<PAGE>
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 June 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
incorporation or organization Identification No.)
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
June 30, 1996 - 34,195,677 shares
<PAGE>
Wilmington Trust Corporation and Subsidiaries
Form 10-Q
Index
Part I. Financial Information
Page
----
Item 1 - Financial Statements
Consolidated Statement of Condition 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 7
Note to Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 1 - Legal Proceedings 24
Item 2 - Changes in Securities 24
Item 3 - Defaults Upon Senior Securities 24
Item 4 - Submission of Matters to a Vote of Security Holders 24
Item 5 - Other Information 24
Item 6 - Exhibits and Reports on Form 8-K 24
Exhibit 11
Exhibit 27
2
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Condition (unaudited)
Wilmington Trust Corporation and Subsidiaries
June 30, December 31,
(in thousands) 1996 1995
---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 204,696 $ 252,831
Interest-bearing time deposits in other banks --- ---
Federal funds sold and securities purchased under agreements to
resell 59,000 78,866
Investment securities available for sale:
U.S. Treasury and government agencies 565,294 536,995
Obligations of state and political subdivisions 15,388 18,627
Other securities 295,874 354,621
---------------------------------------------------------------------------------------------------
Total investment securities available for sale 876,556 910,243
-------- --------
Investment securities held to maturity:
U.S.Treasury and government agencies 272,150 236,444
Obligations of state and political subdivisions 19,174 20,822
Other securities 206,504 193,269
---------------------------------------------------------------------------------------------------
Total investment securities held to maturity
(market values were $489,457 and $453,323,
respectively) 497,828 450,535
-------- --------
Loans:
Commercial, financial and agricultural 1,179,351 1,159,434
Real estate - construction 109,830 104,871
Mortgage - commercial 795,696 770,304
Mortgage - residential 685,206 669,658
Consumer 834,561 823,381
Unearned income (8,612) (5,733)
----------------------------------------------------------------------------------------------------
Total loans net of unearned income 3,596,032 3,521,915
Reserve for loan losses (51,423) (49,867)
----------------------------------------------------------------------------------------------------
Net loans 3,544,609 3,472,048
---------- ----------
Premises and equipment, net 85,478 79,734
Other assets 118,909 127,941
---------------------------------------------------------------------------------------------------
Total assets $5,387,076 $5,372,198
========== ==========
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 714,865 $ 721,400
Interest-bearing:
Savings 366,160 340,581
Interest-bearing demand 999,351 1,007,009
Certificates under $100,000 1,244,641 1,230,045
Certificates $100,000 and over 204,671 288,550
---------------------------------------------------------------------------------------------------
Total deposits 3,529,688 3,587,585
---------- ----------
Short-term borrowings:
Federal funds purchased and securities sold under agreements
to repurchase 1,214,053 1,166,163
U.S. Treasury demand 74,421 29,389
---------------------------------------------------------------------------------------------------
Total short-term borrowings 1,288,474 1,195,552
---------- ----------
Other liabilities 93,361 101,690
Long-term debt 28,000 28,000
---------------------------------------------------------------------------------------------------
Total liabilities 4,939,523 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 59,854 58,111
Retained earnings 487,452 462,215
Net unrealized gain/(loss) on investment securities
available for sale, net of taxes (1,985) 4,379
---------- -----------
Total contributed capital and retained earnings 584,428 563,718
Less: Treasury stock at cost 4,911,785 and 3,922,753
shares, respectively (136,875) (104,347)
----------------------------------------------------------------------------------------------------
Total stockholders' equity 447,553 459,371
---------- -----------
Total liabilities and stockholders' equity $5,387,076 $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 six months ended
June 30, June 30,
-------------------------- ------------------------
(in thousands; except per share data) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $78,279 $77,232 $156,237 $149,939
Interest and dividends on
investment securities:
Taxable interest 18,180 14,190 35,903 25,086
Tax-exempt interest 463 509 962 1,106
Dividends 1,993 2,160 4,190 4,623
Interest on time deposits in other
banks --- --- --- ---
Interest on federal funds sold and
securities purchased under
agreements to resell 247 203 633 360
-------- -------- -------- --------
Total interest income 99,162 94,294 197,925 181,114
-------- -------- -------- --------
