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
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
RIGGS NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
52-1217953
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1503 Pennsylvania Avenue, N.W., Washington, D.C. 20005
(Address of principal executive offices) (Zip Code)
(202) 835-4309
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months
(or 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. Yes X . No__.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $2.50 par value
28,494,905
(Title of Class)
(Outstanding at October 31, 2001)
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three and nine months ended September 30, 2001 and 2000 3
Consolidated Statements of Condition
September 30, 2001 and 2000, and December 31, 2000 4
Consolidated Statements of Changes in Shareholders' Equity
Nine months ended September 30, 2001 and 2000 5
Consolidated Statements of Cash Flows
Nine months ended September 30, 2001 and 2000 6
Notes to the Consolidated Financial Statements 7-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-23
Item 3. Quantitative and Qualitative Disclosures about Market Risk 24-26
Item 1. Legal Proceedings 27 Item 2. Change in Securities 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5. Other Information 27 Item 6. Exhibits and Reports on Form 8-K 27 Signatures 27
ITEM 1. FINANCIAL STATEMENTS-UNAUDITED
RIGGS NATIONAL CORPORATION THREE MONTHS ENDED NINE MONTHS ENDED
CONSOLIDATED STATEMENTS OF INCOME SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) ------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000 2001 2000
===================================================================================================================================
INTEREST INCOME
Interest and Fees on Loans $ 51,076 $ 58,232 $ 156,438 $176,948
Interest and Dividends on Securities Available for Sale 17,522 19,955 53,008 59,872
Interest on Time Deposits with Other Banks 2,750 5,575 11,444 16,671
Interest on Federal Funds Sold and Reverse Repurchase Agreements 3,851 4,603 12,601 14,767
-----------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 75,199 88,365 233,491 268,258
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 394 482 1,331 1,670
Money Market Deposit Accounts 5,958 9,982 21,495 29,449
Time Deposits in Domestic Offices 8,389 11,780 24,891 34,886
Time Deposits in Foreign Offices 6,806 9,401 22,840 26,754
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Total Interest on Deposits 21,547 31,645 70,557 92,759
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Interest on Short-Term Borrowings and Long-Term Debt:
Repurchase Agreements and Other Short-Term Borrowings 3,736 8,045 14,905 25,822
Long-Term Debt 1,618 1,618 4,854 4,854
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Total Interest on Short-Term Borrowings and Long-Term Debt 5,354 9,663 19,759 30,676
-----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 26,901 41,308 90,316 123,435
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Net Interest Income 48,298 47,057 143,175 144,823
Less: Provision for Loan Losses 838 16,491 953 17,494
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Net Interest Income after Provision for Loan Losses 47,460 30,566 142,222 127,329
NONINTEREST INCOME
Trust and Investment Advisory Income 11,549 13,790 37,562 41,252
Service Charges and Fees 11,620 10,890 32,979 30,940
Venture Capital Investment Gains (Losses), Net (7,785) 2,682 (21,662) 15,298
Other Noninterest Income 2,390 2,712 7,498 7,077
Securities Gains, Net 25 3 11,410 324
-----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 17,799 30,077 67,787 94,891
NONINTEREST EXPENSE
Salaries and Employee Benefits 27,105 25,315 79,420 74,599
Occupancy, Net 5,025 4,950 15,402 14,853
Data Processing Services 5,184 4,949 15,959 15,386
Furniture and Equipment 3,148 3,060 9,013 9,093
Other Real Estate Owned (Income) Expense, Net 52 27 (148) 4
Other Noninterest Expense 17,010 17,646 51,559 51,472
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Total Noninterest Expense 57,524 55,947 171,205 165,407
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Income before Taxes, Minority Interest and Extraordinary Loss 7,735 4,696 38,804 56,813
Applicable Income Tax Expense 3,198 3,600 14,590 22,155
Minority Interest in Income of Subsidiaries, Net of Taxes 4,932 5,348 14,815 17,028
===================================================================================================================================
Net Income (Loss) $ (395) $ (4,252) $ 9,399 $ 17,630
EARNINGS PER SHARE- Basic $ (0.01) $ (0.15) $ 0.33 $ 0.62
Diluted (0.01) (0.15) 0.32 0.62
DIVIDENDS DECLARED AND PAID PER SHARE $ 0.05 $ 0.05 $ 0.15 $ 0.15
RIGGS NATIONAL CORPORATION CONSOLIDATED
STATEMENTS OF CONDITION
(UNAUDITED) SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) 2001 2000 2000
=======================================================================================================================
ASSETS
Cash and Due from Banks $ 183,389 $ 143,373 $ 156,075
Federal Funds Sold and Reverse Repurchase Agreements 429,000 150,000 395,000
-----------------------------------------------------------------------------------------------------------------------
Total Cash and Cash Equivalents 612,389 293,373 551,075
Time Deposits with Other Banks 329,849 379,052 365,901
Securities Available for Sale (at Market Value) 1,454,395 1,283,171 1,239,973
Venture Capital Investments 62,423 82,775 83,734
Loans 2,909,967 3,034,839 2,940,738
Reserve for Loan Losses (33,002) (37,147) (36,197)
-----------------------------------------------------------------------------------------------------------------------
Total Net Loans 2,876,965 2,997,692 2,904,541
Premises and Equipment, Net 194,865 199,726 200,455
Other Assets 208,470 237,372 208,793
=======================================================================================================================
Total Assets $5,739,356 $5,473,161 $5,554,472
LIABILITIES
Deposits:
Noninterest-Bearing Demand Deposits $ 528,230 $ 610,060 $ 676,405
Interest-Bearing Deposits:
Savings and NOW Accounts 254,744 272,438 315,375
Money Market Deposit Accounts 1,766,813 1,709,724 1,694,705
Time Deposits in Domestic Offices 1,032,807 916,511 785,318
Time Deposits in Foreign Offices 685,990 568,435 604,174
-----------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,740,354 3,467,108 3,399,572
-----------------------------------------------------------------------------------------------------------------------
Total Deposits 4,268,584 4,077,168 4,075,977
Repurchase Agreements and Other Short-Term Borrowings 499,234 492,602 582,832
Other Liabilities 152,656 121,682 96,392
Long-Term Debt 66,525 66,525 66,525
-----------------------------------------------------------------------------------------------------------------------
Total Liabilities 4,986,999 4,757,977 4,821,726
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES 350,000 350,000 350,000
=======================================================================================================================
SHAREHOLDERS' EQUITY
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at September 30, 2001 and 2000, and
December 31, 2000
Shares Issued - 31,795,703 at September 30, 2001, 31,681,464 at
September 30, 2000 and 31,701,464 at December 31, 2000 79,489 79,204 79,254
Surplus 163,125 162,004 162,206
Retained Earnings 231,745 224,063 226,616
Accumulated Other Comprehensive Loss (645) (28,730) (13,973)
Treasury Stock - 3,300,798 shares at September 30, 2001 and 2000, and
December 31, 2000 (71,357) (71,357) (71,357)
-----------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 402,357 365,184 382,746
=======================================================================================================================
Total Liabilities and Shareholders' Equity $5,739,356 $5,473,161 $5,554,472
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON ACCUMULATED
STOCK OTHER TOTAL
$2.50 RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS'
PAR SURPLUS EARNINGS INCOME (LOSS) STOCK EQUITY
===================================================================================================================================
Balance, December 31, 1999 $ 79,039 $161,439 $ 210,682 $ (42,090) $ (71,357) $ 337,713
Comprehensive Income:
Net Income 17,630 17,630
Other Comprehensive Income
(Loss), Net of Tax: (1)
Unrealized Gain (Loss) on
Securities Available for Sale, Net
of Reclassification Adjustments 15,750 15,750
Foreign Exchange
Translation Adjustments (2,390) (2,390)
------------
Total Other Comprehensive
Income (Loss) 13,360
============
Total Comprehensive Income (Loss) 30,990
Issuance of Common Stock for
Stock Option Plans-65,969 Shares 165 565 730
Cash Dividends -
Common Stock, $.15 per Share (4,249) (4,249)
===================================================================================================================================
Balance, September 30, 2000 $ 79,204 $162,004 $ 224,063 $ (28,730) $ (71,357) $ 365,184
Balance, December 31, 2000 $ 79,254 $162,206 $ 226,616 $ (13,973) $ (71,357) $ 382,746
Comprehensive Income:
Net Income 9,399 9,399
Other Comprehensive Income
(Loss), Net of Tax: (1)
Unrealized Gain (Loss) on
Securities Available for Sale, Net
of Reclassification Adjustments 16,524 16,524
Unrealized Gain (Loss) on Derivatives,
Net of Reclassification Adjustments (2,642) (2,642)
Foreign Exchange
Translation Adjustments (554) (554)
------------
Total Other Comprehensive
Income (Loss) 13,328
============
Total Comprehensive Income (Loss) 22,727
Issuance of Common Stock for
Stock Option Plans-94,239 Shares 235 919 1,154
Cash Dividends -
Common Stock, $.15 per Share (4,270) (4,270)
===================================================================================================================================
Balance, September 30, 2001 $ 79,489 $163,125 $ 231,745 $ (645) $ (71,357) $ 402,357
(1)- See Notes to the Financial Statements for gross unrealized gains or losses arising during each period and the tax effect on each on each item of comprehensive income.
