SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1994
---------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
------------------ ------------------
Commission File Number: 1-9839
-----------------------------------------------
FIRST FIDELITY BANCORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2826775
- - ----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2673 Main Street
P.O. Box 6980
Lawrenceville, NJ 08648
- - ----------------------------------------------------------------------
(Address of principal (Zip Code)
executive office)
(609)-895-6800
----------------------------------------------------
(Registrant's telephone number, including area code)
- - ----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1994
- - ----------------------------- ----------------------------
Common Stock, $1.00 Par Value 81,824,753 Shares
2 of 35
Part I - Financial Information
------------------------------
Item 1 - Financial Statements
- - -----------------------------
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(thousands, except per share amounts) Three Months Ended
June 30
--------------------
1994 1993
-------- --------
INTEREST INCOME
Interest and fees on loans......................... $403,509 $382,994
Interest on federal funds sold and securities
purchased under agreements to resell............. 372 4,108
Interest and dividends on securities:
Taxable interest income.......................... 97,481 93,104
Tax-exempt interest income....................... 9,898 13,084
Dividends........................................ 1,422 1,092
Interest on bank deposits.......................... 7,322 17,470
Interest on trading account securities............. 1,846 1,545
-------- --------
Total Interest Income.......................... 521,850 513,397
-------- --------
INTEREST EXPENSE
Interest on:
Deposits......................................... 144,154 157,057
Short-term borrowings............................ 13,577 7,381
Long-term debt................................... 12,682 9,049
-------- --------
Total Interest Expense......................... 170,413 173,487
-------- --------
Net Interest Income.......................... 351,437 339,910
Provision for possible credit losses................. 20,000 41,000
-------- --------
Net Interest Income after Provision
for Possible Credit Losses....................... 331,437 298,910
-------- --------
NON-INTEREST INCOME
Trust Income....................................... 27,628 26,476
Service charges on deposit accounts................ 36,621 39,905
Other service charges, commissions and fees........ 25,337 21,453
Trading revenue.................................... 984 4,786
Net securities transactions........................ 4,726 194
Other income....................................... 5,806 2,020
-------- --------
Total Non-Interest Income........................ 101,102 94,834
-------- --------
NON-INTEREST EXPENSE
Salaries and benefits expense...................... 118,883 117,005
Occupancy expense.................................. 28,443 26,791
Equipment expense.................................. 10,295 10,785
Other expenses..................................... 108,362 99,268
-------- --------
Total Non-Interest Expense....................... 265,983 253,849
-------- --------
3 of 35
Income before income taxes........................... 166,556 139,895
Income taxes......................................... 54,963 41,967
-------- --------
Net Income........................................... 111,593 97,928
Dividends on Preferred Stock......................... 5,146 5,144
-------- --------
Net Income Applicable to Common Stock................ $106,447 $92,784
======== ========
Per common share:
Net income:
Primary.......................................... $1.29 $1.15
Fully diluted.................................... 1.27 1.13
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 4 of 35
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(thousands, except per share amounts) Six Months Ended
June 30
---------------------
1994 1993
--------- ---------
INTEREST INCOME
Interest and fees on loans........................ $797,655 $754,901
Interest on federal funds sold and securities
purchased under agreements to resell............ 490 10,937
Interest and dividends on securities:
Taxable interest income......................... 194,196 187,442
Tax-exempt interest income...................... 20,407 25,820
Dividends....................................... 2,617 2,255
Interest on bank deposits......................... 17,681 39,433
Interest on trading account securities............ 3,421 3,080
--------- ---------
Total Interest Income......................... 1,036,467 1,023,868
--------- ---------
INTEREST EXPENSE
Interest on:
Deposits........................................ 287,261 323,878
Short-term borrowings........................... 24,057 14,777
Long-term debt.................................. 23,515 19,602
--------- ---------
Total Interest Expense........................ 334,833 358,257
--------- ---------
Net Interest Income......................... 701,634 665,611
Provision for possible credit losses................ 44,000 86,000
--------- ---------
Net Interest Income after Provision
for Possible Credit Losses...................... 657,634 579,611
--------- ---------
NON-INTEREST INCOME
Trust Income...................................... 54,891 49,722
Service charges on deposit accounts............... 73,905 75,673
Other service charges, commissions and fees....... 49,032 40,077
Trading revenue................................... 4,635 8,943
Net securities transactions....................... 8,808 3,871
Other income...................................... 13,040 5,561
--------- ---------
Total Non-Interest Income....................... 204,311 183,847
--------- ---------
NON-INTEREST EXPENSE
Salaries and benefits expense..................... 241,022 224,951
Occupancy expense................................. 60,377 55,342
Equipment expense................................. 21,223 20,818
Other expenses.................................... 210,765 191,059
--------- ---------
Total Non-Interest Expense...................... 533,387 492,170
--------- ---------
Income before income taxes and cumulative effect of
changes in accounting principles.................. 328,558 271,288
Income taxes........................................ 108,099 80,747
--------- ---------
Income before cumulative effect of changes in
accounting principles............................. 220,459 190,541
5 of 35
Cumulative effect of changes in accounting
principles, net of tax............................ - 2,373
--------- ---------
Net Income.......................................... 220,459 192,914
Dividends on Preferred Stock........................ 10,277 10,388
--------- ---------
Net Income Applicable to Common Stock............... $210,182 $182,526
========= =========
Per common share:
Primary
Income before cumulative effect of changes in
accounting principles............................. $2.54 $2.26
Cumulative effect of changes in accounting
principles, net of tax............................ - .03
Net income - primary................................ 2.54 2.29
Fully diluted
Income before cumulative effect of changes in
accounting principles............................. $2.49 $2.21
Cumulative effect of changes in accounting
principles, net of tax............................ - .03
Net income - fully diluted.......................... 2.49 2.24
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 6 of 35
CONSOLIDATED STATEMENTS OF CONDITION
June 30 December 31
1994 1993
(thousands) (unaudited)
----------- -----------
ASSETS
