LAWRENCEVILLE, N.J., July 13 /PRNewswire/ -- First Fidelity Bancorporation (NYSE: FFB) today reported second quarter 1993 record earnings of $97.9 million, up 28.3 percent from second quarter 1992 earnings of $76.3 million and up 5.7 percent from $92.6 million earned in the first quarter of 1993, excluding a one-time accounting gain in the first quarter of $2.4 million.
Earnings per share on a fully-diluted basis were $1.13 in the second quarter of 1993, up 21.5 percent from $.93 per share in the second quarter of 1992 and up 3.7 percent from $1.09 per share earned in the first quarter of 1993.
Pre-tax net income in the second quarter of 1993 was $139.9 million, up 44.8 percent from pre-tax net income in the prior year's period of $96.6 million, and a 6.5 percent increase from the $131.4 million earned in the previous quarter. The company's 1993 effective tax rate approximates 30 percent, compared to 21 percent for 1992.
During the second quarter First Fidelity acquired Northeast Bancorp, Inc. and its principal subsidiary, Union Trust Company, whose May and June results are included in First Fidelity's second quarter performance. Excluding Northeast, First Fidelity had continued strong net interest income, flat expenses quarter to quarter and a reduced credit loss provision, the result of improving asset quality.
"Union Trust is looking somewhat better than our original estimates and should be an excellent addition to the company," Tony Terracciano, chairman and chief executive officer, said. "We also are pleased that the trust campaigns conducted through our account relationships and through our 600-branch network continue their momentum. As we move through the second half of the year, we expect some modest increases in loan business, as well as increases in fee-based revenue."
Besides the acquisition of Northeast in the second quarter, the company also completed the purchase and assumption of the branches and $329 million in deposits of The Dime Savings Bank of N.J. On Monday, shareholders of Village Financial Services, Ltd., of Port Chester, N.Y., approved First Fidelity's acquisition of Village and its principal subsidiary the nine-branch Village Bank and the Office of the Comptroller of the Currency approved the merger of Village Bank into First Fidelity Bank, N.A., New York. Pending receipt of all regulatory approvals, the transaction is expected to close in mid-August.
During the quarter, First Fidelity announced an agreement to acquire Peoples Westchester Savings Bank, of Hawthorne, N.Y., with $1.8 billion in assets, $1.5 billion in deposits and 31 branches. This transaction, subject to regulatory and Peoples Westchester shareholder approval, is expected to close in the fourth quarter of 1993. Peoples, like Village, will be merged into First Fidelity Bank, N.A., New York, which then will have the second largest market share in Westchester County, New York.
Reflecting the initial impact of the Northeast acquisition, return on average assets (ROA) in the second quarter was 1.26 percent, compared to 1.24 percent in the previous quarter, and return on average stockholders' equity (ROE) was 16.33 percent, compared to 16.45 percent in the first quarter of 1993, excluding the one-time accounting gain of $2.4 million. Without Northeast, ROA in the second quarter would have been 1.32 percent and ROE in the quarter would have been 16.48 percent.
Net Interest Income
Taxable equivalent net interest income was $348.3 million in the second quarter, up from $334.6 million in the first quarter of 1993 and $307.2 million in the second quarter of 1992. The primary factors in the quarter-to-quarter increase were a higher level of average earning assets, largely the result of the Northeast acquisition, and an increase in the net interest margin to 4.92 percent from 4.87 percent. Without Northeast Bancorp, net interest income would have been $331.7 million.
Earning assets in the second quarter averaged $28.2 billion, compared to $27.4 billion during the first quarter and $26.6 billion in the second quarter of 1992. Loans averaged $19.3 billion compared to $18.1 billion in the first quarter, reflecting the Northeast acquisition and a modest rise in commercial loan volume. The investment securities portfolios averaged $6.7 billion, an increase of $312.4 million. These increases were partially offset by a $758.2 million decrease in short- term money market assets to $2.2 billion.
The positive impact on net interest income of higher levels of earning assets was offset somewhat by a decline in average yields. As securities mature or are prepaid, a portion of these funds is reinvested in floating rate securities that earn lower yields. Investments in floating rate securities totaled $878.0 million at June 30, 1993. During the quarter, the average yield on the taxable securities portfolio declined to 6.29 percent from the 6.76 percent earned in the first quarter of 1993. Continued refinancings of residential mortgages resulted in a decline in the average yield on mortgages to 8.27 percent from the 8.59 percent earned in the prior quarter. The impact on net interest income of these refinancings is expected to moderate in future quarters. At the same time, the average funding cost on interest- bearing liabilities in the quarter also declined to 2.97 percent from the 3.28 percent paid in the first quarter of 1993.
