LEHMAN BROTHERS
Press Release
For Immediate Release Media Contact: Hannah Burns
(212) 526-4064
Investor Contact: Shaun Butler
(212) 526-8381
LEHMAN BROTHERS REPORTS THIRD QUARTER EARNINGS
-Net Income of $505 Million and EPS of $1.71-
NEW YORK, September 21, 2004 -- Lehman Brothers Holdings Inc. (ticker symbol:
LEH) today reported net income of $505 million for the third quarter ended
August 31, 2004, or $1.71 per common share (diluted), versus net income of $480
million, or $1.81 per common share (diluted) for the third quarter of fiscal
2003. Second quarter 2004 net income was $609 million, or $2.01 per common share
(diluted).
For the first nine months of 2004, net income was a record $1.8 billion, or
$5.94 per common share (diluted), increases of 46% and 28%, respectively, from
$1.2 billion, or $4.63 per common share (diluted) for the comparable period of
2003.
Business Highlights
o Earned net income in excess of $500 million for third straight quarter
o Achieved record net income and net revenues for the first nine months
of 2004; greater than full-year 2003's results
o Ranked No. 1 by Greenwich Associates for overall quality of Fixed
Income sales, trading and research for the fourth consecutive year
o Ranked No. 1 in Institutional Investor's "2004 All-America Fixed Income
Research Team" survey for the fifth year in a row
o Achieved market share gains in calendar 2004 in key investment banking
products, including M&A advisory and global equity origination
o Named a qualified foreign institutional investor in China, which will
allow the Firm to trade yuan-denominated securities
Richard S. Fuld, Jr., chairman and chief executive officer, said, "Our
businesses performed well during the third quarter, despite the pressures of a
more challenging market environment. With revenues and net income for the first
nine months of 2004 already ahead of our full-year 2003 results, we are on our
way to another outstanding year."
Net revenues (total revenues less interest expense) for the third quarter rose
12% to $2.6 billion, up from $2.3 billion in the third quarter of 2003, and down
10% from $2.9 billion in the second quarter of 2004. Capital Markets revenues
rose 2% compared with the third quarter of 2003, reflecting a 16% rise in Fixed
Income Capital Markets, partially offset by a 33% decline in Equities Capital
Markets.Fixed Income Capital Markets revenues remained resilient, due in part to
robust mortgage and asset-backed securitization activity, which helped offset
reduced activity in investment grade debt and interest rate products. Equities
Capital Markets revenues were impacted by low trading volumes and volatility, as
well as a valuation decline in the global equity markets, which were adversely
affected by geopolitical concerns, higher oil prices, mixed economic data and
the seasonal summer slowdown. Investment Banking revenues rose 16% from the
third quarter of 2003, driven by increased equity and debt origination fees and
enhanced levels of M&A advisory activity. Revenues from Client Services rose 75%
from the same quarter last year, reflecting the positive impact of the
acquisition of Neuberger Berman.
For the first nine months of 2004, net revenues increased 37%, to a record $8.7
billion, from $6.3 billion for the first nine months of 2003.
Non-interest expenses for the quarter were $1.9 billion, compared to $1.6
billion in the 2003 third quarter and $2.0 billion in the trailing quarter of
2004. Compensation and benefits as a percentage of net revenues was 49.8% during
the third quarter of 2004, compared to 50.0% during the third quarter of 2003
and 49.8% in the second quarter of 2004. Non-personnel expenses in the 2004
third quarter were $594 million, compared with $424 million in the
2
previous year's third quarter, largely reflecting a number of acquisitions
completed subsequent to the third quarter of 2003. Non-personnel expenses were
$585 million in the second quarter of 2004.
For the quarter ended August 31, 2004, the Firm's pretax margin was 27.6%,
compared to 31.9% in the 2003 third quarter. For the 2004 third quarter, the
Firm's return on average common equity was 15.0%, compared to 20.7% in the 2003
third quarter, and return on average tangible common equity was 20.9% for the
third quarter of 2004, compared with 21.2% in the third quarter of 2003.
As of August 31, 2004, Lehman Brothers stockholders' equity totaled $14.4
billion, and total capital (stockholders' equity and long-term debt) was
approximately $64.5 billion. Book value per common share was $48.10.
