10-Q/A 1 d10qa.txt FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-Q/A-1 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-7273 ------------------------------ Allfirst Financial Inc. (Exact name of registrant as specified in its charter) Delaware 52-0981378 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) The Allfirst Building 25 South Charles Street Baltimore, Maryland 21201 (Address of principal executive offices) (zip code) 410-244-4000 (Registrant's telephone number, including area code) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Registrant hereby amends its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001, filed with the SEC on August 14, 2001, by deleting the existing text of Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, in its entirety and inserting the following text in lieu thereof: FORWARD-LOOKING STATEMENTS Certain information included in the following section of this report, other than historical information, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are identified by terminology such as "may", "will", "believe", "expect", "estimate", "anticipate", "continue", or similar terms. Actual results may differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: global, national and regional economic conditions; levels of market interest rates; credit or other risks of lending and investment activities; competitive and regulatory factors; and technological change. ANALYSIS OF RESULTS OF OPERATIONS Performance Overview Net income to common stockholders for the three months ended June 30, 2001 was $51.6 million, a 10% increase when compared to net income to common stockholders of $46.7 million for the three months ended June 30, 2000. Net income to common shareholders represents net income after deducting preferred stock dividends. Return on average assets and return on average common stockholder's equity were 1.18% and 10.35%, respectively, for the three months ended June 30, 2001 compared to 1.07% and 10.51% for the three months ended June 30, 2000. Net income to common stockholders for the six months ended June 30, 2001 of $97.4 million increased 6% when compared to net income to common stockholders of $92.0 million for the six months ended June 30, 2000. Return on average assets and return on average common stockholder's equity were 1.11% and 9.94%, respectively, for the six months ended June 30, 2001 compared to 1.05% and 10.44% for the six months ended June 30, 2000. Allfirst's results for the six months ended June 30, 2001 included CCS which was acquired in May (Note 2). CCS represented 1.2% of Allfirst's year over year revenue growth and 1.6% of year over year expense growth. Total revenues grew 6% compared to last year, with a 12% increase in noninterest income and a 3% increase in net interest income. The net interest margin (on a tax equivalent basis) was 3.54%, up 15 basis points over the same period last year. Excluding CCS, revenue growth was 5% which included a 9% increase in noninterest income. Noninterest expenses were 9% higher reflecting planned investments in retail / business banking and wealth management. Excluding CCS, noninterest expenses grew 8% compared to last year. Higher pension and healthcare costs represented 3% of the overall growth in noninterest expenses for the first half of 2001. The provision for loan and lease losses was $15.5 million compared to $16.9 million last year. The allowance for loan and lease losses was 1.45% of total loans at June 30, 2001. Tangible net income, which excludes the amortization of goodwill and other intangible assets related to purchase business combinations, was $62.5 million for the three months ended June 30, 2001, compared to $57.8 million for the three months ended June 30, 2000. Return on average tangible assets and return on average tangible common equity, which exclude intangible assets and amortization related to purchase business combinations, were 1.49% and 20.43%, respectively, for the three months ended June 30, 2001 compared to 1.38% and 23.71% for the three months ended June 30, 2000. Tangible net income for the six months ended June 30, 2001 was $119.1 million compared to $113.9 million for the six months ended June 30, 2000. Return on average tangible assets and return on average tangible common equity were 1.42% and 19.95%, respectively, for the six months ended June 30, 2001 compared to 1.37% and 23.90% for the six months ended June 30, 2000. 