United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarter ended September 30, 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 Identification
incorporation or organization 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
September 30, 1997 - 33,631,652 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 and Use of Proceeds 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>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
Wilmington Trust Corporation and Subsidiaries
----------------------------
September 30, December 31,
(in thousands) 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 215,567 $ 231,233
----------------------------
Interest-bearing time deposits in other banks ---- ----
----------------------------
Federal funds sold and securities purchased
under agreements to resell 51,500 134,190
----------------------------
Investment securities available for sale:
U.S. Treasury and government agencies 652,723 545,772
Obligations of state and political subdivisions 9,395 13,377
Other securities 424,325 239,370
- ---------------------------------------------------------------------------------------------
Total investment securities available for sale 1,086,443 798,519
----------------------------
Investment securities held to maturity:
U.S. Treasury and government agencies 235,039 267,502
Obligations of state and political subdivisions 12,772 19,121
Other securities 118,397 181,009
- ---------------------------------------------------------------------------------------------
Total investment securities held to maturity
(market values were $366,913 and $466,763,
respectively) 366,208 467,632
----------------------------
Loans:
Commercial, financial and agricultural 1,215,009 1,237,061
Real estate-construction 144,946 123,111
Mortgage-commercial 933,116 862,974
Mortgage-residential 800,093 678,800
Consumer 941,643 881,994
Unearned income (12,218) (12,456)
- ---------------------------------------------------------------------------------------------
Total loans net of unearned income 4,022,589 3,771,484
Reserve for loan losses (60,008) (54,361)
- ---------------------------------------------------------------------------------------------
Net loans 3,962,581 3,717,123
----------------------------
Premises and equipment, net 124,283 94,387
Other assets 99,910 121,325
- ---------------------------------------------------------------------------------------------
Total assets $5,906,492 $5,564,409
============================
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 834,018 $ 840,987
Interest-bearing:
Savings 353,239 352,431
Interest-bearing demand 1,089,497 1,062,917
Certificates under $100,000 1,258,016 1,269,206
Certificates $100,000 and over 595,997 388,157
- ---------------------------------------------------------------------------------------------
Total deposits 4,130,767 3,913,698
----------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 1,050,501 983,017
U.S. Treasury demand 89,507 53,526
- ---------------------------------------------------------------------------------------------
Total short-term borrowings 1,140,008 1,036,543
----------------------------
Other liabilities 95,562 106,451
Long-term debt 43,000 43,000
- ---------------------------------------------------------------------------------------------
Total liabilities 5,409,337 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 62,221 59,463
Retained earnings 558,113 515,072
Net unrealized gain on investment securities
available for sale, net of taxes 6,249 1,004
- ---------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 665,775 614,646
Less: Treasury stock, at cost, 5,560,196 and
5,214,158 shares, respectively (168,620) (149,929)
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 497,155 464,717
----------------------------
Total liabilities and stockholders' equity $5,906,492 $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 nine months ended
September 30, September 30,
---------------------------------------------------------
(in thousands; except per share data) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME
Interest and fees on loans $ 87,183 $ 80,778 $255,182 $237,015
Interest and dividends on investment securities:
Taxable interest 20,068 17,762 54,453 53,665
Tax-exempt interest 335 438 1,147 1,400
Dividends 2,191 2,056 6,061 6,246
Interest on time deposits in other banks ---- ---- ---- ----
Interest on federal funds sold and
securities purchased under agreements
to resell 249 408 961 1,041
- --------------------------------------------------------------------------------------------------
Total interest income 110,026 101,442 317,804 299,367
--------------------------------------------------------
Interest on deposits 35,024 29,398 97,681 90,830
Interest on short-term borrowings 17,023 17,417 48,831 49,454
Interest on long-term debt 189 307 838 1,064
- --------------------------------------------------------------------------------------------------
Total interest expense 52,236 47,122 147,350 141,348
--------------------------------------------------------
