<PAGE> 1
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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: 1-14659
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
<PAGE> 2
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of issuer's common stock ($1.00 par value) outstanding
at March 31, 2000 - 32,235,847 shares
2
<PAGE> 3
Wilmington Trust Corporation and Subsidiaries
Form 10-Q/A
Index
<TABLE>
<CAPTION>
Page
------
<S> <C>
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Statements of Condition 4
Consolidated Statements of Income 6
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 10
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 21
Part II. Other Information
Item 1 - Legal Proceedings 23
Item 2 - Changes in Securities and Use of Proceeds 23
Item 3 - Defaults Upon Senior Securities 23
Item 4 - Submission of Matters to a Vote of Security Holders 23
Item 5 - Other Information 23
Item 6 - Exhibits and Reports on Form 8-K 23
Exhibit 11
Exhibit 27
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION (unaudited)
Wilmington Trust Corporation and Subsidiaries
----------------------------------
March 31, December 31,
(in thousands) 2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 228,510 $ 225,145
----------------------------------
Interest-bearing time deposits in other banks ---- ----
----------------------------------
Federal funds sold and securities purchased
under agreements to resell 46,800 129,760
----------------------------------
Investment securities available for sale:
U.S. Treasury and government agencies 931,127 997,799
Obligations of state and political subdivisions 4,721 4,732
Other securities 658,252 683,736
---------------------------------------------------------------------------------------------------------------
Total investment securities available for sale 1,594,100 1,686,267
----------------------------------
Investment securities held to maturity:
U.S. Treasury and government agencies 11,588 11,960
Obligations of state and political subdivisions 7,244 7,244
Other securities 9,407 12,028
---------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity (market values
were $28,074 and $31,150, respectively) 28,239 31,232
----------------------------------
Loans:
Commercial, financial and agricultural 1,579,741 1,521,336
Real estate-construction 342,530 303,734
Mortgage-commercial 917,503 919,297
Mortgage-residential 984,723 968,259
Consumer 1,143,916 1,108,945
Unearned income (1,062) (1,492
---------------------------------------------------------------------------------------------------------------
Total loans net of unearned income 4,967,351 4,820,079
Reserve for loan losses (73,628) (76,925
---------------------------------------------------------------------------------------------------------------
Net loans 4,893,723 4,743,154
----------------------------------
Premises and equipment, net 130,371 132,160
Goodwill and other intangible assets, net of accumulated amortization
of $21,066 in 2000 and $20,818 in 1999 161,422 163,622
Accrued interest receivable 44,246 43,672
Other assets 90,537 46,932
---------------------------------------------------------------------------------------------------------------
Total assets $7,217,948 $7,201,944
==================================
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 944,066 $ 994,643
Interest-bearing:
Savings 406,592 393,750
Interest-bearing demand 1,429,648 1,397,574
Certificates under $100,000 995,103 1,067,729
Certificates $100,000 and over 1,775,736 1,515,788
----------------------------------------------------------------------------------------------------------------
Total deposits 5,551,145 5,369,484
-----------------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 844,171 995,858
U.S. Treasury demand 52,267 95,000
----------------------------------------------------------------------------------------------------------------
Total short-term borrowings 896,438 1,090,858
-----------------------------------
Accrued interest payable 50,637 56,012
Other liabilities 45,475 19,359
Long-term debt 168,000 168,000
----------------------------------------------------------------------------------------------------------------
Total liabilities 6,711,695 6,703,713
-----------------------------------
Stockholders' equity:
Common stock ($1.00 par value) authorized
150,000,000 shares; issued 39,264,173 39,264 39,264
Capital surplus 71,012 70,749
Retained earnings 706,664 689,598
Accumulated other comprehensive income (37,229) (34,796)
----------------------------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 779,711 764,815
Less: Treasury stock, at cost, 7,028,326 and
6,911,398 shares, respectively (273,458) (266,584)
----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 506,253 498,231
-----------------------------------
Total liabilities and stockholders' equity $7,217,948 $7,201,944
===================================
See Notes to Consolidated Financial Statements
</TABLE>
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
--------------------------------
For the three months ended
March 31,
--------------------------------
(in thousands; except per share data) 2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INTEREST INCOME
Interest and fees on loans $ 99,722 $ 87,201
Interest and dividends on investment securities:
Taxable interest 22,986 17,356
Tax-exempt interest 152 190
Dividends 2,508 2,361
Interest on time deposits in other banks ---- ----
