United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For The Transition Period From ____________ to ___________
Commission File Number: 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, 1998 - 33,615,534 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 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 20
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
------------------------------------
June 30, December 31,
(in thousands) 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 248,852 $ 239,392
------------------------------------
Interest-bearing time deposits in other banks ---- ----
------------------------------------
Federal funds sold and securities purchased
under agreements to resell 154,000 50,000
------------------------------------
Investment securities available for sale:
U.S. Treasury and government agencies 956,540 790,519
Obligations of state and political subdivisions 7,902 8,007
Other securities 580,021 517,877
- --------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale 1,544,463 1,316,403
------------------------------------
Investment securities held to maturity:
U.S. Treasury and government agencies 116,312 219,136
Obligations of state and political subdivisions 8,524 12,743
Other securities 71,516 101,128
- --------------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity (market values
were $197,217 and $333,812, respectively) 196,352 333,007
------------------------------------
Loans:
Commercial, financial and agricultural 1,331,851 1,207,930
Real estate-construction 189,203 145,097
Mortgage-commercial 870,168 884,146
Mortgage-residential 836,423 813,116
Consumer 986,612 954,486
Unearned income (7,497) (10,840)
- --------------------------------------------------------------------------------------------------------------------
Total loans net of unearned income 4,206,760 3,993,935
Reserve for loan losses (68,055) (63,805)
- --------------------------------------------------------------------------------------------------------------------
Net loans 4,138,705 3,930,130
------------------------------------
Premises and equipment, net 141,455 135,129
Other assets 164,711 118,290
- --------------------------------------------------------------------------------------------------------------------
Total assets $6,588,538 $6,122,351
====================================
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 831,271 $ 792,513
Interest-bearing:
Savings 413,061 393,539
Interest-bearing demand 1,248,678 1,134,996
Certificates under $100,000 1,205,933 1,211,771
Certificates $100,000 and over 1,045,190 636,211
- --------------------------------------------------------------------------------------------------------------------
Total deposits 4,744,133 4,169,030
------------------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 958,204 1,246,287
U.S. Treasury demand 99,350 61,290
- --------------------------------------------------------------------------------------------------------------------
Total short-term borrowings 1,057,554 1,307,577
------------------------------------
Other liabilities 84,042 99,737
Long-term debt 168,000 43,000
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 6,053,729 5,619,344
------------------------------------
Stockholders' equity:
Common stock ($1.00 par value) authorized
150,000,000 shares; issued 39,264,173
and 39,191,848 shares, respectively 39,264 39,192
Capital surplus 65,774 62,511
Retained earnings 604,022 573,570
Accumulated other comprehensive income 6,625 7,504
- --------------------------------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 715,685 682,777
Less: Treasury stock, at cost, 5,648,639 and
5,713,735 shares, respectively (180,876) (179,770)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 534,809 503,007
------------------------------------
Total liabilities and stockholders' equity $6,588,538 $6,122,351
====================================
See Notes 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) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME
Interest and fees on loans $ 89,943 $ 85,892 $ 177,685 $ 167,999
Interest and dividends on investment securities:
Taxable interest 24,266 17,541 47,492 34,385
Tax-exempt interest 214 399 450 812
Dividends 2,287 1,932 4,367 3,870
Interest on time deposits in other banks ---- ---- ---- ----
Interest on federal funds sold and securities
purchased under agreements to resell 413 369 648 712
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income 117,123 106,133 230,642 207,778
-----------------------------------------------------------------------------
Interest on deposits 39,485 31,712 75,692 62,657
Interest on short-term borrowings 15,394 17,103 33,292 31,808
Interest on long-term debt 2,027 312 2,027 649
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 56,906 49,127 111,011 95,114
-----------------------------------------------------------------------------
Net interest income 60,217 57,006 119,631 112,664
Provision for loan losses (5,000) (5,000) (10,000) (9,500)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 55,217 52,006 109,631 103,164
-----------------------------------------------------------------------------
OTHER INCOME
Trust and asset management fees 32,147 27,868 62,152 53,781
Service charges on deposit accounts 5,262 5,281 10,607 9,960
Gain on business disposition ---- ---- 5,503 ----
Other operating income 5,590 4,661 10,322 9,625
Securities gains 33 11 2 12
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income 43,032 37,821 88,586 73,378
-----------------------------------------------------------------------------
Net interest and other income 98,249 89,827 198,217 176,542
-----------------------------------------------------------------------------
OTHER EXPENSE
Salaries and employment benefits 33,723 32,541 68,458 64,048
Net occupancy 3,199 2,585 6,014 5,438
Furniture and equipment 4,858 3,949 8,943 7,579
Stationery and supplies 1,299 1,274 2,699 2,732
Provision for litigation settlement ---- ---- 5,500 ----
Servicing and consulting fees 3,091 1,420 5,286 2,569
Other operating expense 9,820 9,033 18,560 18,134
- ------------------------------------------------------------------------------------------------------------------------------------
Total other expense 55,990 50,802 115,460 100,500
-----------------------------------------------------------------------------
NET INCOME
Income before income taxes 42,259 39,025 82,757 76,042
