FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2003
OR
[ ] 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 | |
|
|
||
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| Two Portland Square, Portland, Maine | 04112 | |||
|
|
||||
| (Address of principal executive offices) | (Zip Code) |
(207) 761-8500
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ x ] No [ ]
The number of shares outstanding of the Registrant’s common stock and related stock purchase rights as of July 31, 2003 is:
| Common stock, par value $.01 per share | 161,179,800 | |||
|
|
||||
| (Class) | (Outstanding) |
Available on the Web @ www.banknorth.com
INDEX
BANKNORTH GROUP, INC. AND SUBSIDIARIES
| PAGE | |||||||||
| PART I. | FINANCIAL INFORMATION |
||||||||
Item 1. Financial Statements
|
|||||||||
Consolidated Balance Sheets |
3 | ||||||||
Consolidated Statements of Income |
4 | ||||||||
Consolidated Statements of Changes in Shareholders’ Equity |
5 | ||||||||
Consolidated Statements of Cash Flows |
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 |
41 | ||||||||
Item 4. Controls and Procedures |
41 | ||||||||
| PART II. | OTHER INFORMATION |
||||||||
Item 1. Legal proceedings |
41 | ||||||||
Item 2. Changes in securities and use of proceeds |
41 | ||||||||
Item 3. Defaults upon senior securities |
41 | ||||||||
Item 4. Submission of matters to a vote of security holders |
41 | ||||||||
Item 5. Other information |
42 | ||||||||
Item 6. Exhibits and reports on Form 8-K |
42 | ||||||||
Signatures |
43 | ||||||||
Exhibits |
44 | ||||||||
2
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) (Unaudited)
| June 30, 2003 | December 31, 2002 | ||||||||||
Assets |
|||||||||||
Cash and due from banks |
$ | 661,103 | $ | 690,250 | |||||||
Federal funds sold and other short term investments |
2,968 | 79,753 | |||||||||
Securities available for sale, at market value |
6,992,917 | 6,731,467 | |||||||||
Securities held to maturity (fair value of $172,339 and $221,571 at June 30, 2003
and December 31, 2002, respectively) |
166,239 | 216,409 | |||||||||
Loans held for sale |
92,795 | 128,622 | |||||||||
Loans and leases: |
|||||||||||
Residential real estate mortgages |
2,852,991 | 2,382,197 | |||||||||
Commercial real estate mortgages |
5,140,130 | 4,792,049 | |||||||||
Commercial business loans and leases |
3,229,718 | 2,968,474 | |||||||||
Consumer loans and leases |
4,510,473 | 3,913,288 | |||||||||
Total loans and leases |
15,733,312 | 14,056,008 | |||||||||
Less: Allowance for loan and lease losses |
227,240 | 208,273 | |||||||||
Net loans and leases |
15,506,072 | 13,847,735 | |||||||||
Premises and equipment, net |
271,124 | 271,677 | |||||||||
Goodwill |
1,092,345 | 660,684 | |||||||||
Identifiable intangible assets |
38,986 | 34,474 | |||||||||
Mortgage servicing rights |
2,973 | 3,598 | |||||||||
Bank-owned life insurance |
476,470 | 380,405 | |||||||||
Other assets |
446,118 | 373,867 | |||||||||
Total assets |
$ | 25,750,110 | $ | 23,418,941 | |||||||
Liabilities and Shareholders’ Equity |
|||||||||||
Deposits: |
|||||||||||
Savings accounts |
$ | 2,472,816 | $ | 1,940,195 | |||||||
Money market access and NOW accounts |
6,759,000 | 6,091,429 | |||||||||
Certificates of deposit |
5,122,392 | 4,658,778 | |||||||||
Demand deposits |
3,340,408 | 2,974,199 | |||||||||
Total deposits |
17,694,616 | 15,664,601 | |||||||||
Short-term borrowings |
1,111,500 | 1,276,467 | |||||||||
Long-term debt |
3,505,200 | 3,861,058 | |||||||||
Company obligated, mandatorily redeemable securities of subsidiary trusts
holding solely parent junior subordinated debentures |
295,056 | 295,056 | |||||||||
Other liabilities |
679,987 | 258,274 | |||||||||
Total liabilities |
23,286,359 | 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 |
1,436,016 | 1,059,778 | |||||||||
Retained earnings |
1,388,048 | 1,269,422 | |||||||||
Treasury stock, at cost (21,450,050 shares in 2003 and 18,313,517 shares in 2002) |
(459,061 | ) | (382,350 | ) | |||||||
Accumulated other comprehensive income |
96,925 | 114,946 | |||||||||
Total shareholders’ equity |
2,463,751 | 2,063,485 | |||||||||
Total liabilities and shareholders’ equity |
$ | 25,750,110 | $ | 23,418,941 | |||||||
See accompanying Notes to unaudited Consolidated Financial Statements.
