UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

ý                                 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2005

 

OR

 

o                                 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 0-5127

 

MERCANTILE BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

 

Maryland

 

52-0898572

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

2 Hopkins Plaza

Baltimore, Maryland 21201

(Address of principal executive offices) (Zip Code)

 

 

 

(410) 237-5900

(Registrant’s telephone number, including area code)

 

 

 

NONE

(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.  Yes ý  No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý  No o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No ý

 

 

As of October 20, 2005, 82,082,915 shares of registrant’s Common Stock, $2 par value per share, were outstanding.

 

 



 

MERCANTILE BANKSHARES CORPORATION

Quarterly Report on Form 10-Q

September 30, 2005

 

Table of Contents

 

Part I - Financial Information

 

Item 1.  Financial Statements (Unaudited)

 

 

Consolidated Balance Sheets

 

 

Consolidated Statements of Income

 

 

Consolidated Statements of Changes in Shareholders’ Equity

 

 

Consolidated Statements of Cash Flows

 

 

Notes to Consolidated Financial Statements

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Item 4. Controls and Procedures

 

 

 

Part II - Other Information

 

Item 1. Legal Proceedings

 

Item 6. Exhibits

 

 

 

Signatures

 

 

2



 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

MERCANTILE BANKSHARES CORPORATION

CONSOLIDATED BALANCE SHEETS

 

(Dollars in thousands, except per share data)

 

September 30,
2005

 

December 31,
2004

 

September 30,
2004

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

328,964

 

$

244,875

 

$

290,401

 

Interest-bearing deposits in other banks

 

200

 

158

 

158

 

Federal funds sold

 

232,129

 

101

 

24,500

 

Total cash and cash equivalents

 

561,293

 

245,134

 

315,059

 

Investment securities available-for-sale

 

3,048,846

 

2,908,694

 

2,955,674

 

Investment securities held-to-maturity fair value of $17,380 (2005), $21,094 (December 2004) and $23,000 (September 2004)

 

16,804

 

20,176

 

21,909

 

Total investment securities

 

3,065,650

 

2,928,870

 

2,977,583

 

Loans held-for-sale

 

42,307

 

11,000

 

15,984

 

Loans:

 

 

 

 

 

 

 

Commercial and leasing

 

2,925,445

 

2,866,693

 

2,841,088

 

Commercial real estate

 

3,638,238

 

3,122,701

 

3,022,463

 

Construction

 

1,543,633

 

1,268,350

 

1,170,704

 

Residential real estate

 

1,778,684

 

1,677,932

 

1,692,700

 

Home equity lines

 

520,214

 

495,462

 

473,089

 

Consumer

 

1,039,845

 

797,295

 

814,270

 

Total loans

 

11,446,059

 

10,228,433

 

10,014,314

 

Less: allowance for loan losses

 

(157,176

)

(149,002

)

(161,441

)

Loans, net

 

11,288,883

 

10,079,431

 

9,852,873

 

Bank premises and equipment, less accumulated depreciation of $147,395 (2005), $142,384 (December 2004) and $159,477 (September 2004)

 

146,615

 

139,946

 

140,411

 

Other real estate owned, net

 

777

 

212

 

388

 

Goodwill

 

670,306

 

507,791

 

507,791

 

Other intangible assets, net

 

47,485

 

48,226

 

50,391

 

Other assets

 

580,138

 

465,080

 

442,539

 

Total assets

 

$

16,403,454

 

$

14,425,690

 

$

14,303,019

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

3,329,331

 

$

3,049,031

 

$

3,167,398

 

Interest-bearing deposits

 

8,710,575

 

7,750,168

 

7,554,685

 

Total deposits

 

12,039,906

 

10,799,199

 

10,722,083

 

Short-term borrowings

 

1,266,672

 

887,857

 

923,447

 

Accrued expenses and other liabilities

 

165,398

 

129,996

 

127,534

 

Long-term debt

 

780,087

 

690,955

 

642,510

 

Total liabilities

 

14,252,063

 

12,508,007

 

12,415,574

 

 

 

 

 

 

 

 

 

COMMITMENTS and CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Preferred stock, no par value; authorized 2,000,000 shares; issued and outstanding - None

 

 

 

 

 

 

 

Common stock, $2 par value; authorized 130,000,000 shares; issued and outstanding - 82,078,721 (2005), 79,300,506 (December 2004) and 79,152,310 (September 2004)

 

164,157

 

158,601

 

158,305

 

Capital surplus

 

669,185

 

530,705

 

525,011

 

Retained earnings

 

1,343,076

 

1,231,102

 

1,198,039

 

Accumulated other comprehensive (loss) income

 

(25,027

)

(2,725

)

6,090

 

Total shareholders’ equity

 

2,151,391

 

1,917,683

 

1,887,445

 

Total liabilities and shareholders’ equity

 

$

16,403,454

 

$

14,425,690

 

$

14,303,019

 

 

See notes to consolidated financial statements

 

3



 

MERCANTILE BANKSHARES CORPORATION

STATEMENTS OF CONSOLIDATED INCOME

 

 

 

For the 9 months
ended September 30,

 

For the 3 months
ended September 30,

 

(Dollars in thousands, except per share data)

 

2005

 

2004

 

2005

 

2004

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

508,135

 

$

399,417

 

$

185,714

 

$

138,117

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

 

 

Taxable interest income

 

77,052

 

79,614

 

26,686

 

26,048

 

Tax-exempt interest income

 

2,348

 

2,500

 

839

 

803

 

Other investment income

 

1,753

 

1,157

 

526

 

472

 

Total interest and dividends on investment securities

 

81,153

 

83,271

 

28,051

 

27,323

 

Other interest income

 