Applicable income taxes 13,970 12,741 27,156 24,837
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 28,289 $ 26,284 $ 55,601 $ 51,205
=============================================================================
Net income per share:
basic $ 0.84 $ 0.78 $ 1.66 $ 1.52
=============================================================================
diluted $ 0.82 $ 0.77 $ 1.61 $ 1.49
=============================================================================
Weighted average shares outstanding:
basic 33,575 33,689 33,541 33,778
diluted 34,406 34,344 34,434 34,426
Cash dividends per share $ 0.39 $ 0.36 $ 0.75 $ 0.69
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Wilmington Trust Corporation and Subsidiaries
-------------------------------
For the six months ended
June 30,
(in thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 55,601 $ 51,205
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 10,000 9,500
Provision for depreciation 6,275 5,030
(Accretion)/amortization of investment securities available for sale
discounts and premiums (538) 1,622
Accretion of investment securities held to maturity discounts
and premiums (134) (24)
Deferred income taxes 487 (557)
Losses on sales of loans 583 139
Securities gains (2) (12)
Decrease in other assets 6,088 9,653
Decrease in other liabilities (15,688) (9,848)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,672 66,708
-------------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 322,635 3,648
Proceeds from maturities of investment securities available for sale 279,444 418,232
Proceeds from maturities of investment securities held to maturity 136,788 62,480
Purchases of investment securities available for sale (830,971) (570,213)
Investment in affiliate (52,509) ----
Gross proceeds from sales of loans 55,981 8,584
Purchases of loans (1,095) (67,292)
Net increase in loans (274,044) (151,894)
Net increase in premises and equipment (12,601) (11,700)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (376,372) (308,155)
-------------------------------
FINANCING ACTIVITIES
Net increase in demand, savings and interest-bearing
demand deposits 171,962 3,550
Net increase in certificates of deposit 403,141 54,795
Net (decrease)/increase in federal funds purchased and securities sold
under agreements to repurchase (288,083) 137,232
Net increase in U.S. Treasury demand 38,060 41,474
Proceeds from issuance of long-term debt 125,000 ----
Cash dividends (25,149) (23,305)
Proceeds from common stock issued under employment benefit plans 7,092 5,942
Payments for common stock acquired through buybacks (4,863) (17,261)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 427,160 202,427
-------------------------------
Increase/(decrease) in cash and cash equivalents 113,460 (39,020)
Cash and cash equivalents at beginning of period 289,392 365,423
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 402,852 $ 326,403
===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 112,598 $ 100,346
Taxes 28,429 25,314
Loans transferred during the year:
To other real estate owned $ 1,226 $ 2,194
From other real estate owned 2,946 4,028
See Notes to Consolidated Financial Statements
</TABLE>
6
<PAGE>
Notes to Consolidated Financial Statements
Wilmington Trust Corporation and Subsidiaries
Note 1 - Accounting and Reporting Policies
The accounting and reporting policies of Wilmington Trust Corporation (the
"Corporation"), a holding company which owns all 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 Annual
Report to Stockholders for 1997.
Note 2 - Comprehensive Income
Effective January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components. The statement requires, among other things,
unrealized gains or losses on the Corporation's available-for-sale securities,
which prior to adoption were reported separately in shareholders' equity, to be
included in comprehensive income. The adoption of SFAS No. 130 had no impact on
the Corporation's net income or shareholders' equity.
For the three months ended June 30, 1998 and 1997, total comprehensive
income, net of taxes, was $26,808,000 and $30,918,000, respectively. For the six
months ended June 30, 1998 and 1997, total comprehensive income, net of taxes,
was $54,722,000 and $52,680,000, respectively.
Note 3 - Contingent Liabilities
The Corporation recorded a $5.5 million provision in the first quarter
of 1998 in connection with the anticipated settlement of litigation described in
footnote 9 of the Corporation's Annual Report to Stockholders for 1997.
Note 4 - Sale of Mutual Fund Servicing
The Corporation's first quarter results reflect the recognition of a
gain of $5.5 million as a result of the transfer by Rodney Square Management
Corporation, an indirect subsidiary of the Corporation ("RSMC"), to PFPC, Inc.,
an indirect subsidiary of PNC Bank, N.A., of its interest in certain agreements
under which RSMC provided accounting, administrative, custody, distribution
and/or transfer agency services to mutual funds.
Note 5 - Acquisition of Interest in Investment Advisor
On January 2, 1998, WT Investments, Inc. an indirect subsidiary of the
Corporation ("WTI"), consummated a transaction with Cramer, Rosenthal, McGlynn,
Inc., an asset management firm with offices in New York City and White Plains,
New York ("Cramer"), and its principals. Under this agreement, a new entity,
Cramer Rosenthal McGlynn, LLC ("CRM"), assumed Cramer's investment management
business. CRM performs investment management services relating to small- to
middle-capitalization stocks for institutional and individual clients.
7
<PAGE>
As a result of this transaction, WTI acquired a 24% equity interest in
CRM, with the balance of the equity interests held by Cramer and CRM's other
owners. Options to acquire additional ownership interests in CRM have been
distributed to key employees. The Corporation will be able to purchase
additional ownership interests in CRM from its other equity owners upon the
occurrence of a number of specified events, including the termination of
employment, death, disability or retirement of the individual principals.
CRM has a staff of more than 50 employees and currently manages over
$3.6 billion in assets on a discretionary basis. The firm is managed by a board
of five managers. The board currently consists of four people designated by
Cramer and its principals and one person designated by WTI. WTI will be entitled
to elect a majority of the Board when it acquires a majority of the equity
interests in CRM.