Interest on deposits 29,915 25,835 61,432 50,080
Interest on short-term borrowings 16,419 19,638 32,037 35,854
Interest on long-term debt 364 --- 757 ---
-------- -------- -------- --------
Total interest expense 46,698 45,473 94,226 85,934
-------------------------------------------------------------------------------------------------------
Net interest income 52,464 48,821 103,699 95,180
Provision for loan losses (3,500) (2,520) (7,000) (4,280)
-------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 48,964 46,301 96,699 90,900
-------- -------- -------- --------
OTHER INCOME
Trust and investment management fees 24,370 21,609 47,470 43,051
Service charges on deposit accounts 4,591 4,315 9,301 8,360
Other operating income 5,125 5,722 9,748 9,938
Securities gains / (losses) (10) 38 (13) 45
-------------------------------------------------------------------------------------------------------
Total other income 34,076 31,684 66,506 61,394
-------- -------- -------- --------
Net interest and other income 83,040 77,985 163,205 152,294
-------- -------- -------- --------
5
<PAGE>
OTHER EXPENSE
Salaries and employment benefits 29,478 27,270 58,647 54,272
Net occupancy 2,520 2,579 5,218 5,001
Furniture and equipment 3,844 3,481 7,290 6,621
Stationery and supplies 1,678 1,681 3,158 3,089
FDIC insurance 169 1,909 333 3,819
Other operating expense 9,630 8,424 18,782 16,901
-------------------------------------------------------------------------------------------------------
Total other expense 47,319 45,344 93,428 89,703
-------- -------- -------- --------
NET INCOME
Income before income taxes 35,721 32,641 69,777 62,591
Applicable income taxes 11,604 10,143 22,641 19,123
-------------------------------------------------------------------------------------------------------
Net income $24,117 $22,498 $47,136 $43,468
======== ======== ======== ========
Net income per share $0.70 $0.64 $1.36 $1.24
======== ======== ======== ========
Weighted average shares outstanding 34,462 35,172 34,735 35,178
Cash dividends per share $0.33 $0.30 $0.63 $0.57
See note to consolidated financial statements
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (unaudited)
Wilmington Trust Corporation and Subsidiaries
---------------------------------
For the six months ended June 30,
(in thousands) 1996 1995
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 47,136 $ 43,468
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 7,000 4,280
Provision for depreciation 5,155 4,742
Amortization of investment securities available
for sale discounts and premiums 1,766 ---
(Accretion)/amortization of investment securities
held to maturity discounts and premiums (6) 2,155
Deferred income taxes 16,149 16,393
Losses/(gains) on sales of loans 268 (1,000)
Securities losses/(gains) 13 (45)
Decrease/(increase) in other assets 9,032 (34,830)
Decrease in other liabilities (20,898) (9,981)
-------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 65,615 25,182
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 17,144 26,550
Proceeds from maturities of investment securities available for
sale 555,411 792,500
Proceeds from maturities of investment securities held
to maturity 65,194 109,298
Purchase of investment securities available for sale (584,193) (766,470)
Purchase of investment securities held to maturity (78,879) (362,984)
Gross proceeds from sales of loans 18,113 30,900
Net increase in loans (97,942) (183,584)
Net increase in premises and equipment (10,899) (13,973)
-------------------------------------------------------------------------------------------------------
Net cash used for investing activities (116,051) (367,763)
-------- --------
7
<PAGE>
FINANCING ACTIVITIES
Net increase /(decrease) in demand, savings and
interest-bearing demand 11,386 (153,175)
Net (decrease)/increase in certificates of deposit (69,283) 36,817
Net increase in federal funds purchased and securities
sold under agreements to repurchase 47,890 475,503
Net increase in U.S. Treasury demand 45,032 57,679
Cash dividends (21,899) (20,027)
Proceeds from common stock issued under employment
benefit plans 3,575 6,240
Payments for common stock acquired through buybacks (34,266) (11,017)
-------------------------------------------------------------------------------------------------------
Net cash (used for) / provided by financing activities (17,565) 392,020
-------- --------
(Decrease)/increase in cash and cash equivalents (68,001) 49,439
Cash and cash equivalents at beginning of period 331,697 335,883
-------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $263,696 $385,322
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 97,662 $ 75,106
Taxes 22,300 19,251
Loans transferred during the year:
To other real estate owned $8,055 $3,017
From other real estate owned 14,491 4,270
See note to consolidated financial statements
</TABLE>
8
<PAGE>
Notes 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 (formerly Freedom Valley Bank) 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.
