as a single class without regard to series, shall be
necessary to authorize or issue any shares of any class of stock of
the Corporation ranking prior to the shares of the Series as to
dividends or upon liquidation, or to reclassify any authorized stock
of the Corporation into any such prior shares, or authorize or issue
any obligation or security convertible into or evidencing the right
to purchase any such prior shares; and
(iii) If at the time of any annual meeting of the Corporation's
stockholders for the election of directors there is a default in
preference dividends (as defined below) on the Series, the number of
directors constituting the Board of Directors of the Corporation
shall be increased by two, and the holders of the shares of the
Series (together with the holders of the Preferred Stock of all
other series upon which like voting rights have been conferred and
are exercisable), shall have the right at such meeting, voting
together as a single class without regard to series, to the
exclusion of the holders of common stock, to elect two directors of
the Corporation (each a "Preferred Director") to fill such newly
created directorships. Each holder of shares of the Series will
have one vote for each share of stock held and each holder of each
other series of Preferred Stock with like voting rights will have
such number of rights, if any, for each share of stock held as may
be granted to such holder. Such right shall continue until there
are no dividends in arrears upon the Series, subject to re-vesting
in the event of each and every subsequent default in preference
dividends on the Series. Any Preferred Director may be removed with
or without cause by the vote of the holders of record of the
outstanding shares of Preferred Stock entitled to elect such
Preferred Director, voting together as a single class without regard
to series, at a meeting of the Corporation's stockholders, or of the
holders of such shares of Preferred Stock, called for that purpose.
Any Preferred Director may be removed for cause by the vote of the
holders of outstanding shares of stock of the Corporation entitled
to vote for the election of directors. So long as a default in any
preference dividends on the Series shall exist, (a) any vacancy in
the office of a Preferred Director may be filled (except as provided
in the following clause (b)) by an instrument in writing signed by
the remaining Preferred Director and filed with the Corporation and
(b) in the case of the removal of any Preferred Director, the
vacancy may be filled by the vote of the holders of the outstanding
shares of Preferred Stock, voting together as a single class without
regard to series, at the same meeting at which such removal shall be
voted. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a
Preferred Director. Whenever a default in preference dividends
shall no longer exist, subject to the rights of the holders of any
other series of Preferred Stock, the number of directors
constituting the Board of Directors of the Corporation shall be
reduced by two. For the purposes hereof, a "default in preference
dividends" on the Series shall be deemed to have occurred whenever
the amount of accrued dividends upon the Series shall be equivalent
to six full quarterly dividends or more (whether or not
consecutive), and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on
all shares of the Series shall have been paid to the end of the last
preceding dividend period.
SECOND: The shares of the Series have been classified and the terms
of the Series have been fixed by a committee of the Board of Directors
pursuant to a general formula adopted by the Board of Directors under
authority set forth in the Charter of the Corporation.
Exhibit 10.1: 1997 Long Term Incentive Plan, as amended
1. Establishment
MBNA Corporation (the "Corporation") hereby establishes the 1997 LONG TERM
INCENTIVE PLAN (the "Plan"). The Plan permits the grant of stock options and
restricted or unrestricted share awards for shares of the Corporation's Common
Stock ("Common Stock").
2. Administration
The Plan shall be administered by the Board of Directors of the
Corporation or a committee ("Committee") of the Board of Directors. All
references herein to "Committee" shall mean the Board of Directors if no
committee of the Board of Directors is appointed or otherwise authorized to act
on a particular matter. The Committee shall have all power and authority
necessary to administer the Plan, including but not limited to the power to
select persons to participate in the Plan, determine the terms of grants made
under the Plan, interpret the Plan and adopt such policies for carrying out the
Plan as it may deem appropriate. The decisions of the Committee on all matters
relating to the Plan shall be conclusive.
3. Shares Available for the Plan; Limitations
(a) Shares of Common Stock may be issued by the Corporation pursuant to
incentive or nonqualified stock options or restricted or unrestricted share
awards granted under the Plan.