Interest on federal funds sold and securities
purchased under agreements to resell 650 280
-------------------------------------------------------------------------------------------------------------
Total interest income 126,018 107,388
--------------------------------
Interest on deposits 44,563 33,833
Interest on short-term borrowings 15,004 12,980
Interest on long-term debt 2,761 2,756
-------------------------------------------------------------------------------------------------------------
Total interest expense 62,328 49,569
--------------------------------
Net interest income 63,690 57,819
Provision for loan losses (5,500) (5,000)
-------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 58,190 52,819
--------------------------------
OTHER INCOME
Trust and asset management fees 40,330 36,079
Service charges on deposit accounts 6,225 5,426
Card fees 2,235 2,002
Other operating income 1,937 2,072
Securities gains 1,475 20
-------------------------------------------------------------------------------------------------------------
Total other income 52,202 45,599
--------------------------------
Net interest and other income 110,392 98,418
--------------------------------
OTHER EXPENSE
Salaries and employment benefits 41,690 33,792
Net occupancy 3,617 3,087
Furniture and equipment 5,595 4,413
Stationery and supplies 1,633 1,561
Servicing and consulting fees 1,762 1,777
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C>
Advertising and contributions 1,305 1,945
Other operating expense 8,961 8,468
-----------------------------------------------------------------------------------------------------------
Total other expense 64,563 55,043
------------------------------
NET INCOME
Income before income taxes 45,829 43,375
Applicable income taxes 15,228 14,219
-----------------------------------------------------------------------------------------------------------
Net income $ 30,601 $ 29,156
==============================
Net income per share:
basic $ 0.95 $ 0.88
==============================
diluted $ 0.94 $ 0.87
==============================
Weighted average shares outstanding:
basic 32,227 33,075
diluted 32,544 33,703
Cash dividends per share $ 0.42 $ 0.39
See Notes to Consolidated Financial Statements
</TABLE>
7
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
----------------------------------
For the three months ended
March 31,
(in thousands) 2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 30,601 $ 29,156
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 5,500 5,000
Provision for depreciation 4,583 3,985
Amortization of investment securities available for sale
discounts and premiums 1,453 609
Accretion of investment securities held to maturity
discounts and premiums (3) (28)
Deferred income taxes 122 1,951
Securities gains (1,475) (20)
(Increase)/decrease in other assets (42,101) 973
Increase/(decrease) in other liabilities 22,422 (1,478)
---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 21,102 40,148
----------------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 145,736 276,380
Proceeds from maturities of investment securities available for sale 120,658 113,916
Proceeds from maturities of investment securities held to maturity 2,996 29,050
Purchases of investment securities available for sale (178,007) (548,511)
Purchases of investment securities held to maturity ---- ----
Gross proceeds from sales of loans 6,813 37,783
Purchases of loans (2,913) (1,422)
Net increase in loans (159,969) (133,935)
Net increase in premises and equipment (2,794) (4,845)
---------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (67,480) (231,584)
----------------------------------
FINANCING ACTIVITIES
Net decrease in demand, savings and interest-bearing
demand deposits (5,661) (82,489)
Net increase in certificates of deposit 187,322 9,709
Net (decrease)/increase in federal funds purchased and securities sold
under agreements to repurchase (151,687) 241,387
Net (decrease)/increase in U.S. Treasury demand (42,733) 9,962
Cash dividends (13,535) (12,887)
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C>
Proceeds from common stock issued under employment benefit plans 1,659 4,454
Payments for common stock acquired through buybacks (8,582) (26,885)
---------------------------------------------------------------------------------------------------------------
Net cash (used for)/provided by financing activities (33,217) 143,251
-------------------------------
Decrease in cash and cash equivalents (79,595) (48,185)
Cash and cash equivalents at beginning of period 354,905 288,079
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 275,310 $ 239,894
===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 67,704 $ 46,229
Taxes 1,014 6,407
Loans transferred during the year:
To other real estate owned $ 1,024 $ 143
From other real estate owned 1,020 620
See Notes to Consolidated Financial Statements
</TABLE>
9
<PAGE> 10
Note 1 - Accounting and Reporting Policies
The accounting and reporting policies of Wilmington Trust Corporation
(the "Corporation"), a holding company that owns all of the issued and
outstanding shares of capital stock of Wilmington Trust Company, Wilmington
Trust of Pennsylvania, Wilmington Trust FSB and WT Investments, Inc., 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 that are of a normal recurring nature and
that 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 Shareholders for 1999.