9
<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 second quarter and first six months of 1996 was $24.1
million, or $.70 per share, and $47.1 million, or $1.36 per share,
respectively. This was a 7% increase over the $22.5 million, or $.64 per
share, reported for the second quarter last year and an 8% increase over
the $43.5 million, or $1.24 per share, reported for the first six months
of 1995.
Net interest income for the second quarter of 1996 was $52.5 million, a
$3.6 million, or 8%, increase over the $48.8 million reported for the
second quarter of 1995. On a year-to-date basis, net interest income was
$103.7 million, or 9% higher than the $95.2 million reported for the
corresponding six-month period last year.
The quarterly provision for loan losses was $3.5 million, an increase of
$1 million, or 39%, over the $2.5 million provided for the second quarter
of 1995. The reserve for loan losses at quarter-end was $51.4 million, or
1.43% of period-end loans outstanding, up 7% over the $48 million, or
1.40% of loans outstanding, reported at June 30, 1995.
Noninterest income for the second quarter and first six months of 1996 was
$34.1 million and $66.5 million, respectively. This was a $2.4 million,
or 8%, increase and a $5.1 million, or 8%, increase over the $31.7 million
and $61.4 million reported for the second quarter and first six months of
1995, respectively.
Operating expenses for the second quarter of 1996 were $47.3 million, an
increase of $2 million, or 4%, over the level for the second quarter of
1995. For the six months year-to-date, operating expenses were $93.4
million, an increase of $3.7 million, or 4%, over the $89.7 million
reported for the corresponding period of 1995.
Return on assets for the six months ended June 30, 1996, on an annualized
basis, was 1.80%, down slightly from the 1.83% reported for the
corresponding period a year ago. Return on stockholders' equity, also on
an annualized basis, was 20.85%, up from the 20.77% reported for the first
half of 1995.
STATEMENT OF CONDITION
----------------------
Average total assets for the second quarter of 1996 were $5.28 billion.
This compares with the level of $4.91 billion for the corresponding period
of 1995.
10
<PAGE>
Average total earning assets for the second quarter of 1996 reached $4.95
billion, an increase of $366 million, or 8%, over the $4.58 billion
reported for the second quarter of 1995. Growth in the average level of
both loans outstanding and investment securities was responsible for this
increase.
Loans rose $162.3 million, or 5%, to $3.54 billion. Commercial loans rose
$84.6 million, or 8%, to $1.15 billion; real estate construction loans
rose $7.9 million, or 8%, to $111.9 million; commercial mortgage loans
rose $32.8 million, or 4%, to $784.7 million; residential mortgage loans
rose $44.1 million, or 7%, to $673.2 million and consumer loans declined
$7 million, or 1%, to $820 million.
The investment portfolio grew $198.1 million, or 17%, to $1.38 billion,
as the level of U.S. Treasuries and government agency securities rose
$233.1 million, or 39%, to $826.5 million. Offsetting this increase, in
part, were decreases in the average levels of municipal bonds, preferred
stocks and asset-backed securities.
The average level of total interest-bearing liabilities for the second
quarter of 1996 was $4.11 billion. This was a $280.6 million, or 7%,
increase over the $3.83 billion reported for the second quarter of 1995.
