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 quarter ended September 30, 1996
OR
[ ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For The Transition Period From ____________ to ___________
Commission File Number: 0-25442
WILMINGTON TRUST CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0328154
- ------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890
-------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(302) 651-1000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(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 Sections 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.
[ X ] Yes [ ] No
Number of shares of Issuer's common stock ($1.00 par value) outstanding at
September 30, 1996 - 34,045,821 shares
<PAGE>
<TABLE>
<CAPTION>
Wilmington Trust Corporation and Subsidiaries
Form 10-Q
Index
Part I. Financial Information
Page
----
<S> <C> <C>
Item 1 - Financial Statements
Consolidated Statement of Condition 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Note to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information
Item 1 - Legal Proceedings 17
Item 2 - Changes in Securities 17
Item 3 - Defaults Upon Senior Securities 17
Item 4 - Submission of Matters to a Vote of Security Holders 17
Item 5 - Other Information 17
Item 6 - Exhibits and Reports on Form 8-K 17
Exhibit 11
Exhibit 27
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
Wilmington Trust Corporation and Subsidiaries
-------------------------------------------
September 30, December 31,
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $209,779 $252,831
-------------------------------------------
Interest-bearing time deposits in other banks ---- ----
-------------------------------------------
Federal funds sold and securities purchased
under agreements to resell 52,500 78,866
-------------------------------------------
Investment securities available for sale:
U.S. Treasury and government agencies 564,345 536,995
Obligations of state and political subdivisions 14,876 18,627
Other securities 233,022 354,621
- ----------------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale 812,243 910,243
-------------------------------------------
Investment securities held to maturity:
U.S. Treasury and government agencies 272,894 236,444
Obligations of state and political subdivisions 19,120 20,822
Other securities 199,391 193,269
- ----------------------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity (market values
were $487,768 and $453,323, respectively) 491,405 450,535
-------------------------------------------
Loans:
Commercial, financial and agricultural 1,197,479 1,159,434
Real estate-construction 122,935 104,871
Mortgage-commercial 840,310 770,304
Mortgage-residential 701,100 669,658
Consumer 867,950 823,381
Unearned income (10,533) (5,733)
- ----------------------------------------------------------------------------------------------------------------------------
Total loans net of unearned income 3,719,241 3,521,915
Reserve for loan losses (52,506) (49,867)
- ----------------------------------------------------------------------------------------------------------------------------
Net loans 3,666,735 3,472,048
-------------------------------------------
Premises and equipment, net 88,637 79,734
Other assets 109,401 127,941
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $5,430,700 $5,372,198
===========================================
- 3 -
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $698,044 $721,400
Interest-bearing:
Savings 354,570 340,581
Interest-bearing demand 1,019,058 1,007,009
Certificates under $100,000 1,239,402 1,230,045
Certificates $100,000 and over 253,886 288,550
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 3,564,960 3,587,585
-------------------------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 1,184,611 1,166,163
U.S. Treasury demand 94,999 29,389
- ----------------------------------------------------------------------------------------------------------------------------
Total short-term borrowings 1,279,610 1,195,552
-------------------------------------------
Other liabilities 101,130 101,690
Long-term debt 28,000 28,000
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,973,700 4,912,827
-------------------------------------------
Stockholders' equity:
Common stock ($1.00 par value) authorized
150,000,000 shares; issued 39,107,462
and 39,012,912 shares, respectively 39,107 39,013
Capital surplus 59,625 58,111
Retained earnings 501,036 462,215
Net unrealized (loss)/gain on investment securities
available for sale, net of taxes (600) 4,379
- ----------------------------------------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 599,168 563,718
Less: Treasury stock at cost 5,061,641 and
3,922,753 shares, respectively (142,168) (104,347)
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 457,000 459,371
-------------------------------------------
Total liabilities and stockholders' equity $5,430,700 $5,372,198
===========================================
See Note to Consolidated Financial Statements
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Wilmington Trust Corporation and Subsidiaries
----------------------------------------------------------------------
For the three months ended For the nine months ended
September 30, September 30,
----------------------------------------------------------------------
(in thousands; except per share data) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME
Interest and fees on loans $80,778 $78,688 $237,015 $228,627
Interest and dividends on investment securities:
Taxable interest 17,762 15,708 53,665 40,794
Tax-exempt interest 438 434 1,400 1,540
Dividends 2,056 1,542 6,246 6,165
Interest on time deposits in other banks ---- ---- ---- ----
Interest on federal funds sold and securities
purchased under agreements to resell 408 248 1,041 608
- --------------------------------------------------------------------------------------------------------------------------
Total interest income 101,442 96,620 299,367 277,734
----------------------------------------------------------------------
Interest on deposits 29,398 26,495 90,830 76,575