(b) The number of shares of Common Stock with respect to which stock
option and share awards may be made pursuant to the Plan is 21,500,000. If any
grant under the Plan expires or terminates unexercised, becomes unexercisable
or is forfeited as to any shares, such unpurchased or forfeited shares shall
thereafter be available for further grants under the Plan.
(c) The maximum number of shares of Common Stock with respect to which
options may be granted pursuant to the Plan in any calendar year to any one
participant is 1,500,000.
(d) In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, share exchange, consolidation,
substantial distribution of assets, or any other change in the corporate
structure or shares of the Corporation, the maximum numbers and total of shares
provided in Sections 3(b) and 3(c), but not Section 5(e), and the kinds of
shares under the Plan shall be appropriately adjusted.
4. Participation
Participation in the Plan is limited to officers, directors, key
employees, consultants and advisors of the Corporation and its subsidiaries
selected by the Committee. Only officers and key employees of the Corporation
and its subsidiaries are eligible to receive incentive stock options.
5. Stock Options
(a) The Committee may from time to time grant to participants non-
qualified stock options or incentive stock options.
(b) The price per share payable upon the exercise of each option shall not
be less than 100% of the fair market value of a share of Common Stock on the
date the option is granted.
(c) The Committee shall determine all terms and conditions of options,
including but not limited to the period for exercise, the expiration date and
any conditions to exercise. The Committee may amend or modify the terms of any
outstanding option grant.
(d) Options may be exercised in any manner approved by the Committee. If
authorized by the Committee, a participant may deliver Common Stock, including
shares acquired upon exercise of the option, to pay the exercise price or
withholding taxes in connection with exercise of an option.
(e) Each person who becomes a nonemployee director of the Corporation
shall be granted an option to purchase 5,000 shares of Common Stock on the date
the person becomes a director and each person who is a nonemployee director on
January 2 of each year beginning in 1998 shall be granted an option to purchase
5,000 shares of Common Stock on that date or the next day the New York Stock
Exchange is open for trading. The exercise price shall be the closing price of
the Common Stock on the New York Stock Exchange on the grant date. All
non-employee director's options are exerciseable immediately following the
effective date of the grant, shall have a term of ten years, and shall expire
90 days after the grantee is no longer a director.
6. Restricted and Unrestricted Share Awards
The Committee may from time to time award shares of Common Stock to
participants in such amounts and on such terms as it determines. Each award of
shares shall specify the restrictions, if any, on the shares. The Committee may
waive or modify any restriction.
7. Amendment and Termination of the Plan
The Plan may be amended or terminated at any time by the Board of
Directors. The Board of Directors may condition any amendment of the Plan on
approval by the stockholders of the Corporation. No further grants may be made
under the Plan after December 31, 2006.
Exhibit 12: Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements
(dollars in thousands)
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
INCLUDING INTEREST ON DEPOSITS
Earnings:
Income before income taxes....................... $ 241,350 $ 205,203
Fixed charges.................................... 294,803 228,193
Interest capitalized during period, net of
amortization of previously capitalized interest. (2,165) (590)
------------ ------------
Earnings, for computation purposes............... $ 533,988 $ 432,806
============ ============
Fixed Charges and Preferred Stock Dividend
Requirements:
Interest on deposits, short-term borrowings,
and long-term debt and bank notes, expensed or
capitalized..................................... $ 292,313 $ 225,143
Portion of rents representative of the interest
factor.......................................... 2,490 3,050
------------ -----------
Fixed charges.................................... 294,803 228,193
Preferred stock dividend requirements (a)........ 5,852 10,316
Fixed charges and preferred stock dividend ------------ -----------
requirements, including interest on deposits,
for computation purposes........................ $ 300,655 $ 238,509
============ ===========
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements,
including interest on deposits.................. 1.78 1.81
For the Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
(unaudited)
EXCLUDING INTEREST ON DEPOSITS
Earnings:
Income before income taxes....................... $ 241,350 $ 205,203
Fixed charges.................................... 99,142 79,347
Interest capitalized during period, net of
amortization of previously capitalized interest. (2,170) (595)
------------ ------------
Earnings, for computation purposes............... $ 338,322 $ 283,955
============ ============
Fixed Charges and Preferred Stock Dividend
Requirements:
Interest on short-term borrowings and long-term
debt and bank notes, expensed or capitalized.... $ 96,652 $ 76,297
Portion of rents representative of the interest
factor.......................................... 2,490 3,050
------------ ------------
Fixed charges.................................... 99,142 79,347
Preferred stock dividend requirements (a)........ 5,852 10,316
Fixed charges and preferred stock dividend ------------ ------------
requirements, excluding interest on deposits,
for computation purposes........................ $ 104,994 $ 89,663
============ ============
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements,
excluding interest on deposits.................. 3.22 3.17
(a) Preferred stock dividend requirements are adjusted to represent a pretax
earnings equivalent.