3
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Interest and dividend income: |
||||||||||||||||||
Interest and fees on loans and leases |
$ | 225,809 | $ | 218,981 | $ | 446,094 | $ | 440,764 | ||||||||||
Interest and dividends on securities |
76,669 | 90,406 | 165,711 | 174,629 | ||||||||||||||
Total interest and dividend income |
302,478 | 309,387 | 611,805 | 615,393 | ||||||||||||||
Interest expense: |
||||||||||||||||||
Interest on deposits |
50,734 | 61,466 | 102,126 | 126,307 | ||||||||||||||
Interest on borrowed funds |
40,170 | 48,448 | 91,969 | 93,127 | ||||||||||||||
Total interest expense |
90,904 | 109,914 | 194,095 | 219,434 | ||||||||||||||
Net interest income |
211,574 | 199,473 | 417,710 | 395,959 | ||||||||||||||
Provision for loan and lease losses |
10,500 | 10,829 | 21,401 | 22,656 | ||||||||||||||
Net interest income after provision
for loan and lease losses |
201,074 | 188,644 | 396,309 | 373,303 | ||||||||||||||
Noninterest income: |
||||||||||||||||||
Deposit services |
23,747 | 19,936 | 46,273 | 38,896 | ||||||||||||||
Insurance brokerage commissions |
10,948 | 10,060 | 23,305 | 20,215 | ||||||||||||||
Merchant and electronic banking income, net |
11,210 | 9,660 | 20,328 | 17,410 | ||||||||||||||
Trust and investment management services |
7,957 | 8,519 | 15,309 | 16,796 | ||||||||||||||
Bank-owned life insurance |
5,826 | 4,994 | 11,168 | 9,371 | ||||||||||||||
Investment planning services |
3,911 | 2,964 | 7,167 | 5,681 | ||||||||||||||
Net securities gains |
33,423 | 350 | 36,206 | 369 | ||||||||||||||
Other noninterest income |
18,806 | 6,503 | 34,311 | 15,824 | ||||||||||||||
| 115,828 | 62,986 | 194,067 | 124,562 | |||||||||||||||
Noninterest expenses: |
||||||||||||||||||
Compensation and employee benefits |
82,248 | 75,747 | 162,941 | 151,044 | ||||||||||||||
Data processing |
10,415 | 9,843 | 20,593 | 20,425 | ||||||||||||||
Occupancy |
15,154 | 12,785 | 30,063 | 25,284 | ||||||||||||||
Equipment |
12,425 | 9,908 | 23,676 | 19,638 | ||||||||||||||
Advertising and marketing |
5,957 | 4,237 | 11,017 | 8,215 | ||||||||||||||
Amortization of identifiable intangible assets |
2,306 | 1,143 | 4,302 | 2,727 | ||||||||||||||
Merger and consolidation costs |
1,530 | 1,061 | 5,981 | 9,265 | ||||||||||||||
Prepayment penalties on borrowings |
30,490 | — | 30,490 | — | ||||||||||||||
Other noninterest expenses |
23,514 | 22,067 | 44,883 | 43,090 | ||||||||||||||
| 184,039 | 136,791 | 333,946 | 279,688 | |||||||||||||||
Income before income tax expense |
132,863 | 114,839 | 256,430 | 218,177 | ||||||||||||||
Applicable income tax expense |
45,338 | 38,680 | 87,511 | 73,539 | ||||||||||||||
Net income |
$ | 87,525 | $ | 76,159 | $ | 168,919 | $ | 144,638 | ||||||||||
Basic earnings per share |
$ | 0.54 | $ | 0.52 | $ | 1.06 | $ | 0.98 | ||||||||||
Diluted earnings per share |
$ | 0.53 | $ | 0.51 | $ | 1.04 | $ | 0.96 | ||||||||||
Weighted average shares outstanding: |
||||||||||||||||||
Basic |
162,312 | 147,233 | 159,980 | 148,258 | ||||||||||||||
Diluted |
164,559 | 149,064 | 161,898 | 150,068 | ||||||||||||||
See accompanying Notes to unaudited Consolidated Financial Statements.
4
BANKNORTH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands) (Unaudited)
| Accumulated | |||||||||||||||||||||||||||||||||
| 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 | $ | — | ($382,350 | ) | $ | 114,946 | $ | 2,063,485 | ||||||||||||||||||
Net income |
— | — | — | 168,919 | — | — | — | 168,919 | |||||||||||||||||||||||||
Unrealized loss on available for sale securities, net of
tax and reclassification adjustment |
— | — | — | — | — | — | (19,176 | ) | (19,176 | ) | |||||||||||||||||||||||
Unrealized gain on cash flow hedges,
net of tax and reclassification adjustment |
— | — | — | — | — | — | 1,155 | 1,155 | |||||||||||||||||||||||||
Comprehensive income |
150,898 | ||||||||||||||||||||||||||||||||
Issuance of stock and options exchanged
for acquisitions |
13,401 | 134 | 382,669 | — | — | — | — | 382,803 | |||||||||||||||||||||||||
Treasury stock issued for employee benefit plans |
1,279 | — | (5,508 | ) | — | — | 25,634 | — | 20,126 | ||||||||||||||||||||||||
Treasury stock purchased |
(4,416 | ) | — | — | — | — | (103,663 | ) | — | (103,663 | ) | ||||||||||||||||||||||
Distribution of restricted stock |
— | — | (923 | ) | — | — | 1,318 | — | 395 | ||||||||||||||||||||||||
Cash dividends declared |
— | — | — | (50,293 | ) | — | — | — | (50,293 | ) | |||||||||||||||||||||||