Interest on short-term borrowings 17,417 19,731 49,454 55,585
Interest on long-term debt 307 ---- 1,064 ----
- --------------------------------------------------------------------------------------------------------------------------
Total interest expense 47,122 46,226 141,348 132,160
----------------------------------------------------------------------
Net interest income 54,320 50,394 158,019 145,574
Provision for loan losses (4,000) (3,000) (11,000) (7,280)
- --------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 50,320 47,394 147,019 138,294
----------------------------------------------------------------------
OTHER INCOME
Trust and asset management fees 23,796 21,493 71,266 64,544
Service charges on deposit accounts 4,714 4,457 14,015 12,817
Other operating income 4,943 4,900 14,691 14,838
Securities gains 519 30 506 75
- --------------------------------------------------------------------------------------------------------------------------
Total other income 33,972 30,880 100,478 92,274
----------------------------------------------------------------------
Net interest and other income 84,292 78,274 247,497 230,568
----------------------------------------------------------------------
OTHER EXPENSE
Salaries and employment benefits 29,745 27,348 88,392 81,620
Net occupancy 3,200 2,985 8,418 7,986
Furniture and equipment 3,515 3,656 10,805 10,277
Stationery and supplies 1,336 1,369 4,494 4,458
FDIC insurance 170 (203) 503 3,616
Other operating expense 9,347 8,447 28,129 25,348
- --------------------------------------------------------------------------------------------------------------------------
Total other expense 47,313 43,602 140,741 133,305
----------------------------------------------------------------------
NET INCOME
Income before income taxes 36,979 34,672 106,756 97,263
Applicable income taxes 12,117 11,284 34,758 30,407
- --------------------------------------------------------------------------------------------------------------------------
Net income $24,862 $23,388 $71,998 $66,856
======================================================================
Net income per share $0.73 $0.66 $2.09 $1.90
======================================================================
Weighted average shares outstanding 34,121 35,292 34,529 35,217
Cash dividends per share $0.33 $0.30 $0.96 $0.87
See Note to Consolidated Financial Statements
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Wilmington Trust Corporation and Subsidiaries
-------------------------------------------
For the nine months ended
September 30,
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $71,998 $66,856
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 11,000 7,280
Provision for depreciation 7,691 7,284
Amortization of investment securities available for sale discounts
and premiums 2,388 2
(Accretion)/amortization of investment securities held to
maturity discounts and premiums (15) 2,970
Deferred income taxes 15,380 16,363
Losses/(gains) on sales of loans 343 (980)
Securities gains (506) (75)
Decrease in other assets 18,540 1,089
Decrease in other liabilities (13,139) (7,680)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 113,680 93,109
-------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 36,018 27,148
Proceeds from maturities of investment securities available for sale 799,760 1,048,300
Proceeds from maturities of investment securities held to maturity 77,437 187,680
Purchases of investment securities available for sale (781,039) (1,033,080)
Purchases of investment securities held to maturity (84,693) (503,656)
Gross proceeds from sales of loans 19,889 29,386
Net increase in loans (225,919) (194,076)
Net increase in premises and equipment (16,594) (16,599)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (175,141) (454,897)
-------------------------------------------
FINANCING ACTIVITIES
Net increase/(decrease) in demand, savings and interest-bearing demand 2,682 (178,500)
Net (decrease)/increase in certificates of deposit (25,307) 58,660
Net increase in federal funds purchased and securities sold
under agreements to repurchase 18,448 440,835
Net increase in U.S. Treasury demand 65,610 22,495
Cash dividends (33,177) (30,620)
Proceeds from common stock issued under employment benefit plans 4,899 7,053
Payments for common stock acquired through buybacks (41,112) (13,530)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash (used for)/provided by financing activities (7,957) 306,393
-------------------------------------------
Decrease in cash and cash equivalents (69,418) (55,395)
Cash and cash equivalents at beginning of period 331,697 335,883
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $262,279 $280,488
===========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $140,264 $125,634
Taxes 33,802 26,961
Loans transferred during the year:
To other real estate owned 9,083 9,607
From other real estate owned 17,440 11,131
See Note to Consolidated Financial Statements
</TABLE>
- 6 -
<PAGE>
Note to Consolidated Financial Statements
Wilmington Trust Corporation and Subsidiaries
Note 1 - Accounting and Reporting Policies
The accounting and reporting policies of Wilmington Trust Corporation
(the "Corporation"), a holding company which owns all the issued and outstanding
shares of capital stock of Wilmington Trust Company, Wilmington Trust of
Pennsylvania and Wilmington Trust FSB, conform to generally accepted accounting
principles and practices in the banking industry. The information for the
interim periods is unaudited and includes all adjustments which are of a normal
recurring nature and which management believes to be necessary for fair
presentation. Results of the interim periods are not necessarily indicative of
the results that may be expected for the full year. This note is presented and
should be read in conjunction with the Notes to the Consolidated Financial
Statements included in the Corporation's 1995 Annual Report to Stockholders.
- 7 -
<PAGE>
Wilmington Trust Corporation and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
- -------
Net income for the third quarter and first nine months of 1996 was $24.9
million, or $.73 per share, and $72.0 million, or $2.09 per share, respectively.