RIGGS NATIONAL
CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
2001 2000
===================================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 9,399 $ 17,630
Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:
Provision for Loan Losses 953 17,494
Unrealized Losses (Gains) on Venture Capital Investments 27,955 (12,033)
Gains on Sales of Venture Capital Investments (6,293) (3,264)
Depreciation Expense and Amortization of Leasehold Improvements 11,318 10,427
Gains on Sales of Securities Available for Sale (11,410) (324)
Gains on Sales of OREO Properties (57) -
Increase in Other Assets (8,800) (17,493)
Increase in Other Liabilities 12,991 46,816
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Total Adjustments 26,657 41,623
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Net Cash Provided By Operating Activities 36,056 59,253
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net Decrease In Time Deposits with Other Banks 36,052 34,476
Principal Collections and Maturities of Securities Available for Sale 3,504,678 899,171
Proceeds from Sales of Securities Available for Sale 190,041 212,046
Purchases of Securities Available for Sale (3,831,678) (1,073,460)
Purchases of Venture Capital Investments (10,616) (33,978)
Proceeds from Sale of Venture Capital Investments 10,265 6,025
Net Decrease in Loans 26,666 145,705
Net Increase in Premises and Equipment (5,728) (7,313)
Other, Net 239 (590)
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Net Cash (Used In) Provided By Investing Activities (80,081) 182,082
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in:
Demand, NOW, Savings and Money Market Deposit Accounts (136,698) (21,522)
Time Deposits 329,305 (76,643)
Repurchase Agreements and Other Short-Term Borrowings (83,598) (339,600)
Proceeds from the Issuance of Common Stock 1,154 730
Dividend Payments - Common (4,270) (4,249)
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Net Cash Provided By (Used In) Financing Activities 105,893 (441,284)
-----------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes (554) (2,390)
-----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 61,314 (202,339)
Cash and Cash Equivalents at Beginning of Period 551,075 495,712
===================================================================================================================================
Cash and Cash Equivalents at End of Period $ 612,389 $ 293,373
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
NONCASH ACTIVITIES:
Trade Dated Securities Included in Other Liabilities $ 50,789 $ 6,490
Loans Transferred to Other Real Estate Owned - 225
CASH PAID DURING THE YEAR FOR:
Interest Paid (Net of Amount Capitalized) $ 90,842 $ 124,047
Income Tax Payments 126 7,198
The interim financial statements presented in this Quarterly Report on Form 10-Q are in conformity with accounting principles generally accepted in the United States which have been applied on a consistent basis. In our opinion these interim financial statements include all normal recurring adjustments necessary to fairly present our results of operations, financial condition and cash flows. The preparation of financial statements requires the use of estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates and the results of operations for the three and nine months ended September 30, 2001 are not necessarily indicative of the results to be expected for all of 2001. The financial statements contained herein should be read in conjunction with the financial statements and accompanying notes in our Annual Report on Form 10-K.
Earnings per share computations are as follows:
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
================================================
BASIC DILUTED BASIC DILUTED
EPS EPS EPS EPS
================================================
Net Income (Loss) Available to Common Shareholders $ (395)$ (395) $ (4,252)$ (4,252)
Weighted-Average Shares Outstanding 28,490,836 28,490,836 28,363,275 28,363,275
Weighted-Average Dilutive Effect
of Stock Option Plans n/a 583,169 n/a 132,279
------------------------------------------------
Adjusted Weighted-Average Shares Outstanding 28,490,836 29,074,005 28,363,275 28,495,554
Basic EPS $ (.01) $ (.15)
Diluted EPS $ (.01) $ (.15)
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
================================================
BASIC DILUTED BASIC DILUTED
EPS EPS EPS EPS
================================================
Net Income Available to Common Shareholders $ 9,399 $ 9,399 $ 17,630 $ 17,630
Weighted-Average Shares Outstanding 28,462,881 28,462,881 28,337,017 28,337,017
Weighted-Average Dilutive Effect
of Stock Option Plans n/a 478,233 n/a 112,932
------------------------------------------------
Adjusted Weighted-Average Shares Outstanding 28,462,881 28,941,114 28,337,017 28,449,949
Basic EPS $ .33 $ .62
Diluted EPS $ .32 $ .62
OTHER COMPREHENSIVE INCOME (LOSS)
BEFORE - TAX
TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
===================================================================================================================================
NINE MONTHS ENDED SEPTEMBER 30, 2001:
Foreign Currency Translation Adjustments $ (852) $ 298 $ (554)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) Arising During Period 25,523 (8,933) 16,590
Less: Reclassification Adjustment for (Gains) Losses Realized in Net Income (102) 36 (66)
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Net Unrealized Gains (Losses) 25,421 (8,897) 16,524
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Unrealized Gains (Losses) on Derivatives:
Unrealized Holding Gains (Losses) Arising During Period (4,064) 1,422 (2,642)
-----------------------------------------------------------------------------------------------------------------------------------
Net Unrealized Gains (Losses) (4,064) 1,422 (2,642)
===================================================================================================================================
Other Comprehensive Income (Loss) $ 20,505 $ (7,177) $ 13,328
NINE MONTHS ENDED SEPTEMBER 30, 2000:
Foreign Currency Translation Adjustments $ (3,677) $ 1,287 $ (2,390)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) Arising During Period 24,554 (8,593) 15,961
Less: Reclassification Adjustment for (Gains) Losses Realized in Net Income (324) 113 (211)
-----------------------------------------------------------------------------------------------------------------------------------
Net Unrealized Gains (Losses) 24,230 (8,480) 15,750
-----------------------------------------------------------------------------------------------------------------------------------
Unrealized Gains (Losses) on Derivatives:
Unrealized Holding Gains (Losses) Arising During Period - - -
-----------------------------------------------------------------------------------------------------------------------------------
Net Unrealized Gains (Losses) - - -
===================================================================================================================================
Other Comprehensive Income (Loss) $ 20,553 $ (7,193) $ 13,360
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BALANCES
FOREIGN UNREALIZED UNREALIZED ACCUMULATED
CURRENCY GAIN (LOSS) GAIN (LOSS) OTHER
TRANSLATION ON ON COMPREHENSIVE
ADJUSTMENTS SECURITIES DERIVATIVES INCOME (LOSS)
===================================================================================================================================
NINE MONTHS ENDED SEPTEMBER 30, 2001:
Balance, December 31, 2000 $ (4,657) $ (9,316) $ - $ (13,973)
Current-Period Change (554) 16,524 (2,642) 13,328
===================================================================================================================================
Balance, September 30, 2001 $ (5,211) $ 7,208 $ (2,642) $ (645)
NINE MONTHS ENDED SEPTEMBER 30, 2000:
Balance, December 31, 1999 $ (2,597) $ (39,493) $ - $ (42,090)
Current-Period Change (2,390) 15,750 - 13,360
===================================================================================================================================
Balance, September 30, 2000 $ (4,987) $ (23,743) $ - $ (28,730)
Our reportable segments are strategic business units that provide diverse products and services within the financial services industry. We have six reportable segments: Banking, International Banking, Riggs & Company, Treasury, Riggs Capital Partners and Other. The Banking segment provides traditional banking services, such as lending and deposit taking to retail, corporate and commercial customers. The International Banking segment includes our Washington, D.C.- based embassy banking business, our London-based banking subsidiary, Riggs Bank Europe Limited (RBEL), and our Berlin branch (a subsidiary of RBEL). The International Banking segment also includes the part of our private-client services division based in London–Riggs & Company International, Limited. Riggs & Company is our private client services division that provides trust and investment management services to a broad customer base. The Treasury segment is responsible for asset and liability management throughout our company and for management of our investment portfolio. Riggs Capital Partners represents our venture capital subsidiaries, which initially invest in privately-held companies and hold equities in both privately-held and publicly-owned growth companies. “Other” consists of our unallocated parent-company income and expense, net interest income from unallocated equity and foreclosed real estate activities.