1,546

 

1,089

 

760

 

449

 

Total interest income

 

590,834

 

483,777

 

214,525

 

165,889

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Interest on deposits

 

95,280

 

60,782

 

38,591

 

20,142

 

Interest on short-term borrowings

 

17,228

 

4,889

 

7,702

 

1,990

 

Interest on long-term debt

 

23,634

 

16,035

 

8,990

 

5,575

 

Total interest expense

 

136,142

 

81,706

 

55,283

 

27,707

 

NET INTEREST INCOME

 

454,692

 

402,071

 

159,242

 

138,182

 

Provision for loan losses

 

1,576

 

7,221

 

820

 

2,442

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

453,116

 

394,850

 

158,422

 

135,740

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Investment and wealth management

 

71,505

 

67,315

 

23,668

 

22,396

 

Service charges on deposit accounts

 

32,992

 

32,951

 

11,478

 

11,278

 

Mortgage banking-related fees

 

10,329

 

8,296

 

5,151

 

3,063

 

Investment securities gains and (losses)

 

458

 

534

 

(32

)

(1

)

Nonmarketable investments

 

13,683

 

7,421

 

4,190

 

2,767

 

Other income

 

52,042

 

41,684

 

18,619

 

14,418

 

Total noninterest income

 

181,009

 

158,201

 

63,074

 

53,921

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

 

 

Salaries

 

148,482

 

138,173

 

51,748

 

48,696

 

Employee benefits

 

35,490

 

33,998

 

11,637

 

10,557

 

Net occupancy expense of bank premises

 

20,918

 

18,007

 

7,139

 

6,128

 

Furniture and equipment expenses

 

23,168

 

22,873

 

7,965

 

7,936

 

Communications and supplies

 

11,992

 

12,610

 

3,933

 

4,111

 

Other expenses

 

72,398

 

60,309

 

25,960

 

21,789

 

Total noninterest expenses

 

312,448

 

285,970

 

108,382

 

99,217

 

Income before income taxes

 

321,677

 

267,081

 

113,114

 

90,444

 

Applicable income taxes

 

120,221

 

98,286

 

42,158

 

33,659

 

NET INCOME

 

$

201,456

 

$

168,795

 

$

70,956

 

$

56,785

 

NET INCOME PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

 

Basic

 

$

2.50

 

$

2.13

 

$

0.87

 

$

0.72

 

Diluted

 

$

2.48

 

$

2.11

 

$

0.86

 

$

0.71

 

DIVIDENDS PAID PER COMMON SHARE

 

$

1.11

 

$

1.03

 

$

0.38

 

$

0.35

 

 

See notes to consolidated financial statements

 

4



 

MERCANTILE BANKSHARES CORPORATION

STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY

 

For the 9 months ended September 30, 2005 and 2004

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

Common

 

Capital

 

Retained

 

Comprehensive

 

(Dollars in thousands, except per share data)

 

Total

 

Stock

 

Surplus

 

Earnings

 

Income (Loss)

 

BALANCE, DECEMBER 31, 2003

 

$

1,841,441

 

$

159,545

 

$

548,664

 

$

1,110,748

 

$

22,484

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

168,795

 

 

 

 

 

168,795

 

 

 

Unrealized losses on securities available-for-sale, net of reclassification adjustment, net of taxes

 

(16,394

)

 

 

 

 

 

 

(16,394

)

Comprehensive income

 

152,401

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

Common stock ($1.03 per share)

 

(81,601

)

 

 

 

 

(81,601

)

 

 

Issuance of 91,006 shares for dividend reinvestment and stock purchase plan

 

3,981

 

182

 

3,799

 

 

 

 

 

Issuance of 18,418 shares for employee stock purchase dividend reinvestment plan

 

822

 

37

 

785

 

 

 

 

 

Issuance of 244,698 shares for employee stock option plan

 

4,434

 

490

 

3,944

 

 

 

 

 

Directors’ deferred compensation plan:

 

 

 

 

 

 

 

 

 

 

 

Transfer opening balance

 

6,406

 

 

 

6,406

 

 

 

 

 

Contribution

 

404

 

 

 

404

 

 

 

 

 

Dividend

 

 

 

 

109

 

(109

)

 

 

Restricted stock awards:

 

 

 

 

 

 

 

 

 

 

 

Issuance of 25,483 shares

 

1,169

 

51

 

1,118

 

 

 

 

 

Deferred compensation

 

(1,385

)

 

 

 

 

(1,385

)

 

 

Amortization

 

1,591

 

 

 

 

 

1,591

 

 

 

Purchase of 1,000,000 shares under stock repurchase plan

 

(44,110

)

(2,000

)

(42,110

)

 

 

 

 

Vested stock options

 

1,892

 

 

1,892

 

 

 

BALANCE, SEPTEMBER 30, 2004

 

$

1,887,445

 

$

158,305

 

$

525,011

 

$

1,198,039

 

$

6,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, DECEMBER 31, 2004

 

$

1,917,683

 

$

158,601

 

$

530,705

 

$

1,231,102

 

$

(2,725

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

201,456

 

 

 

 

 

201,456

 

 

 

Unrealized losses on securities available-for-sale, net of reclassification adjustment, net of taxes

 

(22,302

)

 

 

 

 

 

 

(22,302

)

Comprehensive income

 

179,154

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

Common stock ($1.11 per share)

 

(89,017

)

 

 

 

 

(89,017

)

 

 

Issuance of 2,444,408 shares for bank acquisition

 

124,335

 

4,889

 

119,446

 

 

 

 

 

Fair value of 138,764 converted options related to employee stock option plan of acquired bank

 

5,182

 

 

 

5,182

 

 

 

 

 