Lehman Brothers (ticker symbol: LEH), an innovator in global finance, serves the
financial needs of corporations, governments and municipalities, institutional
clients, and high-net-worth individuals worldwide. Founded in 1850, Lehman
Brothers maintains leadership positions in equity and fixed income sales,
trading and research, investment banking, private equity and wealth and asset
management services. The Firm is headquartered in New York, with regional
headquarters in London and Tokyo and operates in a network of offices around the
world. For further information about Lehman Brothers' services, products and
recruitment opportunities, visit our Web site at www.lehman.com.
Conference Call
A conference call to discuss the Firm's financial results and outlook will be
held at 9:30 a.m., EDT on Tuesday, September 21, 2004. Members of the public who
would like to access the conference call should dial, from the U.S.,
888-456-0338 or from outside the U.S., 212-547-0182. The pass code for all
callers is LEHMAN. The conference call will also be accessible through the
"Shareholders" section of the Firm's Web site under the subcategory "Webcasts."
For those unable to listen to the live broadcast, a replay will be available on
the Firm's Web site or by dialing 888-567-0424 (domestic) or 402-998-1797
(international). The replay will be available approximately one hour after the
event and will remain available on the Lehman Brothers Web site until 5:00 p.m.
EDT on October 21, 2004, and by phone until 11:59 p.m. EDT on October 8, 2004.
3
Please direct any questions regarding the conference call to Shaun Butler at
212-526-8381, sbutler@lehman.com or Elizabeth Besen at 212-526-2733,
ebesen@lehman.com.
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements. These statements are
not historical facts, but instead represent only the Firm's expectations,
estimates, and projections regarding future events. These statements are not
guarantees of future performance and involve certain risks and uncertainties
that are difficult to predict, which may include risks and uncertainties
relating to market fluctuations and volatility, industry competition and changes
in the competitive environment, investor sentiment, liquidity risks, credit
ratings changes, credit exposures and legal and regulatory changes and
proceedings. The Firm's actual results and financial condition may differ,
perhaps materially, from the anticipated results and financial condition in any
such forward-looking statements. The Firm undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise. For more information concerning the risks and other factors
that could affect the Firm's future results and financial condition, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" in the Firm's most recent Annual Report to Shareholders and Quarterly
Report on Form 10-Q.
# # #
4
LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
Quarters Ended
--------------------------------------------------------------
8/31/04 5/31/04 2/29/04 11/30/03 8/31/03
------- ------- ------- -------- -------
Income Statement
- ----------------
Net Revenues $2,623 $2,926 $3,144 $2,298 $2,347
Non-Interest Expenses:
Compensation and Benefits 1,306 1,457 1,566 1,103 1,174
Non-personnel Expenses 594 585 527 473 424
Real Estate Related Charge - - 19 - -
Net Income (a) 505 609 670 481 480
Net Income Applicable to Common Stock 487 592 653 464 469
Earnings per Common Share: (b)
Basic $1.79 $2.14 $2.37 $1.82 $1.92
Diluted $1.71 $2.01 $2.21 $1.71 $1.81
Financial Ratios (%)
- ----------------
Return on Average Common Stockholders' Equity (annualized) (c) 15.0% 18.6% 21.1% 18.9% 20.7%
Return on Average Tangible Common Stockholders' Equity
(annualized) (d) 20.9% 26.0% 29.7% 20.6% 21.2%
Pretax Margin (e) 27.6% 30.2% 32.8% 31.4% 31.9%
Compensation and Benefits/Net Revenues 49.8% 49.8% 49.8% 48.0% 50.0%
Effective Tax Rate (f) 30.2% 31.1% 32.8% 30.5% 33.4%
Financial Condition
- -------------------
Total Assets $341,000 $346,499 $328,064 $312,061 $291,638
Net Assets (g) 171,340 175,452 171,600 163,182 156,985
Long-Term Debt (h) 50,043 52,380 50,982 43,529 41,693
Preferred Securities Subject to Mandatory Redemption (h) - - - 1,310 1,010
Common Stockholders' Equity (i) 13,076 12,831 12,601 12,129 9,231
Total Stockholders' Equity 14,421 14,006 13,776 13,174 10,276
Total Stockholders' Equity plus Junior Subordinated Debt(j) 15,421 15,391 15,086 14,484 11,286
Tangible Equity Capital (k) 11,761 11,536 11,296 10,681 11,040
Total Capital (l) 64,464 66,386 64,758 58,013 52,979
Book Value per Common Share (m) 48.10 47.05 45.45 44.17 37.95
Gross Leverage (n) 23.6x 24.7x 23.8x 23.7x 28.4x
Net Leverage (g) 14.6x 15.2x 15.2x 15.3x 14.2x
Other Data (#s)
- ----------
Employees 19,286 17,625 16,505 16,188 14,497
Assets Under Management (in billions) $126.1 $124.8 $123.8 $116.2 $42.5
Common Stock Outstanding (in millions) 269.5 272.7 277.2 266.7 239.2
Weighted Average Shares (in millions):
Basic 272.8 276.8 275.5 254.7 243.8
Diluted 285.0 294.2 294.7 271.2 259.5
See Footnotes to Selected Statistical Information on page 6.