We evaluate segment performance based on income before taxes and minority interest. The accounting policies of the segments are substantially the same as those described in the summary of significant accounting policies disclosed in our December 31, 2000 Form 10-K. We account for intercompany transactions as if the transactions were to third parties under market conditions. Overhead and support expenses are allocated to each operating segment based on number of employees, service usage and other factors relevant to the expense incurred.
Reconciliations are provided from the segment totals to our consolidated financial statements. The reconciliations of noninterest income and noninterest expense offset as these items result from intercompany transactions. For years in which we have either no provision for loan losses or a reduction to the reserve for loan losses, an allocation of loan loss is not provided to the segments. The reconciliation of total average assets represents the elimination of intercompany transactions.
===================================================================================================================================
THREE MONTHS RIGGS RIGGS
ENDED INTERNATIONAL RIGGS & CAPITAL NATIONAL
SEPTEMBER 30, 2001 BANKING BANKING COMPANY TREASURY PARTNERS OTHER RECONCILIATION CORPORATION
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NET INTEREST INCOME
Interest Income $ 45,020 $ 11,310 $ 1,128 $ 30,484 $ 118 $ 9,953
Interest Expense 12,542 14,234 1,202 9,178 - 11,940
Funds Transfer Income (Expense) (3,262) 11,595 2,420 (16,390) (1,182) 6,819
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss),
Tax-Equivalent 29,216 8,671 2,346 4,916 (1,064) 4,832
Provision for Loan Losses - (838) - - - -
Tax Equivalent Adjustment (619) - - - - -
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss) $ 28,597 $ 7,833 $ 2,346 $ 4,916 $(1,064) $ 4,832 $ - $ 47,460
-----------------------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest Income-External
Customers $ 11,244 $ 1,280 $12,153 $ 237 $(7,785) $ 670
Intersegment Noninterest Income 807 1,966 578 - - 641
-----------------------------------------------------------------------------------------------
Total Noninterest Income $ 12,051 $ 3,246 $12,731 $ 237 $(7,785) $ 1,311 $ (3,992) $ 17,799
-----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 1,066 $ 359 $ 220 $ 4 $ 7 $ 2,336
Direct Expense 17,659 9,531 8,796 969 1,045 19,525
Overhead and Support 13,139 3,391 2,904 565 93 (20,093)
-----------------------------------------------------------------------------------------------
Total Noninterest Expense $ 31,864 $ 13,281 $11,920 $ 1,538 $ 1,145 $ 1,768 $ (3,992) $ 57,524
-----------------------------------------------------------------------------------------------
Income (Loss) Before Taxes and
Minority Interest $ 8,784 $ (2,202) $ 3,157 $ 3,615 $(9,994) $ 4,375 $ - $ 7,735
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Total Average Assets $2,831,945 $854,762 $92,209 $2,758,064 $86,253 $853,714 $(1,921,327) $5,555,620
===================================================================================================================================
===================================================================================================================================
THREE MONTHS RIGGS RIGGS
ENDED INTERNATIONAL RIGGS & CAPITAL NATIONAL
SEPTEMBER 30, 2000 BANKING BANKING COMPANY TREASURY PARTNERS OTHER RECONCILIATION CORPORATION
-----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME
Interest Income $ 49,712 $ 15,293 $ 1,512 $ 38,451 $ 34 $ 11,749
Interest Expense 17,398 21,326 3,408 13,687 - 13,332
Funds Transfer Income (Expense) (518) 15,877 4,638 (24,488) (725) 5,216
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss),
Tax-Equivalent 31,796 9,844 2,742 276 (691) 3,633
Provision for Loan Losses (3,860) (12,631) - - - -
Tax Equivalent Adjustment (543) - - - - -
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss) $ 27,393 $ (2,787) $ 2,742 $ 276 $ (691) $ 3,633 $ - $ 30,566
-----------------------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest Income-External
Customers $ 10,175 $ 1,198 $14,965 $ 753 $ 2,597 $ 389
Intersegment Noninterest Income 875 2,233 45 - 85 723
-----------------------------------------------------------------------------------------------
Total Noninterest Income $ 11,050 $ 3,431 $15,010 $ 753 $ 2,682 $ 1,112 $ (3,961) $ 30,077
-----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 1,424 $ 301 $ 215 $ 4 $ 6 $ 2,254
Direct Expense 16,995 10,149 8,870 1,011 450 18,229
Overhead and Support 12,953 3,219 3,020 424 19 (19,635)
-----------------------------------------------------------------------------------------------
Total Noninterest Expense $ 31,372 $ 13,669 $12,105 $ 1,439 $ 475 $ 848 $ (3,961) $ 55,947
-----------------------------------------------------------------------------------------------
Income (Loss) Before Taxes and
Minority Interest $ 7,071 $(13,025) $ 5,647 $ (410) $ 1,516 $ 3,897 $ - $ 4,696
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Total Average Assets $2,813,902 $869,842 $99,914 $2,384,700 $83,837 $918,936 $(1,619,026) $5,552,105
===================================================================================================================================
===================================================================================================================================
NINE MONTHS RIGGS RIGGS
ENDED INTERNATIONAL RIGGS & CAPITAL NATIONAL
SEPTEMBER 30, 2001 BANKING BANKING COMPANY TREASURY PARTNERS OTHER RECONCILIATION CORPORATION
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NET INTEREST INCOME
Interest Income $ 136,090 $ 36,480 $ 3,657 $ 95,907 $ 363 $ 31,568
Interest Expense 41,839 47,060 6,117 29,973 - 33,980
Funds Transfer Income (Expense) (1,058) 38,174 11,029 (61,676) (3,656) 17,187
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss),
Tax-Equivalent 93,193 27,594 8,569 4,258 (3,293) 14,775
Provision for Loan Losses 3,444 (4,397) - - - -
Tax Equivalent Adjustment (1,921) - - - - -
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss) $ 94,716 $ 23,197 $ 8,569 $ 4,258 $ (3,293) $ 14,775 $ - $ 142,222
-----------------------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest Income-External
Customers $ 32,256 $ 3,241 $39,651 $ 2,118 $(21,662) $ 12,183
Intersegment Noninterest Income 2,489 5,576 1,830 1 - 1,924
-----------------------------------------------------------------------------------------------
Total Noninterest Income $ 34,745 $ 8,817 $41,481 $ 2,119 $(21,662) $ 14,107 $ (11,820) $ 67,787
-----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 3,197 $ 1,057 $ 644 $ 12 $ 22 $ 6,954
Direct Expense 51,531 29,153 28,120 2,944 6,094 53,296
Overhead and Support 39,405 9,822 7,971 1,719 285 (59,201)
-----------------------------------------------------------------------------------------------
Total Noninterest Expense $ 94,133 $ 40,032 $36,735 $ 4,675 $ 6,401 $ 1,049 $ (11,820) $ 171,205
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Income (Loss) Before Taxes and
Minority Interest $ 35,328 $ (8,018) $13,315 $ 1,702 $(31,356) $ 27,833 $ - $ 38,804
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Total Average Assets $2,739,725 $851,244 $93,960 $2,527,073 $ 89,264 $866,663 $(1,740,669) $5,427,260
===================================================================================================================================
===================================================================================================================================
NINE MONTHS RIGGS RIGGS
ENDED INTERNATIONAL RIGGS & CAPITAL NATIONAL
SEPTEMBER 30, 2000 BANKING BANKING COMPANY TREASURY PARTNERS OTHER RECONCILIATION CORPORATION
-----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME
Interest Income $ 148,440 $ 47,392 $ 4,459 $ 113,250 $ 34 $ 35,337
Interest Expense 46,549 62,654 9,262 43,284 - 40,693
Funds Transfer Income (Expense) (8,038) 43,342 13,389 (61,461) (2,155) 14,923
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss),
Tax-Equivalent 93,853 28,080 8,586 8,505 (2,121) 9,567
Provision for Loan Losses (4,160) (13,334) - - - -
Tax Equivalent Adjustment (1,647) - - - - -
-----------------------------------------------------------------------------------------------
Net Interest Income (Loss) $ 88,046 $ 14,746 $ 8,586 $ 8,505 $(2,121) $ 9,567 $ - $ 127,329
-----------------------------------------------------------------------------------------------
NONINTEREST INCOME
Noninterest Income-External
Customers $ 29,846 $ 3,245 $ 43,589 $ 2,536 $15,050 $ 625
Intersegment Noninterest Income 2,653 4,304 177 1 248 2,168
-----------------------------------------------------------------------------------------------
Total Noninterest Income $ 32,499 $ 7,549 $ 43,766 $ 2,537 $15,298 $ 2,793 $ (9,551) $ 94,891
-----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Depreciation and Amortization $ 5,205 $ 790 $ 660 $ 13 $ 15 $ 6,680
Direct Expense 50,376 24,779 27,163 3,050 1,503 54,723
Overhead and Support 39,291 9,335 9,282 1,279 59 (59,245)
-----------------------------------------------------------------------------------------------
Total Noninterest Expense $ 94,872 $ 34,904 $ 37,105 $ 4,342 $ 1,577 $ 2,158 $ (9,551) $ 165,407
-----------------------------------------------------------------------------------------------
Income (Loss) Before Taxes and
Minority Interest $ 25,673 $(12,609) $ 15,247 $ 6,700 $11,600 $ 10,202 $ - $ 56,813
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Total Average Assets $2,806,172 $921,332 $102,080 $2,420,691 $68,568 $932,073 $(1,586,485) $5,664,431
===================================================================================================================================
Adoption of SFAS No. 133
We adopted SFAS No. 133,“Accounting for Derivative Investments and Hedging Activities”, as amended by SFAS No.138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133", as of January 1, 2001. The adoption of SFAS No. 133 resulted in a cumulative charge of $8 thousand, recorded as a component of Other Noninterest Income, to reflect the fair value of derivatives designated as fair- value hedges and fair values of related hedged items. In addition, we recorded a cumulative net of tax charge to Other Comprehensive Income of $751 thousand to recognize at fair value all derivatives that are designated as cash flow hedges and net investment hedges.