Note 6 - Issuance of Subordinated Debentures
On May 4, 1998, the Corporation issued $125 million in subordinated
debentures due on May 1, 2008, and bearing interest at a rate of 6.625% per
annum payable semi-annually on May 1 and November 1.
Note 7 - Subsequent Events
On July 31, 1998, WTI consummated a transaction with Roxbury Capital
Management, an asset management firm headquartered in Santa Monica, California
("Roxbury"), and its principals. Under this agreement, a new entity, Roxbury
Capital Management, LLC ("RCM"), assumed Roxbury's investment management
business. RCM performs investment management services relating to
large-capitalization stocks for institutional and individual clients.
As a result of this transaction, WTI has a preferred profits interest
in RCM, with the balance of those profits being retained by Roxbury and RCM's
other owners. Options to acquire additional ownership interest in RCM will be
distributed to key employees. The Corporation will be able to purchase
additional ownership interests in RCM from its equity owners upon the occurrence
of a number of specified events, including the termination of employment, death,
disability or retirement of the individual.
RCM has a staff of 52 employees and currently manages over $4 billion
in assets on a discretionary basis. The firm is managed by a board of seven
managers. The board currently consists of five people designated by Roxbury and
its principals and two people designated by WTI. WTI will be entitled to elect a
majority of the board when it acquires a majority of the equity interests in
RCM.
8
<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 1998 was $28.3 million, or $.84 per share,
an 8% increase over the $26.3 million, or $.78 per share, recorded for the
second quarter of last year. Diluted net income per share for the second quarter
of 1998 was $.82, compared with $.77 for the second quarter last year.
Total revenues for the second quarter of 1998 reached $103.2 million, a 9%
increase over the $94.8 million reported for the second quarter of 1997.
Net interest income for the second quarter of 1998 reached $60.2 million, a 6%
increase over the $57.0 million reported for the second quarter last year.
The quarterly provision for loan losses of $5.0 million was unchanged from the
provision for the second quarter of 1997. The reserve for loan losses at
quarter-end stood at $68.1 million, up $4.3 million, or 7%, over the $63.8
million reported at December 31, 1997.
Noninterest income for the second quarter of 1998 was $43.0 million, a 14%
increase over the $37.8 million reported for the second quarter of last year.
Operating expenses for the second quarter of 1998 were $56.0 million, a 10%
increase over the $50.8 million reported for the second quarter last year.
Return on assets for the six months ended June 30, 1998, on an annualized basis,
was 1.80%, down from the 1.88% reported for the corresponding period a year ago.
Return on stockholders' equity, also on an annualized basis, was 21.71%, down
from the 22.13% reported for the first six months of 1997.
STATEMENT OF CONDITION
- ----------------------
Total assets at June 30, 1998 were $6.59 billion, up $466.2 million or 8%, over
the $6.12 billion reported at December 31, 1997. Total earning assets increased
$408.2 million, or 8%, to $6.10 billion over the same period of time. Growth in
both the loan and investment portfolios contributed to these increases.
Total loans at June 30, 1998 were $4.21 billion, an increase of $212.8 million,
or 5%, over the December 31, 1997 level of $3.99 billion. Contributing to this
increase were commercial loans of $1.33 billion, which rose $123.9 million, or
10%, over their December 31, 1997 level; commercial construction loans of $189.2
million, which rose $44.1 million, or 30%, over their December 31, 1997 level;
residential mortgage loans of $836.4 million, which rose $23.3 million, or 3%,
over their December 31, 1997 level; and consumer loans of $986.6 million, which
rose $32.1 million, or 3%, over their prior year-end level.
The investment portfolio at June 30, 1998 was $1.74 billion, an increase of
$91.4 million, or 6%, over the December 31, 1997 level of $1.65 billion.
Contributing to this increase, in part, were U.S. Treasury and government agency
securities, which rose $63.2 million, or 6%, to $1.07 billion and other
securities, which rose $29.2 million, or 36%, to $109.3 million.
Interest-bearing liabilities at quarter-end were $5.14 billion, up $411.3
million, or 9%, over the $4.73 billion at year-end. Total deposits during the
first six months of 1998 rose $575.1 million. A $409.0 million increase in
certificates of deposit of $100,000 and over was primarily responsible for these
increases, as the Corporation moved into the national market in an effort to
9
<PAGE>
diversify its sources of funds. Interest-bearing demand account balances rose
$113.7 million, or 10%, over this same period of time. Offsetting this growth,
in part, was a $5.8 million decline in certificates of deposit under $100,000.
In response to deposit growth, short-term borrowings decreased $250.0 million
from their December 31, 1997 levels to $1.06 billion at quarter-end.
In May 1998, the Corporation issued $125 million of subordinated debentures. The
debentures mature May 1, 2008 and carry an interest rate of 6.625% payable
semiannually on November 1 and May 1. The net proceeds are to be used for
general corporate purposes, which may include contributions to capital and other
financings for the Corporation's banking and other subsidiaries, investments at
the holding company level and possible future acquisitions.
Stockholders' equity at June 30, 1998 was $534.8 million, up $31.8 million, or
6%, over the year-end level as first half earnings of $55.6 million and $7.1
million in new stock issued were offset, in part, by $25.1 million in cash
dividends, $4.9 million for the stock buyback program and a $900,000 valuation
reserve adjustment included in other comprehensive income.