5
LEHMAN BROTHERS HOLDINGS INC.
FOOTNOTES TO SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(a) For the quarter ended February 29, 2004 net income includes a $19 million
pre-tax ($11 million after tax) charge related to reconfiguration of
certain of the Company's real estate.
(b) For the quarter ended February 29, 2004 basic EPS and diluted EPS were
reduced by $0.04 as a result of the real estate charge.
(c) Return on average common stockholders' equity is computed by dividing
annualized net income applicable to common stock for the period by average
common stockholders' equity. (See the reconciliation on page 10.) For the
quarter ended November 30, 2003 average common stockholders' equity was
appropriately weighted for the effect of the equity issued in connection
with the Neuberger Berman Inc. acquisition on October 31, 2003. For the
quarter ended February 29, 2004 return on average common stockholders'
equity was reduced by 0.4% as a result of the real estate charge.
(d) Return on average tangible common stockholders' equity is computed by
dividing annualized net income applicable to common stock for the period by
average tangible common stockholders' equity. Tangible common stockholders'
equity equals total common stockholders' equity less identifiable
intangible assets and goodwill. (See the reconciliation on page 10.) For
the quarter ended November 30, 2003 average tangible common stockholders'
equity was appropriately weighted for the effect of the equity issued in
connection with the Neuberger Berman Inc. acquisition on October 31, 2003.
Management believes average tangible common stockholders' equity is a
meaningful measure because it reflects the common stockholders' equity
deployed in the Company's businesses. For the quarter ended February 29,
2004 return on average tangible common stockholders' equity was reduced by
0.5% as a result of the real estate charge.
(e) Pretax margin for the quarter ended February 29, 2004 was reduced by
approximately 0.6% as a result of the real estate charge.
(f) The effective tax rate for the quarter ended February 29, 2004 was reduced
by approximately 0.2% as a result of the real estate charge.
(g) Net assets represents total assets excluding cash and securities segregated
and on deposit for regulatory and other purposes, secured financing
arrangements, collateral received recognized in inventory pursuant to SFAS
140 and identifiable intangible assets and goodwill. (See the
reconciliation on page 12.) Net leverage is defined as net assets divided
by tangible equity capital. (See the reconciliation on page 12.) The
Company believes net assets and net leverage are useful to investors when
comparing companies in the securities industry because they exclude certain
assets considered to have a low risk profile. The Company believes tangible
equity capital to be a more meaningful measure of the Company's equity for
purposes of calculating net leverage because the Company does not view the
amount of equity used to support identifiable intangible assets and
goodwill as available to support the Company's remaining net assets. Net
leverage, as so defined, is used by many of the Company's creditors and a
leading rating agency. These measures as presented by the Company are not
necessarily comparable to similarly-titled measures presented by other
companies in the securities industry because of different methods of
calculation.
(h) At August 31, 2004, May 31, 2004 and February 29, 2004, long-term debt
includes $1,000 million, $1,385 million and $1,310 million, respectively,
of junior subordinated debt issued to trusts that prior to February 29,
2004 was classified as preferred securities subject to mandatory
redemption. On and after February 29, 2004 these amounts are classified as
long-term debt pursuant to the adoption of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities - an interpretation of ARB No.