Note 2 - Comprehensive Income
Total comprehensive income for the Corporation included net income and
the after-tax, unrealized gains and/or losses on the Corporation's investment
securities available-for-sale portfolio. For the three months ended March 31,
2000 and 1999, total comprehensive income, net of taxes, was $28,168,000 and
$26,259,000, respectively.
Note 3 - Earnings per share
The following table sets forth the computation of basic and diluted net earnings
per share:
<TABLE>
<CAPTION>
------------------------------------
For the three months ended
March 31,
------------------------------------
(in thousands; except per share data) 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Numerator
Net income $ 30,601 $ 29,156
-----------------------------------------------------------------------------------------------------------------
Denominator
Denominator for basic earnings per share - weighted-average shares 32,227 33,075
-----------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Employee stock options 317 628
-----------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share - adjusted weighted-average
shares and assumed conversions 32,544 33,703
-----------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 0.95 $ 0.88
=================================================================================================================
Diluted earnings per share $ 0.94 $ 0.87
=================================================================================================================
</TABLE>
10
<PAGE> 11
Note 4 - Segment Reporting
Financial data by segment for March 31, 2000 vs March 31, 1999 is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Banking Fee-based Funds
Year-to-Date March 31, 2000 (in thousands) business business management Totals
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 54,973 $ 6,673 $ 2,563 $ 64,209
Provision for loan losses (5,467) (33) ---- (5,500)
---------------------------------------------------------------------------------------------------------------
Net interest income after provision 49,506 6,640 2,563 58,709
Trust and asset management fees:
Personal trust ---- 17,816 ---- 17,816
Corporate financial services ---- 13,087 ---- 13,087
Asset management ---- 9,463 ---- 9,463
Other operating income 10,064 436 390 10,890
Securities gains 1,470 ---- 5 1,475
---------------------------------------------------------------------------------------------------------------
Net interest and other income 61,040 47,442 2,958 111,440
Other expense (33,820) (30,801) (421) (65,042)
---------------------------------------------------------------------------------------------------------------
Segment profit from operations 27,220 16,641 2,537 46,398
Segment loss from infrequent events ---- (34) ---- (34)
---------------------------------------------------------------------------------------------------------------
Segment profit before income taxes $ 27,220 $ 16,607 $ 2,537 $ 46,364
===============================================================================================================
Intersegment revenue $ 5,377 $ 1,833 $ 710 $ 7,920
Depreciation and amortization 2,814 1,898 74 4,786
Investment in equity method investees ---- 158,741 ---- 158,741
Segment average assets 4 ,461,114 809,046 3,405,866 8,676,026
Year-to-Date March 31, 1999 (in thousands)
---------------------------------------------------------------------------------------------------------------
Net interest income $ 49,396 $ 5,102 $ 3,846 $ 58,344
Provision for loan losses (4,944) (56) ---- (5,000)
---------------------------------------------------------------------------------------------------------------
Net interest income after provision 44,452 5,046 3,846 53,344
Trust and asset management fees:
Personal trust ---- 16,014 ---- 16,014
Corporate financial services ---- 11,185 ---- 11,185
Asset management ---- 9,137 ---- 9,137
Other operating income 9,300 510 182 9,992
Securities gains ---- ---- 20 20
---------------------------------------------------------------------------------------------------------------
Net interest and other income 53,752 41,892 4,048 99,692
Other expense (29,425) (25,686) (464) (55,575)
---------------------------------------------------------------------------------------------------------------
Segment profit from operations 24,327 16,206 3,584 44,117
Segment loss from infrequent events ---- (190) ---- (190)
---------------------------------------------------------------------------------------------------------------