NET INTEREST INCOME
- -------------------
Net interest income for the second quarter of 1998 on a fully tax-equivalent
("FTE") basis was $62.4 million. This was a $2.9 million, or 5%, increase over
the $59.4 million reported for the second quarter of 1997. For the first six
months of 1998, net interest income was $123.8 million, up $6.5 million, or 6%,
over the $117.4 million reported for the first six months of 1997.
Interest income (FTE) for the second quarter of 1998 rose $10.7 million, or 10%,
to $119.3 million from $108.5 million for the second quarter of 1997.
Contributing to this increase was a $657.0 million increase in the average level
of earning assets for the second quarter of 1998 versus the second quarter last
year. Interest revenues rose $11.3 million as a result of this increase in
earning assets. Partially offsetting this increase was a $600,000 decrease in
interest revenues associated with lower rates earned on the Corporation's
earning assets. The average prime lending rate the for the second quarter of
1998 was 8.50%, unchanged from a year ago. For the first six months of 1998, the
average level of earning assets was $633.5 million higher than a year ago,
contributing $22.0 million in increased interest revenues.
Interest expense for the second quarter of 1998 rose $7.8 million, or 16%, to
$56.9 million from the $49.1 million reported for the second quarter of last
year. Contributing to this increase in interest expense was a $633.7 million
increase in the average level of interest-bearing liabilities, which resulted in
a $6.8 million increase in interest expense. Complementing this increase was a
$1.0 million increase in interest expense attributable to an 11-basis point
increase in the rate paid for those funds. The average rate the Corporation paid
for its funds during the second quarter of 1998 was 3.85%, versus 3.74% for the
second quarter of 1997. For the first six months of 1998, the average level of
interest-bearing liabilities was $623.7 million higher than that for the
corresponding period of 1997, resulting in increased interest expense of $13.9
million. Complementing this increase was a $2.0 million increase in interest
expense attributable to a 15-basis point increase in the rate paid for those
funds. For the first six months of 1998, the average rate the Corporation paid
for its funds was 3.85%, versus 3.70% for the first half of 1997.
The Corporation's net interest margin for the second quarter of 1998 was 4.21%,
down 28 basis points from the 4.49% reported for the second quarter a year ago.
For the first six months of 1998, the margin was 4.27%, down 26 basis points
from the 4.53% reported for the first half of 1997. 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
1998 and 1997.
10
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY ANALYSIS OF EARNINGS
1998 Second Quarter 1997 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 29,547 413 5.53 24,431 369 5.98
- --------------------------------------------------------------------------------- --------------------------
Total short-term investments 29,547 413 5.53 24,431 369 5.98
--------------------------------------------------------------------------------
U.S. Treasury and government
agencies 1,073,849 16,689 6.25 836,142 13,466 6.40
State and municipal 16,676 317 7.62 31,480 631 8.05
Preferred stock 146,732 2,781 7.79 135,377 2,315 6.82
Asset-backed securities 396,524 6,514 6.60 205,345 3,204 6.23
Other 104,872 1,458 5.59 85,526 1,230 5.76
- --------------------------------------------------------------------------------- --------------------------
Total investment securities 1,738,653 27,759 6.43 1,293,870 20,846 6.42
--------------------------------------------------------------------------------
Commercial, financial and
agricultural 1,266,682 27,014 8.45 1,251,298 27,306 8.65
Real estate-construction 167,293 3,970 9.39 125,249 3,000 9.48
Mortgage-commercial 902,684 21,656 9.50 895,206 21,168 9.36
Mortgage-residential 827,864 16,298 7.88 761,733 14,653 7.70
Consumer 971,271 22,148 9.12 895,231 21,194 9.48
- --------------------------------------------------------------------------------- --------------------------
Total loans 4,135,794 91,086 8.76 3,928,717 87,321 8.84
--------------------------------------------------------------------------------
Total earning assets $5,903,994 119,258 8.06 $5,247,018 108,536 8.23
================================================================================
Funds supporting earning assets
Savings $ 413,224 2,399 2.33 $ 367,246 2,141 2.34
Interest-bearing demand 1,230,692 7,940 2.59 1,073,601 6,805 2.54
Certificates under $100,000 1,209,725 16,619 5.51 1,231,885 17,188 5.60
Certificates $100,000 and over 887,728 12,527 5.58 398,781 5,578 5.53
- --------------------------------------------------------------------------------- --------------------------
Total interest-bearing
deposits 3,741,369 39,485 4.21 3,071,513 31,712 4.13
--------------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,076,277 14,639 5.42 1,187,549 16,348 5.49
U.S. Treasury demand 57,409 755 5.20 62,012 755 4.82
- --------------------------------------------------------------------------------- --------------------------
11
<PAGE>
Total short-term borrowings 1,133,686 15,394 5.41 1,249,561 17,103 5.46
--------------------------------------------------------------------------------
Long-term debt 122,670 2,027 6.61 43,000 312 2.91
- --------------------------------------------------------------------------------- --------------------------
Total interest-bearing
liabilities 4,997,725 56,906 4.54 4,364,074 49,127 4.50
--------------------------------------------------------------------------------
Other noninterest funds 906,269 ---- ---- 882,944 ---- ----
- --------------------------------------------------------------------------------- --------------------------
Total funds used to support
earning assets $5,903,994 56,906 3.85 $5,247,018 49,127 3.74
================================================================================
Net interest income/yield 62,352 4.21 59,409 4.49
Tax-equivalent adjustment (2,135) (2,403)
---------------- -------------
Net interest income $ 60,217 $ 57,006
================ =============
</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.
