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, 1997
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, 1997 - 33,716,310 shares
<PAGE>
Wilmington Trust Corporation and Subsidiaries
Form 10-Q
Index
Page
----
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Statements of Condition 3
Consolidated Statements of Income 5
Consolidated Statements 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 22
Item 2 - Changes in Securities 22
Item 3 - Defaults Upon Senior Securities 22
Item 4 - Submission of Matters to a Vote of
Security Holders 22
Item 5 - Other Information 22
Item 6 - Exhibits and Reports on Form 8-K 22
Exhibit 11
Exhibit 27
2
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
Wilmington Trust Corporation and Subsidiaries
--------------------------
June 30, December 31,
(in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 215,303 $ 231,233
--------------------------
Interest-bearing time deposits in other banks ---- ----
--------------------------
Federal funds sold and securities purchased
under agreements to resell 111,100 134,190
--------------------------
Investment securities available for sale:
U.S. Treasury and government agencies 618,000 545,772
Obligations of state and political subdivisions 15,802 13,377
Other securities 313,741 239,370
- -----------------------------------------------------------------------------------------------------
Total investment securities available for sale 947,543 798,519
--------------------------
Investment securities held to maturity:
U.S. Treasury and government agencies 251,241 267,502
Obligations of state and political subdivisions 14,649 19,121
Other securities 139,290 181,009
- -----------------------------------------------------------------------------------------------------
Total investment securities held to maturity (market values
were $404,368 and $466,763, respectively) 405,180 467,632
--------------------------
Loans:
Commercial, financial and agricultural 1,250,940 1,237,061
Real estate-construction 121,892 123,111
Mortgage-commercial 929,716 862,974
Mortgage-residential 780,930 678,800
Consumer 905,984 881,994
Unearned income (13,269) (12,456)
- -----------------------------------------------------------------------------------------------------
Total loans net of unearned income 3,976,193 3,771,484
Reserve for loan losses (58,107) (54,361)
- -----------------------------------------------------------------------------------------------------
Net loans 3,918,086 3,717,123
--------------------------
Premises and equipment, net 101,057 94,387
Other assets 111,672 121,325
- -----------------------------------------------------------------------------------------------------
Total assets $ 5,809,941 $ 5,564,409
==========================
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 820,158 $ 840,987
Interest-bearing:
Savings 365,544 352,431
Interest-bearing demand 1,076,933 1,062,917
Certificates under $100,000 1,232,524 1,269,206
Certificates $100,000 and over 476,884 388,157
- -----------------------------------------------------------------------------------------------------
Total deposits 3,972,043 3,913,698
--------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 1,120,249 983,017
U.S. Treasury demand 95,000 53,526
- -----------------------------------------------------------------------------------------------------
Total short-term borrowings 1,215,249 1,036,543
--------------------------
Other liabilities 96,876 106,451
Long-term debt 43,000 43,000
- -----------------------------------------------------------------------------------------------------
Total liabilities 5,327,168 5,099,692
--------------------------
Stockholders' equity:
Common stock ($1.00 par value) authorized
150,000,000 shares; issued 39,191,848
and 39,107,462 shares, respectively 39,192 39,107
Capital surplus 62,031 59,463
Retained earnings 542,972 515,072
Net unrealized (loss)/gain on investment securities
available for sale, net of taxes 2,479 1,004
- -----------------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 646,674 614,646
Less: Treasury stock at cost 5,475,538 and
5,214,158 shares, respectively (163,901) (149,929)
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 482,773 464,717
--------------------------
Total liabilities and stockholders' equity $ 5,809,941 $ 5,564,409
==========================
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) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME
Interest and fees on loans $ 85,892 $ 78,279 $ 167,999 $ 156,237
Interest and dividends on investment securities:
Taxable interest 17,541 18,180 34,385 35,903
Tax-exempt interest 399 463 812 962
Dividends 1,932 1,993 3,870 4,190
Interest on time deposits in other banks ---- ---- ---- ----
Interest on federal funds sold and securities
purchased under agreements to resell 369 247 712 633
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 106,133 99,162 207,778 197,925
-------------------------------------------------------------------
Interest on deposits 31,712 29,915 62,657 61,432