Cash and due from banks............................ $1,765,962 $1,831,270
Interest-bearing time deposits..................... 441,899 979,769
Securities held to maturity........................ 4,780,112 5,241,987
(market value of $4,725,616 at June 30, 1994
and $5,321,239 at December 31, 1993)
Securities available for sale...................... 3,069,713 2,656,721
Trading account securities at market value......... 161,733 149,887
Federal funds sold and securities purchased under
agreements to resell............................. 558,540 15,000
Loans, net of unearned income...................... 21,608,066 21,386,911
Less: Reserve for possible credit losses......... (590,936) (602,183)
----------- -----------
Net loans...................................... 21,017,130 20,784,728
Premises and equipment............................. 402,914 404,208
Customers' acceptance liability.................... 194,903 187,903
Other assets....................................... 1,515,400 1,511,112
----------- -----------
Total Assets................................. $33,908,306 $33,762,585
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand deposits.................................. $5,286,211 $5,347,007
Savings/NOW deposits............................. 9,575,406 9,650,774
Money market deposit accounts.................... 3,687,910 3,893,130
Other consumer time deposits..................... 8,284,684 8,637,296
Corporate certificates of deposit................ 355,636 398,435
Deposits in overseas offices....................... 252,299 216,380
----------- -----------
Total Deposits................................. 27,442,146 28,143,022
Short-term borrowings.............................. 2,067,526 1,620,125
Acceptances outstanding............................ 197,517 196,117
Other liabilities.................................. 567,936 451,835
Long-term debt..................................... 812,877 613,058
----------- -----------
Total Liabilities............................ 31,088,002 31,024,157
7 of 35
STOCKHOLDERS' EQUITY
Preferred stock.................................... 230,344 230,422
Common stock ($1.00 par)
Authorized: 150,000,000 shares
Issued: 81,920,643 shares at June 30, 1994 and
79,937,719 shares at December 31, 1993......... 81,921 79,938
Surplus............................................ 1,253,818 1,202,373
Retained earnings.................................. 1,258,737 1,227,368
Less treasury stock, at cost: 95,858 shares at
June 30, 1994 and 36,714 shares
at December 31, 1993........................... (4,516) (1,673)
----------- -----------
Total Common Stockholders' Equity............ 2,589,960 2,508,006
----------- -----------
Total Stockholders' Equity................... 2,820,304 2,738,428
----------- -----------
Total Liabilities and Stockholders' Equity... $33,908,306 $33,762,585
=========== ===========
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 8 of 35
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended
June 30
-------------------------
(thousands) 1994 1993
----------- -----------
Cash flows from operating activities:
Net income......................................... $220,459 $192,914
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses............... 44,000 86,000
Depreciation, amortization and accretion........... 36,363 28,977
Deferred income tax provision...................... 27,524 (1,318)
Gain on sale of assets............................. (6,828) (7,412)
Net securities transactions (gains)................ (8,808) (3,871)
Proceeds from sales of trading account
securities....................................... 5,084,239 4,261,459
Purchases of trading account securities............ (5,092,353) (4,182,793)
(Increase) decrease in accrued interest receivable. (3,081) 23,536
Increase (decrease) in accrued interest payable.... 42,066 (36,255)
Change in current taxes payable.................... 35,621 (37,667)
Other, net......................................... 127,329 173,226
Cumulative effect of changes in accounting
principles, net of tax........................... - (2,373)
---------- ----------
Net cash provided by operating activities...... 506,531 494,423
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity................................. 1,439,318 2,608,239
Purchases of securities held to maturity........... (936,070) (2,829,181)
Proceeds from sales of securities available
for sale......................................... 497,067 96,340
Proceeds from maturities of securities
available for sale............................... 408,296 -
Purchases of securities available for sale......... (1,396,346) -
Net (disbursements) from lending activities........ (129,033) (7,762)
Purchases of premises and equipment................ (31,043) (35,527)
Proceeds from sales of premises and equipment...... 6,378 6,409
Net change in acceptances.......................... (5,600) (6,451)
Net cash on acquisitions........................... 49,454 641,861
---------- ----------
Net cash (used in)/provided by
investing activities......................... (97,579) 473,928
Cash flows from financing activities:
Change in demand, savings/NOW, and money market
deposits......................................... (546,401) (1,379,920)
Change in corporate certificates of deposit and
deposits in overseas offices..................... (6,880) (68,436)
Change in other consumer time deposits............. (469,920) (933,827)
Change in short-term borrowings.................... 442,503 (99,279)
Issuance of long-term debt......................... 200,000 150,000
Payments on long-term debt......................... (181) (68,291)
Purchases of treasury stock........................ (144,634) (11,378)
Issuance of common stock........................... 134,303 99,674
Dividends paid..................................... (77,380) (62,509)
---------- ----------
Net cash (used in) financing activities........ (468,590) (2,373,966)
---------- ----------
9 of 35
Net change in cash and cash equivalents........ (59,638) (1,405,615)
Cash and cash equivalents at beginning
of period (A)................................ 2,826,039 5,287,115
---------- ----------
Cash and cash equivalents at end
of period (A)................................ $2,766,401 $3,881,500
========== ==========
Supplemental disclosures:
Total amount of interest paid for the period....... $292,767 $394,512
========== ==========
Total amount of income taxes paid for
the period....................................... $99,196 $69,532
========== ==========
Total amount of loans transferred to OREO.......... $23,194 $63,622
========== ==========
(A) Reconciliation: June 30 December 31
---------------------- ----------------------
1994 1993 1993 1992
---------- ---------- ---------- ----------
Cash and due from banks......... $1,765,962 $1,735,900 $1,831,270 $1,913,177
Interest-bearing time deposits.. 441,899 1,550,600 979,769 2,635,938
Federal funds sold and
securities purchased under
agreements to resell.......... 558,540 595,000 15,000 738,000
---------- ---------- ---------- ----------
Total cash and cash
equivalents................... $2,766,401 $3,881,500 $2,826,039 $5,287,115
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
10 of 35
SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) In Management's opinion, the financial information, which is
unaudited, reflects all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the
financial information as of and for the three and six month
periods ended June 30, 1994 and June 30, 1993 in conformity with
generally accepted accounting principles. These financial
statements should be read in conjunction with First Fidelity
Bancorporation's ("First Fidelity" or "the Company" herein) 1993
Annual Report on Form 10-K.