Net interest income 57,790 54,320 170,454 158,019
Provision for loan losses (5,000) (4,000) (14,500) (11,000)
- --------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 52,790 50,320 155,954 147,019
--------------------------------------------------------
OTHER INCOME
Trust and asset management fees 29,071 23,796 82,852 71,266
Service charges on deposit accounts 5,602 4,714 15,562 14,015
Other operating income 5,574 4,943 15,199 14,691
Securities gains 1 519 13 506
- --------------------------------------------------------------------------------------------------
Total other income 40,248 33,972 113,626 100,478
--------------------------------------------------------
Net interest and other income 93,038 84,292 269,580 247,497
--------------------------------------------------------
OTHER EXPENSE
Salaries and employment benefits 31,605 29,745 95,653 88,392
Net occupancy 3,656 3,200 9,094 8,418
Furniture and equipment 4,516 3,515 12,095 10,805
Stationery and supplies 1,541 1,336 4,273 4,494
Other operating expense 11,205 9,517 31,908 28,632
- --------------------------------------------------------------------------------------------------
Total other expense 52,523 47,313 153,023 140,741
--------------------------------------------------------
5
<PAGE>
NET INCOME
Income before income taxes 40,515 36,979 116,557 106,756
Applicable income taxes 13,252 12,117 38,089 34,758
- --------------------------------------------------------------------------------------------------
Net income $ 27,263 $ 24,862 $ 78,468 $ 71,998
========================================================
Net income per share $ 0.81 $ 0.73 $ 2.33 $ 2.09
========================================================
Weighted average shares outstanding 33,662 34,121 33,739 34,529
Cash dividends per share $ 0.36 $ 0.33 $ 1.05 $ 0.96
See Note to Consolidated Financial Statements
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Wilmington Trust Corporation and Subsidiaries
----------------------------
For the nine months ended
September 30,
(in thousands) 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 78,468 $ 71,998
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 14,500 11,000
Provision for depreciation 7,640 7,691
Amortization of investment securities
available for sale discounts
and premiums 2,028 2,388
Accretion of investment securities held to
maturity discounts and premiums (34) (15)
Deferred income taxes (2,684) 2,798
Losses on sales of loans 171 343
Securities gains (13) (506)
Decrease in other assets 21,415 18,540
Decrease in other liabilities (11,155) (557)
- ---------------------------------------------------------------------------------------------
Net cash provided by operating activities 110,336 113,680
----------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available
for sale 3,956 36,018
Proceeds from maturities of investment securities
available for sale 555,043 799,760
Proceeds from maturities of investment securities held to
maturity 101,463 77,437
Purchases of investment securities available for sale (840,748) (781,039)
Purchases of investment securities held to maturity ---- (84,693)
Gross proceeds from sales of loans 15,043 19,889
Purchases of loans (67,543) ----
Net increase in loans (207,629) (225,919)
Net increase in premises and equipment (37,536) (16,594)
- ---------------------------------------------------------------------------------------------
Net cash used for investing activities (477,951) (175,141)
----------------------------
FINANCING ACTIVITIES
Net increase in demand, savings and interest-bearing
demand deposits 20,419 2,682
Net increase/(decrease) in certificates of deposit 196,650 (25,307)
Net increase in federal funds purchased and securities sold
under agreements to repurchase 67,484 18,448
Net increase in U.S. Treasury demand 35,981 65,610
Cash dividends (35,427) (33,177)
Proceeds from common stock issued under employment benefit
plans 6,833 4,899
Payments for common stock acquired through buybacks (22,681) (41,112)
- ---------------------------------------------------------------------------------------------
Net cash provided by/(used for)
financing activities 269,259 (7,957)
----------------------------
7
<PAGE>
Decrease in cash and cash equivalents (98,356) (69,418)
Cash and cash equivalents at beginning of period 365,423 331,697
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 267,067 $ 262,279
============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 164,560 $ 140,264
Taxes 36,674 33,802
Loans transferred during the year:
To other real estate owned $ 3,502 $ 9,083
From other real estate owned 5,576 17,440
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 of 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 third quarter of 1997 was $27.3 million, or $.81 per share, a
10% increase over the $24.9 million, or $.73 per share, reported for the third
quarter of last year.
Net interest income for the third quarter of 1997 reached $57.8 million, a 6%
increase over the $54.3 million reported for the third quarter of last year.