Interest on short-term borrowings 17,103 16,419 31,808 32,037
Interest on long-term debt 312 364 649 757
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 49,127 46,698 95,114 94,226
-------------------------------------------------------------------
Net interest income 57,006 52,464 112,664 103,699
Provision for loan losses (5,000) (3,500) (9,500) (7,000)
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 52,006 48,964 103,164 96,699
-------------------------------------------------------------------
OTHER INCOME
Trust and asset management fees 27,868 24,370 53,781 47,470
Service charges on deposit accounts 5,281 4,591 9,960 9,301
Other operating income 4,661 5,125 9,625 9,748
Securities gains/(losses) 11 (10) 12 (13)
- ----------------------------------------------------------------------------------------------------------------------
Total other income 37,821 34,076 73,378 66,506
-------------------------------------------------------------------
Net interest and other income 89,827 83,040 176,542 163,205
-------------------------------------------------------------------
OTHER EXPENSE
Salaries and employment benefits 32,541 29,478 64,048 58,647
Net occupancy 2,585 2,520 5,438 5,218
Furniture and equipment 3,949 3,844 7,579 7,290
Stationery and supplies 1,274 1,678 2,732 3,158
Other operating expense 10,453 9,799 20,703 19,115
- ----------------------------------------------------------------------------------------------------------------------
5
<PAGE>
Total other expense 50,802 47,319 100,500 93,428
-------------------------------------------------------------------
NET INCOME
Income before income taxes 39,025 35,721 76,042 69,777
Applicable income taxes 12,741 11,604 24,837 22,641
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 26,284 $ 24,117 $ 51,205 $ 47,136
===================================================================
Net income per share $ 0.78 $ 0.70 $ 1.52 $ 1.36
===================================================================
Weighted average shares outstanding 33,689 34,462 33,778 34,735
Cash dividends per share $ 0.36 $ 0.33 $ 0.69 $ 0.63
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) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 51,205 $ 47,136
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 9,500 7,000
Provision for depreciation 5,030 5,155
Amortization of investment securities available for
sale discounts and premiums 1,622 1,766
Accretion of investment securities held to maturity
discounts and premiums (24) (6)
Deferred income taxes (557) 3,568
Losses on sales of loans 139 268
Securities (gains)/losses (12) 13
Increase in other assets 9,653 9,032
Decrease in other liabilities (9,848) (8,317)
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 66,708 65,615
-------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 3,648 17,144
Proceeds from maturities of investment securities available for sale 418,232 555,411
Proceeds from maturities of investment securities held to maturity 62,480 65,194
Purchases of investment securities available for sale (570,213) (584,193)
Purchases of investment securities held to maturity ---- (78,879)
Gross proceeds from sales of loans 8,584 18,113
Purchases of loans (67,292) ----
Net increase in loans (151,894) (97,942)
Net increase in premises and equipment (11,700) (10,899)
- ---------------------------------------------------------------------------------------------------
Net cash used for investing activities (308,155) (116,051)
-------------------------
FINANCING ACTIVITIES
Net decrease in demand, savings and interest-bearing
demand deposits 6,300 11,386
Net increase/(decrease) in certificates of deposit 52,045 (69,283)
Net increase in federal funds purchased and securities sold
under agreements to repurchase 137,232 47,890
Net increase in U.S. Treasury demand 41,474 45,032
Cash dividends (23,305) (21,899)
Proceeds from common stock issued under employment benefit plans 5,942 3,575
Payments for common stock acquired through buybacks (17,261) (34,266)
- ---------------------------------------------------------------------------------------------------
Net cash provided by/(used for) financing activities 202,427 (17,565)
-------------------------
7
<PAGE>
Decrease in cash and cash equivalents (39,020) (68,001)
Cash and cash equivalents at beginning of period 365,423 331,697
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 326,403 $ 263,696
=========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 100,346 $ 97,662
Taxes 25,314 22,300
Loans transferred during the year:
To other real estate owned $ 2,194 $ 8,055
From other real estate owned 4,028 14,491
See Note to Consolidated Financial Statements
</TABLE>
8
<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 for interim financial
information. 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 1996 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 of 1997 was $26.3 million, or $.78 per share,
a 9% increase over the $24.1 million, or $.70 per share, recorded for the second
quarter of last year.
