Second Quarter 2004 Review July 16, 2004
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Second Quarter 2004 Review
July 16, 2004Speakers: Henry Meyer Jeff Weeden
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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995FORWARD-LOOKING STATEMENT DISCLOSURE
The conference call and discussion, including related questions and answers, and presentation materials, contain forward-looking statements about issues like anticipated third quarter and full-year 2004 earnings, anticipated level of net loan charge-offs and nonperforming assets and anticipated improvement in profitability and competitiveness. Forward-looking statements by their nature are subject to assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: changes in interest rates; failure of the economy to continue to recover, which could materially impact credit quality trends and the ability to generate loans; failure of the capital markets to function consistent with customary levels; delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; consummation of significant business combinations or divestitures; new legal obligations or restrictions or unfavorable resolution of litigation; further disruption in the economy or the general business climate as a result of terrorist activities or military actions; and changes in accounting, tax or regulatory practices or requirements.
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Strategic Overview
Strengthened management team
Announced acquisitions
Improved asset quality
Increased commercial loan activity
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Financial Summary – 2Q04
EPS of $0.58
Net interest margin down 17 bps vs. 1Q04
Noninterest income up $15 million vs. 1Q04
NPLs down $133 million vs. 1Q04
Repurchased 6.0 million shares
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Net Interest Income
$658$685$693$690
$710
3.85%3.73% 3.78% 3.74%
3.57%
$200
$400
$600
$800
2Q03 3Q03 4Q03 1Q04 2Q04
1.0%
2.0%
3.0%
4.0%
$0
$25,000
$50,000
$75,000
2Q03 3Q03 4Q03 1Q04 2Q04
Net Interest Income (TE)Net Interest Margin (TE)
Net Interest Income (TE) Average Earning Assets
InvestmentsConsumer LoansCommercial Loans
$73,934 $73,623 $73,113 $73,381 $73,874
$ in millions
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Total Revenue (TE)$ in
millions
$1,104$1,116$1,159$1,153$1,144
$1,100$1,170$1,154$1,169
$1,145$1,144$1,150 $1,117$1,184
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
Net Interest Inc. Noninterest Inc.
695 719 730 726 702 721 722 724 703 710 690 693 685658
455 398 454 418 443 448 432 446 397 434 463 466 431446
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Noninterest Expense$ in millions
$679$698
$858
$683 $702$661 $665 $659 $668 $657
$688 $698$699$659
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
PersonnelNon-Personnel
364 345 334 335 363 361 358 354 363 371 380 379 373371
334 513 349 367 298 304 301 314 294 317 319 319 286308
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Asset Quality
Net C/O to Average Loans
Nonperforming Loans
to EOP Loans
Nonperforming Assets to EOP Loans + OREO
Allowance to Total Loans to Nonperforming Loans
$ in millions
2Q03 3Q03 4Q03 1Q04 2Q04
$ 141 .90%
$ 837 1.32%
$ 897 1.42%
$1,405 2.22% 168%
$ 123 .77%
$ 795 1.27%
$ 862 1.37%
$1,405 2.24% 177%
$ 123 .78%
$ 694 1.11%
$ 753 1.20%
$1,406 2.24% 203%
$ 111 .71%
$ 587 .94%
$ 670 1.07%
$1,306 2.09% 222%
$ 104 .67%
$ 454 .71%
$ 540 .84%
$1,276 1.99% 281%
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Capital
2Q03 3Q03 4Q03 1Q04 2Q04
Tang. Equity/Tang. Assets 6.90% 6.94% 6.94% 6.98%6.64%
Tier 1 Risk-Based Capital 7.94% 8.23% 8.35% 8.10%7.73% *
Cash dividends paid $ .305 $ .305 $ .305 $ .31 $ .31 (per share)
Shares Repurchased 3.0 2.5 4.0 8.0 6.0 (millions)* Estimated
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Stable net interest margin
Modest loan/earning assets growth
Improving climate for fee-based businesses
Improving asset quality
Continued cost discipline
EPS Range: 3Q04 $0.57 to $0.61
