FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2003
OR
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-31251
BANKNORTH GROUP, INC.
| Maine | 01-0437984 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| Two Portland Square, Portland, Maine | 04112 | |
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| (Address of principal executive offices) | (Zip Code) |
(207) 761-8500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
The number of shares outstanding of the Registrant’s common stock and related stock purchase rights as of April 30, 2003 is:
| Common stock, par value $.01 per share | 162,610,564 | |||
| (Class) | (Outstanding) |
Available on the Web @ www.banknorth.com
INDEX
BANKNORTH GROUP, INC. AND SUBSIDIARIES
| PAGE | ||||||
PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Consolidated Balance Sheets
March 31, 2003 and December 31, 2002 |
3 | |||||
Consolidated
Statements of Income — Three months ended
March 31, 2003 and 2002 |
4 | |||||
Consolidated Statements of Changes in Shareholders’ Equity — Three months ended March 31, 2003 and 2002 |
5 | |||||
Consolidated Statements of Cash Flows — Three months ended March 31, 2003 and 2002 |
6 | |||||
Notes to Consolidated Financial Statements |
7 | |||||
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
14 | |||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
38 | |||||
Item 4. Controls and Procedures |
38 | |||||
PART II. OTHER INFORMATION |
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Item 1. Legal proceedings |
39 | |||||
Item 2. Changes in securities and use of proceeds |
39 | |||||
Item 3. Defaults upon senior securities |
39 | |||||
Item 4. Submission of matters to a vote of security holders |
39 | |||||
Item 5. Other information |
39 | |||||
Item 6. Exhibits and reports on Form 8-K |
39 | |||||
Signatures |
40 | |||||
Section 302 Certification of the Chief Executive Officer |
41 | |||||
Section 302 Certification of the Chief Financial Officer |
42 | |||||
Exhibits |
43 | |||||
2
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| March 31, 2003 | December 31, 2002 | |||||||||||
Assets |
||||||||||||
Cash and due from banks |
$ | 604,779 | $ | 690,250 | ||||||||
Federal funds sold and other short term investments |
2,838 | 79,753 | ||||||||||
Securities available for sale, at market value |
7,674,151 | 6,731,467 | ||||||||||
Securities held to maturity (fair value of $197,752 and $221,571 at March 31, 2003
and December 31, 2002, respectively) |
193,181 | 216,409 | ||||||||||
Loans held for sale |
87,396 | 128,622 | ||||||||||
Loans and leases: |
||||||||||||
Residential real estate mortgages |
3,028,851 | 2,382,197 | ||||||||||
Commercial real estate mortgages |
5,016,865 | 4,792,049 | ||||||||||
Commercial business loans and leases |
3,080,034 | 2,968,474 | ||||||||||
Consumer loans and leases |
4,453,423 | 3,913,288 | ||||||||||
Total loans and leases |
15,579,173 | 14,056,008 | ||||||||||
Less: Allowance for loan and lease losses |
226,677 | 208,273 | ||||||||||
Net loans and leases |
15,352,496 | 13,847,735 | ||||||||||
Premises and equipment, net |
278,316 | 271,677 | ||||||||||
Goodwill |
1,095,476 | 660,684 | ||||||||||
Identifiable intangible assets |
41,292 | 34,474 | ||||||||||
Mortgage servicing rights |
3,620 | 3,598 | ||||||||||
Bank-owned life insurance |
470,645 | 380,405 | ||||||||||
Other assets |
451,101 | 373,867 | ||||||||||
Total assets |
$ | 26,255,291 | $ | 23,418,941 | ||||||||
Liabilities and Shareholders’ Equity |
||||||||||||
Deposits: |
||||||||||||
Savings accounts |
$ | 2,439,896 | $ | 1,940,195 | ||||||||
Money market access and NOW accounts |