Net interest income for the second quarter of 1997 reached $57.0 million, a 9%
increase over the $52.5 million reported for the second quarter of last year.
The quarterly provision for loan losses of $5.0 million was an increase of $1.5
million, or 43%, over the provision for the second quarter of 1996. The reserve
for loan losses at quarter-end was $58.1 million, up $3.7 million, or 7%, over
the $54.4 million reported at December 31,1996.
Noninterest income for the second quarter of 1997 was $37.8 million, an 11%
increase over the $34.1 million reported for the corresponding period last year.
Operating expenses for the second quarter of 1997 were $50.8 million, a 7%
increase over the $47.3 million reported for the second quarter of last year.
Return on assets for the six months ended June 30, 1997, on an annualized basis,
was 1.88%, up over the 1.80% reported for the corresponding period a year ago.
Return on stockholders' equity, also on an annualized basis, was 22.13%, up over
the 20.85% reported for the first six months of 1996.
STATEMENT OF CONDITION
- ----------------------
Total assets at June 30, 1997 were $5.81 billion, up $245.5 million, or 4%, over
the $5.56 billion reported at December 31, 1996. Total earning assets increased
$268.2 million, or 5%, to $5.44 billion over the same period of time.
Contributing to these increases were the loan portfolio, which increased $204.7
million, or 5%, and the investment portfolio, which increased $86.6 million, or
7%.
Total loans at June 30, 1997 were $3.98 billion, an increase of $204.7 million,
or 5%, over the December 31, 1996 level of $3.77 billion. Contributing to this
increase were: commercial mortgage loans of $929.7 million, which increased
$66.7 million, or 8%, over their December 31, 1996 level; residential mortgage
loans of $780.9 million, which increased $102.1 million, or 15%, over their
prior year-end level, due primarily to the purchase of $67.3 million of such
loans during the second quarter; and consumer loans of $906.0 million, which
increased $24.0 million, or 3%, over their prior year-end level.
The investment portfolio at June 30, 1997 was $1.35 billion, an increase of
$86.6 million, or 7%, over the December 31, 1996 level of $1.27 billion.
Contributing to this increase were: U.S. Treasury and government agency
securities, which increased $56 million, or 7%, to $869.2 million; and other
securities, which increased $32.7 million, or 8%, to $453.0 million, due to the
acquisition of additional asset-backed securities and money market preferred
stocks.
Interest-bearing liabilities at quarter-end were $4.41 billion, up $257.9
million, or 6%, over the year-end level of $4.15 billion. Total deposits
increased $58.3 million, or 1%, while short-term borrowings increased $178.7
million, or 17%. An $88.7 million, or 23%, increase in certificates of deposit
of $100,000 and over was primarily responsible for this increase, as the
Corporation moved into the national market in an effort to diversify its sources
of funds. Offsetting this growth, in part, was a $36.7 million, or 3%, decline
in certificates of deposit under $100,000. Approximately $21.4 million, or 58%,
of this decrease occurred in the Corporation's Pennsylvania markets, where rates
are more competitive. Short-term borrowings rose to $1.22 billion at
10
<PAGE>
quarter-end, an increase of $178.7 million, or 17%, over the 1996 year-end
level. A $137.2 million, or 14%, increase in Federal funds purchased was
primarily responsible for this increase, as asset growth continued to outpace
deposit growth for the first six months of 1997.
Stockholders' equity at June 30, 1997 was $482.8 million, up $18.1 million, or
4%, over the year-end level as first half earnings of $51.2 million and $5.9
million in stock issued were offset, in part, by $23.3 million in cash dividends
and $17.2 million used for the Corporation's stock buyback program.
NET INTEREST INCOME
- -------------------
Net interest income for the second quarter of 1997 on a fully tax-equivalent
("FTE") basis was $59.4 million. This was a $4.3 million, or 8%, increase over
the $55.1 million reported for the second quarter of 1996. For the first six
months of 1997, net interest income (FTE) was $117.4 million, up $8.4 million,
or 8%, over the $109.0 million reported for the first six months of 1996.