12
<PAGE>
<TABLE>
<CAPTION>
YEAR-TO-DATE ANALYSIS OF EARNINGS
Year-to-Date 1998 Year-to-Date 1997
------------------------------------- --------------------------------
(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 23,818 648 5.41 24,747 712 5.72
- -------------------------------------------------------------------------------- ---------------------------
Total short-term investments 23,818 648 5.41 24,747 712 5.72
--------------------------------------------------------------------------
U.S. Treasury and government
agencies 1,044,435 32,740 6.31 826,917 26,511 6.39
State and municipal 17,459 675 7.75 31,683 1,272 8.07
Preferred stock 136,181 5,290 7.99 133,461 4,639 6.96
Asset-backed securities 383,007 12,662 6.64 199,025 6,110 6.14
Other 100,111 2,804 5.63 86,909 2,433 5.61
- -------------------------------------------------------------------------------- ---------------------------
Total investment securities 1,681,193 54,171 6.49 1,277,995 40,965 6.40
--------------------------------------------------------------------------
Commercial, financial and
agricultural 1,232,365 52,909 8.56 1,233,225 53,338 8.62
Real estate-construction 159,541 7,459 9.29 124,847 5,860 9.34
Mortgage-commercial 904,330 42,621 9.38 884,597 41,630 9.36
Mortgage-residential 824,212 33,224 8.06 725,992 28,034 7.73
Consumer 965,101 43,795 9.13 885,694 41,925 9.53
- -------------------------------------------------------------------------------- ---------------------------
Total loans 4,085,549 180,008 8.80 3,854,355 170,787 8.85
--------------------------------------------------------------------------
Total earning assets $5,790,560 234,827 8.12 $5,157,097 212,464 8.23
==========================================================================
Funds supporting earning assets
Savings $ 405,911 4,723 2.35 $ 362,443 4,209 2.34
Interest-bearing demand 1,184,843 15,203 2.59 1,054,769 13,134 2.51
Certificates under $100,000 1,210,399 33,266 5.54 1,245,667 34,682 5.61
Certificates $100,000 and over 796,231 22,500 5.62 388,597 10,632 5.44
- -------------------------------------------------------------------------------- ---------------------------
Total interest-bearing
deposits 3,597,384 75,692 4.23 3,051,476 62,657 4.13
--------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,169,141 31,975 5.46 1,127,325 30,465 5.40
U.S. Treasury demand 49,994 1,317 5.24 54,032 1,343 4.94
- -------------------------------------------------------------------------------- ---------------------------
Total short-term borrowings 1,219,135 33,292 5.45 1,181,357 31,808 5.38
--------------------------------------------------------------------------
Long-term debt 83,055 2,027 4.88 43,000 649 3.04
- -------------------------------------------------------------------------------- ---------------------------
13
<PAGE>
Total interest-bearing
liabilities 4,899,574 111,011 4.54 4,275,833 95,114 4.46
--------------------------------------------------------------------------
Other noninterest funds 890,986 ---- ---- 881,264 ---- ----
- -------------------------------------------------------------------------------- ---------------------------
Total funds used to support
earning assets $5,790,560 111,011 3.85 $5,157,097 95,114 3.70
==========================================================================
Net interest income/yield 123,816 4.27 117,350 4.53
Tax-equivalent adjustment (4,185) (4,686)
--------------- --------------
Net interest income $119,631 $ 112,664
=============== ==============
</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.
14
<PAGE>
<TABLE>
<CAPTION>
RATE-VOLUME ANALYSIS OF NET INTEREST INCOME
-------------------------------------------- --------------------------------------
For the three months ended June 30, For the six months ended June 30,
-------------------------------------------- --------------------------------------
1998/1997 1998/1997
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 (33) 44 (27) (37) (64)
- ------------------------------------------------------------------------------------------------------------------------------------
Total short-term
investments 77 (33) 44 (27) (37) (64)
--------------------------------------------------------------------------------------------
U.S. Treasury and
government agencies 3,623 (400) 3,223 6,654 (425) 6,229
State and municipal * (296) (18) (314) (569) (28) (597)
Preferred stock * 147 319 466 (2) 653 651
Asset-backed securities 2,950 360 3,310 5,598 954 6,552
Other * 273 (45) 228 360 11 371
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment
securities 6,697 216 6,913 12,041 1,165 13,206
--------------------------------------------------------------------------------------------
Commercial, financial and
agricultural * 332 (624) (292) (37) (392) (429)
Real estate-construction 994 (24) 970 1,607 (8) 1,599
Mortgage-commercial * 175 313 488 916 75 991
Mortgage-residential 1,270 375 1,645 3,765 1,425 5,190
Consumer 1,797 (843) 954 3,753 (1,883) 1,870
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans 4,568 (803) 3,765 10,004 (783) 9,221
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income $ 11,342 $ (620) $ 10,722 $ 22,018 $ 345 $ 22,363
============================================================================================
15
<PAGE>
Interest expense:
Savings $ 268 $ (10) $ 258 $ 504 $ 10 $ 514
Interest-bearing demand 995 140 1,135 1,619 450 2,069
Certificates under $100,000 (309) (260) (569) (981) (435) (1,416)
Certificates $100,000 and over 6,835 114 6,949 11,149 719 11,868
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 7,789 (16) 7,773 12,291 744 13,035
--------------------------------------------------------------------------------------------
Federal funds purchased and
secruities sold under
agreements to repurchase (1,527) (182) (1,709) 1,129 381 1,510
U.S. Treasury demand (56) 56 ---- (100) 74 (26)
- ------------------------------------------------------------------------------------------------------------------------------------
Total short-term
borrowings (1,583) (126) (1,709) 1,029 455 1,484
--------------------------------------------------------------------------------------------
Long-term debt 578 1,137 1,715 604 774 1,378
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense $ 6,784 $ 995 $ 7,779 $ 13,924 $ 1,973 $ 15,897
============================================================================================
Changes in net interest income $ 2,943 $ 6,466
========= =========
</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.