Segment profit before income taxes $ 24,327 $ 16,016 $ 3,584 $ 43,927
===============================================================================================================
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Intersegment revenue $ 2,462 $ 1,886 $ 635 $ 4,983
Depreciation and amortization 2,532 1,665 69 4,266
Investment in equity method investees ---- 132,244 ---- 132,244
Segment average assets 4,083,777 662,882 3,052,629 7,799,288
</TABLE>
A reconciliation of reportable segment amounts to the Corporation's consolidated
balances is as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Year-to-Date March 31 (in thousands) 2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Total revenues for reportable segments $ 64,209 $ 58,344
Other revenues 52,731 46,348
Elimination of intersegment revenues (1,048) (1,274)
---------------------------------------------------------------------------------
Total consolidated revenues before provision $ 115,892 $ 103,418
============================
Profit or loss:
Total profit or loss for reportable segments $ 46,364 $ 43,927
Elimination of intersegment profits (535) (552)
---------------------------------------------------------------------------------
$ 45,829 $ 43,375
============================
Assets:
Total assets for reportable segments $ 8,676,026 $ 7,799,288
Other assets 196,243 228,173
Elimination of intersegment assets (1,791,755) (1,741,707)
Other assets not allocated to segments ---- ----
---------------------------------------------------------------------------------
Consolidated total average assets $ 7,080,514 $ 6,285,754
============================
</TABLE>
A description of the Corporation's business lines is contained in Note 18 to its
Consolidated Financial Statements in the Corporation's 1999 Annual Report to
Shareholders.
12
<PAGE> 13
Wilmington Trust Corporation and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
SUMMARY
-------
Net income for the first quarter of 2000 was $30.6 million, or $.95 per share, a
5% increase over the $29.2 million, or $.88 per share, reported for the first
quarter of last year. Diluted net income per share for the first quarter of 2000
was $.94, compared to $.87 for the first quarter of last year.
Total revenues for the first quarter of 2000 reached $115.9 million, a 12%
increase over the $103.4 million reported for the first quarter of 2000.
Net interest income for the first quarter of 2000 reached $63.7 million, a 10%
increase over the $57.8 million reported for the first quarter of last year.
The quarterly provision for loan losses of $5.5 million was 10% higher than the
$5.0 million for the first quarter of 1999. The reserve for loan losses at
quarter-end was $73.6 million, $3.3 million, or 4%, below the $76.9 million
reported at December 31, 1999.
Noninterest income for the first quarter of 2000 was $52.2 million, a 14%
increase over the $45.6 million reported for the same quarter of last year.
Operating expenses for the first quarter of 2000 were $64.6 million, a 17%
increase above the $55.0 million reported for the first quarter of last year.
Return on assets for the three months ended March 31, 2000, on an annualized
basis, was 1.74%, down from the 1.88% reported for the corresponding period a
year ago. Return on stockholders' equity, also on an annualized basis, was
24.57%, as compared with 22.10% for the first three months of 1999.
STATEMENT OF CONDITION
----------------------
Total assets at March 31, 2000 were $7.22 billion, up $16.0 million over the
$7.20 billion reported at December 31, 1999. Total earning assets decreased
$25.9 million over the same period of time, to $6.64 billion, as decreases in
investment securities offset increases in the loan portfolio.
Total loans at March 31, 2000 were $4.97 billion, an increase of $147.3 million,
or 3%, over the December 31, 1999 level of $4.82 billion. Contributing to this
increase were commercial loans of $1.58 billion, which rose $63.4 million, or
4%, over their December 31, 1999 level; commercial construction loans of $342.5
million, which rose $38.8 million, or 13%; residential mortgage loans of $984.7
million, which rose $16.5 million, or 2%; and consumer loans of $1.14 billion,
which rose $35.0 million, or 3%. Over half of the loan portfolio growth was from
activity in the southeastern Pennsylvania market.
The investment portfolio at March 31, 2000 was $1.62 billion, a decrease of
$95.2 million, or 6%, from the December 31, 1999 level of $1.72 billion.