Derivative Instruments and Hedging
We maintain a risk management strategy that includes the use of derivative instruments to reduce unplanned earnings and equity fluctuations caused by interest rate volatility and foreign exchange fluctuation. We attempt to minimize our sensitivity to rate volatility by altering the repricing or maturity characteristics of certain assets and liabilities so that income is not materially impacted by unexpected rate movements.
Use of derivative instruments is a component of our overall risk management strategy and is utilized in accordance with a formal policy that is monitored by a committee which has delegated authority over our interest rate risk management function.
The derivative instruments that we utilize include interest rate swaps, futures contracts and options contracts that relate to the pricing of specific assets and liabilities. Interest rate swaps involve the exchange of fixed and variable rate interest payments between two parties based upon a notional principal amount and maturity date. Interest rate futures generally involve exchange- traded contracts to buy or sell U.S. Treasury bonds or notes in the future at specified prices. Interest rate options represent contracts that allow the owner the option to either receive cash or purchase, sell or enter into a financial
instrument at a specified price within a specified time period. Certain of these contracts grant the right to enter into interest rate swaps and cap and floor agreements with the writer of the option.
We also enter into foreign exchange derivative contracts, including foreign currency forward contracts, to manage our exchange risk associated with the translation of foreign currency into U. S. dollars.
We are exposed to credit and market risk as a result of our use of derivative instruments. If the fair value of the derivative contract is positive, the counterparty owes us and, hence, a repayment risk exists. If the fair value of the derivative contract is negative, we owe the counterparty and, therefore, there is no repayment risk. We minimize repayment risk by entering into transactions with financially stable counterparties that are specified by our policy and reviewed periodically by our credit committee. We require that derivative contracts be governed by an International Swaps and Derivative Master Agreement and, depending on the nature of the agreement, bilateral collateral arrangements also may be obtained. When we have multiple derivative transactions with the counterparty, the net mark-to-market exposure represents the netting of positive and negative exposures with the same counterparty. The net mark-to- market exposure with a counterparty is a measure of credit risk when there is a legally enforceable master netting agreement between us and the counterparty. We use master netting agreements with the majority of our counterparties.
Market risk is the adverse effect that a change in interest rates or comparative currency values has on the fair value of a financial instrument or expected cash flows. We manage the market risk associated with interest rate and foreign exchange hedge contracts by establishing formal policy limits concerning the types and degree of risk that may be undertaken. Our Treasury group monitors compliance with this policy.
Accounting for Derivatives
All derivatives are recognized on the Consolidated Statements of Condition at fair value. When a derivative contract is entered into, we first determine whether or not it qualifies as a hedge. If it does, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability, (2) a hedge of actual or forecasted cash flows or (3) a hedge of a net investment in a foreign operation. Changes in the fair value of a derivative that is designated a fair value hedge and qualifies as a highly effective hedge, along with any gain or loss on the hedged asset or liability attributable to the hedged risk, are recorded in current period earnings. The effective portion of changes in fair value of a derivative that is designated as a cash flow hedge and that qualifies as a highly effective hedge is recorded in Other Comprehensive Income until such time as periodic settlements on a variable rate hedged item are recorded in earnings. The ineffective portion of changes in fair value of cash- flow derivatives is recorded in current period earnings. Changes in the fair value of a derivative designated as a foreign currency hedge and that qualifies as a highly effective hedge, are either recorded in current earnings, Other Comprehensive Income, or both, depending on whether the transaction is a fair value hedge or a cash flow hedge. If a derivative is used as a hedge of a net investment in a foreign operation, changes in its fair value, to the extent effective as a hedge, are recorded in Other Comprehensive Income.
When entering into hedging transactions, we document the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy. This process links all derivatives that are designated fair value, cash flow or foreign currency hedges to specific assets and liabilities on the Consolidated Statements of Condition. We assess, both at inception and on an on- going basis, the effectiveness of all hedges in offsetting changes in fair values or cash flows of hedged items.
We discontinue hedge accounting prospectively when (1) the derivative is no longer effective in offsetting changes in fair values or cash flows of a hedged item, (2) the derivative matures or is sold, terminated or exercised, or (3) the derivative is dedesignated as a hedge instrument.
When hedge accounting is discontinued because the derivative no longer qualifies as an effective fair value hedge, it will continue to be carried on the Consolidated Statements of Condition at its fair value and the hedged asset or liability will no longer be adjusted to reflect changes in fair value. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, we will continue to carry the derivative on the Consolidated Statements of Condition at its fair value and any gains or losses accumulated in Other Comprehensive Income will be recognized immediately in earnings. In all situations in which hedge accounting is discontinued, the derivative will be carried at fair value with changes in fair value recognized in income.
Fair-Value Hedges
We enter into pay fixed, receive floating interest rate swaps to hedge changes in fair value of fixed rate loans attributable to changes in market interest rates.
For the quarter ended September 30, 2001, we recognized a net loss of $33 thousand which represented the ineffective portion of all fair value hedges, and for the nine months ended September 30, 2001, we recognized a net loss of $126 thousand. These amounts are included in Other Noninterest Income in the Consolidated Statements of Income.
Cash-Flow Hedges
We use interest rate swaps to hedge the exposure to variability in expected future cash outflows on floating rate liabilities attributable to changes in interest rates. We also use foreign currency forward contracts to hedge the foreign exchange risk associated with principal and interest payments on loans denominated in a foreign currency.
For the quarter and for the nine months ended September 30, 2001, there was no impact to Other Noninterest Income in the Consolidated Statements of Income for the ineffective portion of all cash flow hedges.
Gains or losses on derivatives that are reclassified from Accumulated Other Comprehensive Income to income are included in the line item in the Consolidated Statements of Income in which the income or expense related to the hedged item is recorded. As of September 30, 2001, $220 thousand of deferred net losses on derivative instruments in Accumulated Other Comprehensive Income is expected to be reclassified as expense during the next twelve months. The maximum term over which we were hedging our exposure to the variability of cash flows was forty- five (45) months as of September 30, 2001.
Hedges of Net Investments in Foreign Operations
We use forward exchange contracts to hedge substantially all of our net investment in a foreign subsidiary. The purpose of this hedge is to protect against adverse movements in currency exchange rates. As of September 30, 2001, $271 thousand of net losses related to the existing net investment forward exchange contract are included in Accumulated Other Comprehensive Income.
Other
As of September 30, 2001, we had certain derivative instruments used to manage interest rate risk that were not designated to specific hedge relationships. The carrying value of these items is a net liability of $1.1 million and they are marked to market through current period earnings.