Demand deposit, NOW and savings accounts together averaged $12.8 billion for the period, a quarter-to-quarter increase of $524.0 million, and money market deposits averaged $4.0 billion, up $266.1 million quarter-to-quarter, all largely the result of the Northeast acquisition. Consumer time deposits averaged $8.9 billion, modestly below the first quarter level, as the continuing shift by consumers from time deposits into alternative market investments offset the deposits acquired with Northeast.
Second quarter non-interest income, excluding securities gains, totaled $94.6 million, up from $85.3 million in the first quarter of the year and $81.1 million in the second quarter of 1992. Non-interest income excluding securities gains represented 21.4 percent of total revenue, up from 20.3 percent in the first quarter of 1993. Excluding Northeast, non-interest income would have been about $87.1 million.
Trust income increased to $26.5 million from $23.2 million in the first quarter and $21.2 million in the prior year's quarter. Service charges on deposit accounts rose to $39.9 million in the second quarter from $35.8 million in the previous quarter and $34.6 million in the prior year's period. Other service charges, commissions and fees were $21.5 million, up from $18.6 million in the previous quarter and $18.8 million in the second quarter of 1992. Net securities gains were nominal--$194 thousand--in the second quarter, compared to $3.7 million in the first quarter and $1.1 million in the 1992 second quarter.
Non-interest expense was $253.8 million in the second quarter, compared to $238.3 million in the first quarter of the year and $223.4 million in the second quarter of 1992. Without Northeast, non-interest expense would have been $236.1 million, down $2.2 million from the first quarter.
Due to the initial impact of the Northeast acquisition, the efficiency ratio -- the ratio of non-interest expense to taxable equivalent operating income -- was 57.3 percent for the second quarter, compared to 56.3 percent in the first quarter. On a core basis, i.e., excluding net securities transactions and OREO (other real estate owned) expenses, the ratio was 55.3 percent in the second quarter, compared to 54.7 percent in the first quarter. Northeast's core efficiency ratio for the period was 71.5 percent.
The company took two additional steps during the quarter to enhance operating efficiency. Fidelity Bank, N.A., of Philadelphia, Merchants Bank, N.A., of Allentown, and Merchants Bank (North), of Wilkes-Barre, were consolidated into a single bank, First Fidelity Bank, N.A., Pennsylvania. This consolidation completed the establishment of single banks in each state, Connecticut, New Jersey, New York and Pennsylvania.
First Fidelity, along with Bankers Trust Company of New York, also established a bank service corporation, Global Processing Alliance, Inc., that will provide check processing and related services to itself and Bankers Trust as well as to other banks. When fully operational, the Alliance is expected to save First Fidelity about $5 million annually in check processing costs. The Alliance also is expected to generate fee income to the founders as it sells its services to other banks.
Salaries and benefits expense in the second quarter was $117.0 million, compared to $107.9 million for the first quarter and net occupancy and related expense was $26.8 million in the second quarter compared to $28.6 million in the previous quarter. Equipment expense was $10.8 million in the quarter, compared to $10.0 million in the first quarter of 1993. Other expenses, excluding OREO expense, were $90.3 million in second quarter, compared to $83.2 million in the first quarter.
The OREO provision in the second quarter was $6.0 million, down from $6.8 million in the first quarter and other expenses associated with managing OREO were $3.0 million in the second quarter of 1993, compared to $1.8 million in the previous quarter.
Non-performing loans totaled $481.9 million at June 30, 1993, compared to $461.4 million at March 31, 1993 and $596.7 million at June 30, 1992. Without the acquisition of Northeast, non-performing loans would have declined $30.7 million during the second quarter.
Net charge-offs in the quarter were $49.3 million, compared to $51.2 million in the first quarter of 1993 and $64.2 million in the second quarter of last year.
The provision for possible credit losses was $41.0 million for the second quarter, down from $45.0 million for the previous quarter and $59.0 million for the second quarter of last year. At June 30, the reserve for possible credit losses was $656.9 million, including a credit loss reserve acquired in the Northeast transaction, compared to $604.2 million at March 31 and $602.0 million at June 30 a year ago. The reserve coverage of non-performing loans rose to 136 percent, compared to 131 percent at March 31 and 101 percent at June 30, 1992.