This was a 6% increase over the $23.4 million, or $.66 per share, reported for
the third quarter last year and an 8% increase over the $66.9 million, or $1.90
per share, reported for the first nine months of 1995.
Net interest income for the third quarter of 1996 was $54.3 million, a $3.9
million, or 8%, increase over the $50.4 million reported for the third quarter
of 1995. On a year-to-date basis, net interest income was $158.0 million, or 9%
higher than the $145.6 million reported for the corresponding nine-month period
last year.
The quarterly provision for loan losses was $4.0 million, an increase of $1
million, or 33%, over the $3.0 million provided for the third quarter of 1995.
The reserve for loan losses at quarter-end was $52.5 million, or 1.41% of
period-end loans outstanding, up 10% over the $47.8 million, or 1.39% of loans
outstanding, reported at September 30, 1995.
Noninterest income for the third quarter and first nine months of 1996 was $34.0
million and $100.5 million, respectively. This was a $3.1 million, or 10%,
increase and an $8.2 million, or 9%, increase over the $30.9 million and $92.3
million reported for the third quarter and first nine months of 1995,
respectively.
Operating expenses for the third quarter of 1996 were $47.3 million, an increase
of $3.7 million, or 9%, over the level for the third quarter of 1995. For the
nine months year-to-date, operating expenses were $140.7 million, an increase of
$7.4 million, or 6%, over the $133.3 million reported for the corresponding
period of 1995.
Return on assets for the nine months ended September 30, 1996, on an annualized
basis, was 1.82%, down slightly from the 1.84% reported for the corresponding
period a year ago. Return on stockholders' equity, also on an annualized basis,
was 21.25%, up from the 20.84% reported for the first nine months of 1995.
STATEMENT OF CONDITION
- ----------------------
Total assets, on average, for the third quarter of 1996 were $5.31 billion. This
compares with the level of $5.00 billion for the corresponding period of 1995.
Total earning assets, on average, for the third quarter of 1996 reached $4.98
billion, an increase of $338 million, or 7%, over the $4.64 billion reported for
the third quarter of 1995. Growth in the average level of both loans outstanding
and investment securities was responsible for this increase.
Total loans, on average, rose $214.8 million, or 6%, to $3.63 billion.
Commercial loans rose $79.6 million, or 7%, to $1.16 billion; real estate
construction loans rose $11.9 million, or 12%, to $114.4 million; commercial
mortgage loans rose $58.5 million, or 8%, to $817.6 million; residential
mortgage loans rose $59.9 million, or 9%, to $693.5 million and consumer loans
rose $5.0 million, or .6%, to $841.6 million.
- 8 -
<PAGE>
The investment portfolio, on average, grew $111.4 million, or 9%, to $1.32
billion, as the level of U.S. Treasuries and government agency securities rose
$204.1 million, or 32%, to $833.4 million. Offsetting this increase, in part,
were decreases in the average levels of municipal bonds, asset-backed and other
securities.
The level of total interest-bearing liabilities, on average, for the third
quarter of 1996 was $4.12 billion. This was a $245.9 million, or 6%, increase
over the $3.87 billion reported for the third quarter of 1995. Contributing to
this increase was a $273.6 million, or 11%, increase in the average level of
interest-bearing deposits and the addition of $28 million in long-term debt for
the construction of a new operations facility, scheduled to be completed in late
1997. This was offset, in part, by a $55.7 million decrease in short-term
borrowings.
The level of interest-bearing deposits, on average, rose $273.6 million as
certificates of deposit under $100,000 rose $154.8 million, or 14%, to $1.24
billion; certificates of deposit $100,000 and over rose $85.3 million, or 61%,
to $226 million; and interest-bearing demand accounts rose $25.0 million, or 3%,
to $1.0 billion. The increases in the levels of certificates of deposit largely
were attributable to a premium-rate deposit promotion program conducted during
the fourth quarter of 1995. These deposits had a seven-month term and matured
during the second and third quarters of 1996. Short-term borrowings decreased
$55.7 million as deposit growth reduced the Corporation's need to seek funding
in the form of Federal funds purchased.
Stockholders' equity, on average, for the third quarter of 1996 was $448.7
million, a $6.1 million, or 1%, increase over the level reported for the third
quarter of 1995 of $442.5 million.
NET INTEREST INCOME
- -------------------
Net interest income for the third quarter of 1996 on a fully tax-equivalent
("FTE") basis was $56.8 million. This was a $3.8 million, or 7%, increase over
the $53.0 million reported for the third quarter of 1995.
Interest income (FTE) for the third quarter of 1996 rose $4.7 million, or 5%, to
$103.9 million from $99.2 million for the third quarter of 1995. Interest
revenues rose by $7.2 million due to increasing levels of earning assets ($338
million), and decreased by $2.5 million due to lower interest rates. The average
prime lending rate for the third quarter of 1996 was 8.25%, 52 basis points
lower than the 8.77% for the third quarter of 1995.