SFAS No. 141, “Business Combinations,” was issued in June 2001. It requires corporations to account for business combinations using the purchase method. The Statement also requires that intangible assets resulting from a business combination, if they can be identified and result from contractual or other legal rights, be recognized as assets apart from goodwill. Two criteria, the contractual-legal criterion or the separability criterion, must be met before separate recognition can occur. Finally, the Statement requires disclosure of the primary reasons for the business combination and the allocation of the purchase price paid to the assets acquired and liabilities assumed by major balance sheet caption. Implementation of SFAS No. 141 applies to all business combinations we initiate after June 30, 2001.
SFAS No. 142, “Goodwill and Other Intangible Assets,” was issued in June 2001. It discontinues amortization of intangible assets unless they have finite useful lives, and, instead, requires that they be tested at least annually for impairment by comparing their fair values with their recorded amounts. The Statement also requires disclosure of the changes in the carrying amounts of goodwill from period to period, the carrying amount of intangible assets by major intangible asset class for those subject to and not subject to amortization, and the estimated intangible asset amortization expense for the next five years. Since SFAS No. 142 is required to be implemented starting with fiscal years beginning after December 15, 2001, we will discontinue the amortization of goodwill beginning on January 1, 2002. Goodwill totaled $6.9 million as of September 30, 2001. For the nine months ended September 30, 2001, amortization expense was $484 thousand. For comparative purposes, goodwill amortization expense was $484 thousand and $645 thousand for the nine and twelve months ended September 30, 2000, respectively. We have not yet determined the impact of the impairment provisions of SFAS No. 142.
SFAS No. 143, “Accounting for Asset Retirement Obligations,” was also issued in June 2001. SFAS No. 143 addresses accounting and reporting for legal obligations and related costs associated with the retirement of long-lived assets. The Statement requires that the fair value of the liability for an asset retirement obligation be recognized in the period incurred if a reasonable estimate of fair value can be made. The estimated retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. We have not determined the impact, if any, SFAS No. 143 will have on the company.
SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets, ” was issued in August 2001 and is effective for our fiscal 2002 year. This Statement retains existing requirements to recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and measure any impairment loss as the difference between the carrying amount and the fair value of the asset. SFAS No. 144 a) removes goodwill from its scope, b) allows for probability-weighted cash flow estimation techniques when measuring for impairment, c) requires that, for any assets to be abandoned, the depreciable life be adjusted and the cumulative impact of such change treated as an accounting change and d) an impairment loss be recognized at the date a long-lived asset is exchanged for a similar productive asset or distributed to owners in a spinoff if the carrying value of the asset exceeds its fair value. Management has not determined the impact, if any, implementation of this statement will have.
In July 2001, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 102 (“SAB 102”), “Selected Loan Loss Allowance Methodology and Documentation Issues.” SAB 102 represents the SEC staff’s views on the development, documentation and application of a systematic methodology for determining the required allowance for loan losses. We do not anticipate any significant impact on either the way we determine the adequacy of our allowance for loan losses or future provisions for loan losses as a result of SAB 102.
RESULTS OF OPERATIONS
We recorded a net loss of $395 thousand, or $.01 per diluted share, for the third quarter of 2001, compared to a net loss of $4.3 million, or $.15 per diluted share, in the third quarter of 2000. The loss in the current quarter resulted primarily from losses in our venture capital segment of $7.8 million, while in the prior year’s quarter the loss resulted from a $16.5 million loan loss provision taken after the discovery of fraud in a commercial facility to a borrower at our London operation.
For the nine months ended September 30, 2001, we had net income of $9.4 million, or $.32 per diluted share, compared with net income of $17.6 million, or $.62 per diluted share, for the first nine months of 2000. Venture capital losses totaled $21.7 million, compared to $15.3 million in venture capital gains for the first nine months of 2000. The 2001 losses were partially offset by $11.3 million in gains from the sale of our investment in Concord EFS, Inc., an ATM network exchange company.
Return on average assets was (.03)% and .23% for the three and nine months ended September 30, 2001, compared to (.30)% and .42% for the same periods a year ago. Return on average shareholders’ equity was (.40)% and 3.20% for the three and nine months ended September 30, 2001, and (4.60)% and 6.69% for the three and nine months ended September 30, 2000.
Net interest income on a tax-equivalent basis (net interest income plus an amount equal to the tax savings on tax-exempt interest) totaled $48.9 million in the third quarter of 2001, an increase of $1.3 million from the $47.6 million for the same quarter in 2000. For the nine months ended September 30, 2001, net interest income on a tax-equivalent basis was $145.1 million, a $1.4 million decrease from the $146.5 million recorded for the first nine months of 2000. The decrease for the nine months was primarily due to a reduction in interest income, which was $34.5 million less than a year ago. Decreases in interest rates contributed to the decline, but decreases in average balances, primarily in the loan portfolio, also contributed. The decrease in interest income was partially offset by a decrease in interest expense of $33.1 million, primarily attributable to decreases in rates paid on time deposits and other short-term borrowings.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2001 VS 2000 SEPTEMBER 30, 2001 VS 2000
------------------------------------------------------------------------
(TAX-EQUIVALENT BASIS) DUE TO DUE TO TOTAL DUE TO DUE TO TOTAL
(IN THOUSANDS) RATE VOLUME CHANGE RATE VOLUME CHANGE
===================================================================================================================================
Interest Income:
Loans, Including Fees $ (4,213) $(2,867) $ (7,080) $ (7,687) $(12,550) $(20,237)
Securities Available for Sale (3,154) 721 (2,433) (4,958) (1,906) (6,864)
Time Deposits with Other Banks (2,814) (11) (2,825) (4,519) (708) (5,227)
Federal Funds Sold and Reverse
Repurchase Agreements (2,626) 1,874 (752) (4,821) 2,655 (2,166)
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Total Interest Income (12,807) (283) (13,090) (21,985) (12,509) (34,494)
Interest Expense:
Interest-Bearing Deposits (11,618) 1,520 (10,098) (20,409) (1,793) (22,202)
Repurchase Agreements and Other
Short-Term Borrowings (3,367) (942) (4,309) (6,238) (4,679) (10,917)
-----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense (14,985) 578 (14,407) (26,647) (6,472) (33,119)
===================================================================================================================================
Net Interest Income $ 2,178 $ (861) $ 1,317 $ 4,662 $ (6,037) $ (1,375)
(1)-The dollar amount of changes in interest income and interest expense attributable to changes in rate/volume (change in rate multiplied by change in volume) has been allocated between rate and volume variances based on the percentage relationship of such variances to each other. Income and rates are computed on a tax-equivalent basis using a Federal income tax rate of 35% and local tax rates as applicable.
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
------------------------------------------------------------------------
(TAX-EQUIVALENT BASIS) (1) AVERAGE INCOME/ AVERAGE INCOME/
(IN THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
===================================================================================================================================
ASSETS
Loans, Including Fees (2) $2,909,096 $51,695 7.05% $3,074,941 $58,775 7.60%
Securities Available for Sale (3) 1,316,179 17,522 5.28 1,269,559 19,955 6.25
Time Deposits with Other Banks 327,646 2,750 3.33 328,265 5,575 6.76
Federal Funds Sold and Reverse Repurchase Agreements 426,537 3,851 3.58 277,315 4,603 6.60
-----------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned (5) 4,979,458 75,818 6.04 4,950,080 88,908 7.15
Reserve for Loan Losses (33,788) (36,860)
Cash and Due from Banks 144,431 128,591
Other Assets 465,519 510,294
===================================================================================================================================
Total Assets $5,555,620 $5,552,105
LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS' EQUITY
Interest-Bearing Deposits $3,670,742 $21,547 2.33% $3,605,820 $31,645 3.49%
Repurchase Agreements and Other Short-Term Borrowings 462,380 3,736 3.21 545,662 8,045 5.87
Long-Term Debt 66,525 1,618 9.65 66,525 1,618 9.68
-----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 4,199,647 26,901 2.54 4,218,007 41,308 3.90
Demand Deposits (4) 508,965 514,644
Other Liabilities 100,452 101,457
Minority Interest in Preferred Stock of Subsidiaries 350,000 350,000
Shareholders' Equity 396,556 367,997
===================================================================================================================================
Total Liabilities, Minority Interest and
Shareholders' Equity $5,555,620 $5,552,105
===================================================================================================================================
NET INTEREST INCOME AND SPREAD $48,917 3.50% $47,600 3.25%
===================================================================================================================================
NET INTEREST MARGIN ON EARNING ASSETS 3.90% 3.83%
(1) - Income and rates are computed on a tax-equivalent basis using a Federal income tax rate of 35% and local tax rates as applicable.