Issuance of 82,444 shares for dividend reinvestment and stock purchase plan

 

4,098

 

165

 

3,933

 

 

 

 

 

Issuance of 17,550 shares for employee stock purchase dividend reinvestment plan

 

873

 

35

 

838

 

 

 

 

 

Issuance of 181,808 shares for employee stock option plan

 

3,664

 

364

 

3,300

 

 

 

 

 

Directors’ deferred compensation plan:

 

 

 

 

 

 

 

 

 

 

 

Issuance of 10,182 shares

 

439

 

19

 

420

 

 

 

 

 

Contribution

 

520

 

 

 

520

 

 

 

 

 

Dividend

 

 

 

 

195

 

(195

)

 

 

Restricted stock awards:

 

 

 

 

 

 

 

 

 

 

 

Issuance of 41,823 shares

 

2,211

 

84

 

2,127

 

 

 

 

 

Deferred compensation

 

(2,242

)

 

 

 

 

(2,242

)

 

 

Amortization

 

1,972

 

 

 

 

 

1,972

 

 

 

Vested stock options

 

2,519

 

 

2,519

 

 

 

BALANCE, SEPTEMBER 30, 2005

 

$

2,151,391

 

$

164,157

 

$

669,185

 

$

1,343,076

 

$

(25,027

)

 

See notes to consolidated financial statements

 

5



 

MERCANTILE BANKSHARES CORPORATION

STATEMENTS OF CONSOLIDATED CASH FLOW

 

Increase (decrease) in cash and cash equivalents

 

For the 9 months ended September 30,

 

(Dollars in thousands)

 

2005

 

2004

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

201,456

 

$

168,795

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for loan losses

 

1,576

 

7,221

 

Depreciation

 

11,581

 

11,732

 

Amortization of other intangible assets

 

6,482

 

6,132

 

Write-downs of other real estate owned

 

1

 

14

 

Gains on sales of other real estate owned

 

(153

)

(119

)

Gains on sales of investments securities

 

(458

)

(534

)

Gains on sales of premises

 

(4,341

)

(1,620

)

Loans held-for-sale

 

(31,307

)

(1,059

)

Net (increase) decrease in assets:

 

 

 

 

 

Interest receivable

 

(9,332

)

(3,049

)

Nonmarketable investments

 

11,912

 

(4,367

)

Other assets

 

(80

)

4,690

 

Net increase (decrease) in liabilities:

 

 

 

 

 

Interest payable

 

13,710

 

5,031

 

Other liabilities

 

(10,811

)

(1,000

)

Net cash provided by operating activities

 

190,236

 

191,867

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Proceeds from maturities of investment securities held-to-maturity

 

3,372

 

8,199

 

Proceeds from maturities of investment securities available-for-sale

 

655,641

 

727,003

 

Proceeds from sales of investment securities available-for-sale

 

121,207

 

47,182

 

Purchases of investment securities held-to-maturity

 

 

(8,441

)

Purchases of investment securities available-for-sale

 

(782,084

)

(707,120

)

Net increase in customer loans

 

(551,290

)

(745,923

)

Proceeds from sales of other real estate owned

 

273

 

181

 

Capital expenditures

 

(12,878

)

(9,021

)

Proceeds from sales of premises

 

7,981

 

3,813

 

Business acquisitions (net of cash received)

 

(78,655

)

 

Purchase of nonmarketable investments

 

(57,105

)

(5,119

)

Net cash used in investing activities

 

(693,538

)

(689,246

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Net increase in noninterest-bearing deposits

 

172,450

 

416,677

 

Net increase in interest-bearing deposits

 

442,943

 

42,853

 

Net increase in short-term borrowings

 

369,109

 

114,426

 

Repayment of long-term debt

 

(84,659

)

(7,745

)

Proceeds from issuance of shares

 

8,635

 

9,237

 

Repurchase of common shares

 

 

(44,110

)

Dividends paid

 

(89,017

)

(81,601

)

Net cash provided by financing activities

 

819,461

 

449,737

 

Net increase in cash and cash equivalents

 

316,159

 

(47,642

)

Cash and cash equivalents at beginning of period

 

245,134

 

362,701

 

Cash and cash equivalents at end of period

 

$

561,293

 

$

315,059

 

SUPPLEMENTAL INFORMATION

 

 

 

 

 

Cash payments for interest

 

$

121,081

 

$

76,651

 

Cash payments for income taxes

 

133,745

 

100,098

 

 

See notes to consolidated financial statements

 

6



 

MERCANTILE BANKSHARES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. Basis of Presentation

 

The consolidated financial statements, which include the accounts of Mercantile Bankshares Corporation (“Bankshares”) (Nasdaq: MRBK) and all of its affiliates, are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practice within the banking industry.  In the opinion of management, the consolidated financial statements include all adjustments necessary for a fair presentation of the interim period.  These adjustments are of a normal nature and include adjustments to eliminate all significant intercompany transactions.  In view of the changing conditions in the national economy, the effect of actions taken by regulatory authorities and normal seasonal factors, the results for the interim period are not necessarily indicative of annual performance.  For comparability, certain prior period amounts have been reclassified to conform with current period presentation.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities in the financial statements, and the disclosure of revenue and expenses during the reporting period.  These assumptions are based on information available as of the date of the financial statements and could differ from actual results.  See Annual Report on Form 10-K for more detail.

 

2. Business Combinations / Restructuring

 

The following provides information concerning acquisitions and restructuring. Acquisitions are accounted for as purchases with the results of their operations subsequent to the acquisition date included in Bankshares’ Statements of Consolidated Income.