The quarterly provision for loan losses of $5.0 million was an increase of $1.0
million, or 25%, over the provision for the third quarter of 1996. The reserve
for loan losses at quarter-end was $60.0 million, up $5.6 million, or 10%, over
the $54.4 million reported at December 31, 1996.
Noninterest income for the third quarter of 1997 was $40.2 million, an 18%
increase over the $34.0 million reported for the third quarter of last year.
Operating expenses for the third quarter of 1997 were $52.5 million, an 11%
increase over the $47.3 million reported for the third quarter of last year.
Return on assets for the nine months ended September 30, 1997, on an annualized
basis, was 1.87%, up over the 1.82% reported for the corresponding period a year
ago. Return on stockholders' equity, also on an annualized basis, was 22.23%, up
over the 21.25% reported for the first nine months of 1996.
STATEMENT OF CONDITION
- ----------------------
Total assets at September 30, 1997 were $5.91 billion, up $342.1 million, or 6%,
over the $5.56 billion reported at December 31, 1996. Total earning assets
increased $354.9 million, or 7%, to $5.53 billion over the same period of time.
Contributing to this increase were the loan portfolio, which rose $251.1
million, or 7%, and the investment portfolio, which rose $186.5 million, or 15%.
Total loans at September 30, 1997 were $4.02 billion, an increase of $251.1
million, or 7%, over the level of $3.77 billion at December 31, 1996.
Contributing to this increase were commercial mortgage loans of $933.1 million,
which rose $70.1 million, or 8%, over their prior year-end level; residential
mortgage loans of $800.1 million, which rose $121.3 million, or 18%, over their
prior year-end level; and consumer loans of $941.6 million, which rose $59.6
million, or 7%, over their prior year-end level.
The investment portfolio at September 30, 1997 was $1.45 billion, an increase of
$186.5 million, or 15%, over the level of $1.27 billion at December 31, 1996.
Contributing to this increase were U.S. Treasury and government agency
securities, which rose $74.5 million, or 9%, to $887.8 million; and other
securities, which rose $122.3 million, or 29%, to $542.7 million, due to the
acquisition of additional asset-backed securities.
Interest-bearing liabilities at quarter-end were $4.48 billion, up $327.5
million, or 8%, over the prior year-end level of $4.15 billion. Total deposits
rose $217.1 million, or 6%. A $207.8 million increase in certificates of deposit
$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. Short-term borrowings at quarter-end rose to $1.14 billion, an
increase of $103.5 million, or 10%, over the prior year-end level. A $67.5
million, or 7%, increase in Federal funds purchased and securities sold under
agreements to repurchase was primarily responsible for this increase, as asset
growth continued to outpace deposit growth for the first nine months of 1997.
10
<PAGE>
Stockholders' equity at September 30, 1997 was $497.2 million, $32.4 million, or
7%, above the prior year-end level, as earnings of $78.5 million, together with
$6.8 million in stock issued and $5.2 million in valuation reserve adjustments
for the investment portfolio, were offset, in part, by $35.4 million in cash
dividends and $22.7 million utilized for the stock buyback program.
NET INTEREST INCOME
- -------------------
Net interest income for the third quarter of 1997 on a fully tax-equivalent
("FTE") basis was $60.2 million. This was a $3.4 million, or 6%, increase over
the $56.8 million reported for the third quarter of 1996. For the first nine
months of 1997, net interest income was $177.5 million, up $11.8 million, or 7%,
over the $165.8 million reported for the first nine months of 1996.
Interest income (FTE) for the third quarter of 1997 rose $8.5 million, or 8%, to
$112.4 million from $103.9 million for the third quarter of 1996. Contributing
to this increase was a $457.7 million increase in the average level of earning
assets for the third quarter of 1997 compared to that for the third quarter of
last year. Interest revenues rose $9.3 million as a result of this increase in
earning assets, offset, in part, by an $800,000 decrease in interest revenues
associated with the lower interest rates earned on those assets. For the first
nine months of 1997, the average level of earning assets was $307.8 million
higher than that for the corresponding period a year ago, contributing $18.9
million in increased interest revenues. These increases were offset, in part, by
a $1.1 million decrease in interest revenues associated with the lower interest
rates earned on those assets.