(2) - Nonperforming loans are included in average balances used to determine rates.
(3) - The averages and rates for the securities available for sale portfolio are based on amortized cost.
(4) - Demand deposit balances for all periods presented exclude certain accounts transferred to the money market classification to reduce the level of deposit reserves required.
(5) - Excludes venture capital investments
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
------------------------------------------------------------------------
(TAX-EQUIVALENT BASIS) (1) AVERAGE INCOME/ AVERAGE INCOME/
(IN THOUSANDS) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
===================================================================================================================================
ASSETS
Loans, Including Fees (2) $2,903,502 $158,359 7.29% $3,125,668 $178,596 7.63%
Securities Available for Sale (3) 1,232,870 53,008 5.75 1,274,350 59,872 6.28
Time Deposits with Other Banks 339,279 11,444 4.51 354,881 16,671 6.27
Federal Funds Sold and Reverse Repurchase Agreements 380,900 12,601 4.42 316,113 14,767 6.24
-----------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,856,551 235,412 6.48 5,071,012 269,906 7.11
Reserve for Loan Losses (34,782) (38,820)
Cash and Due from Banks 139,059 137,973
Other Assets 466,432 494,266
===================================================================================================================================
Total Assets $5,427,260 $5,664,431
LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS' EQUITY
Interest-Bearing Deposits $3,532,541 $ 70,557 2.67% $3,614,943 $ 92,759 3.43%
Repurchase Agreements and Other Short-Term Borrowings 479,446 14,905 4.16 629,212 25,822 5.48
Long-Term Debt 66,525 4,854 9.76 66,525 4,854 9.75
-----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate Paid 4,078,512 90,316 2.96 4,310,680 123,435 3.82
Demand Deposits (4) 511,277 559,841
Other Liabilities 94,750 91,708
Minority Interest in Preferred Stock of Subsidiaries 350,000 350,000
Shareholders' Equity 392,721 352,202
===================================================================================================================================
Total Liabilities, Minority Interest and
Shareholders' Equity $5,427,260 $5,664,431
===================================================================================================================================
NET INTEREST INCOME AND SPREAD $145,096 3.52% $146,471 3.29%
===================================================================================================================================
NET INTEREST MARGIN ON EARNING ASSETS 3.99% 3.86%
(1) - Income and rates are computed on a tax-equivalent basis using a Federal income tax rate of 35% and local tax rates as applicable.
(2) - Nonperforming loans are included in average balances used to determine rates.
(3) - The averages and rates for the securities available for sale portfolio are based on amortized cost.
(4) - Demand deposit balances for all periods presented exclude certain accounts transferred to the money market classification to reduce the level of deposit reserves required.
(5) - Excludes venture capital investments
Noninterest income for the third quarter of 2001 totaled $17.8 million, a decrease of $12.3 million from the $30.1 million in the third quarter of 2000. Contributing to the decrease was $7.8 million in venture capital losses in the third quarter of 2001. This compares to a gain of $2.7 million in the third quarter of 2000. A decline in trust and investment advisory income of $2.2 million quarter to quarter also contributed to the decrease. The decrease was caused primarily by the lower market value of assets under management.
For the nine months ended September 30, 2001, we recorded $67.8 million in noninterest income. This compares to $94.9 million earned in the same period a year ago. The decrease was primarily due to $21.7 million in venture capital losses for the first nine months of 2001, compared to venture capital gains of $15.3 million in the first nine months of 2000. Trust and investment advisory income for the nine months in 2001 was $3.7 less than in 2000. This decrease was partially offset by total securities gains on the Concord EFS, Inc. investment of $11.3 million recorded in the first half of 2001, and a $1.2 million gain from the settlement of a significant estate by our private client services division.
Noninterest expense for the three months ended September 30, 2001, was $57.5 million, an increase of $1.6 million from the $55.9 million reported for the three months ended September 30, 2000. This increase was due principally to the start-up costs of $573 thousand associated with our international private banking initiative. Start-up costs of $500 thousand associated with the formation of our second venture capital subsidiary, Riggs Capital Partners II, LLC, also contributed to the increase.
For the nine months ended September 30, 2001, noninterest expense totaled $171.2 million, compared to $165.4 million for the same period a year ago. As mentioned in the preceding paragraph, start-up costs (related principally to personnel and data processing) associated with our international private banking group of $3.6 million and $1.5 million of operating costs for Riggs Capital Partners II, LLC, were the principal reasons for the increase.
FINANCIAL CONDITION
Securities available for sale totaled $1.45 billion as of September 30, 2001, compared to $1.24 billion as of year-end 2000 and $1.28 billion as of September 30, 2000. The activity for the first nine months included purchases of securities available for sale totaling $3.83 billion, which were partially offset by maturities and calls, principal payments and sales of securities available for sale totaling $3.68 billion. The weighted-average duration and yield for the portfolio, adjusted for anticipated prepayments, were approximately 1.8 years and 4.87%, respectively, as of September 30, 2001. As of September 30, 2000, the weighted-average duration and yield were 3.3 years and 6.14%, respectively.
In June 2001 we sold our investment in 243,849 shares of Concord EFS, Inc. At the time of sale we recognized an additional gain on the investment of $1.0 million. In the first quarter of 2001 we recognized a $10.3 million gain as a result of Concord EFS’s acquisition of STAR Systems, Inc., an investment we had previously accounted for at cost.
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000 DECEMBER 31, 2000
------------------------------------------------------------------------
AMORTIZED MARKET/ AMORTIZED MARKET/ AMORTIZED MARKET/
AVAILABLE FOR SALE COST BOOK VALUE COST BOOK VALUE COST BOOK VALUE
===================================================================================================================================
(IN THOUSANDS)
U.S. Treasury Securities $ 54,972 $ 53,434 $ 313,718 $ 301,519 $ 313,609 $ 309,117
Government Agencies Securities 876,440 882,202 445,211 442,725 375,388 374,836
Mortgage-Backed Securities 457,327 464,192 513,285 491,442 511,932 502,642
Other Securities 54,567 54,567 47,485 47,485 53,378 53,378
===================================================================================================================================
Total $1,443,306 $1,454,395 $ 1,319,699 $1,283,171 $1,254,307 $1,239,973
As of September 30, 2001, loans outstanding totaled $2.91 billion, decreasing from the September 30, 2000 and December 31, 2000 balances of $3.03 and $2.94 billion, respectively. The decreases from both periods were primarily in commercial and financial, residential real estate/home equity/ consumer and foreign loans. The majority of the decrease in commercial and financial loans from both prior periods was in syndicated loans. Syndicated loan commitments decreased $97.5 million from September 30, 2000 and $78.0 million from December 31, 2000. It is part of our strategy generally to no longer participate in these types of loans, except where the borrower is in our primary market area. These decreases were partially offset by increases in real estate-commercial/ construction loans.
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 2001 2000 2000
========================================================================================================================
Commercial and Financial $ 448,861 $ 538,718 $ 479,443
Real Estate - Commercial/Construction 495,552 450,862 440,900
Residential Mortgage 1,150,439 1,175,691 1,168,243
Loans Available for Sale 10,489 18,559 15,433
Home Equity 316,215 339,557 335,825
Consumer 65,200 69,951 68,010
Foreign 428,626 446,685 437,825
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Total Loans 2,915,382 3,040,023 2,945,679
Net Deferred Loan Fees,
Premiums and Discounts (5,415) (5,184) (4,941)
=======================================================================================================================
Loans $2,909,967 $3,034,839 $2,940,738
Changes in the reserve for loan losses are summarized as follows:
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
(IN THOUSANDS) 2001 2000
===================================================================================================================================
Balance, January 1 $ 36,197 $ 41,455
Provision for loan losses 953 17,494
Loans charged-off 5,205 23,403
Less: Recoveries on charged-off loans 1,100 2,191
-----------------------------------------------------------------------------------------------------------------------------------
Net loan charge-offs (recoveries) 4,105 21,212
Foreign exchange translation adjustments (43) (590)
===================================================================================================================================
Balance, September 30 $ 33,002 $ 37,147
For the nine month period ended September 30, 2001, we had a consolidated loan loss provision of $953 thousand which compares to a provision of $17.5 million during the comparable period of the prior year. This decrease is primarily due to an $11.1 million provision associated with a fraudulent credit in our London operations and a $3.9 million provision made to facilitate the sale of a loan at a discount in the prior year.