 

On May 18, 2005, Bankshares completed its acquisition of Community Bank of Northern Virginia (“CBNV”), a bank headquartered in Sterling, Virginia, which was merged into Mercantile-Safe Deposit & Trust Company.  CBNV operated fourteen branch offices in the Northern Virginia metropolitan market at the time of the acquisition. The primary reason for the merger with CBNV was to expand Bankshares’ distribution network in Northern Virginia, a higher growth market. The total consideration paid to CBNV shareholders in connection with the acquisition was $82.9 million in cash and 2.4 million shares of Bankshares’ common stock.  CBNV transactions have been included in Bankshares’ financial results subsequent to May 18, 2005.  The assets and liabilities of CBNV were recorded on the Consolidated Balance Sheet at their respective fair values. The fair values have been determined as of May 18, 2005 and are subject to refinement, as further information becomes available. The transaction resulted in total assets acquired as of May 18, 2005 of  $888.2 million, including $671.0 million of loans and leases; liabilities assumed were $842.3 million, including $626.9 million of deposits. Additionally, Bankshares recorded $162.5 million of goodwill and $4.6 million of core deposit intangible (“CDI”).  CDI are subject to amortization and are being amortized over nine years on a straight-line basis.

 

Bankshares’ exit costs, referred to herein as “merger-related” costs, are defined to include those costs for its branch closings and related severance, combining operations such as systems conversions, and printing/mailing costs incurred by Bankshares prior to and after the merger date and are included in Bankshares’ results of operations.  Bankshares expensed merger-related costs totaling $743 thousand and $1.1 million for the three and nine-month periods ended September 30, 2005, respectively. The costs associated with these activities are included in noninterest expenses. Merger-related expenses incurred year to date consisted largely of expenses for systems conversion costs. Bankshares will incur additional merger-related expenses in the fourth quarter as systems conversions, branch closings and integration of operations continue and these expenses will be reflected when incurred. Prior to the merger, CBNV recorded exit costs of $9.7 million relating to severance, system conversions, branch consolidations and costs associated with terminating contracts. At September 30, 2005, $810 thousand remained unpaid, which was primarily made up of severance and contract write-offs.

 

In the second quarter of 2005, Bankshares consolidated Fidelity Bank into Farmers & Mechanics Bank. The consolidation of these banks allows the surviving bank to serve its local customers with greater scale and expertise. Also, in the second quarter of 2005, Mercantile Potomac Bank merged into Mercantile-Safe Deposit and Trust Company. This combination allows Bankshares to provide the resources necessary for greater expansion into the Washington, D.C. and Northern Virginia markets.

 

7



 

3. Earnings Per Share

 

Basic earnings per share (“EPS”) is computed by dividing income available to common shareholders by weighted average common shares outstanding.  Diluted EPS is computed using the same components as basic EPS with the denominator adjusted for the dilutive effect of stock awards.  The following tables provide reconciliation between the computation of basic EPS and diluted EPS for the nine months and quarters ended September 30, 2005 and 2004, respectively.

 

 

 

For the 9 months ended September 30,

 

 

 

2005

 

2004

 

 

 

Net

 

Weighted Average

 

 

 

Net

 

Weighted Average

 

 

 

(In thousands, except per share data)

 

Income

 

Common Shares

 

EPS

 

Income

 

Common Shares

 

EPS

 

Basic EPS

 

$

201,456

 

80,545

 

$

2.50

 

$

168,795

 

79,269

 

$

2.13

 

Dilutive effect of:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted stock awards

 

 

 

499

 

 

 

 

 

489

 

 

 

Directors deferred compensation plan shares

 

 

 

172

 

 

 

 

 

101

 

 

 

Diluted EPS

 

$

201,456

 

81,216

 

$

2.48

 

$

168,795

 

79,859

 

$

2.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 3 months ended September 30,

 

 

 

2005

 

2004

 

 

 

Net

 

Weighted Average

 

 

 

Net

 

Weighted Average

 

 

 

(In thousands, except per share data)

 

Income

 

Common Shares

 

EPS

 

Income

 

Common Shares

 

EPS

 

Basic EPS

 

$

70,956

 

81,865

 

$

0.87

 

$

56,785

 

78,965

 

$

0.72

 

Dilutive effect of:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted stock awards

 

 

 

594

 

 

 

 

 

491

 

 

 

Directors deferred compensation plan shares

 

 

 

176

 

 

 

 

 

155

 

 

 

Diluted EPS

 

$

70,956

 

82,635

 

$

0.86

 

$

56,785

 

79,611

 

$

0.71

 

 

There were no antidilutive options and awards excluded from the computation of diluted earnings per share for the nine months or the three months ended September 30,2005. Antidilutive options and awards excluded from the computation of diluted earnings per share were 526,465 for the nine months ended September 30, 2004 and 57,388 for the third quarter of 2004.

 

4. Investment Securities

 

At September 30, 2005 and December 31, 2004, securities with an amortized cost of $1.3 billion and $1.1 billion, respectively, were pledged as collateral for certain deposits as required by regulatory guidelines. The following table shows amortized cost and fair value of investment securities at September 30, 2005 and December 31, 2004.