(2) Primary earnings per share is based on the weighted average
number of common shares outstanding during each period, including
the assumed exercise of dilutive stock options and warrants,
using the treasury stock method. Primary earnings per share also
reflect provisions for dividend requirements on all outstanding
shares of the Company's preferred stock.
Fully diluted earnings per share is based on the weighted average
number of common shares outstanding during each period, including
the assumed conversion of convertible preferred stock into common
stock and the assumed exercise of dilutive stock options and
warrants using the treasury stock method. Fully diluted earnings
per share also reflect provisions for dividend requirements on
non-convertible preferred stock.
Item 2
- - ------
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and related
notes and with the statistical information and financial data
appearing in this report as well as the Company's 1993 Annual Report
on Form 10-K. Results of operations for the three and six month
periods ended June 30, 1994 are not necessarily indicative of results
to be attained for any other period.
Summary
- - -------
First Fidelity recorded net income of $111.6 million, or $1.29
per common share on a primary basis and $1.27 per common share on a
fully-diluted basis, for the second quarter of 1994. These results
compare to net income of $97.9 million or $1.15 per common share on a
primary basis and $1.13 per common share on a fully-diluted basis for
the second quarter of 1993.
The earnings improvement for the current quarter, compared to the
second quarter of 1993, resulted from a lower provision for possible
credit losses, stronger net interest income, and higher non-interest
income, partly offset by an increased provision for income taxes and
higher non-interest expenses. The provision for possible credit
losses was $20.0 million in the second quarter of 1994, down from
$41.0 million in the second quarter of 1993, reflecting management's
evaluation of the adequacy of the level of the reserve for possible
credit losses in light of improving asset quality trends, current
11 of 35
economic conditions, the continued decline in non-performing loans and
lower charge-offs. Non-performing assets totaled $421.6 million at
June 30, 1994, compared to $665.9 million at June 30, 1993. Net
interest income increased $11.5 million to $351.4 million as a result
of increased earning assets, due primarily to acquisitions during the
last half of 1993. This increase in earning assets was partially
offset by a slight reduction in net interest margin, reflecting, in
part, recent acquisitions.
Return on average stockholders' equity for the current quarter
was 16.24% compared to 16.33% for the second quarter of last year.
Return on average common stockholders' equity was 16.90% in the
current quarter as compared to 17.11% for the same period of 1993.
Return on average assets for the second quarter of 1994 improved to
1.35%, compared to 1.26% a year earlier.
Net income for the six months ended June 30, 1994 was $220.5
million, or $2.54 per common share on a primary basis and $2.49 on a
fully-diluted basis, compared to net income before the cumulative
effect of changes in accounting principles of $190.5 million, or $2.26
per common share on a primary basis and $2.21 on a fully-diluted
basis, for the first half of 1993.
During the quarter, the Company continued to pursue its strategy
of making acquisitions of banks, bank branches and other financial
institutions located in the Company's market area or in contiguous
markets. On May 12, 1994, the Company completed its acquisition of
The Savings Bank of Rockland County ($184 million in assets), and in
mid-June, the Company established a presence in Maryland by acquiring
4 branches of the John Hanson Federal Savings Bank from the Resolution
Trust Corporation. In addition, in July 1994 the Company entered into
an agreement to acquire First State Bank in Wilmington, Delaware ($38
million in assets), for $7 million in cash. Subject to receipt of
regulatory and shareholder approvals, the pending cash acquisitions of
Mid-Hudson Savings Bank FSB ($504 million in assets) for $56 million
and The Bank of Baltimore ($2.1 billion in assets) for $346 million
are expected to close before the end of 1994. The pending
acquisitions will generate approximately $250 million of goodwill.
The consequent effect on regulatory capital ratios is expected to be
partly offset by earnings retention during the remainder of 1994. As
a result, the Company's capital ratios are expected to be impacted by
less than 100 basis points as of December 31, 1994. The Company
expects that all First Fidelity entities will continue to
significantly exceed the "well capitalized" criteria.
Each of the recent and pending acquisitions described above is
expected to have an additive effect on earnings per share within 18
months of its consummation, assuming the absence of significant
adverse economic conditions. These acquisitions are not expected to
have a material adverse impact on liquidity.
First Fidelity expects to continue to pursue opportunities to
acquire depository institutions, financial service companies, thrift
or savings type associations and related companies based generally in
markets in which the Company presently operates or in markets in
proximity to one of First Fidelity's then existing markets. The
Company contemplates that any such acquisition would be financed
12 of 35
through working capital and/or the issuance of equity and debt
securities.
Capital Markets:
As of July 31, 1994, the Company had acquired a total of 2.9
million shares in 1994 pursuant to the open market repurchase
program (exclusive of shares acquired to fund certain benefit
plans) authorized by the Board of Directors in 1993 and 1994, at
an average price of $44.77 per share.
During the second quarter of 1994, Santander exercised the final
tranche of its warrants pursuant to its Investment Agreement with
the Company by acquiring 2,376,250 shares of First Fidelity
Common Stock at $25.50 per share. Fully-diluted shares
outstanding averaged 86,448,152 in the first quarter of 1994 and
86,054,920 in the second quarter.
In May, 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan". SFAS 114 requires
that "impaired" loans be measured based on the present value of
expected future cash flows, discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan is
collateral dependent. Although management is continuing to review
SFAS 114 and the expected changes to that standard, it does not
currently expect that the adoption of SFAS 114, which is required for
fiscal years beginning after December 15, 1994, will have a material
effect on the Company's financial statements.
In July 1994, a United States Senate and House Conference
Committee agreed upon the terms of a bill which would authorize
nationwide interstate branching and interstate bank acquisitions one
year after enactment. The bill would allow states to opt out of
interstate branching provisions. Although it is uncertain what
provisions the final law, if any, will have, the Company anticipates
that, in the event that a law in the form approved by the joint
committee is enacted, there may very well be further consolidation in
the banking industry.