Interest expense for the third quarter of 1997 rose $5.1 million, or 11%, to
$52.2 million from the $47.1 million reported for the third quarter of last
year. Contributing to this increase was a $397.6 million increase in the average
level of interest-bearing liabilities, which resulted in a $4.6 million increase
in interest expense. Complementing this $4.6 million increase was a $600,000
increase in interest expense associated with a three-basis point increase in the
rate paid for those funds. The average rate the Corporation paid for its funds
during the third quarter of 1997 was 3.81%, compared to 3.75% for the third
quarter of 1996. For the first nine months of 1997, the average level of
interest-bearing liabilities was $255.0 million higher than that for the
corresponding period of 1996, resulting in increased interest expense of $8.8
million. This increase was partially offset by a $2.8 million decrease in
interest expense associated with the lower interest rates the Corporation paid
on its liabilities over that period. For the first nine months of 1997, the
average rate the Corporation paid for its funds was 3.74%, compared to 3.81% for
the first nine months of 1996.
The Corporation's net interest margin for the third quarter of 1997 was 4.37%,
12 basis points lower than the 4.49% reported for the third quarter a year ago.
For the first nine months of 1997, the net interest margin was 4.47%, up five
basis points over the 4.42% reported for the first nine months 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 third quarters
and first nine months of 1997 and 1996, respectively.
11
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY ANALYSIS OF EARNINGS
1997 Third Quarter 1996 Third 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 17,252 249 5.65 28,191 408 5.66
- ----------------------------------------------------------------------- -----------------------
Total short-term investments 17,252 249 5.65 28,191 408 5.66
------------------------------------------------------------------------
U.S. Treasury and government
agencies 876,875 13,941 6.38 833,369 13,291 6.36
State and municipal 26,977 524 7.78 34,347 679 7.94
Preferred stock 128,777 2,630 8.13 122,597 2,480 7.84
Asset-backed securities 314,262 5,180 6.61 239,180 3,518 5.88
Other 83,251 1,292 6.24 93,250 1,268 5.45
- ----------------------------------------------------------------------- -----------------------
Total investment securities 1,430,142 23,567 6.60 1,322,743 21,236 6.39
------------------------------------------------------------------------
Commercial, financial and
agricultural 1,209,106 26,575 8.63 1,162,249 25,807 8.71
Real estate-construction 132,816 3,308 9.74 114,363 2,766 9.47
Mortgage-commercial 935,487 22,028 9.21 817,644 19,744 9.45
Mortgage-residential 792,442 15,133 7.63 693,495 13,434 7.77
Consumer 920,700 21,575 9.28 841,607 20,506 9.67
- ----------------------------------------------------------------------- -----------------------
Total loans 3,990,551 88,619 8.75 3,629,358 82,257 8.94
------------------------------------------------------------------------
Total earning assets $5,437,945 112,435 8.18 $4,980,292 103,901 8.24
========================================================================
Funds supporting earning assets
Savings $ 361,885 2,138 2.34 $ 364,792 2,150 2.34
Interest-bearing demand 1,096,706 7,075 2.56 1,002,106 6,498 2.58
Certificates under $100,000 1,238,341 17,460 5.59 1,235,809 17,637 5.68
Certificates $100,000 and over 577,031 8,351 5.66 226,018 3,113 5.39
- ----------------------------------------------------------------------- -----------------------
Total interest-bearing
deposits 3,273,963 35,024 4.23 2,828,725 29,398 4.13
------------------------------------------------------------------------
12
<PAGE>
Federal funds purchased and
securities sold under
agreements to repurchase 1,156,676 16,381 5.63 1,218,888 16,860 5.51
U.S. Treasury demand 42,045 642 5.97 42,428 557 5.14
- ----------------------------------------------------------------------- -----------------------
Total short-term borrowings 1,198,721 17,023 5.64 1,261,316 17,417 5.49
------------------------------------------------------------------------
Long-term debt 43,000 189 1.74 28,000 307 4.36
- ----------------------------------------------------------------------- -----------------------