Contributing to this increase was a $297.7 million, or 12%, 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, which is scheduled to be completed in late 1997. This was
offset, in part, by a $45.1 million decrease in short-term borrowings.
The average level of interest-bearing deposits rose $297.7 million as
certificates of deposit under $100,000 rose $183.4 million, or 17%, to
$1.25 billion; certificates of deposit $100,000 and over rose $88.6
million, or 61%, to $235.1 million; and interest-bearing demand accounts
rose $24.9 million, or 3%, to $1 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 have a seven-month term and mature during the second and
third quarters of 1996. Short-term borrowings decreased $45.1 million as
deposit growth reduced the Corporation's need to seek funding in the form
of Federal funds purchased.
Average stockholders' equity for the second quarter of 1996 was $448.6
million, a $21.2 million, or 5%, increase over the level reported for the
second quarter of 1995 of $427.4 million.
NET INTEREST INCOME
-------------------
Net interest income for the second quarter of 1996 on a fully tax-
equivalent ("FTE") basis was $55.1 million. This was a $3.4 million, or
7%, increase over the $51.7 million reported for the second quarter of
1995.
11
<PAGE>
Interest income (FTE) for the second quarter of 1996 rose $4.6 million, or
5%, to $101.8 million from $97.2 million for the corresponding period of
1995. Interest revenues rose by $7.7 million due to increasing levels of
earning assets ($366 million), decreased by $3.1 million due to lower
interest rates. The average prime lending rate the Bank charged for the
second quarter of 1996 was 8.25%, 75 basis points lower than the 9%
charged for the second quarter of 1995.
Interest expense for the second quarter of 1996 rose $1.2 million to $46.7
million from the level of $45.5 million reported for the corresponding
period last year. Interest expense rose by $3.3 million due to increased
levels of interest-bearing liabilities ($280.6 million), decreased by $2.1
million due to lower interest rates. The average rate the Corporation
paid for its funds dropped 18 basis points, to 3.78% from the 3.96%
reported for the second quarter of 1995.
The net interest margin for the second quarter of 1996 was 4.41%, down
slightly from the 4.49% reported for the second 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 second
quarters and first six months of 1996 and 1995.
12
<PAGE>
<TABLE>
<CAPTION>
Quarterly Analysis of Earnings
1996 Second Quarter 1995 Second 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 18,616 247 5.25 12,995 203 6.18
--------- ------- ---------- -------
Total short-term investments 18,616 247 5.25 12,995 203 6.18
--------- ------- ----- ---------- ------- -----
U.S. Treasury and government
agencies 826,453 13,051 6.31 593,306 9,208 6.21
State and municipal 35,714 718 8.04 43,664 765 7.01
Preferred stock 137,796 2,442 6.95 166,038 2,685 6.40
Asset-backed securities 281,488 4,085 5.81 287,818 3,943 5.48
Other 102,139 1,362 5.33 94,646 1,348 5.69
--------- ------- ---------- --------
Total investment securities 1,383,590 21,658 6.24 1,185,472 17,949 6.05
---------- ------- ---- ---------- ------- ----
Commercial, financial and
agricultural 1,153,144 25,596 8.80 1,068,585 24,532 9.10
Real estate - construction 111,898 2,692 9.52 104,026 2,707 10.29
Mortgage - commercial 784,735 18,710 9.43 751,913 18,922 9.96
Mortgage - residential 673,201 13,148 7.81 629,108 12,514 7.96
Consumer 820,024 19,724 9.65 827,071 20,333 9.84
---------- ------- ---------- -------
Total loans 3,543,002 79,870 8.97 3,380,703 79,008 9.30