Contributing to this decrease were U.S. Treasury and government agency
securities, which decreased $67.0 million, or 7%, to $942.7 million, preferred
stocks, which decreased $16.6 million, or 12%, to $125.9 million, and
asset-backed securities, which decreased $13.0 million, or 4%, to $348.9
million.
Interest-bearing liabilities at quarter-end were $5.67 billion, $37.8 million,
or 1%, above the year-end level of $5.63 billion. Total deposits during the
first three months of 2000 increased $181.7 million, while short-term borrowings
decreased $194.4 million. A $259.9 million increase in certificates of deposit
$100,000
13
<PAGE> 14
and over was offset, in part, by a decrease in certificates of deposit under
$100,000 and non-interest-bearing demand deposits which decreased $72.6 million
and $50.6 million, respectively. The higher overall level of deposits at
quarter-end decreased the Corporation's dependence on short-term borrowings,
which resulted in lower levels of Federal funds purchased, reverse repurchase
agreements and U.S. Treasury demand balances.
Shareholders' equity at March 31, 2000 was $506.3 million, $8.0 million, or 2%,
over the 1999 year-end level. Earnings of $30.6 million and $2.0 million in new
stock issued during that period were offset, in part, by $13.5 million in cash
dividends, the repurchase of $8.6 million of treasury stock and a $2.4 million
valuation reserve adjustment for the investment portfolio.
NET INTEREST INCOME
-------------------
Net interest income for the first quarter of 2000 on a fully tax-equivalent
("FTE") basis was $65.6 million. This was a $5.8 million, or 10%, increase over
the $59.8 million reported for the first quarter of 1999.
Interest income (FTE) for the first quarter of 2000 increased $18.5 million, or
17%, to $127.9 million from $109.4 million for the first quarter of 1999.
Contributing to this improvement was a $774.8 million increase in the average
level of earning assets, which added $14.8 million to interest revenues. This
was complemented by the higher interest rate environment, which added an
additional $3.7 million to interest revenues for the quarter. The average rate
earned on the Corporation's earning assets during the first quarter of 2000
increased 10 basis points, from 7.60% to 7.70%.
Interest expense for the first quarter of 2000 also increased, rising $12.8
million, or 26%, to $62.3 million. Interest-bearing liabilities, on average,
rose $750.7 million over their level of a year ago. This increase in
interest-bearing liabilities contributed an additional $10.2 million to interest
expense, while the higher rate environment added another $2.6 million to
quarterly interest expense. The average rate the Corporation paid for its funds
during the first quarter of 2000 was 3.76%, compared to 3.46% for the first
quarter of 1999.
The Corporation's net interest margin for the first quarter of 2000 was 3.94%,
20 basis points below the 4.14% reported for the first quarter of a year ago.
This decline was driven, in part, by the Corporation's use of the national
certificate of deposit markets to fund its balance sheet growth. The following
two tables present comparative net interest income data and a rate-volume
analysis of changes in net interest income for the first quarters of 2000 and
1999, respectively.