RESULTS OF OPERATIONS
Net Interest Income
- - -------------------
The following tables reflect the significant components of net
interest income for the three and six month periods ended June 30,
1994 and 1993.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 13 of 35
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Three months ended June 30, 1994
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial.................................. $6,556,205 $116,695 7.04%
Installment................................. 5,843,489 120,645 8.28
Mortgage.................................... 8,761,909 166,908 7.62
Loans in overseas offices..................... 111,460 1,653 5.95
----------- --------
Total Loans............................... 21,273,063 405,901 7.61
Taxable mortgage-backed securities (3)........ 4,517,227 60,295 5.34
Other taxable securities...................... 2,786,906 38,723 5.56
Tax-exempt securities......................... 557,346 14,492 10.40
Time deposits with banks...................... 567,636 7,322 5.10
Federal funds sold and securities
purchased under agreements to resell........ 32,459 372 4.54
Trading account............................... 155,721 2,085 5.36
----------- --------
Total Earning Assets.................... 29,890,358 529,190 7.07
Reserve for possible credit losses.............. (607,085)
Cash and due from banks......................... 1,866,853
Other assets.................................... 2,084,941
-----------
Total Assets.......................... $33,235,067
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................. $5,108,316
-----------
Interest-bearing Liabilities
Savings/NOW deposits.......................... 9,613,544 45,339 1.89
Money market deposit accounts................. 3,755,634 21,219 2.27
Other consumer time deposits.................. 8,348,766 72,344 3.48
Corporate certificates of deposit............. 342,750 3,211 3.76
Deposits in overseas offices.................. 228,686 2,041 3.53
Short-term borrowings......................... 1,499,927 13,577 3.58
Long-term debt................................ 812,967 12,682 6.24
----------- --------
Total Interest-bearing Liabilities.......... 24,602,274 170,413 2.78
Other liabilities............................... 767,493
Preferred stockholders' equity.................. 230,417
Common stockholders' equity..................... 2,526,567
----------- --------
Total Liabilities and
Stockholders' Equity.................... $33,235,067 170,413
=========== --------
Net interest income/spread...................... $358,777 4.29
========
Net interest margin............................. 4.78
Tax equivalent adjustment....................... $7,340
========
14 of 35
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 15 of 35
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Three months ended June 30, 1993
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial.................................. $6,758,986 $126,963 7.43%
Installment................................. 5,454,755 113,692 8.36
Mortgage.................................... 6,956,299 143,790 8.27
Loans in overseas offices..................... 119,287 1,179 3.96
----------- --------
Total Loans............................... 19,289,327 385,624 7.97
Taxable mortgage-backed securities (3)........ 4,168,996 65,272 6.26
Other taxable securities...................... 1,833,596 29,072 6.34
Tax-exempt securities......................... 669,550 18,636 11.13
Time deposits with banks...................... 1,540,243 17,470 4.49
Federal funds sold and securities
purchased under agreements to resell........ 523,348 4,108 3.11
Trading account............................... 157,382 1,593 4.05
----------- --------
Total Earning Assets.................... 28,182,442 521,775 7.39
Reserve for possible credit losses.............. (663,730)
Cash and due from banks......................... 1,678,397
Other assets.................................... 1,997,138
-----------
Total Assets.......................... $31,194,247
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................. $4,658,296
-----------
Interest-bearing Liabilities
Savings/NOW deposits.......................... 8,144,337 44,373 2.19
Money market deposit accounts................. 4,035,767 24,992 2.48
Other consumer time deposits.................. 8,918,379 82,447 3.71
Corporate certificates of deposit............. 456,051 3,492 3.07
Deposits in overseas offices.................. 225,240 1,753 3.08
Short-term borrowings......................... 1,067,923 7,381 2.73
Long-term debt................................ 549,988 9,049 6.58
----------- --------
Total Interest-bearing Liabilities.......... 23,397,685 173,487 2.97
Other liabilities............................... 732,991
Preferred stockholders' equity.................. 230,803
Common stockholders' equity..................... 2,174,472
----------- --------
Total Liabilities and
Stockholders' Equity.................... $31,194,247 173,487
=========== --------
Net interest income/spread...................... $348,288 4.42
========
Net interest margin............................. 4.92
Tax equivalent adjustment....................... $8,378
========
16 of 35
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 34%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 17 of 35
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Six months ended June 30, 1994
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial................................. $6,659,343 $232,009 6.93%
Installment................................ 5,814,153 238,636 8.28
Mortgage................................... 8,635,904 328,669 7.61
Loans in overseas offices.................... 113,924 3,108 5.50
----------- ---------
Total Loans.............................. 21,223,324 802,422 7.57
Taxable mortgage-backed securities (3)....... 4,642,072 123,619 5.33
Other taxable securities..................... 2,667,550 73,438 5.51
Tax-exempt securities........................ 560,179 29,777 10.63
Time deposits with banks..................... 718,469 17,681 4.89
Federal funds sold and securities
purchased under agreements to resell....... 25,392 490 3.84
Trading account.............................. 153,654 3,737 4.86
----------- ---------
Total Earning Assets................... 29,990,640 1,051,164 7.02
Reserve for possible credit losses............. (610,105)
Cash and due from banks........................ 1,848,340
Other assets................................... 2,077,906
-----------
Total Assets......................... $33,306,781
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................ $5,254,090
-----------
Interest-bearing Liabilities
Savings/NOW deposits......................... 9,699,886 89,812 1.87
Money market deposit accounts................ 3,737,819 42,162 2.27
Other consumer time deposits................. 8,309,133 145,465 3.53
Corporate certificates of deposit............ 358,139 6,143 3.46
Deposits in overseas offices................. 221,617 3,679 3.30
Short-term borrowings........................ 1,464,449 24,057 3.27
Long-term debt............................... 777,703 23,515 6.05
----------- ---------
Total Interest-bearing Liabilities......... 24,568,746 334,833 2.74
Other liabilities.............................. 734,685
Preferred stockholders' equity................. 230,419