Interest expense for the third quarter of 1996 rose $.9 million to $47.1 million
from the $46.2 million reported for the third quarter of last year. Interest
expense rose by $2.9 million due to increased levels of interest-bearing
liabilities ($245.9 million), and decreased by $2.0 million due to lower
interest rates. The average rate the Corporation paid for its funds dropped 20
basis points, to 3.75% from the 3.95% reported for the third quarter of 1995.
The Corporation's net interest margin for the third quarter of 1996 was 4.49%,
unchanged from the 4.49% reported for the third quarter a year ago. The
following three tables present comparative net interest income data and a
rate-volume analysis of changes in net interest income for the third quarters
and first nine months of 1996 and 1995.
- 9 -
<PAGE>
<TABLE>
<CAPTION>
Quarterly Analysis of Earnings
1996 Third Quarter 1995 Third Quarter
------------------------------------- -----------------------------------
(in thousands; rates on tax- Average Income/ Average Average Income/ Average
equivalent basis) balance expense rate balance expense rate
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Time deposits in other banks $ --- $ --- ---% $ --- $ --- ---%
Federal funds sold and
securities purchased under
agreements to resell 28,191 408 5.66 16,431 248 5.91
- --------------------------------------------------------------- ------------------------
Total short-term investments 28,191 408 5.66 16,431 248 5.91
---------------------------------------------------------------------------
U.S. Treasury and government
agencies 833,369 13,291 6.36 629,291 10,071 6.40
State and municipal 34,347 679 7.94 40,867 652 6.38
Preferred stock 122,597 2,480 7.84 120,939 1,740 5.63
Asset-backed securities 239,180 3,518 5.88 319,437 4,490 5.62
Other 93,250 1,268 5.45 100,804 1,496 5.93
- --------------------------------------------------------------- ------------------------
Total investment securities 1,322,743 21,236 6.39 1,211,338 18,449 6.08
---------------------------------------------------------------------------
Commercial, financial and
agricultural 1,162,249 25,807 8.71 1,082,681 25,223 9.14
Real estate - construction 114,363 2,766 9.47 102,494 2,570 9.83
Mortgage - commercial 817,644 19,744 9.45 759,188 19,294 9.94
Mortgage - residential 693,495 13,434 7.77 633,588 12,789 8.08
Consumer 841,607 20,506 9.67 836,624 20,631 9.76
- --------------------------------------------------------------- ---------------------------
Total loans 3,629,358 82,257 8.94 3,414,575 80,507 9.29
---------------------------------------------------------------------------
Total earning assets $ 4,980,292 103,901 8.24 $ 4,642,344 99,204 8.44
===========================================================================
Funds supporting earning assets
Savings $ 364,792 2,150 2.34 $ 356,334 2,182 2.43
Interest-bearing demand 1,002,106 6,498 2.58 977,124 6,611 2.69
Certificates under $100,000 1,235,809 17,637 5.68 1,080,968 15,737 5.78
Certificates $100,000 and over 226,018 3,113 5.39 140,724 1,965 5.46
- --------------------------------------------------------------- ---------------------------
Total interest-bearing deposits 2,828,725 29,398 4.13 2,555,150 26,495 4.11
---------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,218,888 16,860 5.51 1,271,509 19,087 5.98
U.S. Treasury demand 42,428 557 5.14 45,468 644 5.54
- --------------------------------------------------------------- ---------------------------
Total short-term borrowings 1,261,316 17,417 5.49 1,316,977 19,731 5.96
---------------------------------------------------------------------------
Long-term debt 28,000 307 4.36 --- --- ---
- --------------------------------------------------------------- ---------------------------
Total interest-bearing liabilities 4,118,041 47,122 4.55 3,872,127 46,226 4.74
---------------------------------------------------------------------------
Other noninterest funds 862,251 --- --- 770,217 --- ---
- --------------------------------------------------------------- -------------------------------------
Total funds used to support
earning assets $ 4,980,292 47,122 3.75 $ 4,642,344 46,226 3.95
===========================================================================
Net interest income / yield 56,779 4.49 52,978 4.49
Tax-equivalent adjustment (2,459) (2,584)
-------------------------------------------------------------
Net interest income $54,320 $50,394
=============================================================
</TABLE>
Average rates are calculated using average balances based on historical cost and
do not reflect the market valuation adjustment required by Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective January 1, 1994.