Interest income (FTE) for the second quarter of 1997 increased $6.8 million, or
7%, to $108.5 million from $101.8 million for the second quarter of 1996.
Contributing to this increase was a $301.8 million increase in the average level
of earning assets compared to the corresponding period last year. Interest
revenues increased $6.2 million as a result of this increase in earning assets.
Complementing this $6.2 million increase was a $600,000 increase in interest
revenues associated with higher interest rates the Corporation earned on its
assets. The average prime lending rate the for the second quarter of 1997 was
8.50%, 25 basis points higher than the 8.25% for the second quarter of 1996. For
the first six months of 1997, the average level of earning assets was $231.5
million higher than a year ago, contributing $9.6 million in increased interest
revenues.
Interest expense for the second quarter of 1997 increased $2.4 million, or 5%,
to $49.1 million from the $46.7 million reported for the second quarter of last
year. Contributing to this increase in interest expense was a $250.0 million
increase in average interest-bearing liabilities, which resulted in a $2.8
million increase in interest expense. Partially offsetting this $2.8 million
increase was a $400,000 decrease in interest expense associated with a five
basis point decrease in the rate paid for those funds. The average rate the
Corporation paid for its funds during the second quarter of 1997 was 3.74%,
compared to 3.78% for the second quarter of 1996. For the first six months of
1997, average interest-bearing liabilities were $182.4 million higher than those
for the corresponding period of 1996, resulting in increased interest expense of
$4.2 million. This increase was partially offset by a $3.3 million decrease in
interest expense associated with lower interest rates the Corporation paid on
its liabilities. For the first six months of 1997, the average rate the
Corporation paid for its funds was 3.70%, compared to 3.83% for the first half
of 1996.
The Corporation's net interest margin for the second quarter of 1997 was 4.49%,
up eight basis points over the 4.41% reported for the second quarter a year ago.
For the first six months of 1997, the margin was 4.53%, up 14 basis points over
the 4.39% reported for the first half of 1996. 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
1997 and 1996, respectively.
11
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY ANALYSIS OF EARNINGS
1997 Second Quarter 1996 Second Quarter
--------------------------------------- --------------------------------------
(in thousands; rates on Average Income/ Average Average Income/ Average
tax-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 24,431 369 5.98 18,616 247 5.25
- ---------------------------------------------------------------------- -------------------------
Total short-term
investments 24,431 369 5.98 18,616 247 5.25
--------------------------------------------------------------------------------
U.S. Treasury and government
agencies 836,142 13,466 6.40 826,453 13,051 6.31
State and municipal 31,480 631 8.05 35,714 718 8.04
Preferred stock 135,377 2,315 6.82 137,796 2,442 6.95
Asset-backed securities 205,345 3,204 6.23 281,488 4,085 5.81
Other 85,526 1,230 5.76 102,139 1,362 5.33
- ---------------------------------------------------------------------- -------------------------
Total investment
securities 1,293,870 20,846 6.42 1,383,590 21,658 6.24
--------------------------------------------------------------------------------
Commercial, financial and
agricultural 1,251,298 27,306 8.65 1,153,144 25,596 8.80
Real estate-construction 125,249 3,000 9.48 111,898 2,692 9.52
Mortgage-commercial 895,206 21,168 9.36 784,735 18,710 9.43
Mortgage-residential 761,733 14,653 7.70 673,201 13,148 7.81
Consumer 895,231 21,194 9.48 820,024 19,724 9.65
- ---------------------------------------------------------------------- -------------------------
Total loans 3,928,717 87,321 8.84 3,543,002 79,870 8.97
--------------------------------------------------------------------------------
Total earning assets $5,247,018 108,536 8.23 $4,945,208 101,775 8.19
================================================================================
Funds supporting earning assets
Savings $ 367,246 2,141 2.34 $ 362,324 2,111 2.34
Interest-bearing demand 1,073,601 6,805 2.54 1,007,085 6,469 2.58
Certificates under $100,000 1,231,885 17,188 5.60 1,250,216 18,188 5.85
Certificates $100,000 and over 398,781 5,578 5.53 235,079 3,147 5.30
- ---------------------------------------------------------------------- -------------------------
Total interest-bearing
deposits 3,071,513 31,712 4.13 2,854,704 29,915 4.21
--------------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,187,549 16,348 5.49 1,198,311 15,998 5.33
U.S. Treasury demand 62,012 755 4.82 33,097 421 5.03
- ---------------------------------------------------------------------- -------------------------
Total short-term
borrowings 1,249,561 17,103 5.46 1,231,408 16,419 5.32
--------------------------------------------------------------------------------
Long-term debt 43,000 312 2.91 28,000 364 5.23
- ---------------------------------------------------------------------- -------------------------
Total interest-bearing
liabilities 4,364,074 49,127 4.50 4,114,112 46,698 4.55
--------------------------------------------------------------------------------
12
<PAGE>
Other noninterest funds 882,944 ---- ---- 831,096 ---- ----
- ---------------------------------------------------------------------- -------------------------
Total funds used to support
earning assets $5,247,018 49,127 3.74 $4,945,208 46,698 3.78
================================================================================
Net interest income/yield 59,409 4.49 55,077 4.41
Tax-equivalent adjustment (2,403) (2,613)
---------------------------------------------------
Net interest income $ 57,006 $ 52,464
===================================================
</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.