---------- ------- ---- ---------- ------- ----
Total earning assets $4,945,208 101,775 8.19 $4,579,170 97,160 8.45
========== ======= ==== ========== ======= ====
Funds supporting earning assets
Savings $ 362,324 2,111 2.34 $ 361,547 2,190 2.43
Interest-bearing demand 1,007,085 6,469 2.58 982,144 6,570 2.68
Certificates under $100,000 1,250,216 18,188 5.85 1,066,825 15,080 5.67
Certificates $100,000 and over 235,079 3,147 5.30 146,484 1,995 5.39
---------- ------- ---------- -------
Total interest-bearing deposits 2,854,704 29,915 4.21 2,557,000 25,835 4.05
---------- ------- ---- ---------- ------- ----
13
<PAGE>
Federal funds purchased and
securities sold under agreements to
repurchase 1,198,311 15,998 5.33 1,237,418 19,089 6.10
U.S. Treasury demand 33,097 421 5.03 39,046 549 5.56
---------- ------- ---------- -------
Total short-term borrowings 1,231,408 16,419 5.32 1,276,464 19,638 6.09
---------- ------- ---- ---------- ------- ----
Long-term debt 28,000 364 5.23 --- --- ---
---------- ------- ---- ---------- ------- ----
Total interest-bearing liabilities 4,114,112 46,698 4.55 3,833,464 45,473 4.73
Other noninterest funds 831,096 --- --- 745,706 --- ---
---------- ------- ---- ---------- ------- ----
Total funds used to support earning
assets $4,945,208 46,698 3.78 $4,579,170 45,473 3.96
========== ------- ---- ========== ------- ----
Net interest income/yield 55,077 4.41 51,687 4.49
Tax-equivalent adjustment (2,613) (2,866)
------- -------
Net interest income $52,464 $48,821
======= =======
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.
</TABLE>
14
<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 22,727 633 5.86 11,861 360 6.04
---------- -------- ---------- -------
Total short-term investments 22,727 633 5.86 11,861 360 6.04
---------- -------- ---- ---------- ------- ----
U.S. Treasury and government
agencies 808,972 25,225 6.26 537,712 16,085 5.98
State and municipal 37,310 1,489 7.99 44,970 1,666 7.41
Preferred stock 140,658 5,091 7.13 178,461 5,771 6.43
Asset-backed securities 292,874 8,492 5.80 265,148 7,029 5.30
Other 104,508 2,809 5.40 89,639 2,548 5.67
---------- -------- ---------- -------
Total investment securities 1,384,322 43,106 6.23 1,115,930 33,099 5.93
---------- -------- ---- ---------- ------- ----
Commercial, financial and
agricultural 1,144,260 50,913 8.82 1,038,420 46,886 9.00
Real estate - construction 109,340 5,172 9.35 104,310 5,334 10.17
Mortgage - commercial 779,086 37,712 9.57 744,650 36,483 9.74
Mortgage - residential 669,327 26,290 7.86 620,932 24,616 7.93
Consumer 816,551 39,391 9.67 821,414 40,145 9.84
---------- -------- ---------- -------
Total loans 3,518,564 159,478 9.02 3,329,726 153,464 9.21
---------- -------- ---- ---------- ------- ----
Total earning assets $4,925,613 203,217 8.22 $4,457,517 186,923 8.38
========== ======== ==== ========== ======== ====
Funds supporting earning assets
Savings $ 354,561 4,188 2.38 $ 364,030 4,392 2.43
Interest-bearing demand 999,439 12,952 2.61 989,273 13,046 2.66
Certificates under $100,000 1,244,698 36,513 5.90 1,051,730 28,750 5.51
Certificates $100,000 and over 283,615 7,779 5.43 148,329 3,892 5.22
---------- -------- ---------- -------
Total interest-bearing deposits 2,882,313 61,432 4.28 2,553,362 50,080 3.95
---------- -------- ---- ---------- ------- ----
15
<PAGE>
Federal funds purchased and
securities sold under
agreements to repurchase 1,148,229 31,151 5.41 1,139,075 34,698 6.06
U.S. Treasury demand 34,892 886 5.02 38,628 1,156 5.95
---------- -------- ---------- -------
Total short-term borrowings 1,183,121 32,037 5.41 1,177,703 35,854 6.05
---------- -------- ---- ---------- ------- ----