- 10 -
<PAGE>
<TABLE>
<CAPTION>
Year-to-Date Analysis of Earnings
Year-to-Date 1996 Year-to-Date 1995
------------------------------------ -------------------------------------
(in thousands; rates on tax- Average Income/ Average Average Income/ Average
equivalent basis) balance expense rate balance expense rate
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Time deposits in other banks $ --- $ --- ---% $ --- $ --- ---%
Federal funds sold and
securities purchased under
agreements to resell 24,562 1,041 5.57 13,401 608 5.98
- --------------------------------------------------------------- ---------------------------
Total short-term investments 1,041 5.57 13,401 608 5.98
24,562
---------------------------------------------------------------------------
U.S. Treasury and government
agencies 817,163 38,516 6.29 568,575 26,156 6.13
State and municipal 36,316 2,168 7.98 43,586 2,318 7.09
Preferred stock 134,594 7,571 7.35 159,078 7,511 6.23
Asset-backed securities 274,845 12,010 5.83 283,443 11,519 5.42
Other 100,728 4,077 5.41 93,401 4,044 5.76
- --------------------------------------------------------------- ---------------------------
Total investment securities 1,363,646 64,342 6.28 1,148,083 51,548 5.98
---------------------------------------------------------------------------
Commercial, financial and
agricultural 1,150,299 76,720 8.78 1,053,335 72,109 9.04
Real estate - construction 111,027 7,938 9.39 103,698 7,904 10.05
Mortgage - commercial 792,033 57,456 9.53 749,549 55,777 9.81
Mortgage - residential 677,442 39,724 7.83 625,197 37,405 7.98
Consumer 824,964 59,897 9.67 826,540 60,776 9.81
- --------------------------------------------------------------- ---------------------------
Total loans 3,555,765 241,735 8.99 3,358,319 233,971 9.24
---------------------------------------------------------------------------
Total earning assets $ 4,943,973 307,118 8.23 $ 4,519,803 286,127 8.40
===========================================================================
Funds supporting earning assets
Savings $ 357,996 6,338 2.36 $ 361,436 6,574 2.43
Interest-bearing demand 1,000,335 19,450 2.60 985,178 19,657 2.67
Certificates under $100,000 1,241,713 54,150 5.83 1,061,584 44,487 5.60
Certificates $100,000 and over 264,276 10,892 5.42 145,766 5,857 5.30
- --------------------------------------------------------------- ---------------------------
Total interest-bearing deposits 2,864,320 90,830 4.23 2,553,964 76,575 4.00
---------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,171,953 48,011 5.44 1,183,705 53,785 6.04
U.S. Treasury demand 37,423 1,443 5.07 40,933 1,800 5.80
- --------------------------------------------------------------- ---------------------------
Total short-term borrowings 1,209,376 49,454 5.43 1,224,638 55,585 6.02
---------------------------------------------------------------------------
Long-term debt 28,000 1,064 5.08 --- --- ---
- --------------------------------------------------------------- ---------------------------
Total interest-bearing liabilities 4,101,696 141,348 4.59 3,778,602 132,160 4.66
---------------------------------------------------------------------------
Other noninterest funds 842,277 --- --- 741,201 --- ---
- --------------------------------------------------------------- ---------------------------
Total funds used to support
earning assets $ 4,943,973 141,348 3.81 $ 4,519,803 132,160 3.89
==========================================================================
Net interest income / yield 165,770 4.42 153,967 4.51
Tax-equivalent adjustment (7,751) (8,393)
------------------------------------------------------------
Net interest income $158,019 $145,574
============================================================
</TABLE>
Average rates are calculated using average balances based on historical cost and
do not reflect the market valuation adjustment required by Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective January 1, 1994.
- 11 -
<PAGE>
<TABLE>
<CAPTION>
Rate-Volume Analysis of Net Interest Income
Three months ended September 30, Nine months ended September 30,
1996 / 1995 1996 / 1995
Increase (decrease) Increase (decrease)
due to change in due to change in
-----------------------------------------------------------------------------------
(in thousands) Volume(1) Rate(2) Total Volume(1) Rate(2) Total
- ---------------------------------------------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income
Time deposits in other banks $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Federal funds sold and
securities purchased under
agreements to resell 178 (18) 160 508 (75) 433
- -----------------------------------------------------------------------------------------------------------------------
Total short-term borrowings 178 (18) 160 508 (75) 433
---------------------------------------------------------------------------------
U.S. Treasury and
government agency 3,307 (87) 3,220 11,386 974 12,360
State and municipal * (106) 133 27 (391) 241 (150)
Preferred stock * 41 699 740 (1,123) 1,183 60
Asset-backed securities (1,128) 156 (972) (350) 841 491
Other * (114) (114) (228) 293 (260) 33
- -----------------------------------------------------------------------------------------------------------------------
Total investment securities 1,746 1,041 2,787 9,633 3,161 12,794
---------------------------------------------------------------------------------
Commercial, financial and
agricultural * 1,828 (1,244) 584 6,562 (1,951) 4,611
Real estate - construction 293 (97) 196 551 (517) 34
Mortgage - commercial * 1,461 (1,011) 450 3,120 (1,441) 1,679
Mortgage - residential 1,217 (572) 645 3,121 (802) 2,319
Consumer 122 (247) (125) (116) (763) (879)
- -----------------------------------------------------------------------------------------------------------------------
Total loans 5,016 (3,266) 1,750 13,658 (5,894) 7,764
- -----------------------------------------------------------------------------------------------------------------------
Total interest income $ 7,243 $ (2,546) $ 4,697 $ 26,625 $ (5,634) $ 20,991
=================================================================================
Interest expense
Savings $ 52 $ (84) $ (32) $ (63) $ (173) $ (236)
Interest-bearing demand 169 (282) (113) 303 (510) (207)
Certificates under $100,000 2,250 (350) 1,900 7,552 2,111 9,663
Certificates $100,000 and over 1,190 (42) 1,148 4,781 254 5,035
- -----------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 2,826 77 2,903 9,294 4,961 14,255
---------------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase (787) (1,440) (2,227) (532) (5,242) (5,774)
U.S. Treasury demand (43) (44) (87) (155) (202) (357)
- -----------------------------------------------------------------------------------------------------------------------
Total short-term borrowings (848) (1,466) (2,314) (699) (5,432) (6,131)
---------------------------------------------------------------------------------
Long-term debt 307 0 307 1,064 0 1,064
- -----------------------------------------------------------------------------------------------------------------------
Total interest expense $ 2,930 $ (2,034) $ 896 $ 11,272 $ (2,084) $ 9,188
=================================================================================
Changes in net interest income $ 3,801 % 11,803
====== =======
</TABLE>
* Volume variances are calculated on a fully tax-equivalent basis, which
includes the effects of any disallowed interest expense deduction.