Total interest-bearing
liabilities 4,515,684 52,236 4.58 4,118,041 47,122 4.55
------------------------------------------------------------------------
Other noninterest funds 922,261 ---- ---- 862,251 ---- ----
- ----------------------------------------------------------------------- -----------------------
Total funds used to support
earning assets $5,437,945 52,236 3.81 $4,980,292 47,122 3.75
========================================================================
Net interest income/yield 60,199 4.37 56,779 4.49
Tax-equivalent adjustment (2,409) (2,459)
--------- ---------
Net interest income $57,790 $ 54,320
========= =========
</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 22,221 961 5.70 24,562 1,041 5.57
- --------------------------------------------------------------------- ----------------------
Total short-term investments 22,221 961 5.70 24,562 1,041 5.57
----------------------------------------------------------------------
U.S. Treasury and government
agencies 843,752 40,452 6.38 817,163 38,516 6.29
State and municipal 30,097 1,796 7.99 36,316 2,168 7.98
Preferred stock 131,883 7,269 7.35 134,594 7,571 7.35
Asset-backed securities 237,860 11,290 6.33 274,845 12,010 5.83
Other 85,676 3,725 5.81 100,728 4,077 5.41
- --------------------------------------------------------------------- ----------------------
Total investment securities 1,329,268 64,532 6.47 1,363,646 64,342 6.28
----------------------------------------------------------------------
Commercial, financial and
agricultural 1,225,095 79,913 8.62 1,150,299 76,720 8.78
Real estate-construction 127,533 9,168 9.47 111,027 7,938 9.39
Mortgage-commercial 901,747 63,658 9.31 792,033 57,456 9.53
Mortgage-residential 748,386 43,167 7.70 677,442 39,724 7.83
Consumer 897,491 63,500 9.44 824,964 59,897 9.67
- --------------------------------------------------------------------- ----------------------
Total loans 3,900,252 259,406 8.82 3,555,765 241,735 8.99
----------------------------------------------------------------------
Total earning assets $5,251,741 324,899 8.21 $4,943,973 307,118 8.23
======================================================================
Funds supporting earning assets
Savings $ 362,255 6,347 2.34 $ 357,996 6,338 2.36
Interest-bearing demand 1,068,902 20,209 2.53 1,000,335 19,450 2.60
Certificates under $100,000 1,243,198 52,142 5.61 1,241,713 54,150 5.83
Certificates $100,000 and over 452,098 18,983 5.54 264,276 10,892 5.42
- --------------------------------------------------------------------- ----------------------
Total interest-bearing
deposits 3,126,453 97,681 4.17 2,864,320 90,830 4.23
----------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,137,216 46,846 5.47 1,171,953 48,011 5.44
U.S. Treasury demand 49,993 1,985 5.24 37,423 1,443 5.07
- --------------------------------------------------------------------- ----------------------
Total short-term borrowings 1,187,209 48,831 5.46 1,209,376 49,454 5.43
----------------------------------------------------------------------
Long-term debt 43,000 838 2.61 28,000 1,064 5.08
- --------------------------------------------------------------------- ----------------------
14
<PAGE>
Total interest-bearing
liabilities 4,356,662 147,350 4.50 4,101,696 141,348 4.59
----------------------------------------------------------------------
Other noninterest funds 895,079 ---- ---- 842,277 ---- ----
- --------------------------------------------------------------------- ----------------------
Total funds used to support
earning assets $5,251,741 147,350 3.74 $4,943,973 141,348 3.81
======================================================================
Net interest income/yield 177,549 4.47 165,770 4.42
Tax-equivalent adjustment (7,095) (7,751)
---------------------------------------------
Net interest income $170,454 $158,019
========= ========
</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
-------------------------------- -------------------------------
Three months ended September 30, Nine months ended September 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 (158) (1) (159) (99) 19 (80)
- -----------------------------------------------------------------------------------------------------------------------------
Total short-term
investments (158) (1) (159) (99) 19 (80)