 

 

 

September 30, 2005

 

December 31, 2004

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(Dollars in thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

Investment securities held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions

 

$

16,804

 

$

593

 

$

17

 

$

17,380

 

$

20,176

 

$

921

 

$

3

 

$

21,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

449,820

 

$

160

 

$

2,869

 

$

447,111

 

$

605,505

 

$

4,534

 

$

980

 

$

609,059

 

U.S. Government agencies

 

983,701

 

449

 

11,860

 

972,290

 

853,930

 

3,742

 

4,699

 

852,973

 

Mortgage-backed securities

 

1,518,517

 

971

 

27,869

 

1,491,619

 

1,326,056

 

4,372

 

13,127

 

1,317,301

 

States and political subdivisions

 

75,446

 

461

 

102

 

75,805

 

61,984

 

917

 

31

 

62,870

 

Other investments

 

61,185

 

1,029

 

193

 

62,021

 

65,323

 

1,294

 

126

 

66,491

 

Total

 

$

3,088,669

 

$

3,070

 

$

42,893

 

$

3,048,846

 

$

2,912,798

 

$

14,859

 

$

18,963

 

$

2,908,694

 

 

8



 

The following table shows the unrealized gross losses and fair value of securities in the securities available-for-sale portfolio at September 30, 2005, by length of time that individual securities in each category have been in a continuous loss position.

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

Gross

 

 

 

Gross

 

 

 

Gross

 

 

 

 

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

(Dollars in thousands)

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

U.S. Treasury

 

$

1,862

 

$

393,080

 

$

1,007

 

$

54,031

 

$

2,869

 

$

447,111

 

U.S. Government agencies

 

6,310

 

636,279

 

5,550

 

336,011

 

11,860

 

972,290

 

Mortgage-backed securities

 

13,350

 

1,123,270

 

14,519

 

368,349

 

27,869

 

1,491,619

 

States and political subdivisions

 

98

 

73,777

 

4

 

2,028

 

102

 

75,805

 

Other investments

 

193

 

62,021

 

 

 

193

 

62,021

 

Total bonds

 

$

21,813

 

$

2,288,427

 

$

21,080

 

$

760,419

 

$

42,893

 

$

3,048,846

 

 

At September 30, 2005, there were $760.4 million of individual securities that had unrealized losses for a period greater than 12 months. At September 30, 2005, these securities had an unrealized loss of $21.1 million of which 68.9% were mortgage-backed securities. Management has assessed the impairment of these securities and determined that the impairment is temporary. All principal and interest payments on available-for-sale debt securities in an unrealized loss position for greater than 12 months are expected to be collected given the high credit quality of the U.S. government agency debt securities and Bankshares’ ability and intent to hold the securities. Because the declines in fair value were due to changes in market interest rates, not in estimated cash flows, no other-than-temporary impairment was recorded at September 30, 2005.

 

5. Impaired Loans

 

When scheduled principal or interest payments are past due 90 days or more at quarter-end on any loan, the accrual of interest income is discontinued and subsequent receipts on these loans are recorded as a reduction of principal, and interest income is recorded only once principal recovery is reasonably assured. Previously accrued but uncollected interest on these loans is charged against interest income. Generally, a loan may be restored to accruing status when all past due principal, interest and late charges have been paid and the bank expects repayment of the remaining contractual principal and interest on a timely basis.

 

Under Statements of Financial Accounting Standards (SFAS) Nos. 114 and 118, “Accounting by Creditors for Impairment of a Loan-an amendment of FASB Statements Nos. 5 and 15,” a loan is considered impaired, based on current information and events, if it is probable that Bankshares will not collect all principal and interest payments according to the contractual terms of the loan agreement. The impairment of a loan is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the repayment is expected to be provided predominantly by the underlying collateral. Information with respect to impaired loans and the related valuation allowance (if the measure of the impaired loan is less than the recorded investment) at September 30, 2005, December 31, 2004 and September 30, 2004 is shown below.  See Annual Report on Form 10-K for more detail.

 

 

 

September 30,

 

December 31,

 

September 30,

 

(Dollars in thousands)

 

2005

 

2004

 

2004

 

Impaired loans with a specific valuation allowance

 

$

15,579

 

$

18,365

 

$

25,045

 

All other impaired loans

 

9,103

 

9,113

 

10,306

 

Total impaired loans

 

$

24,682

 

$

27,478

 

$

35,351

 

 

 

 

 

 

 

 

 

Specific allowance for loan losses applicable to impaired loans

 

$

8,671

 

$

10,611

 

$

14,499

 

General allowance for loan losses applicable to other than impaired loans

 

148,505

 

138,391

 

146,942

 

Total allowance for loan losses

 

$

157,176

 

$

149,002

 

$

161,441

 

 

 

 

 

 

 

 

 

Year-to-date interest income on impaired loans recorded on the cash basis

 

$

114

 

$

379

 

$

300

 

Year-to-date average recorded investment in impaired loans during the period

 

$

27,332

 

$

39,025

 

$

40,172

 

Quarter-to-date interest income on impaired loans recorded on the cash basis

 

$

61

 

$

79

 

$

88

 

Quarter-to-date average recorded investment in impaired loans during the period

 

$

26,223

 

$

35,583

 

$

38,285

 

 

9



 

Note: Impaired loans do not include large groups of smaller balance homogeneous loans that are evaluated collectively for impairment (e.g., residential mortgages and consumer installment loans).  The allowance for loan losses related to these loans is included in the general allowance for loan losses applicable to other than impaired loans.

 

On May 18, 2005, Bankshares acquired approximately $671.0 million in loans as part of the CBNV acquisition. At acquisition, CBNV had $7.4 million in an allowance for loan losses of which $7.1 million was carried over to Bankshares in accordance with SFAS No. 141, “Business Combinations,” for those loans that do not fall within the scope of the American Institute of Certified Public Accountants issued Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer.” Under SOP 03-3, Bankshares determined that certain loans acquired in the CBNV acquisition displayed evidence of deterioration of credit quality since their origination for which it was probable that all contractual payments would not be collected. Bankshares determined two commercial real estate loans totaling $4.9 million were within the scope of SOP 03-3. The carrying value and accretable yields of these loans as of September 30, 2005 are shown below.