(1)Changes attributable to volume are defined as change in average balance
multiplied by the prior year's rate.
(2)Changes attributable to rate are defined as a change in rate multiplied by
the average balance in the applicable period of the prior year. A change in
rate / volume (change in rate multiplied by a change in volume) has been
allocated to the change in rate.
The detail in the above table does not sum to the respective totals due to
changes in the mix of interest-earning assets and interest-bearing
liabilities from year to year.
- 12 -
<PAGE>
Noninterest Revenues and Operating Expenses
- -------------------------------------------
Noninterest revenues for the third quarter of 1996 were $34.0 million, a 3.1
million, or 10%, increase over the $30.9 million reported for the third quarter
of 1995.
Trust and asset management fees for the third quarter of 1996 rose $2.3 million,
or 11%, to $23.8 million. Higher levels of personal trust, corporate trust and
asset management fees contributed to this increase, rising $1.3 million, or 13%,
to $11.6 million, $225,000, or 3%, to $6.7 million and $780,000, or 17%, to $5.5
million, respectively.
Service charges on deposit accounts were $4.7 million, an increase of $257,000,
or 6%, over the $4.5 million reported for the corresponding period last year due
to increased volumes and new fee schedules. Other operating income for the third
quarter of 1996 was $4.9 million, a $43,000, or 1%, increase over the $4.9
million reported for the third quarter of 1995 as increased levels of loan and
credit card fees were offset in part by lower levels of precious metal fees.
Operating expenses for the third quarter of 1996 were $47.3 million, an increase
of $3.7 million, or 8%, over the $43.6 million reported for the third quarter of
1995. Personnel expenses were $29.7 million, an increase of $2.4 million, or 9%,
over the $27.3 million reported for the third quarter of 1995. Salaries and
wages rose $1.3 million, or 7%, while bonuses and incentives rose $606,000, or
17%. Employee benefit expenses rose $450,000, or 9%, due to increased payroll
tax and pension expense. Net occupancy expense rose $215,000, or 7%, while
furniture and equipment and stationery and supply expenses declined $141,000, or
4%, and $33,000, or 2%, respectively. Other operating expenses rose $1.3
million, or 15%, to $9.5 million, as increased levels of expense were incurred
for legal and audit services, FDIC deposit insurance, consulting and travel. The
provision for income taxes for the third quarter of 1996 was $12.1 million, an
increase of $833,000, or 7%, over the $11.3 million for the third quarter of
1995. The effective tax rate for the third quarter of 1996 was 32.77%, compared
with 32.54% for the third quarter of 1995.
Interest Rate Sensitivity
- -------------------------
The Corporation's interest rate sensitivity, as measured by gap analysis,
increased slightly since the end of the last quarter. At September 30, 1996, the
Corporation's one-year cumulative gap, as a percentage of rate-sensitive assets,
was a negative 23.9%. At June 30, 1996, the Corporation's one-year cumulative
gap was a negative 20.0%.
Gap analysis, used to measure the difference between volumes of interest
rate-sensitive assets and liabilities, examines the Corporation's balance sheet
at one point in time, but does not capture any balance sheet dynamics that may
be present. Because of these inherent limitations, gap reports cannot predict
accurately the change in net interest income that may occur given a particular
change in interest rates. The Corporation employs simulation models to measure
dynamic changes in interest rate-sensitive assets and liabilities caused by
variations in interest rates. The Corporation also enters into interest rate
swaps ("swaps") and interest rate floor agreements ("floors") as hedges against
fluctuations in the interest rates of identifiable asset categories. The swaps
represent an exchange of interest payments computed on notional amounts. The
Corporation receives fixed-rate interest payments in return for floating-rate
payments on the swaps. At September 30, 1996, the swap portfolio totaled $400
million and had final maturities of between 5 and 43 months, with a weighted
average maturity of 21 months. The floors generate interest payments based on
notional amounts when the floating-rate index falls below the fixed-rate strike
price. When that index is equal to or above the strike price, no payments are
received. A single upfront payment was made to purchase each of the floors.