The ratio of earnings to combined fixed charges and preferred stock dividend
requirements is computed by dividing (i) income before income taxes and fixed
charges less interest capitalized during such period, net of amortization of
previously capitalized interest, by (ii) fixed charges and preferred stock
dividend requirements. Fixed charges consist of interest expense on
borrowings, including capitalized interest (including or excluding deposits,
as the case may be), and the portion of rental expense which is deemed
representative of interest. The preferred stock dividend requirements
represent the pretax earnings which would have been required to cover such
dividend requirements on the Corporation's preferred stock outstanding.
b. Reports on Form 8-K
1. Report dated January 13, 1998, reporting MBNA Corporation's earnings
release for the fourth quarter of 1997.
2. Report dated January 31, 1998, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for January 1998.
3. Report dated February 28, 1998, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for February 1998.
4. Report dated March 18, 1998, reporting the securitization of
$750.0 million of credit card receivables by MBNA America Bank, N.A.
5. Report dated March 26, 1998, reporting the securitization of
250.0 million pounds sterling of credit card receivables by MBNA
International Bank Limited.
6. Report dated March 31, 1998, reporting the net credit losses and loan
delinquencies for MBNA America Bank, N.A., for its net loan portfolio and
managed loan portfolio for March 1998.
7. Report dated April 14, 1998, reporting MBNA Corporation's earnings
release for the first quarter of 1998.
8. Report dated April 30, 1998, 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 1998.
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: May 15, 1998 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 THREE MONTHS ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 265,630
<INT-BEARING-DEPOSITS> 2,045,195
<FED-FUNDS-SOLD> 550,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,032,102
<INVESTMENTS-CARRYING> 335,256
<INVESTMENTS-MARKET> 330,989
<LOANS> 11,073,824<F1>
<ALLOWANCE> 178,297
<TOTAL-ASSETS> 21,860,752
<DEPOSITS> 12,988,109
<SHORT-TERM> 167,170
<LIABILITIES-OTHER> 785,405
<LONG-TERM> 5,914,831
0
86
<COMMON> 5,012
<OTHER-SE> 2,000,139
<TOTAL-LIABILITIES-AND-EQUITY> 21,860,752
<INTEREST-LOAN> 402,332<F1>
<INTEREST-INVEST> 32,799
<INTEREST-OTHER> 30,522
<INTEREST-TOTAL> 465,653
<INTEREST-DEPOSIT> 195,661
<INTEREST-EXPENSE> 290,080
<INTEREST-INCOME-NET> 175,573
<LOAN-LOSSES> 88,598
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 545,135
<INCOME-PRETAX> 241,350
<INCOME-PRE-EXTRAORDINARY> 241,350
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,396
<EPS-PRIMARY> .29
<EPS-DILUTED> .28
<YIELD-ACTUAL> 11.88<F2>
<LOANS-NON> 0
<LOANS-PAST> 130,169<F3>
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 162,476
<CHARGE-OFFS> 110,275
<RECOVERIES> 36,412
<ALLOWANCE-CLOSE> 178,297
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> Includes Loans Held for Securitization.
<F2> On a fully taxable equivalent basis.
<F3> Excludes Loans Held for Securitization.
</FN>
</TABLE>