Long-term debt 28,000 757 5.44 --- --- ---
---------- -------- ---- ---------- ------- ----
Total interest-bearing liabilities 4,093,434 94,226 4.61 3,731,065 85,934 4.62
Other noninterest funds 832,179 -- -- 726,452 -- --
---------- -------- ---- ---------- ------- ----
Total funds used to support
earning assets $4,925,613 94,226 3.83 $4,457,517 85,934 3.86
========== -------- ---- ========== -------- ----
Net interest income/yield 108,991 4.39 100,989 4.52
Tax-equivalent adjustment (5,292) (5,809)
-------- --------
Net interest income $103,699 $95,180
======== =======
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.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Rate-Volume Analysis of Net Interest Income
Three months ended June 30, Six months ended June 30,
1996 / 1995 1996 / 1995
Increase (decrease) Increase (decrease)
due to change in due to change in
------------------------------ --------------------------------
(in thousands) Volume Rate Total Volume Rate 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 88 (44) 44 332 (59) 273
----- ----- ----- ----- ----- -----
Total short-term borrowings 88 (44) 44 332 (59) 273
----- ----- ----- ----- ----- -----
U.S. Treasury and government
agency 3,641 202 3,843 8,029 1,111 9,140
State and municipal (139) 92 (47) (286) 109 (177)
Preferred stock (438) 195 (243) (1,209) 529 (680)
Asset-backed securities (88) 230 142 735 728 1,463
Other 104 (90) 14 400 (139) 261
------ ------ ------ ------ ------ -------
Total investment securities 3,032 677 3,709 7,871 2,136 10,007
------ ------ ------ ------ ------ -------
Commercial, financial and
agricultural 1,913 (849) 1,064 4,737 (710) 4,027
Real estate - construction 201 (216) (15) 254 (416) (162)
Mortgage - commercial 813 (1,025) (212) 1,668 (439) 1,229
Mortgage - residential 873 (239) 634 1,908 (234) 1,674
Consumer (172) (437) (609) (238) (516) (754)
------ ------ ------ ------ ------ -------
Total loans 3,753 (2,891) 862 8,648 (2,634) 6,014
------ ------ ------ ------ ------ -------
Total interest income $7,739 $(3,124) $4,615 $19,385 $(3,091) $16,294
======= ======= ======= ======= ======= =======
Interest expense
Savings $ 5 $ (84) $ (79) $ (114) $ (90) $ (204)
Interest-bearing demand 166 (267) (101) 134 (228) (94)
Certificates under $100,000 2,585 523 3,108 5,287 2,476 7,763
Certificates $100,000 and over 1,207 (55) 1,152 3,570 317 3,887
------ ----- ------ ------ ------ ------
Total interest-bearing deposits 2,998 1,082 4,080 6,461 4,891 11,352
------ ----- ------ ------ ------ ------
Federal funds purchased and
securities sold under
agreements to repurchase (596) (2,495) (3,091) 277 (3,824) (3,547)
17
<PAGE>
U.S. Treasury demand (84) (44) (128) (112) (158) (270)
------ ----- ------ ------ ------ ------
Total short-term borrowings (694) (2,525) (3,219) 166 (3,983) (3,817)
------ ------ ------ ------ ------ ------
Long-term debt 364 0 364 757 0 757
------ ----- ------ ------ ------ ------
Total interest expense $3,301 $(2,076) $1,225 $8,325 $ (33) $8,292
====== ======= ====== ====== ====== ======
Changes in net interest income $3,390 $8,002
====== ======
</TABLE>
Volume variances are calculated on a fully tax-equivalent basis, which
includes the effects of any disallowed interest expense deduction.
Changes attributable to volume are defined as change in average balance
multiplied by the prior year's rate.
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.
18
<PAGE>
Noninterest Revenues and Operating Expenses
-------------------------------------------
Noninterest revenues for the second quarter of 1996 were $34.1 million, a
2.4 million, or 8%, increase over the $31.7 million reported for the
second quarter of 1995.