6,632,023 | 6,091,429 | ||||||||||
Certificates of deposit |
5,381,509 | 4,658,778 | ||||||||||
Demand deposits |
3,093,152 | 2,974,199 | ||||||||||
Total deposits |
17,546,580 | 15,664,601 | ||||||||||
Short-term borrowings |
1,164,039 | 1,276,467 | ||||||||||
Long-term borrowings |
4,534,670 | 3,861,058 | ||||||||||
Company obligated, mandatorily redeemable securities of subsidiary trusts
holding solely parent junior subordinated debentures |
295,056 | 295,056 | ||||||||||
Other liabilities |
216,752 | 258,274 | ||||||||||
Total liabilities |
23,757,097 | 21,355,456 | ||||||||||
Shareholders’ Equity: |
||||||||||||
Preferred stock (par value $0.01 per share, 5,000,000 shares authorized,
none issued) |
— | — | ||||||||||
Common stock (par value $0.01 per share, 400,000,000 shares authorized,
Issued 2003 — 182,292,973; Issued 2002 — 168,892,284) |
1,823 | 1,689 | ||||||||||
Paid-in capital |
1,438,913 | 1,059,778 | ||||||||||
Retained earnings |
1,326,656 | 1,269,422 | ||||||||||
Treasury stock, at cost (18,411,870 shares in 2003 and 18,313,517 shares in 2002) |
(385,286 | ) | (382,350 | ) | ||||||||
Accumulated other comprehensive income |
116,088 | 114,946 | ||||||||||
Total shareholders’ equity |
2,498,194 | 2,063,485 | ||||||||||
Total liabilities and shareholders’ equity |
$ | 26,255,291 | $ | 23,418,941 | ||||||||
See accompanying Notes to Consolidated Financial Statements.
3
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited)
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2003 | 2002 | |||||||||
Interest and dividend income: |
||||||||||
Interest and fees on loans and leases |
$ | 220,285 | $ | 221,784 | ||||||
Interest and dividends on securities |
89,042 | 84,222 | ||||||||
Total interest and dividend income |
309,327 | 306,006 | ||||||||
Interest expense: |
||||||||||
Interest on deposits |
51,391 | 64,841 | ||||||||
Interest on borrowed funds |
51,799 | 44,679 | ||||||||
Total interest expense |
103,190 | 109,520 | ||||||||
Net interest income |
206,137 | 196,486 | ||||||||
Provision for loan and lease losses |
10,901 | 11,828 | ||||||||
Net interest income after provision
for loan and lease losses |
195,236 | 184,658 | ||||||||
Noninterest income: |
||||||||||
Deposit services |
22,526 | 18,960 | ||||||||
Insurance brokerage commissions |
12,357 | 10,155 | ||||||||
Merchant and electronic banking income, net |
9,118 | 7,749 | ||||||||
Trust and investment management services |
7,351 | 8,277 | ||||||||
Bank-owned life insurance |
5,342 | 4,376 | ||||||||
Investment planning services |
3,256 | 2,718 | ||||||||
Net securities gains |
2,782 | 19 | ||||||||
Other noninterest income |
15,506 | 9,322 | ||||||||
| 78,238 | 61,576 | |||||||||
Noninterest expenses: |
||||||||||
Compensation and employee benefits |
80,693 | 75,298 | ||||||||
Data processing |
10,178 | 10,582 | ||||||||
Occupancy |
14,909 | 12,498 | ||||||||
Equipment |
11,250 | 9,730 | ||||||||
Advertising and marketing |
5,060 | 3,978 | ||||||||
Amortization of identifiable intangible assets |
1,997 | 1,584 | ||||||||
Merger
and consolidation costs |
4,450 | 8,204 | ||||||||
Other noninterest expenses |
21,371 | 21,023 | ||||||||
| 149,908 | 142,897 | |||||||||
Income before income tax expense |
123,566 | 103,337 | ||||||||
Applicable income tax expense |
42,173 | 34,859 | ||||||||
Net income |
$ | 81,393 | $ | 68,478 | ||||||
Basic earnings per share |
$ | 0.52 | $ | 0.46 | ||||||
Diluted earnings per share |
$ | 0.51 | $ | 0.45 | ||||||
Weighted average shares outstanding: |
||||||||||
Basic |
157,667 | 149,347 | ||||||||
Diluted |
159,328 | 151,116 | ||||||||
See accompanying Notes to Consolidated Financial Statements.