16
<PAGE>
Noninterest Revenues and Operating Expenses
- -------------------------------------------
Noninterest revenues for the second quarter of 1998 rose $5.2 million, or 14%,
to $43.0 million, compared to those for the second quarter of 1997. For the
first six months of 1998, noninterest revenues rose $15.2 million, or 21%, to
$88.6 million, compared to those for the first six months of 1997.
Higher corporate trust and asset management fees were responsible for the
majority of both the quarterly and year-to-date increases. Corporate trust fees
in the second quarter rose $2.1 million, or 23%, to $11.4 million, due primarily
to new fees in the administration of employee benefits trusts, corporate custody
and trust services and Delaware investment holding company services. For the
first six months of 1998, corporate trust fees rose $3.3 million, or 19%, to
$21.0 million, above those for the first six months of 1997. Asset management
fees in the second quarter of 1998 were $5.6 million, a $200,000, or 5%,
increase over the $5.4 million reported for the second quarter of 1997. For the
first six months of 1998, asset management fees rose $800,000, or 7%, to $11.3
million. The Corporation sold its mutual fund processing business in the second
quarter of 1998, which had contributed $1.5 million and $2.9 million to asset
management fees in the second quarter and first six months of 1997,
respectively. Disregarding those fees, asset management fees for the second
quarter and first six months of 1998 rose $1.5 million, or 40%, and $2.6
million, or 34%, respectively. Personal trust fees in the second quarter of 1998
rose $1.9 million, or 14%, to $15.1 million, due to both new business and the
strength of the stock market. For the first six months of 1998, personal trust
fees rose $4.3 million, or 17%, to $29.8 million, above those for the first six
months of 1997.
Service charges on deposit accounts of $5.3 million for the second quarter of
1998 were unchanged from a year ago. For the first six months of 1998, service
charges rose $700,000, or 6%, above those for the second quarter of 1997, to
$10.6 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 1998 rose $5.2 million, or 10% to
$56.0 million. For the first six months of 1998, operating expenses were $115.5
million, $75 million, or 15%, above those for the second quarter of 1997.
Personnel expenses for the quarter rose $1.2 million, or 4%, to $33.7 million,
and $4.4 million, or 7%, to $68.5 million for the first six months of 1998.
Contributing to this increase were higher levels of base compensation, bonuses
and sales incentives. Net occupancy expense during the second quarter rose
$614,000, or 24%, as the Corporation's new operations facility was occupied
during the first half of 1998. Furniture and equipment expense for the quarter
rose $900,000, or 23%, and $1.4 million, or 18%, for the year-to-date. Higher
maintainence costs and depreciation expense associated with the Corporation's
new trust system and new operations facility contributed to these increases.
Other operating expenses for the second quarter of 1998 rose $800,000, or 9%, to
$9.8 million, and $400,000, or 2%, to $18.6 million for the first six months of
1998. Service and consulting expense contributed $1.7 million to this quarterly
increase, and included $720,000 in year 2000 expenditures, $270,000 in
outsourced mortgage servicing costs and $275,000 in systems and information
consulting expenses. For the year-to-date, servicing and consulting expenses
were $2.7 million above those for the first six months of 1997, including $1.1
million in year 2000 expenditures and $500,000 in outsourced mortgage servicing
costs. Other operating expenses for the first six months of 1998 were $10.4
million, an increase of $5.6 million, or 117%, over those for the first six
months of 1997 due to the charge taken in the first quarter of 1998 for the
settlement of outstanding litigation.
17
<PAGE>
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 28.65%. 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. In May
1998, the Corporation issued $125 million of subordinated debentures due on May
1, 2008 and bearing interest at a rate of 6.625% per annum. 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 1998 was
$5.0 million, unchanged from the amount provided for the second quarter of 1997.
For the first six months of 1998, the provision was $10.0 million, an increase
of $500,000, or 5%, over the $9.5 million provided for the first half of 1997.
The reserve for loan losses at June 30, 1998 was $68.1 million, an increase of
$4.3 million, or 7%, over the $63.8 million reported at December 31, 1997. The
reserve as a percentage of total period-end loans outstanding was 1.62%, up
slightly over the year-end level of 1.60%. Net chargeoffs for the first half of
1998 were $5.8 million, unchanged from the first half of 1997.