Trust and investment management fees for the second quarter of 1996 rose
$2.8 million, or 13%, to $24.4 million. Higher levels of personal trust
and asset management fees contributed to this increase, rising $1.5
million, or 15%, to $11.8 million and $1 million, or 21%, to $5.8 million,
respectively. Corporate trust fees were $6.7 million, an increase of
$270,000, or 4%.
Service charges on deposit accounts were $4.6 million, an increase of
$276,000, or 6%, over the $4.3 million reported for the corresponding
period last year due to increased volumes and new fee schedules. Other
operating income for the second quarter of 1996 was $5.1 million, a
$597,000, or 10%, decrease from the $5.7 million reported for the second
quarter of 1995. The second quarter of 1995 included the recognition of a
$1 million gain on the sale of $30 million of residential mortgage loans.
Operating expenses for the second quarter of 1996 were $47.3 million, an
increase of $2 million, or 4%, over the $45.3 million for the second
quarter of 1995. Personnel expenses were $29.5 million, an increase of
$2.2 million, or 8%, over the $27.2 million reported for the second
quarter of 1995. Salaries and wages rose $1.1 million, or 6%, while
bonuses and incentives rose $926,000, or 30%. Furniture and equipment
expense was $3.8 million, up $363,000, or 10%, due in part to higher
software amortization and equipment maintenance expense. Net occupancy,
stationery and supplies and other operating expenses were all down from
year-ago levels. Other operating expenses were down $534,000, or 5%, due
primarily to a $1.7 million decrease in FDIC deposit insurance premiums.
The provision for income taxes for the second quarter of 1996 was $11.6
million, an increase of $1.5 million, or 14%, over the $10.1 million for
the second quarter of 1995. The effective tax rate for the second quarter
of 1996 was 32.48%, compared with 31.07% for the second quarter of 1995.
Interest Rate Sensitivity
-------------------------
The Corporation's interest rate sensitivity, as measured by gap analysis,
decreased slightly since the end of the last quarter. At June 30, 1996,
the Corporation's one-year cumulative gap, as a percentage of rate-
sensitive assets, was a negative 20.0%. At March 31, 1996, the
Corporation's one-year cumulative gap was a negative 21.8%.
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
19
<PAGE>
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 June 30, 1996, the swap portfolio
totaled $410 million and had final maturities of between 1 and 46 months,
with a weighted average maturity of 24 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 June 30, 1996, the floor portfolio totaled $200 million and had final
maturities of between 37 and 43 months, with a weighted average maturity
of 40 months. Subsequent to June 30, 1996, additional floors were
purchased, increasing the floor portfolio to $250 million. 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 statements 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 27.23%. 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.
20
<PAGE>
Asset Quality and Loan Loss Provision
-------------------------------------
The Corporation's provision for loan losses for the second quarter of 1996
was $3.5 million, an increase of $1 million, or 39%, over the $2.5 million
provided for the second quarter of 1995. The reserve at June 30, 1996 was
$51.4 million, an increase of $3.5 million, or 7%, over the level of $48
million reported at June 30, 1995. The reserve as a percentage of total
period-end loans outstanding was 1.43%, up slightly over the 1.40% at the
corresponding date last year. Net chargeoffs for the second quarter of
1996 were $2.6 million, up slightly over the $2.5 million reported for the
second quarter of 1995. For the first six months of 1996, net chargeoffs
were $5.4 million, compared to $5 million for the corresponding period of
1995.