The reserve balance has been reduced by approximately $4.1 million since September 30, 2000. The reduction primarily relates to charge-offs taken on loans disposed of in the United States and additional charge-offs in London. As a result of the dispositions and charge-offs, the non-performing asset portfolio has been significantly reduced, and thus the reserve for loan losses has been reduced. The remaining reserve amount has been determined based on the risk in the portfolio, including the risks related to the slowing economy and the September 11, 2001 events.
NONPERFORMING ASSETS
Nonperforming assets, which include nonaccrual loans, renegotiated loans and other real estate owned (net of reserves), totaled $6.1 million as of September 30, 2001, a $31.1 million decrease from the year-end 2000 total of $37.2 million and a $33.5 million decrease from the September 30, 2000 total of $39.6 million. The decrease in nonperforming assets from both periods was mainly due to the sale of a $25.0 million nonaccrual loan. From year-end 2000, further decreases were partially attributable to curtailments totalling $6.3 million and $496 thousand on two domestic commercial loans, and $363 thousand on a commercial loan at our London operations. Further reductions resulted from charge-offs totalling $1.4 million on this same London loan and $1.3 million on one domestic commercial loan. The decrease was partially offset by the addition of three nonaccrual loans at our London operation in the first, second and third quarters of 2001, in the amounts of $3.3 million, $1.4 million and $906 thousand, respectively.
From September 30, 2000, additional decreases were due to charge-offs of $480 and $148 thousand on two commercial domestic loans in the fourth quarter of 2000. These additional decreases were partially offset by the addition of a $239 thousand domestic commercial loan in the same quarter.
The assigned reserve for loan losses for impaired loans was $3.9 million as of September 30, 2001.
PAST-DUE AND POTENTIAL PROBLEM LOANS
Past-due loans consist of residential real estate loans, commercial and industrial loans, and consumer loans that are in the process of collection and that are accruing interest. Past-due loans decreased $2.1 million during the first nine months of 2001 to $9.0 million, while potential problem loans decreased $6.8 million during the same period. The decrease in potential problem loans resulted from the removal of two loans previously considered potential problems at December 31, 2000 at our London operations. One loan in the amount of $4.0 million was upgraded, while the second, for $4.5 million, was placed on nonaccrual. The decrease was partially offset by the addition of three loans totaling $1.6 million in London.
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 2001 2000 2000
=======================================================================================================================
NONPERFORMING ASSETS:
Nonaccrual Loans (1) $ 4,319 $ 37,547 $ 35,185
Renegotiated Loans 858 939 853
Other Real Estate Owned, Net 908 1,133 1,133
=======================================================================================================================
Total Nonperforming Assets $ 6,085 $ 39,619 $ 37,171
PAST-DUE LOANS (2) $64,364 $ 59,282 $ 53,098
PAST-DUE LOANS (3) $ 9,013 $ 9,576 $ 11,119
POTENTIAL PROBLEM LOANS $ 1,950 $ 19,333 $ 8,728
(1) Loans that are in default in either principal or interest for 90 days or more that are not well-secured and in the process of collection, or that are, in management’s opinion, doubtful as to the collectibility of either interest or principal.
(2) Loans contractually past due 30-89 days or more in principal or interest.
(3) Loans contractually past due 90 days or more in principal or interest that are well-secured and in the process of collection.
Deposits are our primary and most stable source of funds. Deposits totaled $4.27 billion as of September 30, 2001, increases of $193 million and $191 million from the December 31 and September 30, 2000 totals, respectively. For both periods, deposits increased in time deposits in domestic offices and money market accounts. Balances in savings and NOW accounts decreased, while time deposits in foreign offices increased. Demand deposits decreased as balances were swept into money market accounts.
Short-term borrowings decreased $83.6 million from the year-end 2000 balance and increased $6.6 million from the September 30, 2000 balance. Short-term borrowings are an additional source of funds that we have utilized to meet certain asset/liability and daily cash management objectives and are used to generate cash and maintain adequate levels of liquidity.
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS) 2001 2000 2000
=======================================================================================================================
Repurchase Agreements and Other Short-Term Borrowings $ 499,234 $ 492,602 $ 582,832
Subordinated Debentures due 2009 66,525 66,525 66,525
=======================================================================================================================
Total Short-Term Borrowings and Long-Term Debt $ 565,759 $ 559,127 $ 649,357
We seek to maintain sufficient liquidity to meet the needs of depositors, borrowers and creditors at a reasonable cost and without undue stress on our operations. Our Asset/Liability Committee actively analyzes and manages liquidity in coordination with other areas of the organization (see “Sensitivity to Market Risk”). As of September 30, 2001, our liquid assets, on a consolidated basis, which include cash and due from banks, Government obligations and other securities, federal funds sold, reverse repurchase agreements and time deposits at other banks, totaled $2.40 billion (42% of total assets). This compares with $2.16 billion (39%) as of December 31, 2000, and $1.96 billion (36%) as of September 30, 2000. As of September 30, 2001, $1.11 billion of our assets were pledged to secure deposits and other borrowings. This compares with pledged assets of $971.4 million as of December 31, 2000, and $998.8 million as of September 30, 2000.
Our liquidity position is maintained by a stable source of funds from our core deposit relationships. We have other sources of funds, such as short-term revolving credit lines available from several Federal Home Loan Banks (FHLB) and other financial institutions. In addition, we have a line of credit available through our membership in the FHLB. As of September 30, 2001, December 31, 2000, and September 30, 2000, short-term credit lines and the FHLB Atlanta line of credit available totaled approximately $1.34 billion, $1.34 billion, and $1.75 billion, respectively. As of September 30, 2001, December 31, 2000, and September 30, 2000, the amounts outstanding under these lines were $17.5 million, $17.9 million, and $15.0 million, respectively.
Total shareholders’ equity as of September 30, 2001, was $402.4 million, an increase of $19.6 million from year-end 2000 and $37.2 million from a year ago. The increase from year-end was primarily the result of net income of $9.4 million and unrealized securities gains of $16.5 million, after tax. This increase was partially offset by cash dividends paid of $4.3 million, and unrealized losses on our derivatives and foreign exchange translation adjustments totaling $3.2 million. The increase from September 30, 2000 was primarily the result of net income of $13.4 million, and net unrealized securities gains of $31.0 million. $5.7 million in cash dividends and $2.9 million in unrealized losses on derivatives and foreign exchange translation adjustments partially offset this increase. For more information on our securities portfolio, see the discussion under “Securities” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q.
Book value per common share was $14.12 as of September 30, 2001, compared to $13.48 as of year-end 2000 and $12.87 as of September 30, 2000. The increases in book value from September 30th and year-end 2000 were primarily the result of the net income and net unrealized securities gains described in the preceding paragraph.
Following are our capital ratios (as defined in the regulations) and those of our banking subsidiary, Riggs Bank National Association (Riggs Bank N.A.) as of September 30, 2001 and 2000, and December 31, 2000.
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, REQUIRED
2001 2000 2000 MINIMUMS
====================================================================================================================================
RIGGS NATIONAL CORPORATION:
Tier I 15.97% 15.55% 15.92% 4.00%
Combined Tier I and Tier II 25.63 25.41 25.87 8.00
Leverage 9.43 9.17 9.47 4.00
RIGGS BANK N.A.:
Tier I 14.69 13.47 13.99 4.00
Combined Tier I and Tier II 15.75 14.67 15.18 8.00
Leverage 8.80 8.03 8.44 4.00
We are exposed to various market risks. Some of these risks, such as credit risk and currency risk, are discussed in our Annual Report on Form 10-K. We have determined that interest-rate risk has a material impact on our financial performance, and as such we have established the Asset/Liability Committee (“ALCO”) to manage interest-rate risk. The role of this committee is to manage the asset/liability mix of our operations in an effort to provide a stable net interest margin while maintaining liquidity and capital. This entails the management of our overall risk in conjunction with the acquisition and deployment of funds based upon ALCO’s view of both current and prospective market and economic conditions.
We manage our interest-rate risk through the use of an income simulation model, which forecasts the impact on net interest income of a variety of different interest rate scenarios. A “most likely” interest rate scenario is forecasted based upon an analysis of current market conditions and expectations. The model then evaluates the impact on net interest income of rates moving significantly higher or lower than the “most likely” scenario. The results are compared to risk tolerance limits set by corporate policy. The model’s results as of September 30, 2001 and 2000 are shown in the following tables. Current policy establishes limits for possible changes in net interest income for 12 and 36 month horizons. The interest rate scenarios monitored by ALCO are based upon a 100 basis point (1%) gradual increase or decrease in rates over a 12-month time period versus the most likely scenario and a 300 basis point (3%) gradual increase or decrease in rates over a 36-month time period versus the most likely scenario.