The following table presents the risk elements in the Corporation's loan
portfolio:
Risk Elements (in thousands) June 30, 1998 December 31, 1997 June 30, 1997
- --------------------------------------------------------------------------------
Nonaccruing $28,564 $28,669 $38,207
Restructured --- --- ---
Past due 90 days or more 21,730 15,523 20,117
- --------------------------------------------------------------------------------
Total $50,294 $44,192 $58,324
====================================================
Percent of total loans at 1.20% 1.11% 1.47%
period-end
Other real estate owned $2,018 $3,738 $3,297
Nonaccruing loans at June 30, 1998 were $28.6 million, a decrease of $105,000
from the $28.7 million reported at December 31, 1997. 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, 1998 totaled $30.6 million, or .72% of period-end
loans outstanding. This was a decrease of $1.8 million, or 6%, from the $32.4
million, or .81% of period-end loans outstanding, reported at December 31, 1997.
As a result of the Corporation's ongoing monitoring of its loan portfolio, at
18
<PAGE>
June 30, 1998, approximately $13.6 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 2.38 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 1998 was 14.01%, and its core
(Tier 1) leveraged capital ratio was 7.58%. The corresponding ratios at year-end
1997 were 12.38% and 8.58%, 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, in April the
Corporation increased the quarterly dividend by 8% to 39 cents per share. This
raises the per-share annual dividend rate to $1.56 and marks the seventeenth
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
- -----------------
Year 2000 Issue
The Corporation has a company-wide task force which has reviewed all
computer-based systems and applications and developed a company-wide action plan
for the year 2000 date change. This includes modifications to existing software
and/or the acquisition of new software. In addition, the Corporation could
possibly be affected by the year 2000 issue to the extent other entities not
affiliated with it are unsucessful in addressing this issue. The Corporation has
initiated formal communications with its significant vendors and customers to
determine the extent to which those entities could impact the Corporation by
failing to remediate their own year 2000 issues. There can be no guaranty that
the operating systems of other companies will be converted in a timely manner or
that remediation costs or difficulties would not have an adverse effect on the
Corporation.
The Corporation anticipates primarily utilizing internal resources to reprogram
and test its software for required year 2000 modifications. The Corporation
anticipates completing these system modifications by December 31, 1998. The
total cost for the year 2000 project, including costs and time associated with
the impact of third-party year 2000 issues, has not been finalized. These costs,
which will be expensed as incurred, are to be funded through operating cash
flows.
The preceding two paragraphs contain certain forward-looking and cautionary
statements within the meaning of and pursuant to the safe harbor provisions of
the Private Litigation Securities Reform Act of 1995.
19
<PAGE>
Accounting Pronouncements
In June 1997, the Financial Standards Accounting Board ("FASB") issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." which requires financial disclosure 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 period presented. However, it is not
required to be applied for interim reporting in the initial year of application.
Upon adoption, this statement will result in additional financial statement
disclosures.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is required to be adopted in
two years beginning after June 15, 1999. The Statement will require the
Corporation to recognize all derivatives on its balance sheet at their fair
value. Derivatives which are not hedges must be adjusted to fair value through
income. If a derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of the derivative either will be offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be recognized in earnings immediately. The Corporation has
not yet determined what the effect of SFAS No. 133 will be on the Corporation's
earnings or financial position.
Acquisition of Interest in Investment Advisor
On July 31, 1998, WTI consummated a transaction with Roxbury and its principals.
See Note 7 to the Corporation's Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Net interest income is an important determinant of the Corporation's financial
performance. Through interest rate sensitivity management, the Corporation seeks
to maximize the growth of net interest income on a consistent basis by
minimizing the effects of fluctuations associated with changing market interest
rates.
The Corporation employs simulation models to measure the effect of variations in
interest rates on net interest income. The composition of assets, liabilities
and off-balance-sheet instruments and their respective repricing and maturity
characteristics are evaluated in assessing the Corporation's exposure to changes
in interest rates.
Net interest income is projected over a two-year period using multiple interest
rate scenarios. The results are compared to net interest income projected for
the same time period based on stable interest rates. The Corporation's model
employs interest rate scenarios in which interest rates gradually move up or
down 250 basis points. The simulation model projects, as of June 30, 1998, that
a gradual 250-basis point increase in market interest rates would reduce net
interest income by 3.7% in the first year and 9.9% in the second year. These
figures compare to projected decreases at December 31, 1997 of 2.6% and 6.6% in
the first and second years, respectively. If interest rates were to gradually
decrease 250 basis points, the simulation model projects, as of June 30, 1998,
that net interest income would increase 1.1% in the first year but decrease 2.6%
in the second year. This compares to a projected increase at December 31, 1997
20
<PAGE>
of 1.1% in the first year and a decrease of 1.1% in the second year. The
Corporation's policy limits the permitted reduction in projected net interest
income to 10% in the first one-year period given a change in interest rates of
250 basis points.
The preceding paragraph contains certain forward-looking statements within the
meaning of and made pursuant to the safe harbor provisions of the Private
Litigation Securities Reform Act of 1995 regarding the anticipated effects on
the Corporation's net interest income resulting from hypothetical changes in
market interest rates.
The assumptions that the Corporation uses regarding the effects of changes in
interest rates on the adjustment of retail deposit rates and the balances of
residential mortgages, asset-backed securities and collateralized mortgage
obligations (CMOs) play a significant role in the results the simulation model
projects. The adjustment paths are not assumed to be symmetrical.
The Corporation's model employs assumptions that reflect the historical
adjustment paths of the Corporation's retail deposit rates to changes in the
level of market interest rates. In addition, some of the Corporation's retail
deposit rates reach historic lows within the 250-basis point decline scenario.