Common stockholders' equity.................... 2,518,841
----------- ---------
Total Liabilities and
Stockholders' Equity................... $33,306,781 334,833
=========== ---------
Net interest income/spread..................... $716,331 4.28
=========
Net interest margin............................ 4.78
Tax equivalent adjustment...................... $14,697
=========
18 of 35
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 19 of 35
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Six months ended June 30, 1993
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- --------- -------
Loans in domestic offices
Commercial................................. $6,481,522 $246,079 7.55%
Installment................................ 5,403,102 230,042 8.59
Mortgage................................... 6,688,529 281,628 8.42
Loans in overseas offices.................... 119,330 2,789 4.71
----------- ---------
Total Loans.............................. 18,692,483 760,538 8.14
Taxable mortgage-backed securities (3)....... 4,024,406 132,300 6.57
Other taxable securities..................... 1,807,912 57,755 6.39
Tax-exempt securities........................ 685,174 36,961 10.79
Time deposits with banks..................... 1,756,714 39,433 4.46
Federal funds sold and securities
purchased under agreements to resell....... 688,263 10,937 3.16
Trading account.............................. 153,018 3,188 4.17
----------- ---------
Total Earning Assets................... 27,807,970 1,041,112 7.49
Reserve for possible credit losses............. (646,123)
Cash and due from banks........................ 1,622,146
Other assets................................... 1,908,025
-----------
Total Assets......................... $30,692,018
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................ $4,585,594
-----------
Interest-bearing Liabilities
Savings/NOW deposits......................... 7,955,629 91,933 2.33
Money market deposit accounts................ 3,903,449 50,433 2.61
Other consumer time deposits................. 8,956,358 171,502 3.86
Corporate certificates of deposit............ 430,204 6,553 3.07
Deposits in overseas offices................. 218,714 3,457 3.16
Short-term borrowings........................ 1,078,249 14,777 2.74
Long-term debt............................... 565,371 19,602 6.93
----------- ---------
Total Interest-bearing Liabilities......... 23,107,974 358,257 3.12
Other liabilities.............................. 653,357
Preferred stockholders' equity................. 231,467
Common stockholders' equity.................... 2,113,626
----------- ---------
Total Liabilities and
Stockholders' Equity................... $30,692,018 358,257
=========== ---------
Net interest income/spread..................... $682,855 4.37
=========
Net interest margin............................ 4.90
Tax equivalent adjustment...................... $17,244
=========
20 of 35
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 34%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
21 of 35
Taxable-equivalent net interest income for the second quarter of
1994 was $358.8 million, compared to $348.3 million for the second
quarter of 1993. The increase was primarily due to higher average
earning assets, partially offset by a slight decrease in net interest
margin. Average earning assets increased to $29.9 billion in the
second quarter of 1994 from $28.2 billion in the second quarter of
1993. Net interest margin decreased to 4.78% from 4.92% in the second
quarter of 1993. The increase in average earning assets was largely
the result of higher average total loans, other taxable securities and
taxable mortgage-backed securities, partially offset by reductions in
time deposits with banks and federal funds sold and securities
repurchased under agreements to resell. Increases in average mortgage
and installment loans resulted from acquisitions and from growth in
selected categories, partially offset by prepayments and normal
paydowns. The 14 basis point decline in the net interest margin from
the second quarter of 1993 to the second quarter of 1994 was primarily
due to refinancings of higher rate loans at lower rates, maturing
higher yielding assets being replaced by lower yielding assets and the
integration of acquired banks (which generally had been operating with
lower net interest margins), partly offset by a decline in average
rates paid on interest-bearing liabilities.
Core deposits (demand deposits, savings and NOW accounts, money
market deposits and other consumer time deposits) averaged $26.8
billion in the second quarter of 1994, compared to $25.8 billion for
the same quarter of 1993. The increase was attributable to
acquisitions, partially offset by deposit run-off, which, in the
Company's view, has been moderating.
For the six months ended June 30, 1994, taxable-equivalent net
interest income was $716.3 million compared to $682.9 million for the
first six months of 1993. The increase was attributable to the
factors noted above for the second quarter. The net interest margin
declined 12 basis points from the first half of 1993 to the first half
of 1994, due to the factors noted above.
Core deposits averaged $27.0 billion in the first six months of
1994, compared to $25.4 billion for the first half of 1993. This
increase was attributable to acquisitions, partially offset by deposit
run-off, as described above.
The Company raised its prime rate to 6.75% in mid-April, 1994,
and to 7.25% in late May, 1994, in response to the rising interest
rate environment. Net interest income is expected to fluctuate as a
result of the somewhat lower net interest margin and changes in the
level of earning assets.
Non-Interest Income
- - -------------------
Non-interest income was $101.1 million for the second quarter of
1994, compared to $94.8 million for the same quarter of 1993. Service
charges on deposit accounts declined to $36.6 million in the second
quarter of 1994 from $39.9 million for the second quarter of 1993. An
increase in customers' average deposit balances resulting from the
introduction of new products in April, 1994 has reduced certain
service charges. The decline in service charges on deposit accounts
was partially offset by an increase in other service charges,
commissions and fees, reflecting increased sales of fee-generating
22 of 35
products and services. Other service charges, commissions and fees
were $25.3 million, up $3.9 million, or 18%, compared to the same
quarter in 1993, primarily as a result of increased revenues from
credit card services and commission income earned on branch-based
annuity and mutual fund sales. The $3.8 million increase in other
income resulted primarily from net gains on the sale of various
assets.
For the six months ended June 30, 1994, non-interest income was
$204.3 million compared to $183.8 million for the six months ended
June 30, 1993. Trust income increased to $54.9 million in the first
six months of 1994 from $49.7 million for the same period of 1993,
primarily as a result of acquisitions and trust marketing campaigns.
Other service charges, commissions and fees increased to $49.0 million
in the first half of 1994 from $40.1 million for the first half of
1993, largely due to the factors noted above. Other income increased
$7.5 million, primarily as a result of net gains on the sale of
various assets.