MOVEMENTS IN INTEREST RATES FROM SEPTEMBER 30, 2001
===================================================================================================================================
SIMULATED IMPACT OVER SIMULATED IMPACT OVER
NEXT TWELVE MONTHS NEXT THIRTY-SIX MONTHS
-----------------------------------------------------------------------------------------------------------------------------------
(In Thousands) +100BP -100BP +300BP -300BP
-----------------------------------------------------------------------------------------------------------------------------------
Simulated Impact Compared With a
"Most Likely" Scenario:
Net Interest Income Increase/(Decrease) 0.1 % (2.2)% (0.3)% (5.8)%
Net Interest Income Increase/(Decrease) $ 248 $(4,312) $(1,798) $(33,298)
MOVEMENTS IN INTEREST RATES FROM SEPTEMBER 30, 2000
===================================================================================================================================
SIMULATED IMPACT OVER SIMULATED IMPACT OVER
NEXT TWELVE MONTHS NEXT THIRTY-SIX MONTHS
-----------------------------------------------------------------------------------------------------------------------------------
(In Thousands) +100BP -100BP +300BP -300BP
-----------------------------------------------------------------------------------------------------------------------------------
Simulated Impact Compared With a
"Most Likely" Scenario:
Net Interest Income Increase/(Decrease) (.02)% 3.7 % (0.00)% 4.4 %
Net Interest Income Increase/(Decrease) $(300) $ 7,111 $ (203) $ 26,797
(1) Key Assumptions: Assumptions with respect to the model's projections of the effect of changes in interest rates on Net Interest Income include:
1. Target balances for various asset and liability classes, which are solicited from the management of the various units of the Corporation.
2. Interest rate scenarios which are generated by ALCO for the "most likely" scenario and are dictated by ALCO's policy for the alternative scenarios.
3. Spread relationships between various interest rate indices, which are generated by the analysis of historical relationships and ALCO consensus.
4. Assumptions about the effect of embedded options and prepayment speeds: instruments that are callable are assumed to be called at the first opportunity if an interest rate scenario makes it advantageous for the owner of the call to do so. Prepayment assumptions for mortgage products are derived from accepted industry sources.
5. Reinvestment rates for funds replacing assets or liabilities that are assumed (through early withdrawal, prepayment, calls, etc.) to run off the balance sheet, which are generated by the spread relationships.
6. Maturity strategies with respect to assets and liabilities, which are solicited from the management of the various units of the Corporation.
As of September 30, 2001, the forecasted impact of rates rising or falling 100 basis points versus the “most likely” scenario over a 12-month time period was a change in net interest income not exceeding 3%. For a 300 basis point movement in rates versus the “most likely” scenario over a 36- month period, the impact on net interest income did not exceed 6%. The results of the simulation for September 30, 2001 indicated that we were “neutral” in a rising rate environment and “asset sensitive” in a declining rate environment (due to the inability to reflect decreases in general interest rates in our deposit rates due to local market conditions) over the 12-month time horizon. Over the 36-month time horizon, we were slightly “liability sensitive” in a rising rate environment and “asset sensitive” in a declining rate environment due to the deposit pricing conditions previously mentioned. We were within our policy guidelines for interest rates moving significantly in either direction.
In managing our interest-rate risk, ALCO uses financial derivative instruments, such as interest-rate swaps. Financial derivatives are employed to assist in the management and/or reduction of our interest-rate risk and can effectively alter the sensitivity of segments of the statement of condition for specified periods of time. Along with financial derivative instruments, the income simulation model includes short-term financial instruments, investment securities, loans, deposits, and other borrowings. Interest-rate risk management strategies are discussed and approved by ALCO prior to implementation.
We find that the methodologies previously discussed provide a meaningful representation of our interest-rate and market risk sensitivity, though factors other than changes in the interest rate environment, such as levels of non- earning assets, and changes in the composition of earning assets, may affect net interest income. We believe our current interest-rate sensitivity level is appropriate, considering our economic outlook and what we believe is a conservative approach taken in the review and monitoring of our sensitivity position.
Outstanding commitments and contingent liabilities as of September 30, 2001 and 2000, and December 31, 2000 are detailed in the tables below, including the notional amounts of all derivatives whose fair values are included in the consolidated financial statements. As of September 30, 2001, our financial derivative instruments included five pay fixed, receive floating swaps with a total notional amount of $41.5 million. These agreements were contracted in October 1999, December 1999, January 2000 and July 2000.
We had 22 swaps at Riggs Bank Europe Limited, our London-based banking subsidiary, with a total notional amount of $75.9 million that entail the payment of a blended 6.33% fixed rate and the receipt of a floating rate equal to six-month LIBOR. These swaps have varying maturities extending until 2006 and are entered into primarily for the purpose of converting fixed rate loans to variable.
As a result of Riggs Capital Partners venture capital investment activity, we had venture capital commitments of $24.3 million as of September 30, 2001 of which $151 thousand are committed to be funded within one year.
CONTRACTUAL OR NOTIONAL VALUE
------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
2001 2000 2000
===================================================================================================================================
Commitments to Extend Credit $875,819 $944,225 $1,009,025
Venture Capital Commitments 24,290 13,102 22,622
Letters of Credit 143,890 144,388 153,112
Derivative Instruments:
Foreign Exchange Contracts:
Commitments to Purchase $ 6,979 $ 69,155 $ 44,740
Commitments to Sell 219,664 297,638 231,510
Interest Rate Agreements
Swaps 117,420 237,668 229,854
Our interest rate agreement activity for the nine months ended September 30, 2001, is as follows:
BALANCE BALANCE
DECEMBER 31, SEPTEMBER 30,
2000 ADDITIONS MATURITIES TERMINATIONS 2001
===================================================================================================================================
Interest Rate Agreements:
Receive variable/pay fixed $ 41,500 $ - $ - $ - $ 41,500
Basis swaps 100,000 - 100,000 - -
Riggs Bank Europe Limited 88,354 8,860 12,617 8,677 75,920
===================================================================================================================================
Total $229,854 $ 8,860 $ 112,617 $ 8,677 $ 117,420
This Quarterly Report on Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Quantitative and Qualitative Disclosures About Market Risk, contains forward- looking statements, including the references to earnings from venture capital, implementation of our business strategy, hedging activities and our trust and investment advisory income. A variety of factors could cause our actual results and experiences to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to, certain risks and uncertainties that may affect the operations, performance, development, growth projections and results of our business. More specifically, these factors include the growth of (or decline in) the economy, changes in credit quality or interest rates, changes in value of venture capital investments in the technology and other sectors, timing of technology enhancements for products and operating systems, the impact of competitive products, services and pricing, customer business requirements, Congressional legislation, general economic conditions, both domestic and international, and similar matters. In addition, the continuing impact of the September 11, 2001 terrorist attacks on the global economy and international political conditions also may be an important factor or make the occurrence of one or more of the aforementioned factors more likely.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
(a) Exhibits
The exhibits listed on page 28 are incorporated by reference or filed herewith in response to this item.
(b) Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: | November 6, 2001 | /s/ TIMOTHY C. COUGHLIN |
| Timothy C. Coughlin | ||
| President |
| Date: | November 6, 2001 | /s/ STEVEN T. TAMBURO |
| Steven T. Tamburo | ||
| Treasurer | ||
| (Chief Financial Officer) |
EXHIBIT DESCRIPTION PAGES
NO.
===================================================================================================================================
(3.1) Restated Certificate of Incorporation of Riggs National Corporation, dated April 19, 1999
(Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended June 30,
1999, SEC File No. 09756).
(3.2) By-laws of the Registrant with amendments through July 11, 2001 29
(4.1) Indenture dated June 1, 1989, with respect to $100 million 9.65% Subordinated Debentures
due 2009 (Incorporated by reference to the Registrant’s Form 8-K dated June 20, 1989,
SEC File No. 09756.)
(4.2) Indenture dated December 13, 1996, with respect to $150 million, 8.625% Trust Preferred
Securities, Series A due 2026 (Incorporated by reference to the Registrant’s S-3 dated
February 6, 1997, SEC File No. 333-21297.)
(4.3) Indenture dated March 12, 1997, with respect to $200 million, 8.875% Trust Preferred Securities,
Series C due 2027 (Incorporated by reference to the Registrant’s S-3 dated May 2, 1997,
SEC File No. 333-26447.)