13
<PAGE>
<TABLE>
<CAPTION>
YEAR-TO-DATE ANALYSIS OF EARNINGS
Year-to-Date 1997 Year-to-Date 1996
---------------------------------------- ---------------------------------------
(in thousands; rates on Average Income/ Average Average Income/ Average
tax-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 24,747 712 5.72 22,727 633 5.86
- ----------------------------------------------------------------------- ---------------------------
Total short-term investments 24,747 712 5.72 22,727 633 5.86
----------------------------------------------------------------------------------
U.S. Treasury and government
agencies 826,917 26,511 6.39 808,972 25,225 6.26
State and municipal 31,683 1,272 8.07 37,310 1,489 7.99
Preferred stock 133,461 4,639 6.96 140,658 5,091 7.13
Asset-backed securities 199,025 6,110 6.14 292,874 8,492 5.80
Other 86,909 2,433 5.61 104,508 2,809 5.40
- ----------------------------------------------------------------------- ---------------------------
Total investment securities 1,277,995 40,965 6.40 1,384,322 43,106 6.23
----------------------------------------------------------------------------------
Commercial, financial and
agricultural 1,233,225 53,338 8.62 1,144,260 50,913 8.82
Real estate-construction 124,847 5,860 9.34 109,340 5,172 9.35
Mortgage-commercial 884,597 41,630 9.36 779,086 37,712 9.57
Mortgage-residential 725,992 28,034 7.73 669,327 26,290 7.86
Consumer 885,694 41,925 9.53 816,551 39,391 9.67
- ----------------------------------------------------------------------- ---------------------------
Total loans 3,854,355 170,787 8.85 3,518,564 159,478 9.02
----------------------------------------------------------------------------------
Total earning assets $5,157,097 212,464 8.23 $4,925,613 203,217 8.22
==================================================================================
Funds supporting earning assets
Savings $ 362,443 4,209 2.34 $ 354,561 4,188 2.38
Interest-bearing demand 1,054,769 13,134 2.51 999,439 12,952 2.61
Certificates under $100,000 1,245,667 34,682 5.61 1,244,698 36,513 5.90
Certificates $100,000 and over 388,597 10,632 5.44 283,615 7,779 5.43
- ----------------------------------------------------------------------- ---------------------------
Total interest-bearing
deposits 3,051,476 62,657 4.13 2,882,313 61,432 4.28
----------------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,127,325 30,465 5.40 1,148,229 31,151 5.41
U.S. Treasury demand 54,032 1,343 4.94 34,892 886 5.02
- ----------------------------------------------------------------------- ---------------------------
Total short-term borrowings 1,181,357 31,808 5.38 1,183,121 32,037 5.41
----------------------------------------------------------------------------------
Long-term debt 43,000 649 3.04 28,000 757 5.44
- ----------------------------------------------------------------------- ---------------------------
Total interest-bearing
liabilities 4,275,833 95,114 4.46 4,093,434 94,226 4.61
----------------------------------------------------------------------------------
14
<PAGE>
Other noninterest funds 881,264 ---- ---- 832,179 ---- ----
- ----------------------------------------------------------------------- ---------------------------
Total funds used to support
earning assets $5,157,097 95,114 3.70 $4,925,613 94,226 3.83
==================================================================================
Net interest income/yield 117,350 4.53 108,991 4.39
Tax-equivalent adjustment (4,686) (5,292)
-----------------------------------------------------
Net interest income $ 112,664 $ 103,699
=====================================================
</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.