2004 F.Y. $2.35 to $2.45
2004 Outlook
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Appendix
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Money Market Fixed Income Equity
$74.4$71.4
$68.7$65.0$63.3$60.8$61.7$62.4
$70.7$72.4$72.7$70.2 $69.4 $70.0
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
Assets Under Management $ in billions
22.0 23.2 21.2 20.0 19.4 20.7 19.4 18.4 19.1 19.3 18.9 19.5 19.3 19.014.7 15.3 16.9 16.9 18.5 18.9 17.6 16.1 16.3 17.1 17.3 17.4 18.2 18.734.7 35.9 32.1 35.8 34.5 31.1 25.4 27.2 25.4 26.9 28.8 31.8 31.9 32.3
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Net Interest Margin (TE)
3.57%
3.99%
3.77% 3.74%3.78%3.73%
3.63%
3.85%
3.98%3.93%
3.98%
3.85%3.86%
3.98%
3.69%
3.00%
3.25%
3.50%
3.75%
4.00%
4.25%
4.50%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
KEY Peer Median S&P Regional & Diversified Bank Indices
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Net Charge-Offs to Average Loans
1.37%1.32%
1.27%
1.16% 1.18%
1.04%
0.90%
0.77% 0.78%0.71%
0.67%
1.04%1.02%
0.66%
0.37%
0.00%
0.30%
0.60%
0.90%
1.20%
1.50%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
KEY Peer Median S&P Regional & Diversified Bank Indices
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Net Charge-Offs to Average Loansby Loan Type
0.59%
0.88%
0.55%
0.83%
1.08%0.97%1.00%
0.75%0.84%
0.73%0.83%
0.74%
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
ConsumerCommercial
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
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Allowance to Total Loans
1.99%1.85%
2.37%
2.09%2.24%2.24%
1.49%
1.82%
2.65%2.51%
2.41%
2.22%2.27%2.32%
1.39%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
KEY Peer Median S&P Regional & Diversified Bank Indices
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281%
161%165%151%
168%177%
203%
222%
157%154%
184%
133%
154%140%
262%
0%
50%
100%
150%
200%
250%
300%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
Allowance to NPL
KEY Peer Median S&P Regional & Diversified Bank Indices
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NPAs to Loans and OREO
0.84%
1.42%
1.61%1.58%
1.37%
1.20%
1.07%
1.54%1.59%
1.23%
1.41%1.49%
1.10%
1.56%
0.64%
0.00%
0.40%
0.80%
1.20%
1.60%
2.00%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
KEY Peer Median S&P Regional & Diversified Bank Indices
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$37.1 $36.5 $36.4 $36.5 $36.5 $36.4 $36.1 $36.3 $37.3 11 % 24.0 24.6 24.3 24.7 25.2 25.7 25.7 26.0 25.5 (7)%
2.0 1.7 1.4 1.1 0.9 0.8 0.6 0.4 0.3 NM0.8 0.7 0.6 0.5 0.4 0.2 0.2 0.1 – NM
$63.5$63.9 $63.1$62.8$62.6$63.1$63.0$62.8$62.7
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
Average Loans$ in billions
% change *2Q04 vs. 1Q04
* Annualized
CommercialConsumer
AutoCommercial
Exit Portfolios
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46.3%47.7%
50.1% 49.6%
42.1%
39.8%38.9%38.6%
44.4%45.7%
44.4%
25%
30%
35%
40%
45%
50%
55%
4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
Corporate Banking – Utilization
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$ in billions
Average Core Deposit Growth
* Annualized
$39.2$40.4 $41.3 $42.2 $42.8 $42.6 $43.4
$37.0 $37.2
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
Now/MMDA$13.2 $13.3 $15.1 $16.8 $17.7 $18.4$18.8 $18.9 $19.8 19% Savings 2.0 2.0 2.0 2.0 2.1 2.1 2.1 2.0 2.0 ( 2) CD’s 13.1 12.7 12.2 11.8 11.4 11.111.0 11.0 10.6 (13) DDA 8.7 9.2 9.9 9.8 10.1 10.6 10.9 10.7 11.0 13
TOTAL $37.0$37.2$39.2 $40.4 $41.3 $42.2 $42.8 $42.6 $43.4 8%
% change *2Q04 vs. 1Q04
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Strong Dividend Record
$1.24$1.22$1.20$1.18$1.12
$1.04
$0.94
$0.64$0.72 $0.76
$0.84
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004T
Dividend increased 39 consecutive years
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Tangible Equity to Tangible Assets
6.64%
6.25%
6.69% 6.94% 6.98%6.90%
6.51%
6.94%6.71%6.73%6.71%
6.57%6.29%6.29% 6.78%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
KEY Peer Median S&P Regional & Diversified Bank Indices