--------------------------------------------------------------------------------
U.S. Treasury and
government agencies 615 35 650 1,347 589 1,936
State and municipal* (144) (11) (155) (375) 3 (372)
Preferred stock* 57 93 150 (302) ---- (302)
Asset-backed securities 1,094 568 1,662 (1,624) 904 (720)
Other* (140) 164 24 (607) 255 (352)
- -----------------------------------------------------------------------------------------------------------------------------
Total investment
securities 1,572 759 2,331 (1,635) 1,825 190
--------------------------------------------------------------------------------
Commercial, financial and
agricultural* 1,029 (261) 768 4,912 (1,719) 3,193
Real estate-construction 440 102 542 1,159 71 1,230
Mortgage-commercial* 2,807 (523) 2,284 7,820 (1,618) 6,202
Mortgage-residential 1,938 (239) 1,699 4,155 (712) 3,443
Consumer 1,928 (859) 1,069 5,246 (1,643) 3,603
- -----------------------------------------------------------------------------------------------------------------------------
Total loans 8,139 (1,777) 6,362 23,163 (5,492) 17,671
- -----------------------------------------------------------------------------------------------------------------------------
Total interest income $ 9,318 $ (784) $ 8,534 $ 18,924 $(1,143) $ 17,781
================================================================================
Interest expense:
Savings $ (12) $ ---- $ (12) $ 75 $ (66) $ 9
Interest-bearing demand 615 (38) 577 1,333 (574) 759
Certificates under $100,000 36 (213) (177) 65 (2,073) (2,008)
Certificates $100,000 and over 4,835 403 5,238 7,720 371 8,091
- -----------------------------------------------------------------------------------------------------------------------------
16
<PAGE>
Total interest-bearing
deposits 4,635 991 5,626 8,293 (1,442) 6,851
--------------------------------------------------------------------------------
Federal funds purchased and
secruities sold under
agreements to repurchase (857) 378 (479) (1,417) 252 (1,165)
U.S. Treasury demand (5) 90 85 483 59 542
- -----------------------------------------------------------------------------------------------------------------------------
Total short-term
borrowings (878) 484 (394) (913) 290 (623)
--------------------------------------------------------------------------------
Long-term debt 165 (283) (118) 570 (796) (226)
- -----------------------------------------------------------------------------------------------------------------------------
Total interest expense $ 4,560 $ 554 $ 5,114 $ 8,753 $ (2,751) $ 6,002
================================================================================
Changes in net interest income $ 3,420 $ 11,779
======== ========
</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 third quarter of 1997 rose $6.3 million, or 18%, to
$40.2 million. For the first nine months of 1997, noninterest revenues rose
$13.1 million, or 13%, to $113.6 million.
Higher levels of trust and asset management fees were responsible for the
majority of both the quarterly and year-to-date increases. Personal trust fees
for the third quarter of 1997 rose $2.6 million, or 22%, to $14.2 million, due
to increased levels of principal commissions, estate settlement and private
banking fees. For the first nine months of 1997, personal trust fees rose $5.9
million, or 17%, to $40.5 million. Corporate trust fees for the third quarter of
1997 rose $1.3 million, or 20%, to $8.0 million, due to increased employment
benefit administration fees, equipment leasing fees and corporate/agency income
fees. For the first nine months of 1997, corporate trust fees rose $3.3 million,
or 17%, to $23.3 million. Asset management fees for the third quarter of 1997
rose $1.4 million, or 25%, to $6.8 million, due primarily to higher mutual fund
administration fees. For the first nine months of 1997, asset management fees
rose $2.3 million, or 14%, to $19.0 million, due to higher equity management,
mutual fund administration and discount brokerage fees.
Service charges on deposit accounts for the third quarter of 1997 rose $900,000,
or 19%, to $5.6 million, compared to those for the third quarter of 1996. For
the first nine months of 1997, service charges rose $1.5 million, or 11%, to
$15.6 million. Increased transaction fees associated with automated teller
machine usage, overdrafts and returned items contributed to this increase.
