##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)
      
      [X]
      
      
      
      QUARTERLY
          REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
          SECURITIES EXCHANGE ACT OF 1934For
          the quarterly period ended September 30, 2003[
          ]
      
      
      
      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 0-9756

RIGGS NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
      
      52-1217953(State or other jurisdiction
        of
      
      (I.R.S. Employerincorporation or organization)
      
      Identification No.)


1503 Pennsylvania Avenue, N.W., Washington, D.C. 20005
(Address of principal executive offices)               (Zip Code)

(202) 835-4309
(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 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 __.

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

Common Stock, $2.50 par
        value
      
      28,621,971(Title of Class)
      
      (Outstanding at October 31,
        2003)






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##### 



RIGGS NATIONAL CORPORATION

TABLE OF CONTENTS

PART I.
      
      FINANCIAL INFORMATION
      
      PAGE
          NO.Item 1.
      
      Financial StatementsConsolidated Statements of
        Income (Unaudited)      Three and nine months ended September 30, 2003
        and 2002
      
      3Consolidated Statements of
        Condition (Unaudited)      September 30, 2003 and 2002 and December 31,
        2002
      
      4Consolidated Statements of
        Changes in Shareholders Equity (Unaudited)      Nine months ended September 30,
        2003 and 2002
      
      5Consolidated Statements of
        Cash Flows (Unaudited)       Nine months ended September 30, 2003 and 2002
      
      6Notes to the Consolidated
        Financial Statements (Unaudited)
      
      7-18Item 2.
      
      Managements Discussion
        and Analysis of Financial Condition and Results of Operations
      
      19-31Item 3.
      
      Quantitative and Qualitative
        Disclosures about Market Risk
      
      31-32Item 4.
      
      Controls and Procedures
      
      33PART II.
      
      OTHER INFORMATIONItem 1.
      
      Legal Proceedings
      
      34Item 2.
      
      Change in Securities
      
      34Item 3.
      
      Defaults Upon Senior Securities
      
      34Item 4.
      
      Submission of Matters to a
        Vote of Security Holders
      
      34Item 5.
      
      Other Information
      
      34Item 6.
      
      Exhibits and Reports on Form 8-K
      
      34Signatures
      
      
      
      34


Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to we, us, our, Riggs and the Company refer to Riggs
National Corporation and its subsidiaries.

2



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##### 



PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS-UNAUDITED

RIGGS NATIONAL CORPORATION
    
    THREE MONTHS ENDED
    
    NINE MONTHS ENDEDCONSOLIDATED STATEMENTS
        OF INCOME
    
    SEPTEMBER 30,
    
    SEPTEMBER 30,(UNAUDITED)(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
    
    2003
    
    2002
    
    2003
    
    2002INTEREST INCOMEInterest and Fees on Loans
    
    $
    36,589
    
    
    $
    44,432
    
    
    $
    118,593
    
    
    $
    132,221Interest and Dividends on Securities Available for Sale
    
    
    14,250
    
    
    
    17,537
    
    
    
    51,702
    
    
    
    53,562Interest on Time Deposits with Other Banks
    
    
    1,358
    
    
    
    784
    
    
    
    4,171
    
    
    
    1,999Interest on Federal Funds Sold and Reverse Repurchase Agreements
    
    
    666
    
    
    
    2,169
    
    
    
    3,970
    
    
    
    6,478Total Interest Income
    
    
    52,863
    
    
    
    64,922
    
    
    
    178,436
    
    
    
    194,260INTEREST EXPENSEInterest on Deposits:Savings and NOW Accounts
    
    
    112
    
    
    
    233
    
    
    
    396
    
    
    
    793Money Market Deposit
Accounts
    
    
    2,446
    
    
    
    4,928
    
    
    
    9,543
    
    
    
    14,129Time Deposits in Domestic Offices
    
    
    3,356
    
    
    
    7,358
    
    
    
    13,627
    
    
    
    19,852Time Deposits in Foreign
Offices
    
    
    1,221
    
    
    
    1,638
    
    
    
    4,201
    
    
    
    5,828Total Interest on Deposits
    
    
    7,135
    
    
    
    14,157
    
    
    
    27,767
    
    
    
    40,602Interest on Short-Term Borrowings and Long-Term Debt:Repurchase Agreements and Other Short-Term Borrowings
    
    
    902
    
    
    
    1,742
    
    
    
    3,696
    
    
    