2 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Nonperforming assets at June 30, 2001 were $86.7 million, or 0.82% of loans, other real estate and other assets owned, a $20.8 million decrease from the December 31, 2000 level of $107.5 million, or 0.98% of loans, other real estate and other assets owned. The exposure to several large credits was reduced during the first six months of 2001. Asset quality is discussed in more detail on page 21. Net Interest Income Net interest income is the difference between the interest and yield-related fee income generated by earning assets and the interest expense incurred on interest bearing liabilities. The amount of net interest income is affected by both changes in the level of interest rates and the amount and composition of earning assets and interest bearing liabilities. When net interest income is presented on a tax-equivalent basis, interest income from tax exempt earning assets is increased by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the statutory Federal income tax rate of 35%. Net interest margin represents net interest income on a tax-equivalent basis as a percentage of average earning assets. The net interest income that is presented on pages 14 and 15 is on a tax-equivalent basis. Net interest income as presented in the Consolidated Statements of Income on page 3 is on a non tax-equivalent basis. The largest source of Allfirst's net income is net interest income. Net interest income on a tax-equivalent basis for the three months ended June 30, 2001 was $133.6 million, an increase of $4.3 million when compared to net interest income of $129.3 million for the three months ended June 30, 2000. The net interest margin was 3.57% for the second quarter of 2001, up 17 basis points from the same period last year. Net interest income on a tax-equivalent basis for the six months ended June 30, 2001 was $263.9 million, an increase of $6.4 million when compared to net interest income of $257.6 million for the six months ended June 30, 2000. The net interest margin improved by 15 basis points to 3.54% supported by higher loan product margins. The spread between the yield on earning assets and the rate paid on interest bearing liabilities for the first half of 2001 was 2.68%, up 18 basis points compared to the first half of 2000. Net interest income has been favorably impacted by market interest rates. The following tables provide additional information on Allfirst's average balances, interest yields and rates, and net interest margin for the three months and six months ended June 30, 2001 and 2000. 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Average Balances, Interest Yields and Rates and Net Interest Margin (Tax-Equivalent Basis)

_____________________________ (1) Interest on loans to and obligations of public entities is not subject to Federal income tax. In order to make pre-tax yields comparable to taxable loans and investments, a tax-equivalent adjustment is used based on a 35% Federal tax rate. (2) Yields on investment securities available for sale are calculated based upon average amortized cost. (3) Nonaccrual loans are included under the appropriate loan categories as earning assets. (4) Net interest spread is the difference between the yield on average earning assets and the rate paid on average interest bearing liabilities. (5) Net interest margin is the ratio of net interest income on a tax equivalent basis to average earning assets. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Average Balances, Interest Yields and Rates and Net Interest Margin (Tax-Equivalent Basis)

----------------------------- (1) Interest on loans to and obligations of public entities is not subject to Federal income tax. In order to make pre-tax yields comparable to taxable loans and investments, a tax-equivalent adjustment is used based on a 35% Federal tax rate. (2) Yields on investment securities available for sale are calculated based upon average amortized cost. (3) Nonaccrual loans are included under the appropriate loan categories as earning assets. (4) Net interest spread is the difference between the yield on average earning assets and the rate paid on average interest bearing liabilities. (5) Net interest margin is the ratio of net interest income on a tax equivalent basis to average earning assets. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Noninterest Income The following table presents the components of noninterest income for the three months ended June 30, 2001 and 2000. Noninterest Income

Allfirst's noninterest income for the quarter ended June 30, 2001 was $96.9 million, a $10.9 million (12.7%) increase from noninterest income for the quarter ended June 30, 2000. Excluding CCS noninterest income which is included under the caption "other income", total noninterest income was $91.9 million representing a $5.9 million increase (6.9%) over the same period last year. Deposit service charges were $28.3 million, up $3.7 million (15.0%) from the same quarter last year led by 20% growth in retail deposit service charges and 12% growth in corporate deposit service charges. Retail deposit service charge growth was due primarily to higher levels of non-sufficient funds income resulting from improved fee waiver management and a higher number of retail checking accounts while corporate deposit service charge growth reflected increased cash management activity. Trust and investment advisory fees of $20.8 million were down 5.3% due primarily to the decline in the U.S. equity markets that began in 2000 and the overall market uncertainty that continues to prevail. Electronic