15
<PAGE>
<TABLE>
<CAPTION>
RATE-VOLUME ANALYSIS OF NET INTEREST INCOME
----------------------------------- ---------------------------------
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
1997/1996 1997/1996
Increase (Decrease) Increase (Decrease)
due to change in due to change in
----------------------------------- ------------------------------------
1 2 1 2
(in thousands) Volume Rate Total Volume Rate Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Time deposits in other banks $---- $---- $---- $---- $---- $----
Federal funds sold and
securities purchased under
agreements to resell 77 45 122 60 19 79
- ---------------------------------------------------------------------------------------------------------------------------
Total short-term
investments 77 45 122 60 19 79
------------------------------------------------------------------------------
U.S. Treasury and
government agencies 215 200 415 730 556 1,286
State and municipal* (88) 1 (87) (229) 12 (217)
Preferred stock* (83) (44) (127) (315) (137) (452)
Asset-backed securities (1,102) 221 (881) (2,719) 337 (2,382)
Other* (223) 91 (132) (467) 91 (376)
- ---------------------------------------------------------------------------------------------------------------------------
Total investment
securities (1,374) 562 (812) (3,186) 1,045 (2,141)
------------------------------------------------------------------------------
Commercial, financial and
agricultural* 2,153 (443) 1,710 3,891 (1,466) 2,425
Real estate-construction 317 (9) 308 719 (31) 688
Mortgage-commercial* 2,597 (139) 2,458 5,007 (1,089) 3,918
Mortgage-residential 1,724 (219) 1,505 2,209 (465) 1,744
Consumer 1,809 (339) 1,470 3,316 (782) 2,534
- ---------------------------------------------------------------------------------------------------------------------------
Total loans 8,626 (1,175) 7,451 15,020 (3,711) 11,309
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income $ 6,196 $ 565 $ 6,761 $ 9,601 $ (354) $ 9,247
==============================================================================
Interest expense:
Savings $ 30 $ ---- $ 30 $ 93 $ (72) $ 21
Interest-bearing demand 428 (92) 336 716 (534) 182
Certificates under $100,000 (267) (733) (1,000) 28 (1,859) (1,831)
Certificates $100,000 and over 2,193 238 2,431 2,866 (13) 2,853
------------------------------------------------------------------------------
16
<PAGE>
Total interest-bearing
deposits 2,276 (479) 1,797 3,590 (2,365) 1,225
------------------------------------------------------------------------------
Federal funds purchased and
secruities sold under
agreements to repurchase (143) 493 350 (565) (121) (686)
U.S. Treasury demand 368 (34) 334 483 (26) 457
- ---------------------------------------------------------------------------------------------------------------------------
Total short-term
borrowings 244 440 684 (48) (181) (229)
------------------------------------------------------------------------------
Long-term debt 196 (248) (52) 405 (513) (108)
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense $ 2,836 $ (407) $ 2,429 $ 4,170 $ (3,282) $ 888
==============================================================================
Changes in net interest income $ 4,332 $ 8,359
======== ========
</TABLE>
* Variances are calculated on a fully tax-equivalent basis, which includes
the effects of any disallowed interest expense.
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 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.
17
<PAGE>
Noninterest Revenues and Operating Expenses
- -------------------------------------------
Noninterest revenues for the second quarter of 1997 increased $3.7 million, or
11%, to $37.8 million. For the first six months of 1997, noninterest revenues
increased $6.9 million, or 10%, to $73.4 million.