Non-performing assets were $665.9 million at June 30, 1993, compared to $641.4 million at March 31, 1993, and $809.7 million at June 30, 1992. Without Northeast, non-performing assets would have been $598.9 million at June 30. The reserve coverage of non-performing assets rose to 99 percent from 94 percent at March 31 and 74 percent at June 30, 1992. OREO, net of the OREO reserve, was $184.0 million, compared to $180.0 million at March 31 and $213.0 million a year ago. The OREO reserve totaled $13.1 million at June 30, compared to $7.0 million at March 31, and $6.0 million at June 30, 1992. The quarter-to-quarter increase in the reserve was attributable to reserves acquired in the Northeast merger. Without Northeast, OREO, net of the OREO reserve, would have been $168.1 million at June 30.
Loans that were contractually past-due 90 days but still accruing were $147.1 million at June 30, compared to $148.0 million at March 31, and $123.2 million at June 30 a year ago. Past-due loans acquired in the Northeast acquisition were $8.8 million. Of the June 30 total, $140.3 million were consumer loans, primarily shelter loans in the process of collection.
Segregated assets, non-performing assets acquired in The Howard Savings Bank acquisition and subject to loss-sharing with the Federal Deposit Insurance Corporation (FDIC), are included in Other Assets and totaled $301.0 million at June 30, 1993. Since the FDIC assumes 80 percent of the first $130 million of losses and 95 percent thereafter on these assets, First Fidelity's risk share is $25.3 million with a special segregated loss reserve of $13.4 million.
Capital and Balance Sheet
At June 30, 1993, total stockholders' equity was $2.5 billion, compared to $2.3 billion at March 31, 1993 and $2.1 billion at June 30, 1992.
There were 78,193,836 common shares outstanding at June 30, 1993, compared to common shares issued and outstanding of 74,421,107 at March 31, 1993 and 71,110,116 common shares at June 30, 1992, respectively. The present quarterly dividend on the common stock is $.37 per share. Book value per share at June 30 was $29.08 compared to $28.23 at March 31 and $25.72 at June 30 a year earlier.
During the second quarter, the company redeemed $50 million of 11.5 percent subordinated notes and $16.24 million of 7.75 percent capital debentures and called for redemption $50 million of floating rate capital notes. It issued $150 million of 6.80 percent subordinated ten-year notes, which were subsequently swapped into floating-rate funds.
At June 30, 1993, under the revised Federal Reserve Board rule, the Tier I capital leverage ratio was 7.15 percent, compared to 6.89 percent at March 31 and 6.44 percent at June 30, 1992. The risk-adjusted Tier I capital ratio was approximately 10.42 percent and the total risk- adjusted capital ratio was approximately 14.06 percent, compared to 10.40 percent and 13.79 percent respectively at March 31, 1993, and 9.69 percent and 13.21 percent respectively at June 30, 1992.
At June 30, First Fidelity had total assets of $32.3 billion, compared with $30.5 billion at March 31 and $29.3 billion at June 30 a year ago. Total deposits at June 30 were $27.3 billion compared with $25.1 billion at March 31 and $24.1 billion at June 30, 1992. Loans at June 30 were $19.9 billion, compared with $18.5 billion at March 31 and $17.2 billion at June 30 a year earlier.
First Fidelity, one of the 25 largest banking companies in the country, operates more than 600 branch offices in its principal affiliates, Union Trust Company, of Connecticut, and the First Fidelity Banks in New Jersey, New York and Pennsylvania.
FIRST FIDELITY BANCORPORATION AND SUBSIDIARIES
(In thousands except per share)
At period end June 30 June 30 March 31
1993 1992 1993
Assets $32,323,909 $29,332,224 $30,516,129
Deposits 27,317,372 24,107,533 25,092,370
Loans 19,895,019 17,209,180 18,451,650
Reserve for possible
credit losses 656,890 602,024 604,179
Stockholders' equity 2,504,022 2,060,992 2,332,728
Reserve for possible
credit losses/loans(pct.) 3.30 3.50 3.27
Tier I leverage ratio(pct.) 7.15 6.44 6.89
Tier I capital/risk adjusted
assets(pct.) (A) 10.42 9.69 10.40
Total risk-based capital/risk
adjusted assets(pct.) (A) 14.06 13.21 13.79
Per common share:
Book value $29.08 $25.72 $28.23
Market price 49.13 37.88 48.75
For the three months June 30 June 30 March 31
ended 1993 1992 1993
Income before cumulative effect
of changes in accounting
principles $97,928 $76,344 $92,613
Cumulative effect of changes
in accounting principles,
net of tax --- --- 2,373
Net income 97,928 76,344 94,986
Per common share:
Income before cumulative effect