 

 

 

September 30,

 

(Dollars in thousands)

 

2005

 

Commercial real estate

 

$

4,887

 

Total

 

$

4,887

 

 

 

 

 

Carrying amount

 

$

3,509

 

 

 

 

 

 

 

Accretable
yield

 

Balance at June 30, 2005

 

$

634

 

Additions

 

 

Accretions

 

(96

)

Disposals

 

 

Balance at September 30, 2005

 

$

538

 

 

6. Commitments & Contingencies

 

Bankshares is a party to financial instruments that are not reflected in the balance sheet, which include commitments to extend credit and standby letters of credit. Various commitments to extend credit (lines of credit) are made in the normal course of banking business. Letters of credit are issued for the benefit of customers by affiliated banks. These commitments are subject to loan underwriting standards and geographic boundaries consistent with Bankshares’ loans outstanding. Bankshares’ lending activities are concentrated in Maryland, Delaware and Virginia.

 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Total commitments to extend credit were $4.6 billion at September 30, 2005, $4.2 billion at December 31, 2004, and $4.1 billion at September 30, 2004.

 

Letters of credit are commitments issued to guarantee the performance of a customer to a third party. Outstanding letters of credit were $506.8 million at September 30, 2005, $379.8 million at December 31, 2004 and $347.5 million at September 30, 2004.  Fees received for issuing letters of credit are deferred and amortized over the life of the commitment.  The unamortized fees on letters of credit had a carrying value of $1.7 million at September 30, 2005, and $1.3 million at both December 31, 2004 and September 30, 2004.

 

Bankshares’ mortgage banking subsidiary is a Fannie Mae Delegated Underwriting and Servicing lender and has a loss sharing arrangement for loans originated on behalf of and sold to Fannie Mae.  The unamortized principal balance of the underlying loans totaled $237.2 million, $190.7 million and $191.7 million at September 30, 2005, December 31, 2004 and September 30, 2004, respectively.  A minimal loss reserve has been established for potential losses on loans originated and sold in the secondary market at September 30, 2005.  The mortgage subsidiary also has originated and sold loans with recourse in the event of foreclosure on the underlying real estate.  The unamortized amount of principal balance of loans sold with recourse totaled $1.3 million at September 30, 2005, $1.7 million at December 31, 2004 and $1.8 million at September 30, 2004.  These mortgages are generally in good standing, are well-collateralized and no loss has ensued and no future loss is expected.

 

Bankshares has committed to invest funds in third-party private equity funds. At both September 30, 2005 and December 31, 2004, $28.1 million remained unfunded, and at September 30, 2004, $21.9 million remained unfunded.

 

10



 

In the ordinary course of business, Bankshares and its subsidiaries are involved in a number of pending and threatened legal actions and proceedings. In certain of these actions and proceedings, claims for substantial monetary damages are asserted against Bankshares and its subsidiaries. In view of the inherent difficulty of predicting the outcome of such matters, Bankshares cannot state what the eventual outcome of pending matters will be. However, based on current knowledge, management does not believe that liabilities, if any, arising from pending litigation matters, will have a material adverse effect on the consolidated financial position, earnings or liquidity of Bankshares. If payment associated with a claim becomes probable and the cost can be reasonably estimated, a contingent liability would be established based on information currently available, advice of counsel and available insurance coverage.

 

Between 2001 and 2003, on behalf of either individual plaintiffs or a putative class of plaintiffs, eight separate actions were filed in state and federal court against Community Bank of Northern Virginia (“CBNV”) and other defendants challenging the validity of second mortgage loans the defendants made to the plaintiffs.  All of the cases were either filed in or removed to the federal district court for the Western District of Pennsylvania.  In June 2003, the parties to the various actions informed the court that they had reached an agreement in principle to settle the various actions.  On July 17, 2003, the court conditionally certified a class for settlement purposes, preliminarily approved the class settlement, and directed the issuance of notice to the class.

 

Thereafter, certain plaintiffs who had initially opted out of the proposed settlement and other objectors challenged the validity of the settlement in the district court.  The district court denied their arguments and approved the settlement.  These “opt out” plaintiffs and other objectors appealed the district court’s approval of the settlement to the Third Circuit Court of Appeals.  In August 2005, the Third Circuit reversed the district court’s approval of the settlement and remanded the case back to the district court with instructions to consider and address certain specific issues when re-evaluating the settlement. Certain individuals who were excluded from the settlement class have filed two actions on behalf of a putative class of plaintiffs alleging claims similar to those raised in the initial filing.  These actions recently were consolidated in the Western District of Pennsylvania.  Bankshares believes these actions are without merit and intends to defend the actions vigorously.

 

The contingency, which is estimable and probable, was incorporated in determining the fair value of the liability assumed at the acquisition of CBNV.

 

7. Goodwill and Other Intangible Assets

 

Bankshares’ Consolidated Balance Sheet included goodwill of $670.3 million at September 30, 2005 and $507.8 million at December 31, 2004. In 2005, Bankshares recorded $162.5 million in goodwill and $4.6 million in estimated core deposit intangible in connection with the CBNV acquisition, which was allocated to Bankshares’ banking segment. The core deposit intangible from CBNV is being amortized over a weighted average remaining useful life of nine years on a straight line basis.

 

The following table discloses the gross carrying amount and accumulated amortization of intangible assets subject to amortization at September 30, 2005 and December 31, 2004.