14
<PAGE> 15
QUARTERLY ANALYSIS OF EARNINGS
<TABLE>
<CAPTION>
2000 First Quarter 1999 First 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 47,489 650 5.41 24,444 280 4.53
-------------------------------------------------------------------------- -----------------------------------
Total short-term
investments 47,489 650 5.41 24,444 280 4.53
-------------------------------------------------------------------------------------
U.S. Treasury and government
agencies 956,978 14,711 5.93 834,945 11,959 5.77
State and municipal 11,965 229 7.76 15,244 285 7.61
Preferred stock 133,518 2,783 7.79 168,739 2,813 6.78
Asset-backed securities 353,671 5,680 6.20 290,646 4,603 6.35
Other 194,636 3,179 6.56 92,521 1,199 5.21
-------------------------------------------------------------------------- -----------------------------------
Total investment
securities 1,650,768 26,582 6.23 1,402,095 20,859 6.00
-------------------------------------------------------------------------------------
Commercial, financial and
agricultural 1,513,683 31,062 8.14 1,383,405 26,483 7.68
Real estate-construction 327,134 7,528 9.10 229,912 4,929 8.63
Mortgage-commercial 917,751 19,695 8.49 872,813 19,167 8.81
Mortgage-residential 976,489 17,301 7.09 854,064 15,916 7.39
Consumer 1,123,085 25,063 8.94 1,014,878 21,734 8.67
-------------------------------------------------------------------------- ----------------------------------
Total loans 4,858,142 100,649 8.24 4,355,072 88,229 8.13
-------------------------------------------------------------------------------------
Total earning assets $6,556,399 127,881 7.70 $ 5,781,611 109,368 7.60
=====================================================================================
Funds supporting earning assets
Savings $ 397,069 1,552 1.57 $ 408,230 1,968 1.96
Interest-bearing demand 1,364,286 6,962 2.05 1,349,693 7,661 2.30
Certificates under $100,000 1,044,662 12,561 4.84 1,175,661 14,944 5.16
Certificates $100,000 and over 1,587,167 23,488 5.85 700,084 9,260 5.29
-------------------------------------------------------------------------- ----------------------------------
Total interest-bearing
deposits 4,393,184 44,563 4.04 3,633,668 33,833 3.76
-------------------------------------------------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase 1,004,990 14,401 5.71 1,030,789 12,510 4.85
U.S. Treasury demand 45,469 603 5.25 28,513 470 6.59
-------------------------------------------------------------------------- ----------------------------------
Total short-term
borrowings 1,050,459 15,004 5.69 1,059,302 12,980 4.91
-------------------------------------------------------------------------------------
Long-term debt 168,000 2,761 6.57 168,000 2,756 6.65
-------------------------------------------------------------------------- ----------------------------------
Total interest-bearing
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
liabilities 5,611,643 62,328 4.43 4,860,970 49,569 4.11
-------------------------------------------------------------------------------------
Other noninterest funds 944,756 -- -- 920,641 -- --
---------------------------------------------------------------------------- -------------------------------------
Total funds used to
support earning
assets $6,556,399 62,328 3.76 $ 5,781,611 49,569 3.46
=====================================================================================
Net interest income/yield 65,553 3.94 59,799 4.14
Tax-equivalent adjustment (1,863) (1,980)
---------- -----------
Net interest income $ 63,690 $ 57,819
========== ===========
</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.
16
<PAGE> 17
RATE-VOLUME ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
------------------------------------
For the three months ended March 31,
------------------------------------
2000/1999
Increase(Decrease)
due to change in
------------------------------------
(1) (2)
(in thousands) Volume Rate Total
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Time deposits in other banks $ -- $ -- $ --
Federal funds sold and
securities purchased under
agreements to resell 264 106 370
---------------------------------------------------------------------------------------------------------------------------
Total short-term
investments 264 106 370
--------------------------------------------
U.S. Treasury and
government agencies 2,350 402 2,752
State and municipal * (61) 5 (56)
Preferred stock * (394) 364 (30)
Asset-backed securities 1,217 (140) 1,077
Other * 1,327 653 1,980
---------------------------------------------------------------------------------------------------------------------------
Total investment
securities 4,439 1,284 5,723
--------------------------------------------
Commercial, financial and
agricultural * 2,488 2,091 4,579
Real estate-construction 2,086 513 2,599
Mortgage-commercial * 984 (456) 528
Mortgage-residential 2,249 (864) 1,385
Consumer 2,333 996 3,329
---------------------------------------------------------------------------------------------------------------------------
Total loans 10,140 2,280 12,420
---------------------------------------------------------------------------------------------------------------------------
Total interest income $ 14,843 $ 3,670 $ 18,513
============================================
Interest expense:
Savings $ (54) $ (362) $ (416)
Interest-bearing demand 83 (782) (699)
Certificates under $100,000 (1,681) (702) (2,383)
Certificates $100,000 and over 11,862 2,366 14,228
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 10,210 520 10,730
--------------------------------------------
Federal funds purchased and
securities sold under
agreements to repurchase (313) 2,204 1,891
U.S. Treasury demand 282 (149) 133
---------------------------------------------------------------------------------------------------------------------------
Total short-term
borrowings (31) 2,055 2,024
--------------------------------------------
Long-term debt -- 5 5
---------------------------------------------------------------------------------------------------------------------------
Total interest expense $ 10,179 $ 2,580 $ 12,759
============================================
Changes in net interest income $ 5,754
==========
</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.