Operating expenses for the third quarter of 1997 rose $5.2 million, or 11%, to
$52.5 million, over operating expenses for the third quarter of 1996. For the
first nine months of 1997, operating expenses were $153.0 million, $12.3
million, or 9%, above those for the third quarter of 1996. Personnel expenses
rose $1.9 million, or 6%, to $31.6 million for the quarter, and $7.3 million, or
8%, to $95.7 million for the first nine months of 1997. Contributing to these
increases were higher base compensation and bonuses for both the third quarter
and year-to-date. Higher health care costs also contributed to the increase,
rising $1.1 million, or 14%, for the first nine months of 1997. Other operating
expenses rose $1.7 million, or 18%, to $11.2 million for the third quarter of
1997, and $3.3 million, or 11%, to $31.9 million for the first nine months of
1997, 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,
increased slightly since the end of the last quarter. At September 30, 1997, the
Corporation's one-year cumulative gap, as a percentage of rate-sensitive assets,
was a negative 28.1%. At December 31, 1996, the Corporation's one-year
cumulative gap was a negative 20.6%.
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 enters into interest rate swaps ("swaps") and interest rate
floor agreements ("floors") as hedges against fluctuations in the interest rates
of identifiable asset categories. The swaps represent an exchange of interest
payments computed on notional amounts. The Corporation receives fixed-rate
interest payments in return for floating-rate payments on the swaps. At
September 30, 1997, the swap portfolio totaled $275 million and had final
maturities of between six and 31 months, with a weighted average 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
18
<PAGE>
equal to or above the strike price, no payments are received. A single upfront
payment was made to purchase each of the floors. These payments are amortized
over each floor's original life.
At September 30, 1997, the floor portfolio totaled $325 million and had final
maturities of between 22 and 57 months, with a weighted average maturity of 33
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 25.00%. Management believes that
maturities of the Corporation's investment securities, other readily marketable
assets and external sources of funds offer more than adequate liquidity to meet
any cash flow requirements that may arise. Sources of funds have historically
consisted of deposits, amortization and prepayments of outstanding loans,
maturities of investment securities, borrowings, and interest income. Management
monitors the Corporation's existing and projected liquidity requirements on an
ongoing basis and implements appropriate strategies when deemed necessary.
Asset Quality and Loan Loss Provision
- -------------------------------------
The Corporation's provision for loan losses for the third quarter of 1997 was
$5.0 million, an increase of $1.0 million, or 25%, over the $4.0 million
provided for the third quarter of 1996. For the first nine months of 1997, the
provision was $14.5 million, an increase of $3.5 million, or 32%, over the $11.0
million provided for the first nine months of 1996. The reserve for loan losses
at September 30, 1997 was $60.0 million, an increase of $5.6 million, or 10%,
over the $54.4 million reported at December 31, 1996. The reserve as a
percentage of total period-end loans outstanding was 1.49%, up slightly over the
year-end level of 1.44%. Net chargeoffs for the first nine months of 1997 were
$8.9 million, up $500,000, or 6%, over net chargeoffs for the first nine months
of 1996.
The following table presents the risk elements in the Corporation's loan
portfolio:
<TABLE>
<CAPTION>
Risk Elements (in thousands) September 30, 1997 December 31, 1996 September 30, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccruing $39,483 $40,735 $39,361
Past due 90 days or more 15,183 20,440 23,585
- ----------------------------------------------------------------------------------------------
Total $54,666 $61,175 $62,946
==================================================
Percent of total loans at 1.36% 1.62% 1.69%
period-end
Other real estate owned $ 3,057 $ 5,131 $ 5,931
</TABLE>
19
<PAGE>
Nonaccruing loans at September 30, 1997 were $39.5 million, a decrease of $1.2
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 September 30, 1997 totaled $42.5 million,
or 1.06% of period-end loans outstanding. This was a decrease of $3.3 million,
or 7%, 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 September 30, 1997, approximately $7.9
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 1.52 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 third quarter of 1997 was 12.45%, and its core
(Tier 1) leveraged capital ratio was 8.62%. 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.
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
- -----------------
Acquisition of Interest in Investment Advisor
On October 31, 1997, WT Investments, Inc., a subsidiary of Wilmington Trust
Company, entered into an agreement with Cramer, Rosenthal, McGlynn, Inc., an
asset management firm headquartered in White Plains, New York ("Cramer"), and
its principals. Under this agreement, a new entity, Cramer Rosenthal McGlynn,
LLC ("CRM"), will assume the investment management business of Cramer and its
affiliates. Cramer performs investment management services on
small-capitalization and middle-capitalization companies for institutional and
individual clients. The firm has a staff of 52 people and manages over $3.6
billion in assets on a discretionary basis.