The Corporation's model freezes the rates for these deposit products when they
equal their historic lows. These model assumptions (asymmetrical adjustments and
rate floors based on historic lows) limit the extent to which deposit rates are
expected to adjust in a declining rate scenario and contribute to the projected
simulation results.
Changes in the balances of residential mortgages, CMOs and asset-backed
securities are driven by contractual obligations and prepayments. While
contractual obligations are not typically influenced by changes in interest
rates, prepayment activity (including refinancing) can shift dramatically with
changes in interest rates. The Corporation's prepayment assumptions are based on
industry estimates for loans with similar coupons and remaining maturities. A
250-basis point decline in interest rates can lead to a significant increase in
prepayments when available reinvestment opportunities of similar risk carry
lower returns. Conversely, should interest rates rise 250 basis points, the same
balances are not likely to prepay at the same rate, but instead are likely to
lengthen in effective maturity as debtors elect not to prepay and to retain
these now below-market credit terms as long as possible. Holders of mortgages,
asset-backed securities and CMOs are left with returns below those prevailing in
the current environment. This prepayment-driven effect also contributes to the
projected simulation results.
During the first six months of 1998, the Corporation sold certain fixed-rate
residential mortgage loans into the secondary market. The primary goal of this
program was to eliminate the risk that the average lives of these fixed-rate
residential mortgage loans would extend beyond their anticipated durations, as
frequently occurs during periods of rising interest rates. Total mortgage loans
sold during the first six months of 1998 were $56.6 million.
Management reviews the Corporation's rate sensitivity regularly, and uses a
variety of strategies as needed to adjust that sensitivity. These include
changing the relative proportions of fixed-rate and floating-rate assets and
liabilities, as well as utilizing off-balance-sheet measures such as interest
rate swaps and interest rate floors.
At June 30, 1998, the Corporation was committed to interest rate swaps with a
total notional amount of $125 million, down from the $275 million at year-end
1997. The swaps have remaining maturities of between 0 and 8 months, with a
weighted average maturity of 3 months. During the second quarter of 1998, the
Corporation sold interest rate swaps with a total notional amount of $100
million. These swaps were sold as part of the Corporation's management of its
interest rate risk. Shifts in the mix of assets on the Corporation's balance
sheet eliminated the need for those interest rate swaps. At June 30, 1998, the
Corporation was committed to interest rate floors with a total notional amount
of $325 million, unchanged from year-end 1997. The floors have remaining
maturities of between 13 and 48 months, with a weighted average maturity of 24
months. The net interest differential, and the amortization of the initial fees
associated with the purchase of the floors and any gains recorded on sale are
reported under the caption "Interest and fees on loans" and are recognized over
the lives of the respective instruments. See "Net Interest Income."
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
At the Corporation's Annual Stockholder Meeting held on May 21,
1998 (the "Annual Meeting"), the nominees for director proposed by the
Corporation were elected. The votes for those nominees were as set forth below:
For Withheld
------------------ ---------------
Charles S. Crompton, Jr. 26,727,554 240,757
H. Stewart Dunn, Jr. 26,727,380 240,931
Edward B. duPont 26,727,649 240,662
R. Keith Elliott 26,722,357 245,954
Stacey J. Mobley 26,695,768 272,543
H. Rodney Sharp, III 26,727,157 241,154
In addition, at the Annual Meeting, the Corporation's stockholders
approved the ratification of the selection of Ernst & Young LLP as
the Corporation's independent public accountants as follows:
For Against Abstain
---------- ------- -------
26,869,191 48,476 50,644
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 April 24, 1998
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.
/s/ David R. Gibson
Date: August 14, 1998 -------------------------------------
Name: David R. Gibson
Title: Senior Vice President and
Chief Financial Officer
23
Exhibit 11
Statement Re Computation of Per Share Earnings
- ----------------------------------------------
Earnings per share of $.84 for the second quarter of 1998 were computed by
dividing net income of $28,289,321 by the weighted average number of shares of
common stock outstanding during the quarter of 33,574,590.
<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, 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 248,852
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 154,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,544,463
<INVESTMENTS-CARRYING> 196,352
<INVESTMENTS-MARKET> 197,217
<LOANS> 4,206,760
<ALLOWANCE> 68,055
<TOTAL-ASSETS> 6,588,538
<DEPOSITS> 4,744,133
<SHORT-TERM> 1,057,554
<LIABILITIES-OTHER> 84,042
<LONG-TERM> 168,000
0
0
<COMMON> 39,264
<OTHER-SE> 495,545
<TOTAL-LIABILITIES-AND-EQUITY> 6,588,538
<INTEREST-LOAN> 177,685
<INTEREST-INVEST> 52,309
<INTEREST-OTHER> 648
<INTEREST-TOTAL> 230,642
<INTEREST-DEPOSIT> 75,692
<INTEREST-EXPENSE> 111,011
<INTEREST-INCOME-NET> 119,631
<LOAN-LOSSES> 10,000
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 115,460
<INCOME-PRETAX> 82,757
<INCOME-PRE-EXTRAORDINARY> 55,601
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,601
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.61
<YIELD-ACTUAL> 4.27
<LOANS-NON> 28,564
<LOANS-PAST> 21,730
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 13,623
<ALLOWANCE-OPEN> 63,805
<CHARGE-OFFS> 8,041
<RECOVERIES> 2,291
<ALLOWANCE-CLOSE> 68,055
<ALLOWANCE-DOMESTIC> 56,370
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,685
</TABLE>