banking income captures fee income from automated teller machines and interchange income from VISA debit card transactions and grew by nearly 16% in the second quarter of 2001 compared to the second quarter of 2000 to $8.5 million. Mortgage banking income for the second quarter of 2001 increased by $2.9 million (93.6%), due to a higher volume of loan origination and mortgage placement fees predominately from Allfirst's commercial mortgage banking operations. Trading income, before the effect of the cost to carry derivative assets on the balance sheet, increased by $1.0 million due to growth in both proprietary and corporate trading. Net of the cost to carry derivative assets, trading income increased by $0.7 million. Other income, excluding CCS, was $22.8 million for the second quarter of 2001 compared to $24.5 million, a decline of $1.7 million, mostly due to higher lease residual and venture capital gains in the prior year. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Noninterest Income The following table presents the components of noninterest income for the six months ended June 30, 2001 and 2000. Noninterest Income

Allfirst's noninterest income for the six months ended June 30, 2001 was $184.0 million, a $20.3 million (12.4%) increase from noninterest income for the first six months ended June 30, 2000. Excluding CCS noninterest income, total noninterest income was $179.0 million which represents a $15.3 million increase (9.4%) over the same period last year. Deposit service charges of $53.8 million were up $5.2 million (10.7%) from the prior year. Retail deposit service charges grew $3.3 million due to a 28% increase in retail non-sufficient funds income. Corporate deposit service charges were up $1.9 million (6.2%). Trust and investment advisory fees were $43.2 million, a modest decline of 1.3% considering the weakening in the U.S. equity markets that began in 2000 and the overall market uncertainty that continues to prevail. Electronic banking income grew by nearly 18% in 2001 to $15.7 million. Mortgage banking income for the first half of 2001 increased by $5.5 million (103.6%), due to a higher volume of loan origination and mortgage placement fees predominately from Allfirst's commercial mortgage banking operations. Trading income, before the effect of the cost to carry derivative assets on the balance sheet, increased by $4.2 million due to higher proprietary and corporate trading income. Net of the cost to carry derivative assets, trading income was up $2.0 million from the first half of 2000. Other income, excluding CCS, was $43.7 million for the first half of 2001, compared to $45.3 million for the same period last year. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Noninterest Expenses The following table presents the components of noninterest expenses for the three months ended June 30, 2001 and 2000. Noninterest Expenses

Allfirst's noninterest expenses for the quarter ended June 30, 2001 were $143.7 million, a $13.8 million (10.6%) increase from noninterest expenses for the quarter ended June 30, 2000. Excluding CCS expenses, total noninterest expenses were $139.7 million representing a $9.7 million (7.5%) increase over the same quarter last year. Salaries and other personnel costs, excluding CCS, were $76.4 million for the second quarter of 2001, up $7.4 million (10.7%) from the same quarter last year. This reflected higher salaries and incentives of $3.8 million due to resource investments in retail / business banking and wealth management. Other personnel costs increased by $3.5 million as pension costs increased due to the negative impact of the financial markets on plan asset values and healthcare cost increased as a result of higher claims volume and increases in medical costs in 2001. Advertising and public relations, excluding CCS, increased 19.4 % over same quarter last year. This increase was due to the timing of advertising campaigns within quarters as year to date advertising and public relations has increased by only 1.1% compared to the first six months of 2000. Lending and collection expenses declined 17%, primarily due to lower loan workout expenses. Other operating expenses for the second quarter of 2001, excluding CCS, were $20.3 million, up $1.8 million (9.9%) from the second quarter of 2000. Other expenses included an increase in the automobile lease residual valuation reserve, higher external service costs, higher professional fees, an increase in miscellaneous losses and various other increases, offset by lower deferred compensation expense. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Noninterest Expenses The following table presents the components of noninterest expenses for the six months ended June 30, 2001 and 2000. Noninterest Expenses