Closing is subject to the satisfaction of several customary conditions. At that
time, Wilmington Trust will become a 24% owner of CRM, with the balance retained
by the current owners of Cramer. Options to acquire additional ownership
interests in the company will be distributed to key employees. Wilmington Trust
will be able to purchase additional ownership interests in CRM from the other
equity owners at fair market value over time upon the occurrence of a number of
specified events, including the termination of employment, death, disability or
retirement of the individual.
20
<PAGE>
CRM will be managed by a board of five managers. Initially, the board will
consist of four people designated by Cramer and one person designated by
Wilmington Trust. Wilmington Trust will be entitled to elect a majority of the
board when it acquires a majority of the equity interests in the company.
Other Matters
The Corporation has established a company-wide task force to review all
computer-based systems and applications and develop a company-wide action plan
for the century date change for the year 2000. The Corporation's goal is to have
all systems and applications compliant with the century change by December 31,
1998. Preliminary cost estimates have not been finalized, but remediation
efforts will be expensed. None of these costs is anticipated to have a material
impact on the Corporation's results in any one period. In addition, the
Corporation could possibly be affected by the century change to the extent other
entities not affiliated with it are unsuccessful in addressing this issue on a
timely basis.
Accounting Pronouncements
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 September 30, 1997 and
September 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
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.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," which will require reporting of "comprehensive income" and its
components in financial statements. "Comprehensive income" will include net
income and other items of comprehensive income, such as unrealized gains and
losses on available-for-sale securities and minimum pension liability
adjustments, which are excluded from net income. This statement is effective for
periods beginning after December 15, 1997 and requires the restatement of all
prior periods presented. Upon adoption, this statement will result in additional
financial statement disclosures.
In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which requires financial disclosures and
descriptive information about reportable operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports. This statement is effective for periods beginning after
December 15, 1997 and requires the restatement of all prior periods presented.
Upon adoption, this statement will result in additional financial statement
disclosures.
21
<PAGE>
Part II. Other Information
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Changes In Securities and Use of Proceeds
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 Corporation filed a Report on Form 8-K on October 31, 1997 reporting
certain developments under Item 5.
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: November 14, 1997 /s/ Ted T. Cecala
------------------------------------
Name: Ted T. Cecala
Title: Chairman of the Board and
Chief Executive Officer
Date: November 14, 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 $.81 for the third quarter of 1997 were computed by
dividing net income of $27,263,431 by the weighted average number of shares of
common stock outstanding during the quarter of 33,662,151.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 215,567
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 51,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,086,443
<INVESTMENTS-CARRYING> 366,208
<INVESTMENTS-MARKET> 366,913
<LOANS> 4,022,589
<ALLOWANCE> 60,008
<TOTAL-ASSETS> 5,906,492
<DEPOSITS> 4,130,767
<SHORT-TERM> 1,140,008
<LIABILITIES-OTHER> 95,562
<LONG-TERM> 43,000
0
0
<COMMON> 39,192
<OTHER-SE> 457,963
<TOTAL-LIABILITIES-AND-EQUITY> 5,906,492
<INTEREST-LOAN> 255,182
<INTEREST-INVEST> 61,661
<INTEREST-OTHER> 961
<INTEREST-TOTAL> 317,804
<INTEREST-DEPOSIT> 97,681
<INTEREST-EXPENSE> 147,350
<INTEREST-INCOME-NET> 170,454
<LOAN-LOSSES> 14,500
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 153,023
<INCOME-PRETAX> 116,557
<INCOME-PRE-EXTRAORDINARY> 78,468
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,468
<EPS-PRIMARY> 2.33
<EPS-DILUTED> 2.33
<YIELD-ACTUAL> 4.47
<LOANS-NON> 39,483
<LOANS-PAST> 15,183
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,917
<ALLOWANCE-OPEN> 54,361
<CHARGE-OFFS> 11,778
<RECOVERIES> 2,925
<ALLOWANCE-CLOSE> 60,008
<ALLOWANCE-DOMESTIC> 60,008
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