51 ("FIN 46"). See "Management's Discussion and Analysis--New Accounting
Developments" and Note 12 to the Consolidated Financial Statements in the
Company's 2003 Annual Report to Stockholders. The junior subordinated debt
issued to trusts at August 31, 2004, May 31, 2004 and February 29, 2004 and
the preferred securities subject to mandatory redemption at the prior
period ends are collectively referred to hereinafter as junior subordinated
debt.
(i) On October 31, 2003, the Company acquired Neuberger Berman Inc. for a net
purchase price of $2,788 million, including cash consideration and
incidental costs of $690 million, equity consideration of $2,374 million
and excluding net cash and short-term investments acquired of $276 million.
(j) The Company believes total stockholders' equity plus junior subordinated
debt to be a more meaningful measure of the Company's equity because the
junior subordinated debt is subordinated and has a maturity at issuance of
49 years and the Company can defer interest payments for up to 20
consecutive quarters if the junior subordinated debt is not in default. In
addition, a leading rating agency views these securities as equity capital
for purposes of calculating net leverage. (See the reconciliation on page
12.)
(k) Tangible equity capital is defined as total stockholders' equity plus
junior subordinated debt less identifiable intangible assets and goodwill.
(See the reconciliation on page 12.) The Company believes tangible equity
capital to be a more meaningful measure of the Company's equity for
purposes of calculating net leverage because the Company does not view the
amount of equity used to support identifiable intangible assets and
goodwill as available to support the Company's remaining net assets.
(l) Total capital includes long-term debt (including junior subordinated debt)
and total stockholders' equity. The Company believes total capital is
useful to investors as a measure of the Company's financial strength.
(m) The book value per common share calculation includes amortized restricted
stock units granted under stock award programs, which have been included in
total stockholders' equity.
(n) Gross leverage is defined as total assets divided by total stockholders'
equity.
6
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Three Months Ended % Change from
------------------------------------------ -------------------------
Aug 31, May 31, Aug 31, May 31, Aug 31,
2004 2004 2003 2004 2003
----------- ----------- ---------- ---------- -----------
Revenues:
Principal transactions $1,217 $1,479 $1,200 (a)
Investment banking 526 546 453 (a)
Commissions 348 407 314
Interest and dividends 2,769 2,609 2,467
Asset management and other 191 187 29 (a)
----------- ----------- ----------
Total revenues 5,051 5,228 4,463
Interest expense 2,428 2,302 2,116
----------- ----------- ----------
Net revenues 2,623 2,926 2,347 (10)% 12%
----------- ----------- ----------
Non-interest expenses:
Compensation and benefits 1,306 1,457 1,174
Technology and communications 195 185 150
Brokerage and clearance fees 114 116 96
Occupancy 107 104 76
Professional fees 74 70 35
Business development 56 55 36
Other 48 55 31
----------- ----------- ----------
Total non-interest expenses 1,900 2,042 1,598 (7)% 19%
----------- ----------- ----------
Income before taxes and dividends on trust 723 884 749
preferred securities (b)
Provision for income taxes 218 275 250
Dividends on trust preferred
securities (b) - - 19
----------- ----------- ----------
Net income $505 $609 $480 (17)% 5%
=========== =========== ==========
Net income applicable to common stock $487 $592 $469 (18)% 4%
=========== =========== ==========
Earnings per common share:
Basic $1.79 $2.14 $1.92 (16)% (7)%
=========== =========== ==========
Diluted $1.71 $2.01 $1.81 (15)% (6)%
=========== =========== ==========
(a) 2003 reclassified to conform to the August 31, 2004 presentation.
(b) At February 29, 2004, preferred securities subject to mandatory redemption
were reclassified to junior subordinated debt (a component of long-term
debt) pursuant to the adoption of FIN 46. In periods subsequent to February
29, 2004, dividends on trust preferred securities are included in interest
expense. See note (h) to the Selected Statistical Information on page 6.