Non-Interest Expense
- - --------------------
In July, 1993, First Fidelity and Bankers Trust Company formed a
bank service corporation, Global Processing Alliance, Inc. ("GPA"),
which is primarily involved in providing check-processing and related
services, and is 50%-owned by each company. As of January, 1994, GPA
became operational and as a result, First Fidelity's check-processing
expenses, which were previously reflected in individual expense
categories (i.e., salaries and benefits, occupancy, equipment and
other expenses), are now reported in "other expenses". Total
non-interest expense increased $12.1 million, or 5%, in the second
quarter of 1994 compared to the same quarter in 1993. Salaries and
benefits expense was $118.9 million in the second quarter of 1994, an
increase of $1.9 million, or 2%, from the prior year's level for the
same quarter, primarily reflecting additional personnel expenses
associated with acquisitions. Occupancy expense increased $1.7
million, or 6%, compared to the second quarter of 1993, due primarily
to acquisitions. Other expenses for the second quarter of 1994
increased $9.1 million, or 9%, from the prior year's second quarter.
The increase in other expenses primarily resulted from the
reclassification of check-processing expenses as noted above. In
addition, there was a reduction within the other expense category
related to other real estate owned ("OREO") of $4.5 million from the
1993 second quarter, while the amortization of intangibles increased
by $2.6 million over the prior year's second quarter, to $10.0
million, due to recent acquisitions. As previously noted, the pending
acquisitions (primarily The Bank of Baltimore) are expected to result
in an increase in goodwill and the related amortization expense.
Total non-interest expense for the six months ended June 30, 1994
was $533.4 million, compared to $492.2 million for the six months
ended June 30, 1993. Salaries and benefits expense for the first half
of 1994 was $241.0 million compared to $224.9 million for the same
period in 1993. The $16.1 million, or 7%, increase largely reflects
additional staffing costs associated with recent acquisitions.
Occupancy expense increased $5.0 million, or 9%, compared to the first
half of 1993, due primarily to acquisitions. Other expenses increased
from $191.1 million for the first half of 1993 to $210.8 million for
the first six months of 1994, or 10%. The changes in other expenses
23 of 35
were composed primarily of the factors mentioned in the previous
paragraph.
Productivity continues to benefit from the progressing
integration of the banks acquired in 1993 and early 1994. First
Fidelity currently is undertaking a Company-wide effort to reduce non-
staff expenses, with a view to shifting resources from general
overhead to marketing and product initiatives. The Company also has
begun a review of its branch and ATM network with the aim of
optimizing customer convenience while maximizing the network's cost
effectiveness.
Income Taxes
- - ------------
Income taxes increased to $55.0 million in the second quarter of
1994 from $42.0 million in the second quarter of 1993. Income taxes
for the six months ended June 30, 1994 increased to $108.1 million
from $80.7 million for the six months ended June 30, 1993. The
effective tax rates for the six months ended June 30, 1994 and 1993
were 32.9% and 29.8%, respectively. For the three and six month
periods ended June 30, 1994, the increase over the corresponding
periods of 1993 resulted primarily from the higher level of pre-tax
income. Other factors affecting the increase were the higher federal
income tax rate and a lower level of tax-exempt income.
FINANCIAL CONDITION
Liquidity and Funding
- - ---------------------
During the first half of 1994, the Company continued its program
of utilizing excess liquidity by investing in new assets and by
repurchasing its Common shares in the open market. Total assets
increased by $145.7 million, from $33,763 million at December 31, 1993
to $33,908 million at June 30, 1994. Total loans increased $221.1
million, securities decreased $37.0 million, money market assets
increased by $5.7 million, cash and due from banks decreased $65.3
million and all other assets increased by $10.0 million.
Core deposits were $26.8 billion at June 30, 1994, a decrease of
$694.0 million from December 31, 1993. The decrease was primarily due
to the run-off of Certificates of Deposit, partially offset by core
deposits acquired in recent acquisitions. In addition, short-term
borrowings increased $447.4 million, all other liabilities increased
$117.5 million and long-term debt increased $199.8 million.
The Company's ratio of core deposits to total loans was 124% at
June 30, 1994, compared to 129% at December 31, 1993. The decrease
was the result of a slightly higher level of total loans and a
slightly lower level of core deposits.
In addition to core deposits and long-term debt, the Company has
other potential sources of liquidity, including its ability to enter
into repurchase agreements, primarily using investment securities as
collateral. Management believes that First Fidelity's liquidity
position continues to be more than adequate, based on its levels of
cash, cash equivalents and core deposits, the stability of its other
funding sources and the support provided by its capital base.
24 of 35
Cash and cash equivalents (cash and due from banks, interest-
bearing time deposits, federal funds sold and securities purchased
under agreements to resell) are the Company's most liquid assets. At
June 30, 1994, cash and cash equivalents were $2.8 billion, a decrease
of $59.6 million (2%) from December 31, 1993. Financing activities
absorbed $468.6 million in cash and cash equivalents. This was
primarily the result of a decline in core deposits since December 31,
1993, partly offset by an increase in short-term borrowings. In
addition, the Company increased its long-term debt during the first
half of 1994 by $199.8 million from December 31, 1993, by issuing
floating rate senior notes. Operating activities provided $506.5
million of cash and cash equivalents for the six months ended June 30,
1994. Cash and cash equivalents of $97.6 million were used in
investing activities.
As part of its management objective of maintaining essentially
neutral interest rate sensitivity, the Company employed for hedging
purposes $5.3 billion (notional value) of swaps at June 30, 1994,
compared to $4.3 billion (notional value) at December 31, 1993. First
Fidelity also increased its eurodollar futures contracts from $750
million (notional value) at December 31, 1993 to $2.4 billion
(notional value) at June 30, 1994. Such short-term contracts are an
efficient means of hedging the rollover of a portion of the Company's
short-term money market assets.
Due to the natural maturity gap structure of First Fidelity's
core balance sheet items, substantially all of the Company's interest
rate swaps and futures contracts are structured such that the Company
receives fixed rates and pays floating rates. Through this mechanism,
the Company's net interest income is essentially insensitive to
changes in interest rates within reasonable ranges (i.e., plus or
minus 200 basis points). Consequently, as the earnings contributed by
certain "on balance sheet" items increases, the contribution to net
interest income of the interest rate swaps and futures positions
decreases. Net interest income from hedging activities (interest rate
swaps and futures positions) was $26.5 million in the second quarter
of 1994, down from $36.5 million for the same period in 1993. Net
interest income from interest rate swaps and futures positions may
continue to decline for the remaining quarters of 1994.