18
<PAGE> 19
NON-INTEREST REVENUES AND OPERATING EXPENSES
--------------------------------------------
Non-interest revenues for the first quarter of 2000 were $52.2 million, an
increase of $6.6 million, or 14%, over those for the first quarter of a year
ago, due primarily to higher trust and asset management fees.
Trust and asset management fees for the first quarter of 2000 increased 4.3
million, or 12%, to $40.3 million. Private client advisory services fees for the
quarter rose $2.0 million, or 12%, to $17.8 million. Corporate financial
services fees increased $2.0 million, or 18%, to $13.1 million. Asset management
fees for the quarter rose $326,000, or 4%, to $9.5 million.
Service charges on deposit accounts for the first quarter were $6.2 million, 15%
above those of a year ago. Increased transaction fees associated with checking
accounts and automated teller machine usage contributed to this increase.
Card fees and other operating income for the first quarter were $4.2 million.
This was an increase of $98,000, or 2%, over the $4.1 million reported for the
first quarter of 1999. Increased loan origination and late charge fees, up
$98,000, were responsible for this increase.
Operating expenses for the first quarter of 2000 increased $9.5 million, or 17%,
to $64.6 million. Total personnel expenses for the quarter increased $7.9
million, or 23%, to $41.7 million. Contributing to this increase were higher
compensation costs and expansion activity in California, New York and
Pennsylvania. Salaries and wages increased 23.4%, reflecting higher incentive
compensation and an additional $1.9 million in salary expense associated with
the Corporation's shift in 1999 from 24 to 26 pay periods per year. Net
occupancy expense rose $530,000, or 17%, due to higher costs associated with the
leasing of offices in expansion markets as well as higher levels of depreciation
on leasehold improvements. Furniture and equipment expense for the quarter rose
$1.2 million, or 27%, as higher data processing maintenance costs and
depreciation expense reflected the Corporation's continued investment in new
technology.
Income tax expense for the first three months of 2000 increased $1.0 million, or
7%, to $15.2 million. Approximately $983,000, or 97%, of this increase was
Federal income tax. The Corporation's effective tax rate for the first quarter
of 2000 was 33.23%, compared to 32.78% for the first three months of 1999.
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 24.66%. 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.
19
<PAGE> 20
ASSET QUALITY AND LOAN LOSS PROVISION
-------------------------------------
The Corporation's provision for loan losses for the first quarter of 2000 was
$5.5 million, $500,000, or 10%, above the amount provided for the first quarter
of 1999. The reserve for loan losses at March 31, 2000 was $73.6 million, a
decrease of $3.3 million, or 4%, from the $76.9 million reported at December 31,
1999. The reserve as a percentage of total period-end loans outstanding was
1.48%, down from the year-end level of 1.60%. Net chargeoffs for the first three
months of 2000 were $8.8 million, an increase of $5.0 million, or 174%, over
those for the corresponding period of 1999. These included a chargeoff of $5.0
million taken in connection with $15.9 million in credits to a borrower placed
in nonaccrual status in the first quarter described below.
The following table presents the risk elements in the Corporation's loan
portfolio:
<TABLE>
<CAPTION>
Risk Elements (in thousands) March 31, 2000 December 31, 1999 March 31, 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccruing $41,703 $29,184 $33,485
Past due 90 days or more 20,138 16,520 40,076
------------------------------------------------------------------------------------------------------------------
Total $61,841 $45,704 $73,561
=========================================================
Percent of total loans at period-end 1.24% .95% 1.67%
Other real estate owned $537 $576 $1,055
</TABLE>
Nonaccruing loans at March 31, 2000 were $41.7 million, an increase of $12.5
million, or 43%, over the $29.2 million reported at December 31, 1999. This
includes $15.9 million of credits to a borrower about which the Corporation had
serious doubt at December 31, 1999 that were placed in nonaccrual status in
March of 2000. 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. Other
real estate owned at March 31, 2000 was $537,000, a decrease of $40,000, or 7%,
from the December 31, 1999 level of $576,000. Nonperforming assets (other real
estate owned plus nonaccrual loans) at March 31, 2000 totaled $42.2 million, or
.85% of period-end loans outstanding. This was an increase of $12.5 million, or
42%, over the $29.8 million, or .62% of period-end loans outstanding, reported
at December 31, 1999. As a result of the Corporation's ongoing monitoring of its
loan portfolio, at March 31, 2000, approximately $51.2 million of its loans were
identified that 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 1.77 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.