4
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands) (Unaudited)
| Common | Unearned | Other | |||||||||||||||||||||||||||||||
| Shares | Common | Paid-in | Retained | Compen- | Treasury | Comprehensive | |||||||||||||||||||||||||||
| Outstanding | Stock | Capital | Earnings | sation | Stock | Income (Loss) | Total | ||||||||||||||||||||||||||
Balances at December 31, 2002 |
150,579 | $ | 1,689 | $ | 1,059,778 | $ | 1,269,422 | $0 | ($382,350 | ) | $ | 114,946 | $ | 2,063,485 | |||||||||||||||||||
Net income |
— | — | — | 81,393 | — | — | — | 81,393 | |||||||||||||||||||||||||
Unrealized gain on available for sale securities, net of
tax and reclassification adjustment |
— | — | — | — | — | — | 215 | 215 | |||||||||||||||||||||||||
Unrealized gain on cash flow hedges,
net of tax and reclassification adjustment |
— | — | — | — | — | — | 927 | 927 | |||||||||||||||||||||||||
Comprehensive income |
82,535 | ||||||||||||||||||||||||||||||||
Issuance of stock for acquisitions |
13,401 | 134 | 382,669 | — | — | — | — | 382,803 | |||||||||||||||||||||||||
Treasury stock issued for employee benefit plans |
601 | — | (2,788 | ) | — | — | 11,548 | — | 8,760 | ||||||||||||||||||||||||
Treasury stock purchased |
(700 | ) | — | — | — | — | (15,524 | ) | — | (15,524 | ) | ||||||||||||||||||||||
Distribution of restricted stock |
— | — | (746 | ) | — | — | 1,040 | — | 294 | ||||||||||||||||||||||||
Cash dividends |
— | — | — | (24,159 | ) | — | — | — | (24,159 | ) | |||||||||||||||||||||||
Balances
at March 31, 2003 |
163,881 | $ | 1,823 | $ | 1,438,913 | $ | 1,326,656 | $0 | ($385,286 | ) | $ | 116,088 | $ | 2,498,194 | |||||||||||||||||||
Balances at December 31, 2001 |
151,221 | $ | 1,651 | $958,764 | $ | 1,056,678 | ($1,017 | ) | ($267,529 | ) | $40,568 | $ | 1,789,115 | ||||||||||||||||||||
Net income |
— | — | — | 68,478 | — | — | — | 68,478 | |||||||||||||||||||||||||
Unrealized gain on available for sales securities, net of
tax and reclassification adjustment |
— | — | — | — | — | (28,393 | ) | (28,393 | ) | ||||||||||||||||||||||||
Unrealized gain on cash flow hedges,
net of tax and reclassification adjustment |
— | — | — | — | — | — | (14 | ) | (14 | ) | |||||||||||||||||||||||
Comprehensive income |
40,071 | ||||||||||||||||||||||||||||||||
Treasury stock issued for employee benefit plans |
1,198 | — | (5,525 | ) | — | — | 23,118 | — | 17,593 | ||||||||||||||||||||||||
Treasury stock purchased |
(5,501 | ) | — | — | — | — | (132,815 | ) | — | (132,815 | ) | ||||||||||||||||||||||
Issuance and distribution of restricted stock |
— | — | (421 | ) | — | — | 771 | — | 350 | ||||||||||||||||||||||||
Decrease in unearned compensation-ESOP |
— | — | 3,421 | — | 562 | — | — | 3,983 | |||||||||||||||||||||||||
Cash dividends |
— | — | — | (20,260 | ) | — | — | — | (20,260 | ) | |||||||||||||||||||||||
Balances
at March 31, 2002 |
146,918 | $ | 1,651 | ||||||||||||||||||||||||||||||