The following table presents the risk elements in the Corporation's loan
portfolio:
Risk Elements
-------------
June 30, December 31, June 30,
1996 1995 1995
-------- ----------- --------
Nonaccruing $26,131 $33,576 $31,237
Restructured 1,317 --- ---
Past due 90 days or more 22,787 19,346 18,199
------- ------- -------
Total $50,235 $52,922 $49,436
======= ======= =======
Percent of total loans
at period-end 1.40% 1.50% 1.44%
Other real estate owned $7,852 $14,288 $16,348
Nonaccruing loans at June 30, 1996 were $27.4 million, a decrease of $6.1
million from the $33.6 million reported at December 31, 1995 and $3.8
million from the $31.2 million reported at June 30, 1995. Nonaccruing
loans at June 30, 1996 included three loans aggregating $1.3 million which
had been restructured but which are currently in nonaccrual status. Other
real estate owned, which is reported as a component of other assets in the
consolidated statements of condition, consists of assets that have been
acquired through foreclosure and loans classified as in-substance
foreclosed. 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 June 30, 1996 totaled
$35.3 million, or 1% of period-end loans outstanding. This was a decrease
of $12.6 million, or 26%, from the $47.9 million, or 1.36% of period-end
loans, reported at December 31, 1995 and a decrease of $12.3 million, or
21
<PAGE>
26%, from the $47.6 million, or 1.39% of period-end loans, reported at
June 30, 1995. These balances reflect the reclassification of loans
previously reported as in-substance foreclosed to the nonaccrual category
in accordance with the provisions of Statement of Financial Accounting
Standards Number 114. As a result of the Corporation's ongoing monitoring
of its loan portfolio, at June 30, 1996, approximately $15.9 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 1.87 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 second
quarter of 1996 was 12.04%, and its core (Tier 1) leveraged capital ratio
was 8.30%. The corresponding ratios from one year ago were 12.04% and
8.86%, 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 an
additional 4,000,000 shares of the Corporation's common stock. At June
30, 1996, 335,133 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 amount. Statement 121 also addresses
the accounting for long-lived assets that are to be disposed of. This
22
<PAGE>
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 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.
23
<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
24
<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: August 14, 1996 /s/ Ted T. Cecala
--------------------
Name: Ted T. Cecala
Title: Chairman of the Board and
Chief Executive Officer
Date: August 14, 1996 /s/ Robert V.A. Harra, Jr.
------------------------------
Name: Robert V.A. Harra, Jr.
Title: President and Chief Operating
Officer
25
<PAGE>
<PAGE>
Exhibit 11
Statement Re Computation of Per Share Earnings
----------------------------------------------
Earnings per share of $.70 for the second quarter of 1996 were computed by
dividing net income of $24,115,117 by the weighted average number of
shares of common stock outstanding during the quarter of 34,461,832.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 204,696
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 59,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 876,556
<INVESTMENTS-CARRYING> 497,828
<INVESTMENTS-MARKET> 489,457
<LOANS> 3,596,032
<ALLOWANCE> 51,423
<TOTAL-ASSETS> 5,387,076
<DEPOSITS> 3,529,688
<SHORT-TERM> 1,288,474
<LIABILITIES-OTHER> 93,361
<LONG-TERM> 28,000
0
0
<COMMON> 39,107
<OTHER-SE> 408,446
<TOTAL-LIABILITIES-AND-EQUITY> 5,387,076
<INTEREST-LOAN> 156,237
<INTEREST-INVEST> 41,055
<INTEREST-OTHER> 633
<INTEREST-TOTAL> 197,925
<INTEREST-DEPOSIT> 61,432
<INTEREST-EXPENSE> 94,226
<INTEREST-INCOME-NET> 103,699
<LOAN-LOSSES> 7,000
<SECURITIES-GAINS> (13)
<EXPENSE-OTHER> 93,428
<INCOME-PRETAX> 69,777
<INCOME-PRE-EXTRAORDINARY> 47,136
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,136
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
<YIELD-ACTUAL> 4.39
<LOANS-NON> 26,131
<LOANS-PAST> 22,787
<LOANS-TROUBLED> 1,317
<LOANS-PROBLEM> 15,902
<ALLOWANCE-OPEN> 49,867
<CHARGE-OFFS> 6,944
<RECOVERIES> 1,500
<ALLOWANCE-CLOSE> 51,423
<ALLOWANCE-DOMESTIC> 51,423
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<PAGE>
</TABLE>