 

 

 

September 30, 2005

 

December 31, 2004

 

 

 

Gross Carrying

 

Accumulated

 

Net

 

Gross Carrying

 

Accumulated

 

Net

 

(Dollars in thousands)

 

Amount

 

Amortization

 

Amount

 

Amount

 

Amortization

 

Amount

 

Core deposits

 

$

54,509

 

$

(19,303

)

$

35,206

 

$

49,881

 

$

(15,014

)

$

34,867

 

Mortgage servicing

 

2,483

 

(1,253

)

1,230

 

1,370

 

(1,013

)

357

 

Customer lists and other

 

17,010

 

(5,961

)

11,049

 

17,010

 

(4,008

)

13,002

 

Total

 

$

74,002

 

$

(26,517

)

$

47,485

 

$

68,261

 

$

(20,035

)

$

48,226

 

 

Identifiable intangible assets are amortized based on estimated lives of up to 15 years.  Management reviews other intangible assets for impairment yearly, or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  For those intangible assets subject to amortization, impairment is indicated if the sum of undiscounted estimated future net cash flows is less than the carrying amount of the asset.  Impairment is recognized by writing down the carrying value or adjusting the estimated life of the asset.  Any impairment recognized in a valuation account is reflected in the income statement in the corresponding period.

 

11



 

The following table shows the current period and estimated future amortization expense for amortized intangible assets. The projections of amortization expense shown for mortgage servicing rights are based on asset balances and the interest rate environment as of September 30, 2005. Future amortization expense may be significantly different depending upon changes in the mortgage servicing portfolio, mortgage interest rates and market conditions.

 

 

 

Core

 

Mortgage

 

Customer Lists

 

 

 

(Dollars in thousands)

 

Deposits

 

Servicing

 

and Other

 

Total

 

Nine months ended September 30, 2005 (actual)

 

$

4,289

 

$

240

 

$

1,953

 

$

6,482

 

Three months ended December 31, 2005 (estimated)

 

1,494

 

68

 

646

 

2,208

 

Twelve months ended December 31, 2005 (estimated)

 

5,783

 

308

 

2,599

 

8,690

 

 

 

 

 

 

 

 

 

 

 

Estimate for year ended December 31,

2006

 

5,974

 

228

 

2,343

 

8,545

 

 

2007

 

5,716

 

182

 

2,149

 

8,047

 

 

2008

 

4,796

 

163

 

1,968

 

6,927

 

 

2009

 

4,527

 

152

 

1,028

 

5,707

 

 

8. Comprehensive Income

 

The following table summarizes the market value change and related tax effect of unrealized gains (losses) on securities available-for-sale for the nine months and quarter ended September 30, 2005 and 2004.  The net amount is included in accumulated other comprehensive income (loss) in the Statements of Changes in Consolidated Shareholders’ Equity.

 

 

 

For the 9 months ended September 30,

 

 

 

2005

 

2004

 

 

 

 

 

Tax

 

 

 

 

 

Tax

 

 

 

 

 

Pretax

 

(Expense)

 

Net

 

Pretax

 

(Expense)

 

Net

 

(Dollars in thousands)

 

Amount

 

Benefit

 

Amount

 

Amount

 

Benefit

 

Amount

 

Net Income

 

 

 

 

 

$

201,456

 

 

 

 

 

$

168,795

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

 

(35,258

)

13,234

 

(22,024

)

(25,865

)

9,794

 

(16,071

)

Reclassification adjustment for (gains) losses included in net income

 

(458

)

180

 

(278

)

(534

)

211

 

(323

)

Total other comprehensive (losses) income

 

(35,716

)

13,414

 

(22,302

)

(26,399

)

10,005

 

(16,394

)

Total comprehensive income

 

 

 

 

 

$

179,154

 

 

 

 

 

$

152,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the 3 months ended September 30,

 

 

 

2005

 

2004

 

 

 

 

 

Tax

 

 

 

 

 

Tax

 

 

 

 

 

Pretax

 

(Expense)

 

Net

 

Pretax

 

(Expense)

 

Net

 

(Dollars in thousands)

 

Amount

 

Benefit

 

Amount

 

Amount

 

Benefit

 

Amount

 

Net Income

 

 

 

 

 

$

70,956

 

 

 

 

 

$

56,785

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

 

(22,781

)

8,459

 

(14,322

)

22,395

 

(8,205

)

14,190

 

Reclassification adjustment for (gains) losses included in net income

 

32

 

(13

)

19

 

1

 

 

1

 

Total other comprehensive (losses) income

 

(22,749

)

8,446

 

(14,303

)

22,396

 

(8,205

)

14,191

 

Total comprehensive income

 

 

 

 

 

$

56,653

 

 

 

 

 

$

70,976

 

 

12



 

9. Capital Adequacy

 

Bankshares and its bank affiliates are subject to various regulatory capital adequacy requirements administered by federal and state banking agencies.  These requirements include maintaining certain capital ratios above minimum levels.  These capital ratios include tier I capital and total risk-based capital as percentages of net risk-weighted assets and tier I capital as a percentage of adjusted average total assets (leverage ratio).  The minimum ratios for capital adequacy purposes are 4.00%, 8.00% and 4.00%, for the tier I capital, total capital and leverage ratios, respectively.  To be categorized as well capitalized, a bank must maintain minimum ratios of 6.00%, 10.00% and 5.00%, for its tier I capital, total capital and leverage ratios, respectively.  As of September 30, 2005, Bankshares and all of its bank affiliates exceeded all capital adequacy requirements to be considered well capitalized.

 

Capital ratios and the amounts used to calculate them are presented in the following table for Bankshares and Mercantile-Safe Deposit & Trust Company (MSD&T), the lead bank, as of September 30, 2005 and December 31, 2004. The September 30, 2005 MSD&T capital ratios reflect the impact of the consolidation of Mercantile Potomac Bank into MSD&T and the acquisition of CBNV.