20
<PAGE> 21
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 first quarter of 2000 was 10.67%, and its core
(Tier 1) leveraged capital ratio was 5.52%. The corresponding ratios at year-end
1999 were 10.67% and 5.65%, respectively. Both of these ratios are above 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
-----------------
Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Adoption of this accounting pronouncement
is required for all fiscal quarters of all fiscal years beginning after June 15,
1999. In June 1999, the FASB's SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," extended the pronouncement's effective date. The Corporation
plans to adopt the provisions of this statement, as amended, beginning January
1, 2001, which is the new effective date. 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 impact of adoption
of SFAS No. 133 on the Corporation's financial position, results of operations
and cash flows is not presently determinable and will depend on the financial
position and the nature and purpose of the derivative instruments in use at that
time.
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 using multiple interest rate scenarios. The
results are compared to net interest income projected using 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
21
<PAGE> 22
projects, as of March 31, 2000, that a gradual 250-basis point increase in
market interest rates would reduce net interest income by 6.9% over a one-year
period. This figure compares to a projected decrease at December 31, 1999 of
5.5%. If interest rates were to gradually decrease 250 basis points, the
simulation model projects, as of March 31, 2000, that net interest income would
increase 3.0% over a one-year period. This figure compares to a projected
decrease at December 31, 1999 of 2.9%. The Corporation's policy limits the
permitted reduction in projected net interest income to 10% over a one-year
period, given a change in interest rates.
The preceding paragraph contains certain forward-looking statements 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 new 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 for 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 quarter of 2000, the Corporation sold certain fixed-rate
residential mortgage loans into the secondary market. The primary goal of this
program is to reduce the risk that the average duration of these fixed-rate
residential mortgage loans would extend well beyond the duration that was
anticipated at origination, as frequently occurs during periods of rising
interest rates. Mortgage loans sold during the first quarter of 2000 totaled
$24.2 million.
Management reviews the Corporation's rate sensitivity regularly, and may employ
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 March 31, 2000, the Corporation was not committed to any interest rate swaps.
At March 31, 2000, the Corporation was committed to interest rate floors with a
total notional amount of $125 million, down from the $225 million at year-end
1999. The floors have remaining maturities of between 4 and 27 months, with a
weighted average maturity of 16.8 months. The net interest differential, 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."
22
<PAGE> 23
Part II. Other Information
Item 1 - Legal Proceedings
Not Applicable
Item 2 - Change In Securities and Use of Proceeds
On January 19, 2000, the Corporation issued to a total of 31
individuals not full-time employees of the Corporation
non-statutory stock options to acquire a total of 30,000
shares of its stock at an exercise price of $52.0625 per
share. These options are first exercisable three years after
grant and terminate ten years after grant, and were issued
under the Corporation's 1999 Long-Term Incentive Plan in
reliance on the exemption provided by Section 4(2) under the
Securities Act of 1933. The proceeds from the exercise of
these options will be used for general corporate purposes. The
shares underlying the options are anticipated to be registered
on Form S-3 to be filed with the Securities and Exchange
Commission.
Item 3 - Defaults Upon Senior Securities
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 - Other Information
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
The exhibits listed below are being filed as part of this report. These
exhibits will be made available to any shareholder upon receipt of a
written request therefor, together with payment of $.20 per page for
duplicating costs.
<TABLE>
<CAPTION>
Exhibit Number Exhibit
--------------- -------
<S> <C>
11 Statement re computation of per share earnings
27 Financial data schedule
</TABLE>
23
<PAGE> 24
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: June 1, 2000 /s/ David R. Gibson
---------------------------------------------
Name: David R. Gibson
Title: Senior Vice President and
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)
24