Increased trust and asset management fees were responsible for the majority of
both the quarterly and year-to-date increases. Personal trust fees for the
second quarter of 1997 increased $1.8 million, or 15%, to $13.7 million, due
primarily to increased principal commissions and estate settlement fees. For the
first six months of 1997, personal trust fees increased $3.3 million, or 15%, to
$26.3 million. Corporate trust fees for the second quarter of 1997 increased
$1.2 million, or 18%, to $7.9 million, due primarily to increased employment
benefit administration, equipment leasing and corporate/agency income fees. For
the first six months of 1997, corporate trust fees increased $2.0 million, or
15%, to $15.3 million. For the second quarter of 1997, asset management fees
increased $400,000, or 8%, to $6.3 million, due primarily to higher mutual fund
administration fees. For the first six months of 1997, asset management fees
increased $1.0 million, or 9%, to $12.2 million, due primarily to higher equity
management, mutual fund administration and discount brokerage fees.
Service charges on deposit accounts for the second quarter of 1997 increased
$700,000, or 15%, above those for the second quarter of 1996, to $5.3 million.
For the first six months of 1997, service charges increased $700,000, or 7%,
above those for the first six months of 1997, to $10.0 million. Increased
transaction fees associated with automated teller machine usage, overdrafts and
returned items contributed to this increase.
Operating expenses for the second quarter of 1997 increased $3.5 million, or 7%,
to $50.8 million. For the first six months of 1997, operating expenses were up
$7.1 million, or 8%, to $100.5 million. Personnel expenses increased $3.1
million, or 10%, to $32.5 million for the quarter, and $5.4 million, or 9%, to
$64 million for the first six months of 1997. Contributing to these increases
were higher base compensation, sales incentives and bonuses. Higher health care
costs also contributed to these increases, rising $800,000, or 30%, for the
quarter and $1.1 million, or 21%, for the first six months of 1997, primarily
due to increased insurance premiums. Other operating expenses increased
$700,000, or 7%, for the quarter, to $10.5 million, and $1.6 million, or 8%, for
the first six months of 1997, to $20.7 million, due, in part, to increased
advertising, consulting, credit card and travel expenses.
Interest Rate Sensitivity
- -------------------------
The Corporation's interest rate sensitivity, as measured by gap analysis, was
relatively unchanged since the end of the last quarter. At June 30, 1997, the
Corporation's one-year cumulative gap, as a percentage of rate-sensitive assets,
was a negative 26.0%.
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 June 30, 1997, the swap portfolio totaled $325 million
and had final maturities of between 1 and 34 months, with a weighted average
18
<PAGE>
maturity of 16 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, 1997, the floor portfolio totaled $325 million and had final
maturities of between 25 and 60 months, with a weighted average maturity of 36
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 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 23.73%. 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 second quarter of 1997 was
$5.0 million, an increase of $1.5 million, or 43%, over the $3.5 million
provision for the second quarter of 1996. For the first six months of 1997, the
provision was $9.5 million, an increase of $2.5 million, or 36%, over the $7.0
million provision for the first half of 1996. The reserve for loan losses at
June 30, 1997 was $58.1 million, an increase of $3.7 million, or 7%, over the
$54.4 million reported at December 31, 1996. The reserve as a percentage of
total period-end loans outstanding at that date was 1.46%, up slightly over the
year-end level of 1.44%. Net chargeoffs for the second quarter of 1997 were $2.3
million, down $300,000, or 13%, from those for the second quarter of 1996. Net
chargeoffs for the first half of 1997 were $5.8 million, up $300,000, or 6%,
over those for the first half of 1996.
The following table presents the risk elements in the Corporation's loan
portfolio:
<TABLE>
<CAPTION>
Risk Elements (in thousands) June 30, 1997 December 31, 1996 June 30, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccruing $38,207 $40,735 $27,448
Restructured --- --- ---
Past due 90 days or more 20,117 20,440 22,787
- ------------------------------------------------------------------------------------------
Total $58,324 $61,175 $50,235
============================================
Percent of total loans at period-end 1.47% 1.62% 1.40%
Other real estate owned $ 3,297 $ 5,131 $ 7,852
</TABLE>
19
<PAGE>
Nonaccruing loans at June 30, 1997 were $38.2 million, a decrease of $2.5
million from the $40.7 million reported at December 31, 1996. 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. 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, 1997 totaled $41.5 million, or
1.04% of period-end loans outstanding. This was a decrease of $4.4 million, or
10%, from the $45.9 million, or 1.22% of period-end loans outstanding, reported
at December 31, 1996. As a result of the Corporation's ongoing monitoring of its
loan portfolio, at June 30, 1997, approximately $12.4 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 1.52 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 1997 was 12.09%, and its core
(Tier 1) leveraged capital ratio was 8.61%. The corresponding ratios at year-end
1996 were 12.01% and 8.59%, respectively. Both of these ratios are well in
excess of the current regulatory minimums of 8.00% and 4.00%, respectively.