7
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Nine Months Ended % Change from
--------------- ---- -------------- -------------------
Aug 31, Aug 31, Aug 31,
2004 2003 2003
--------------- -------------- -------------------
Revenues:
Principal transactions $4,435 $3,243 (a)
Investment banking 1,580 1,245 (a)
Commissions 1,145 875
Interest and dividends 7,682 7,599
Asset management and other 562 71 (a)
--------------- --------------
Total revenues 15,404 13,033
Interest expense 6,711 6,684
--------------- --------------
Net revenues 8,693 6,349 37%
--------------- --------------
Non-interest expenses:
Compensation and benefits 4,329 3,215
Technology and communications 550 441
Brokerage and clearance fees 337 272
Occupancy 313 230
Professional fees 191 105
Business development 155 105
Other 160 90
Real estate related charge 19 77
--------------- --------------
Total non-interest expenses 6,054 4,535 33%
--------------- --------------
Income before taxes and dividends on trust preferred 2,639 1,814
securities (b)
Provision for income taxes 831 545
Dividends on trust preferred
securities (b) 24 51
--------------- --------------
Net income $1,784 $1,218 46%
=============== ==============
Net income applicable to common stock $1,732 $1,185 46%
=============== ==============
Earnings per common share:
Basic $6.29 $4.88 29%
=============== ==============
Diluted $5.94 $4.63 28%
=============== ==============
(a) 2003 reclassified to conform to the August 31, 2004 presentation.
(b) At February 29, 2004, preferred securities subject to mandatory redemption
were reclassified to junior subordinated debt (a component of long-term
debt) pursuant to the adoption of FIN 46. In periods subsequent to February
29, 2004, dividends on trust preferred securities are included in interest
expense. See note (h) to the Selected Statistical Information on page 6.
8
LEHMAN BROTHERS HOLDINGS INC.
SEGMENT NET REVENUE INFORMATION
(Preliminary and Unaudited)
(In millions)
Three Months Ended % Change from
------------------------------------------------ -------------------------
Aug 31, May 31, Aug 31, May 31, Aug 31,
2004 2004 2003 2004 2003
----------- ---------- ------------ ---------- -----------
Investment Banking:
Debt Underwriting $241 $256 $232
Equity Underwriting 134 142 119
Merger and Acquisition Advisory 151 148 102
----------- ---------- ------------
Total 526 546 453 (4)% 16%
----------- ---------- ------------
Capital Markets:
Fixed Income 1,381 1,431 1,191
Equities 319 520 476
----------- ---------- ------------
Total 1,700 1,951 1,667 (13)% 2%
----------- ---------- ------------
Client Services:
Private Client 193 237 205 (a)
Asset Management 204 192 22 (a)
----------- ---------- ------------
Total 397 429 227 (8)% 75%
----------- ---------- ------------
Total Net Revenues $2,623 $2,926 $2,347 (10)% 12%
=========== ========== ============
% Change from
Nine Months Ended
---------------------------- -------------
Aug 31, Aug 31, Aug 31,
2004 2003 2003
----------- ---------- -------------
Investment Banking:
Debt Underwriting $714 $705
Equity Underwriting 419 253
Merger and Acquisition Advisory 447 287
----------- ----------
Total 1,580 1,245 27%
----------- ----------
Capital Markets:
Fixed Income 4,413 3,268
Equities 1,458 1,202
----------- ----------
Total 5,871 4,470 31%
----------- ----------
Client Services:
Private Client 642 568(a)
Asset Management 600 66(a)
----------- ----------
Total 1,242 634 96%
----------- ----------
Total Net Revenues $8,693 $6,349 37%
=========== ==========
(a) 2003 reclassified to conform to the August 31, 2004 presentation.
9
LEHMAN BROTHERS HOLDINGS INC.
RECONCILIATION OF AVERAGE COMMON STOCKHOLDERS' EQUITY TO
AVERAGE TANGIBLE COMMON STOCKHOLDERS' EQUITY
(Preliminary and Unaudited)
(In millions)
Quarter Ended
---------------------------------------------------------------------------
Aug 31, May 31, Feb 29, Nov 30, Aug 31,
2004 2004 2004 2003 2003
------------ ----------- ----------- ------------ -------------
Average common stockholders' equity $12,954 $12,716 $12,365 $9,836 $9,083
Less: average identifiable
intangible assets and goodwill (3,642) (3,617) (3,586) (836) (241)
------------ ----------- ----------- ------------ -------------
Average tangible common stockholders' $9,312 $9,099 $8,779 $9,000 $8,842
equity
============ =========== =========== ============ =============
Nine Months Ended
------------ -- -----------
Aug 31, Aug 31,
2004 2003
------------ -----------
Average common stockholders' equity $12,659 $8,716
Less: average identifiable
intangible assets and goodwill (3,614) (233)
------------ -----------
Average tangible common stockholders' $9,045 $8,483
equity ============ ===========
10
LEHMAN BROTHERS HOLDINGS INC.