Capital
- - -------
The Federal Reserve Board (the "FRB") measures capital adequacy
for bank holding companies on the basis of a risk-based capital
framework and a leverage ratio. The Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") established a capital-based
supervisory system of prompt corrective action for all depository
institutions. The bank regulatory agencies' implementing rule under
FDICIA defines "well capitalized" institutions (the highest possible
rating) as those whose capital ratios equal or exceed all of the
following: Tier I Risk-Based Ratio, 6.0%, Total Risk-Based Ratio,
10.0% and Tier I Leverage Ratio, 5.0%. At December 31, 1993 and June
30, 1994, the Company and all of its subsidiary banks reported capital
ratios in excess of these minimum percentages. As previously
mentioned, although the pending acquisitions will affect capital
levels, all First Fidelity companies are expected to retain their
"well capitalized" status.
25 of 35
The following table presents information regarding the Company's
risk-based capital at June 30, 1994 and December 31, 1993, calculated
using the FRB guidelines.
June 30 December 31
(thousands) 1994 1993
----------- ----------- -----------
Tier I:
Common stockholders' equity
(excluding fair value adjustment).... $ 2,618,288 $ 2,480,711
Qualifying perpetual
preferred stock...................... 230,344 230,422
Less: goodwill and other intangibles... (466,826) (412,534)
----------- -----------
Total Tier I capital............... 2,381,806 2,298,599
Tier II: ----------- -----------
Allowable portion of the reserve for
possible credit losses............... 295,448 291,878
Includable subordinated debt........... 300,000 327,350
Mandatory convertible debt securities.. 174,150 174,150
----------- -----------
Total Tier II capital.............. 769,598 793,378
----------- -----------
Total risk-based capital........... $ 3,151,404 $ 3,091,977
=========== ===========
Risk-adjusted assets..................... $23,335,689 $23,033,788
=========== ===========
Regulatory June 30 December 31
Minimums 1994 1993
---------- ---------- -----------
Tier I Capital/Risk-
Adjusted Assets................ 4.00% 10.20% 9.98%
Total Risk-based Capital/
Risk-Adjusted Assets........... 8.00% 13.50% 13.42%
Tier I Capital/Average Total
Assets less Goodwill
(Leverage Ratio)............... 3.00% 7.27% 7.22%
to 5.00%
26 of 35
Stockholders' equity at June 30, 1994 was $2,820.3 million
compared to $2,738.4 million at December 31, 1993. Changes during the
first six months of 1994 resulted from the following:
(millions)
----------
Balance, December 31, 1993.............................. $2,738.4
Net income............................................ 220.5
Common Stock issued:
Private placement--Santander exercise of warrants... 121.2
Stock options and dividend reinvestment plan........ 13.1
Other............................................... 1.6
Purchases of treasury stock........................... (144.6)
Dividends on Common and Preferred Stock............... (77.4)
Fair value adjustment--securities available for sale.. (55.6)
Other................................................. 3.1
--------
Balance, June 30, 1994.................................. $2,820.3
========
The change in unrealized gains and losses on securities
classified as available for sale was reported as a separate component
of stockholders' equity, net of taxes, as noted above.
The increase in capital ratios at June 30, 1994, compared to
December 31, 1993, was primarily due to the retention of earnings,
partially offset by a higher level of risk-adjusted assets. The
issuance of additional Common Stock was more than offset by purchases
of treasury stock. The increase in the Company's Tier I leverage
ratio from 7.22% at December 31, 1993 to 7.27% at June 30, 1994 was
due primarily to the increase in stockholders' equity, partially
offset by a higher level of quarterly average total assets.
ASSET QUALITY 27 of 35
Non-Performing Assets
- - ---------------------
Non-performing assets, which include non-accruing loans,
restructured loans, and OREO, net of the OREO reserve, were $421.6
million at June 30, 1994, compared to $494.7 million at December 31,
1993. The following table presents non-performing asset and
contractually past due loan information at June 30, 1994 and December
31, 1993 (contractually past due loan amounts are not included in
non-performing loan or non-performing asset totals).
(thousands) June 30 December 31
----------- 1994 1993
Non-performing assets (a): ---------- -----------
Non-accruing loans:
Domestic:
Real estate..................... $129,287 $184,610
Other........................... 176,208 168,487
Foreign........................... 12,225 11,913
-------- --------
Total......................... 317,720 365,010
Restructured loans.................. 8,631 13,871
-------- --------
Total Non-Performing Loans........ 326,351 378,881
Other real estate owned:
Foreclosed property............... 95,413 103,344
In-substance foreclosures......... 7,803 19,145
-------- --------
Total........................... 103,216 122,489
Less reserve...................... (8,016) (6,622)
-------- --------
Net............................. 95,200 115,867
-------- --------
Total Non-Performing Assets... $421,551 $494,748
======== ========
Contractually past due but still
accruing loans (b):
Consumer........................ $136,797 $133,112
Other........................... 5,047 8,373
Total Contractually Past Due -------- --------
But Still Accruing Loans.... $141,844 $141,485
======== ========
Non-performing loans/loans (a)........ 1.51% 1.77%
Non-performing assets/loans
and other real estate owned (a)..... 1.94% 2.30%
Reserve for possible credit losses/
non-performing loans (a)............ 181% 159%
Reserve for possible credit losses/
non-performing assets (a)........... 140% 122%
- - -----------------
(a) Non-performing assets and non-performing loans exclude loans
classified as contractually past due 90 days or more and still
accruing, assets subject to FDIC loss-sharing provisions and
assets classified as held for sale, which are included in other
assets.
(b) Accruing loans past due 90 days or more.
28 of 35
Non-performing loans were $326.4 million at June 30, 1994,
compared to $378.9 million at December 31, 1993. The decline in total
non-performing loans primarily reflected payments and charge-offs
resulting from continuing workout and collection efforts. In
addition, the Company experienced a decreased volume of loans
migrating to non-accrual status during 1994.