Allfirst's noninterest expenses for the six months ended June 30, 2001 were $279.5 million, a $23.7 million (9.3%) increase from the same period in 2000. Excluding CCS expenses, total noninterest expenses were $275.4 million representing a $19.6 million (7.7%) increase over the same period last year. Salaries and other personnel costs, excluding CCS, increased to $152.5 million in 2001 representing a 12.4% increase. Base salary expense and incentives were up $8.1 million reflecting additional investments in retail / business banking and wealth management. Other personnel costs were up $8.8 million with the most significant increases in pension and healthcare costs. Pension costs were $2.6 million higher in 2001 due to the negative impact of the financial markets on plan asset values. Healthcare costs were up $5.3 million due to higher claims volume and medical costs in 2001. Lending and collection expenses declined nearly 25%, mostly due to significantly lower loan workout expenses. Other operating expenses, excluding CCS, were $39.6 million, up $5.2 million from the first six months of 2000. Other expenses included higher losses on automobile lease residual sales and increases in professional fees, charitable contributions and external service costs. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) ANALYSIS OF FINANCIAL CONDITION Allfirst's total assets at June 30, 2001 were $17.9 billion, a $538 million decrease from total assets of $18.4 billion at December 31, 2000. Short-term investments increased by $206 million to $255 million at June 30, 2001, while net loans decreased $354 million and the investment portfolio decreased $76 million. Other assets decreased by $214 million primarily due to a decrease in the fair value of derivative and forward contracts held. Cash balances were down $131 million to $803 million at June 30, 2001. Investment securities available for sale at June 30, 2001 of $4.2 billion had net unrealized losses of $1.3 million compared to net unrealized losses of $23.1 million at December 31, 2000. The taxable equivalent yield on the entire securities portfolio for the six months ended June 30, 2001 was 6.35% compared to 6.17% for the first six months of 2000. Investment securities sold in the first six months of 2001 totaled $0.8 billion and generated pretax gains of $0.4 million. In the first half of 2001, Allfirst purchased $1.3 billion of investment securities partially offsetting $0.6 billion of maturities, calls and paydowns of securities and the $0.8 billion of securities sold. Total loans, net of unearned income, were $10.6 billion at June 30, 2001, a decrease of $354 million from December 31, 2000. This decrease reflects Allfirst's on-going decision to curtail its exposure to indirect lending and residential mortgages. Loan balances excluding curtailed businesses were flat compared to December 31, 2000. Retail loans, excluding indirect lending, were up $136 million, or 12% on an annualized basis. This is primarily due to strong growth from Allfirst's home equity product lines. Although the commercial loan portfolio is down overall, middle market commercial loans grew by 9% on an annualized basis during the first six months of 2001. Allfirst's commercial real estate portfolio represents loans secured primarily by commercial real estate property. Commercial real estate loans of $2.3 billion were down slightly from year end levels and comprised 22% of the total loan portfolio at June 30, 2001. Allfirst continues to emphasize relationship lending with a focus on quality investor real estate products and owner-occupied properties within Allfirst's geographical market place. As of June 30, 2001, approximately $1.0 billion of the commercial real estate portfolio (41%) was secured by owner-occupied properties, compared to $1.0 billion (43%) at December 31, 2000. Total deposits as of June 30, 2001 were $12.1 billion compared to $12.7 billion at December 31, 2000. This decrease was due to a reduction in purchased deposits, as short-term large denomination time deposits and foreign balances were down from year end levels. Allfirst met its funding requirements with an increase in core deposits of $104 million, driven by retail deposit growth. Core deposits are deposits generated from retail and commercial customers, and exclude purchased deposits. Successful campaigns to retain and increase core deposits resulted in a significant increase in Allfirst's Money Fund Alternative (TMFA) product. Retail noninterest bearing demand, money market and savings deposits also increased offset by very modest declines in retail interest bearing demand and consumer time accounts. Other increases in core deposits came from corporate customers as commercial interest bearing demand, money market and savings balances were all up from year end levels, offset by slightly lower commercial noninterest bearing demand balances. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Asset Quality Nonperforming assets were $86.7 million at June 30, 2001, compared to $107.5 million at December 31, 2000, a decrease of $20.8 million. During the first half of 2001, nonaccrual loans decreased $11.5 million. Additions to nonaccrual loans in the first six months of 2001 aggregated $31.9 million. These additions were offset by reductions in nonaccrual loans totaling $43.4 million, comprised of loan sales, paydowns and payoffs of nonaccrual loans totaling $23.9 million, charge-offs of $10.1 million, loans returned to accrual status of $6.4 million and transfers to other real estate and other assets owned of $3.0 million. The decrease in nonaccrual loans was primarily attributable to the sale of a $6.6 million loan to a healthcare provider and the $10 million reduction of a $20 million syndicated commercial loan to a financial services provider through sale and partial charge-off. At June 30, 2001, Allfirst's total international maritime exposure was $172.4 million, including loans, leases and letters of credit of $152.7 million, $6.9 million in other foreign maritime assets, and $12.9 million in unfunded loan commitments, letters of credit and risk participations. Nonperforming assets at June 30, 2001 included no nonaccrual foreign maritime loans and $6.9 million in other nonperforming maritime assets compared to $0.5 million in nonaccrual foreign maritime loans and $15.5 million in other nonperforming maritime assets at December 31, 2000. The process of establishing and managing the allowance with respect to Allfirst's commercial portfolios begins when a loan officer initially assigns each loan or lease a risk grade, based on a ten-point numerical scale and using established credit criteria. Risk grades are reviewed at least annually and are also validated periodically on a selective basis by the independent Credit Review Department. Management meets quarterly to discuss current conditions that affect various lines of business and that may warrant adjustments to historical loss experience; adjustment factors that are considered include: the levels and trends in past due and non-accrual loans; trends in loan volume; effects of any changes in lending policies and procedures; changes in underwriting; and the experience and depth of lending management. Historical factors by risk grade are carefully adjusted each quarter based on documentation reflective of management's seasoned judgment. Management also evaluates credit risk concentration, including trends in large dollar exposures to related borrowers, shared national credit exposure and industry concentrations. Experience has demonstrated that concentration risk has the potential to increase loan loss risk when influenced by external industry factors. All nonaccrual and classified loans in the commercial, commercial real estate (construction and mortgages), foreign and commercial lease categories above certain defined thresholds are analyzed individually to confirm the appropriate risk rating and accrual status and to determine the need for a specific reserve. During 2000, management introduced enhancements to support the calculation of the general reserves for loans and leases in the commercial portfolios not specifically reserved. Each risk grade is assigned a graduated risk factor based on probability of default and loss in event of default reflective of historical loss rates over a full economic cycle. The cycle currently being used starts with the last recessionary period that began in 1990. Management believes that use of the graduated risk factors allows it to refine further the determination of the allowance for this group of loans. At June 30, 2001, specific reserves returned to their lower, year-end 2000 level following partial charge-offs on a number of loans that were placed on nonaccrual status during the first quarter as the workout process for these loans progressed during the second quarter. From December 31, 2000 to June 30, 2001, total allocated reserves increased by $3.8 million, due primarily to the trend of increasing past-due commercial loans and the slowing economy. Continuing strong asset quality and ongoing strength in regional commercial real estate markets resulted in slightly lower reserves for the commercial real estate portfolio. Reserves allocated to the foreign maritime portfolio declined by $1.5 million due to stabilizing collateral values, improved risk profiles and loan pay-downs. Reserves for the retail portfolios decreased by nearly $1.0 million. Lower reserves for indirect loans and leases reflected lower outstanding balances, offset somewhat by increasing loss rates on these portfolios; Allfirst has curtailed its indirect auto leasing and lending business lines. Changes in reserves for other retail portfolios were slight, reflecting the stable and strong asset quality. The provision for loan and lease losses for the first six months of I2001 was $15.5 million, a decrease of $1.4 million from the $16.9 million provision for the first half of 2000. The decrease in net charge-offs compared to the first six months of 2000 reflected lower commercial and foreign net charge-offs of $0.7 million and $1.1 million, respectively, offset by an increase in residential mortgage net charge-offs of $0.5 million. Residential mortgage net charge-offs as a percentage of average loans also increased to 0.39% from 0.21% due to a higher level of recoveries in the prior year. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The following table details information on the allowance for credit losses and net charge-offs for the six months ended June 30, 2001 and 2000 and nonperforming assets at June 30, 2001 and December 31, 2000. Asset Quality Analysis ALLOWANCE FOR CREDIT LOSSES Six Months Ended June 30, -------------------------- 2001 2000 --------- --------- (in thousands) Beginning balance ............................ $ 152,539 $ 157,351 Provision for credit losses .................. 15,509 16,875 Net charge-offs .............................. (15,509) (16,875) Allowance attributable to loans sold.......... - - --------- --------- Ending balance .......................... $ 152,539 $ 157,351 ========= ========= NET CHARGE-OFFS (RECOVERIES) AS A PERCENTAGE OF AVERAGE LOANS BY CATEGORY Commercial loans ................................ 0.44% 0.47% Commercial real estate loans .................... 0.02 0.01 Residential mortgages ........................... 0.39 0.21 Retail loans .................................... 0.38 0.37 Commercial leases receivable .................... (0.09) 0.05 Retail leases receivable ........................ 0.79 0.61 Foreign loans ................................... (0.25) 0.66 ---- ---- Total ...................................... 0.29% 0.31% NONPERFORMING ASSETS

______________ (1) Other real estate and assets owned represent collateral on loans to which Allfirst has taken title. This property, which is held for resale, is carried at fair value less estimated costs to sell. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) ASSET QUALITY RATIOS

CAPITAL ADEQUACY AND RESOURCES Allfirst's capital strength provides the resources and flexibility to capitalize on business growth and acquisition opportunities. At June 30, 2001, Allfirst's Tier 1 risk based capital ratio was 10.44% ($1.6 billion of Tier 1 capital) and its total risk based capital ratio was 13.43% ($2.1 billion of total risk based capital). Tier 1 capital consists primarily of common stockholders' equity and qualifying amounts of subordinated capital trust preferred securities less goodwill and certain intangible assets, while total risk-based capital adds qualifying subordinated debt and the allowance for credit losses, within permitted limits, to Tier 1 capital. Risk weighted assets are determined by assigning various levels of risk to different categories of assets and off-balance-sheet activities. The Federal Reserve Board's regulatory capital guidelines require a minimum total capital to risk adjusted assets ratio of 8.0%. One-half of the 8.0% minimum must consist of tangible common stockholders' equity (Tier 1 capital). The leverage ratio measures Tier 1 capital to average assets less goodwill and other disallowed intangible assets and must be maintained in conjunction with the risk-based capital standards. The regulatory minimum for the leverage ratio is 3.0%; however, this minimum applies only to top rated banking organizations without any operating, financial or supervisory deficiencies. Other organizations (including those experiencing or anticipating significant growth) are expected to hold an additional capital cushion of at least 100 to 200 basis points of Tier 1 capital and, in all cases, banking organizations should hold capital commensurate with the level and nature of all risks, including the volume and severity of problem loans, to which they are exposed. Substantially the same capital requirements are applied to Allfirst's banking subsidiaries under guidelines issued by the Federal Reserve Board and the Office of the Comptroller of the Currency. As illustrated in the following table at June 30, 2001, Allfirst and its principal banking subsidiary were "well capitalized" as defined by regulatory authorities. Capital Adequacy Ratios Regulatory Capital Ratios ------------------------- Tier 1 Total Leverage ------ ----- -------- Allfirst ........................... 10.44% 13.43% 9.60% Allfirst Bank ...................... 10.00 12.12 8.94 Regulatory Guidelines: Minimum ....................... 4.00 8.00 3.00 Well Capitalized .............. 6.00 10.00 5.00 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) LIQUIDITY Dividends from subsidiaries are the primary source of funds for the debt service requirements of Allfirst Financial Inc. Dividends from subsidiaries totaled $60.5 million for the six months ended June 30, 2001. Management is confident that the earnings and dividend capacity of its subsidiary banks will be adequate to service interest obligations on the long-term debt of Allfirst. Dividends were paid by Allfirst in the amount of $46.4 million on March 30, 2001 to its sole common stockholder, Allied Irish Banks, p.l.c. ("AIB"). 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. Allfirst Financial Inc. November 7, 2001 By /s/ Robert L. Carpenter, Jr. -------------------------------- Executive Vice President and Controller 15

ALLFIRST FINANCIAL INC 10-Q/A