Reflecting the Corporation's performance and favorable outlook, the Board of
Directors, at its April meeting, increased the quarterly dividend by 9% to 36
cents per share. This raises the per-share annual dividend rate to $1.44 and
marks the sixteenth consecutive year in which dividends have been increased.
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 February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share," which is required to be adopted on
December 31, 1997. After that, the Corporation will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. The Statement will require the Corporation for the first time to report
both basic and fully diluted earnings per share. Under the new requirements,
basic earnings per share will exclude the dilutive effect of stock options,
while fully diluted earnings per share must include the dilutive effect of stock
options, even if that effect is immaterial. The impact of Statement 128 on the
calculation of earnings per share for the quarters ended June 30, 1997 and June
30, 1996 is not expected to be material.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 129, "Disclosure of Information about Capital Structure." Statement 129
20
<PAGE>
consolidates existing guidance and requires entities (public and non-public) to
disclose certain information about the entity's capital structure. This
Statement is effective for financial statements for periods ending after
December 15, 1997. It contains no change in disclosure requirements for entities
such as the Corporation that were previously subject to the requirements of
Opinions 10 - "Omnibus Opinion - 1966" and 15 - "Earnings Per Share" and
Statement 47 - "Disclosure of Long-Term Obligations." Accordingly, this
Statement will impose no new reporting requirements on the Corporation.
21
<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
22
<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 13, 1997 /s/ Ted T. Cecala
------------------------------------
Name: Ted T. Cecala
Title:Chairman of the Board and
Chief Executive Officer
Date: August 13, 1997 /s/ David R. Gibson
------------------------------------
Name: David R. Gibson
Title: Senior Vice President
and Chief Financial
Officer
23
<PAGE>
Exhibit 11
Statement Re Computation of Per Share Earnings
- ----------------------------------------------
Earnings per share of $.78 for the second quarter of 1997 were computed by
dividing net income of $26,283,576 by the weighted average number of shares of
common stock outstanding during the quarter of 33,689,253.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CORPORATION'S FORM 10-Q FOR THE PERIOD
ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 215,303
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 111,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 947,543
<INVESTMENTS-CARRYING> 405,180
<INVESTMENTS-MARKET> 404,368
<LOANS> 3,976,193
<ALLOWANCE> 58,107
<TOTAL-ASSETS> 5,809,941
<DEPOSITS> 3,972,043
<SHORT-TERM> 1,215,249
<LIABILITIES-OTHER> 96,876
<LONG-TERM> 43,000
0
0
<COMMON> 39,192
<OTHER-SE> 443,581
<TOTAL-LIABILITIES-AND-EQUITY> 5,809,941
<INTEREST-LOAN> 167,999
<INTEREST-INVEST> 39,067
<INTEREST-OTHER> 712
<INTEREST-TOTAL> 207,778
<INTEREST-DEPOSIT> 62,657
<INTEREST-EXPENSE> 95,114
<INTEREST-INCOME-NET> 112,664
<LOAN-LOSSES> 9,500
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 100,500
<INCOME-PRETAX> 76,042
<INCOME-PRE-EXTRAORDINARY> 51,205
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,205
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.52
<YIELD-ACTUAL> 4.53
<LOANS-NON> 37,361
<LOANS-PAST> 20,117
<LOANS-TROUBLED> 846
<LOANS-PROBLEM> 12,442
<ALLOWANCE-OPEN> 54,361
<CHARGE-OFFS> 7,388
<RECOVERIES> 1,634
<ALLOWANCE-CLOSE> 58,107
<ALLOWANCE-DOMESTIC> 58,107
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