ASSETS UNDER MANAGEMENT
(Preliminary and Unaudited)
(In billions)
As of
-------------------------------------------------
Composition of Assets Under Management Aug 31, May 31, Aug 31,
2004 2004 2003
----------- ----------- ------------
Money Markets $16.1 $18.0 $9.3
Fixed Income 51.2 49.5 27.5
Equity 48.2 47.2 0.4
Alternative Investments 10.6 10.1 5.3
----------- ----------- ------------
Assets under Management $126.1 $124.8 (a) $42.5
=========== =========== ============
Nine Months Ended Three Months Ended
---------------------- -------------------------------------------------
Assets Under Management Rollforward Aug 31, Aug 31, May 31, Aug 31,
2004 2004 2004 2003
---------------------- ----------- ----------- ------------
Balance, beginning of period $116.2 $124.8 $123.8 (a) $38.7
Net additions (withdrawals) 4.4 (0.3) 2.1 4.4
Net market appreciation (depreciation) 5.5 1.6 (1.1) (0.6)
---------------------- ----------- ----------- ------------
Total increase 9.9 1.3 1.0 3.8
---------------------- ----------- ----------- ------------
Balance, end of period $126.1 $126.1 $124.8 $42.5
====================== =========== =========== ============
(a) Increase from August 31, 2003 primarily reflects the addition of Neuberger
Berman effective October 2003.
11
LEHMAN BROTHERS HOLDINGS INC.
GROSS LEVERAGE and NET LEVERAGE CALCULATIONS
(Preliminary and Unaudited)
(In millions)
Aug 31, May 31, Feb 29, Nov 30, Aug 31,
2004 2004 2004 2003 2003
-------------- -------------- ------------- ------------- ------------
Net assets:
Total assets $341,000 $346,499 $328,064 $312,061 $291,638
Less:
Cash and securities segregated and on
deposit for regulatory and other purposes (4,800) (4,606) (3,633) (3,100) (4,473)
Secured financing arrangements
(reverse repo and securities borrowed) (156,700) (158,441) (143,563) (138,812) (127,462)
Collateral received recognized in
inventory pursuant to SFAS 140 (4,500) (4,376) (5,658) (3,406) (2,472)
Identifiable intangible assets
and goodwill (3,660) (3,624) (3,610) (3,561) (246)
-------------- -------------- ------------- ------------- ------------
Net assets $171,340 $175,452 $171,600 $163,182 $156,985
============== ============== ============= ============= ============
Tangible equity capital:
Total stockholders' equity $14,421 $14,006 $13,776 $13,174 $10,276
Junior subordinated debt issued to trusts
(subject to a limit) (a) 1,000 1,154 1,130 1,068 1,010
Less: Identifiable intangible assets
and goodwill (3,660) (3,624) (3,610) (3,561) (246)
-------------- -------------- ------------- ------------- ------------
Tangible equity capital $11,761 $11,536 $11,296 $10,681 $11,040
============== ============== ============= ============= ============
Gross leverage (total assets/ total
stockholders' equity) 23.6x 24.7x 23.8x 23.7x 28.4x
Net leverage (net assets/ tangible
equity capital) 14.6x 15.2x 15.2x 15.3x 14.2x
(a) Under the definition of tangible equity capital used by a leading rating
agency, the maximum equity credit given to junior subordinated debt issued to
trusts is 10% of tangible equity capital. (Junior subordinated debt issued to
trusts is included in the calculation to determine the limit). Prior to
February 29, 2004, junior subordinated debt was classified as preferred
securities subject to mandatory redemption. See note (h) to the Selected
Statistical Information on page 6.