At June 30, 1994, OREO, net of an $8.0 million OREO reserve, was
$95.2 million compared to $115.9 million at December 31, 1993. The
June 30, 1994 balance consisted of foreclosed property of $95.4
million and in-substance foreclosures of $7.8 million.
Loans that were 90 days or more past due but still accruing
totaled $141.8 million compared to $141.5 million at December 31,
1993. Management's determination regarding the accrual of interest on
these loans is based on the availability and sufficiency of collateral
and the status of collection efforts. In the present environment,
certain of such loans could become non-performing assets or result in
charge-offs in the future.
In connection with the acquisition of assets from The Howard
Savings Bank on October 2, 1992, the Company obtained certain assets
subject to a loss-sharing arrangement with the FDIC. The Company's
total net exposure on such assets was approximately $6.6 million at
June 30, 1994, net of a $6.1 million reserve for possible losses.
The Company pursues an accelerated disposition approach for
certain assets. Such assets (classified as "assets held for sale")
decreased from $88.4 million at December 31, 1993 to $65.1 million at
June 30, 1994, despite $15.5 million of additions in the first half of
1994 related to the acquisitions of Greenwich Financial Corporation
and Rockland. Assets held for sale are carried at the lower of
adjusted cost or fair value.
Neither segregated assets nor assets held for sale are included
in the non-performing asset and contractually past due loan totals
presented above.
While the Company believes it has responded appropriately to the
current economic environment, management remains sensitive to the
evolving economic situation and its potential impact on asset quality
and the reserve for possible credit losses.
Provision and Reserve for Possible Credit Losses 29 of 35
- - ------------------------------------------------
The following table presents information regarding the Company's
provision and reserve for possible credit losses and charge-off
experience.
Three Months Ended Six Months Ended
June 30 June 30
------------------- --------------------
(thousands) 1994 1993 1994 1993
----------- -------- -------- -------- --------
Balance at beginning
of period............ $597,356 $604,179 $602,183 $610,353
Provision............. 20,000 41,000 44,000 86,000
Charge-offs........... (39,139) (61,035) (80,670) (122,493)
Recoveries............ 9,999 11,732 19,858 22,016
-------- -------- -------- --------
Net charge-offs..... (29,140) (49,303) (60,812) (100,477)
-------- -------- -------- --------
Acquired reserves..... 2,720 61,014 5,565 61,014
-------- -------- -------- --------
Balance at end of
period............... $590,936 $656,890 $590,936 $656,890
======== ======== ======== ========
At June 30, 1994, the reserve for possible credit losses was
$590.9 million, or 2.73% of total loans, compared to $602.2 million,
or 2.82% of total loans, at December 31, 1993. The reserve was 181%
of non-performing loans at June 30, 1994, compared to 159% at December
31, 1993.
The provision for possible credit losses for the second quarter
of 1994 was $20.0 million, compared to a second quarter 1993 provision
of $41.0 million. The provision for possible credit losses for the
first half of 1994 was $44.0 million, compared to $86.0 million for
the same period in 1993. The levels of the provision and reserve for
possible credit losses are based on management's ongoing assessment of
the Company's credit exposure and consideration of a number of
relevant variables. These variables include prevailing and
anticipated domestic and international economic conditions, assigned
risk ratings on credit exposures, the diversification and size of the
loan portfolio, the results of the most recent regulatory examinations
available to the Company, the current and projected financial status
and creditworthiness of borrowers, certain off balance-sheet credit
risks, the nature and level of non-performing assets and loans that
have been identified as potential problems, the adequacy of
collateral, past and expected loss experience and other factors deemed
relevant by management. The Company's risk rating system and the
quarterly reporting process for problem and vulnerable credits are
utilized by management in determining the adequacy of the Company's
reserve for possible credit losses.
Net charge-offs were $29.1 million in the second quarter of 1994,
compared to $49.3 million in the same quarter of 1993. In the second
quarter of 1994 and 1993, respectively, net charge-offs included $10.7
million and $27.4 million related to commercial borrowers, $5.8
million and $12.8 million in commercial real estate-related credits
and $12.6 million and $9.1 million of consumer credits.
Net charge-offs for the first six months of 1994 were $60.8
million, compared to $100.5 million for the same period in 1993. The
30 of 35
net charge-offs in both periods represented a broad cross-section of
the loan portfolio. In the first half of 1994 and 1993, respectively,
net charge-offs included $30.2 million and $53.0 million related to
commercial borrowers, $8.7 million and $27.6 million in commercial
real estate-related credits, and $21.9 million and $19.9 million in
consumer credits.
OREO Reserve
- - ------------
The following table sets forth information regarding the
Company's provision and reserve for OREO:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
(thousands) 1994 1993 1994 1993
----------- ------ ------- ------ -------
Balance at beginning
of period............. $6,391 $ 7,002 $6,622 $ 5,765
Provision.............. 3,000 6,000 6,250 12,800
Acquired reserves...... - 6,076 456 6,076
Charge-offs and
write-downs.......... (1,375) (5,986) (5,312) (11,549)
------ ------- ------ -------
Balance at end of
period................ $8,016 $13,092 $8,016 $13,092
====== ======= ====== =======
An OREO reserve is maintained at a level sufficient to absorb
unidentified declines in the fair value of OREO properties between
periodic appraisals, and for estimated selling costs.
31 of 35
Part II - Other Information
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Information regarding the Company's Annual Meeting of
Shareholders was provided in the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits as required by Item 601 of Regulation S-K.
(11) Statement regarding computation of per share earnings.
(28) Letter from the Company's independent accountants
referred to in Paragraph (d) of Rule 10-01 of
Regulation S-X.
(b) Reports on Form 8-K filed during the second quarter:
None.
32 of 35
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FIRST FIDELITY BANCORPORATION
Wolfgang Schoellkopf
Vice Chairman
Chief Financial Officer
Date: August 12, 1994
Anthony R. Burriesci
Executive Vice President
Corporate Controller
Date: August 12, 1994