 

 

 

September 30, 2005

 

December 31, 2004

 

(Dollars in thousands)

 

Bankshares

 

MSD&T

 

Bankshares

 

MSD&T

 

 

 

 

 

 

 

 

 

 

 

Tier I capital

 

$

1,466,362

 

$

484,906

 

$

1,370,112

 

$

411,587

 

Total risk-based capital

 

1,925,034

 

598,665

 

1,802,520

 

459,812

 

Net risk-weighted assets

 

12,670,868

 

5,712,306

 

11,109,137

 

3,847,161

 

Adjusted average total assets

 

15,278,974

 

6,747,264

 

13,674,386

 

4,504,451

 

 

 

 

 

 

 

 

 

 

 

Tier I capital ratio

 

11.57

%

8.49

%

12.33

%

10.70

%

Total capital ratio

 

15.19

%

10.48

%

16.23

%

11.95

%

Leverage ratio

 

9.60

%

7.19

%

10.02

%

9.14

%

 

Bankshares has an ongoing share repurchase program.  Purchases may be made from time to time, subject to regulatory requirements, in open market or in privately negotiated transactions. Purchased shares are retired. At September 30, 2005, there were 476,327 shares remaining available for repurchase under the plan.

 

10. Segment Reporting

 

Operating segments as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, are components of an enterprise with separate financial information.  The component engages in business activities from which it derives revenues and incurs expenses and the operating results of which management relies on for decision-making and performance assessment. Bankshares has two reportable segments – Banking and Investment and Wealth Management  (“IWM”).

 

The following tables present selected segment information for the three and nine months ended September 30, 2005 and 2004. The components in the “Other” column consist of amounts for the nonbank affiliates, unallocated corporate expenses including income taxes and intercompany eliminations. Certain expense amounts such as operations overhead have been reclassified in order to provide for full cost absorption. These reclassifications are shown on the “Adjustments” line.  Results of the CBNV acquisition have been included in the “Banking” column from its acquisition date in the second quarter of 2005.

 

 

 

For the 9 months ended September 30, 2005

 

For the 9 months ended September 30, 2004

 

(Dollars in thousands)

 

Banking

 

IWM

 

Other

 

Total

 

Banking

 

IWM

 

Other

 

Total

 

Net interest income

 

$

455,013

 

$

 

$

(321

)

$

454,692

 

$

401,781

 

$

 

$

290

 

$

402,071

 

Provision for loan losses

 

(1,576

)

 

 

(1,576

)

(7,221

)

 

 

(7,221

)

Noninterest income

 

98,733

 

71,635

 

10,641

 

181,009

 

85,650

 

67,548

 

5,003

 

158,201

 

Noninterest expenses

 

(254,629

)

(52,784

)

(5,035

)

(312,448

)

(233,583

)

(50,748

)

(1,639

)

(285,970

)

Adjustments

 

14,261

 

(2,598

)

(11,663

)

 

14,251

 

(3,070

)

(11,181

)

 

Income (loss) before income taxes

 

311,802

 

16,253

 

(6,378

)

321,677

 

260,878

 

13,730

 

(7,527

)

267,081

 

Income tax (expense) benefit

 

(108,707

)

(6,501

)

(5,013

)

(120,221

)

(90,979

)

(5,492

)

(1,815

)

(98,286

)

Net income (loss)

 

$

203,095

 

$

9,752

 

$

(11,391

)

$

201,456

 

$

169,899

 

$

8,238

 

$

(9,342

)

$

168,795

 

Average loans

 

$

10,871,333

 

 

 

$

391

 

$

10,871,724

 

$

9,596,686

 

 

 

$

189

 

$

9,596,875

 

Average earning assets

 

13,850,301

 

 

 

5,328

 

13,855,629

 

12,595,524

 

 

 

28,040

 

12,623,564

 

Average assets

 

15,131,318

 

 

 

143,413

 

15,274,731

 

13,335,183

 

 

 

550,375

 

13,885,558

 

Average deposits

 

11,465,466

 

 

 

(213,685

)

11,251,781

 

10,400,049

 

 

 

(75,173

)

10,324,876

 

Average equity

 

1,899,294

 

 

 

158,830

 

2,058,124

 

1,380,857

 

 

 

477,720

 

1,858,577

 

 

13



 

 

 

For the 3 months ended September 30, 2005

 

For the 3 months ended September 30, 2004

 

(Dollars in thousands)

 

Banking

 

IWM

 

Other

 

Total

 

Banking

 

IWM

 

Other

 

Total

 

Net interest income

 

$

159,347

 

$

 

$

(105

)

$

159,242

 

$

138,041

 

$

 

$

141

 

$

138,182

 

Provision for loan losses

 

(820

)

 

 

(820

)

(2,442

)

 

 

(2,442

)

Noninterest income

 

36,254

 

23,794

 

3,026

 

63,074

 

29,496

 

22,319

 

2,106

 

53,921

 

Noninterest expenses

 

(90,009

)

(17,481

)

(892

)

(108,382

)

(80,819

)

(16,939

)

(1,459

)

(99,217

)

Adjustments

 

6,161

 

(1,155

)

(5,006

)

 

5,865

 

(1,144

)

(4,721

)

 

Income (loss) before income taxes

 

110,933

 

5,158

 

(2,977

)

113,114

 

90,141

 

4,236

 

(3,933

)

90,444

 

Income tax (expense) benefit

 

(38,784

)

(2,063

)

(1,311

)

(42,158

)

(30,997

)

(1,695

)

(967

)

(33,659

)

Net income (loss)

 

$

72,149

 

$

3,095

 

$

(4,288

)

$

70,956

 

$

59,144

 

$

2,541

 

$

(4,900

)

$

56,785

 

Average loans

 

$

11,389,356

 

 

 

$

375

 

$

11,389,731

 

$

9,825,607