These payments are amortized over each floor's original life.
At September 30, 1996, the floor portfolio totaled $250 million and had final
maturities of between 34 and 48 months, with a weighted average maturity of 39
- 13 -
<PAGE>
months. The net interest differential which the Corporation currently receives
on these swaps and floors is reported under the caption "Interest and fees on
loans" in the Corporation's Consolidated Statement of Income, and is recognized
over the lives of the respective agreements.
Liquidity
- ---------
A financial institution's liquidity represents its ability to meet, in a timely
manner, cash flow requirements that may arise. Liquidity of the asset side of
the balance sheet is provided by the maturity and marketability of loans, money
market assets and investments. Liquidity of the liability side of the balance
sheet is usually provided through a stable base of core deposits.
The Corporation's quarter-end liquidity ratio, calculated in accordance with
regulatory requirements of the FDIC, was 25.23%. Management believes that
maturities of the Corporation's investment securities, other readily marketable
assets and external sources of funds offer more than adequate liquidity to meet
any cash flow requirements that may arise. Sources of funds have historically
consisted of deposits, amortization and prepayments of outstanding loans,
maturities of investment securities, borrowings, and interest income. Management
monitors the Corporation's existing and projected liquidity requirements on an
ongoing basis and implements appropriate strategies when deemed necessary.
Asset Quality and Loan Loss Provision
- -------------------------------------
The Corporation's provision for loan losses for the third quarter of 1996 was
$4.0 million, an increase of $1 million, or 33%, over the $3.0 million provided
for the third quarter of 1995. The reserve at September 30, 1996 was $52.5
million, an increase of $4.7 million, or 10%, over the level of $47.8 million
reported at September 30, 1995. The reserve as a percentage of total period-end
loans outstanding was 1.41%, up slightly over the 1.39% at the corresponding
date last year. Net chargeoffs for the third quarter of 1996 were $2.9 million,
down slightly from the $3.1 million reported for the third quarter of 1995. For
the first nine months of 1996, net chargeoffs were $8.4 million, compared to
$8.1 million for the corresponding period of 1995.
The following table presents the risk elements in the Corporation's loan
portfolio:
<TABLE>
<CAPTION>
Risk Elements (in thousands) September 30, 1996 December 31, 1995 September 30, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccruing $38,056 $33,576 $32,539
Restructured 1,305 --- ---
Past due 90 days or more 23,585 19,346 18,345
- ------------------------------------------------------------------------------------------------------------------
Total $62,946 $52,922 $50,884
========================================================================
Percent of total loans at period-end 1.69% 1.50% 1.48%
Other real estate owned $5,931 $14,288 $16,077
</TABLE>
Nonaccruing loans at September 30, 1996 were $39.4 million, an increase of $5.8
million over the $33.6 million reported at December 31, 1995 and $6.8 million
over the $32.5 million reported at September 30, 1995. Nonaccruing loans at
September 30, 1996 included three loans aggregating $1.3 million which had been
- 14 -
<PAGE>
restructured but which are currently in nonaccrual status. Other real estate
owned, which is reported as a component of other assets in the Consolidated
Statement of Condition, consists of assets that have been acquired through
foreclosure. These assets are recorded on the books of the Corporation at the
lower of their cost or the estimated fair value less cost to sell, adjusted
periodically based upon current appraisals. Nonperforming assets (other real
estate owned plus nonaccrual loans) at September 30, 1996 totaled $45.3 million,
or 1% of period-end loans outstanding. This was a decrease of $2.6 million, or
5%, from the $47.9 million, or 1.36% of period-end loans outstanding, reported
at December 31, 1995 and a decrease of $3.3 million, or 7%, from the $48.6
million, or 1.41% of period-end loans outstanding, reported at September 30,
1995. As a result of the Corporation's ongoing monitoring of its loan portfolio,
at September 30, 1996, approximately $12.0 million of its loans were identified
which are either currently performing in accordance with their terms or are less
than 90 days past due but for which, in management's opinion, serious doubt
exists as to the borrowers' ability to continue to repay their loans in full on
a timely basis.
The reserve for loan losses at quarter-end was 1.33 times the level of
nonaccrual loans. Management believes the reserve is adequate, based upon
currently available information. The Corporation's determination of the adequacy
of its reserve is based upon an evaluation of its classified loans and other
assets, past loss experience, current economic and real estate market conditions
and any regulatory recommendations.
Capital Resources
- -----------------
A strong capital position provides a margin of safety for both depositors and
stockholders, enables a financial institution to take advantage of profitable
opportunities and provides for future growth. The Corporation's total risk-based
capital ratio at the end of the third quarter of 1996 was 12.01%, and its core
(Tier 1) leveraged capital ratio was 8.44%. The corresponding ratios from one
year ago were 12.29% and 8.97%, respectively. Both of these ratios are well in
excess of the current regulatory minimums of 8.00% and 4.00%, respectively.
At its April meeting, the Board of Directors authorized the buyback of 4,000,000
shares of the Corporation's common stock. At September 30, 1996, 546,412 shares
had been purchased under this program.
Management monitors the Corporation's capital position and will make adjustments
as needed to insure that the capital base will satisfy existing and impending
regulatory requirements, as well as meet appropriate standards of safety and
provide for future growth.
Other Information
- -----------------
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121 - "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This statement requires impairment losses
to be recorded on long-lived assets used in operations when the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement 121 also addresses the accounting for long-lived
assets that are to be disposed of. This statement was adopted on January 1, 1996
and, based on current circumstances, will not have a material impact on
earnings.
In May 1995, the FASB issued Statement No. 122 - "Accounting for Mortgage
Servicing Rights," an amendment to FASB No. 65, which requires that an
enterprise recognize as separate assets the rights to service mortgage loans for
- 15 -
<PAGE>
others, however those servicing rights are acquired. This statement requires
that a mortgage banking enterprise assess its capitalized mortgage servicing
rights for impairment based upon the fair value of those rights. Impairment
should be recognized through a valuation allowance. This statement was adopted
January 1, 1996 and, based upon current circumstances, will not have a material
impact upon earnings.
In October 1995, the FASB issued Statement No. 123 - "Accounting for Stock-Based
Compensation," which provides an alternative to APB Opinion No. 25 - "Accounting
for Stock Issued to Employees" in accounting for stock-based compensation issued
to employees. The Corporation will continue to utilize the cost measurement
principles of APB Opinion No. 25, while adopting only the disclosure provisions
of FASB No. 123. This statement was adopted January 1, 1996 and will not impact
earnings.
In June 1996, the FASB issued Statement No. 125 - "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides new accounting and reporting standards for sales, securitization and
servicing of receivables and other financial assets and extinguishments of
liabilities. The provisions of this statement are to be applied to transactions
occurring after December 31, 1996. The Corporation is currently reviewing the
provisions of this statement to determine what, if any, impact it will have on
the Corporation.
- 16 -
<PAGE>
Part II. Other Information
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Change In Securities
Not Applicable
Item 3 - Defaults Upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 - Other Information
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
The exhibits listed below are being filed as part of this report.
These exhibits will be made available to any shareholder upon receipt
of a written request therefor, together with payment of $.20 per page
for duplicating costs.
Exhibit Number Exhibit
- -------------- ---------------------------------------------------------
11 Statement re computation of per share earnings
27 Financial data schedule
-17 -
<PAGE>
Signatures
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 thereunto duly authorized.
Date: November 14, 1996 /s/ Ted T. Cecala
----------------------------------------
Name: Ted T. Cecala
Title: Chairman of the Board and
Chief Executive Officer
Date: November 14, 1996 /s/ Robert V.A. Harra, Jr.
----------------------------------------
Name: Robert V.A. Harra, Jr.
Title: President and Chief Operating
Officer
- 18 -
Exhibit 11
Statement Re Computation of Per Share Earnings
- ----------------------------------------------
Earnings per share of $.73 for the third quarter of 1996 were computed by
dividing net income of $24,862,372 by the weighted average number of shares of
common stock outstanding during the quarter of 34,120,700.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 209,779
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 52,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 812,243
<INVESTMENTS-CARRYING> 491,405
<INVESTMENTS-MARKET> 487,768
<LOANS> 3,719,241
<ALLOWANCE> 52,506
<TOTAL-ASSETS> 5,430,700
<DEPOSITS> 3,564,960
<SHORT-TERM> 1,279,610
<LIABILITIES-OTHER> 101,130
<LONG-TERM> 28,000
0
0
<COMMON> 39,107
<OTHER-SE> 417,893
<TOTAL-LIABILITIES-AND-EQUITY> 5,430,700
<INTEREST-LOAN> 237,015
<INTEREST-INVEST> 61,311
<INTEREST-OTHER> 1,041
<INTEREST-TOTAL> 299,367
<INTEREST-DEPOSIT> 90,830
<INTEREST-EXPENSE> 141,348
<INTEREST-INCOME-NET> 158,019
<LOAN-LOSSES> 11,000
<SECURITIES-GAINS> 506
<EXPENSE-OTHER> 140,741
<INCOME-PRETAX> 106,756
<INCOME-PRE-EXTRAORDINARY> 71,998
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,998
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
<YIELD-ACTUAL> 4.42
<LOANS-NON> 38,056
<LOANS-PAST> 23,585
<LOANS-TROUBLED> 1,305
<LOANS-PROBLEM> 11,989
<ALLOWANCE-OPEN> 49,867
<CHARGE-OFFS> 10,475
<RECOVERIES> 2,114
<ALLOWANCE-CLOSE> 52,506
<ALLOWANCE-DOMESTIC> 52,506
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