    5,444FHLB Borrowings and Other Long-Term Debt
    
    
    4,865
    
    
    
    1,618
    
    
    
    13,096
    
    
    
    4,854Total Interest on Short-Term Borrowings and Long-Term Debt
    
    
    5,767
    
    
    
    3,360
    
    
    
    16,792
    
    
    
    10,298Total Interest Expense
    
    
    12,902
    
    
    
    17,517
    
    
    
    44,559
    
    
    
    50,900Net Interest Income
    
    
    39,961
    
    
    
    47,405
    
    
    
    133,877
    
    
    
    143,360Provision for Loan Losses
    
    
    580
    
    
    
    1,400
    
    
    
    2,321
    
    
    
    (268
    )Net Interest Income after Provision for Loan Losses
    
    
    39,381
    
    
    
    46,005
    
    
    
    131,556
    
    
    
    143,628NONINTEREST INCOMETrust and Investment Advisory Income
    
    
    9,132
    
    
    
    10,206
    
    
    
    28,129
    
    
    
    33,462Service Charges and Fees
    
    
    12,771
    
    
    
    11,557
    
    
    
    36,648
    
    
    
    33,892Venture Capital Investment Losses, Net
    
    
    (979
    )
    
    
    (3,155
    )
    
    
    (3,637
    )
    
    
    (13,743
    )Other Noninterest Income
    
    
    6,308
    
    
    
    2,549
    
    
    
    11,172
    
    
    
    7,701Securities Gains, Net
    
    
    1,423
    
    
    
    5,973
    
    
    
    12,557
    
    
    
    7,395Total Noninterest Income
    
    
    28,655
    
    
    
    27,130
    
    
    
    84,869
    
    
    
    68,707NONINTEREST EXPENSESalaries and Employee Benefits
    
    
    30,999
    
    
    
    28,389
    
    
    
    87,186
    
    
    
    83,610Occupancy, Net
    
    
    5,414
    
    
    
    5,658
    
    
    
    15,949
    
    
    
    16,255Data Processing Services
    
    
    4,713
    
    
    
    5,281
    
    
    
    14,873
    
    
    
    15,850Furniture, Equipment and
Software
    
    
    4,180
    
    
    
    4,262
    
    
    
    11,622
    
    
    
    11,912Consultants
    
    
    4,707
    
    
    
    2,221
    
    
    
    10,959
    
    
    
    4,150Other Noninterest Expense
    
    
    16,175
    
    
    
    13,494
    
    
    
    50,029
    
    
    
    44,175Total Noninterest Expense
    
    
    66,188
    
    
    
    59,305
    
    
    
    190,618
    
    
    
    175,952Income before Taxes and Minority Interest
    
    
    1,848
    
    
    
    13,830
    
    
    
    25,807
    
    
    
    36,383Applicable Income Tax Expense (Benefit)
    
    
    (1,833
    )
    
    
    4,424
    
    
    
    7,353
    
    
    
    12,560Minority Interest in Income of Subsidiaries, Net of Taxes
    
    
    3,542
    
    
    
    4,015
    
    
    
    10,617
    
    
    
    13,005Net Income
    
    $
    139
    
    
    $
    5,391
    
    
    $
    7,837
    
    
    $
    10,818EARNINGS PER SHARE-
    Basic
    
    $
    0.00
    
    
    $
    0.19
    
    
    $
    0.27
    
    
    $
    0.38Diluted
    
    
    0.00
    
    
    
    0.19
    
    
    
    0.27
    
    
    
    0.37DIVIDENDS DECLARED AND PAID PER SHARE
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.15
    
    
    $
    0.15


The Accompanying Notes Are An Integral Part Of These Statements

3



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##### 



RIGGS NATIONAL CORPORATIONCONSOLIDATED STATEMENTS
        OF CONDITION(UNAUDITED)
      
      
      
      
      
      
      
      
      
      
      
      
      
      SEPTEMBER 30,
      
      DECEMBER 31,
      
      SEPTEMBER 30,(IN THOUSANDS, EXCEPT
        SHARE AMOUNTS)
      
      
      
      
      
      
      
      
      
      
      
      
      
      2003
      
      2002
      
      2002ASSETSCash
          and Due from Banks
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      201,140
      
      
      $
      244,703
      
      
      $
      191,227Federal
          Funds Sold and Reverse Repurchase Agreements
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      75,000
      
      
      
      610,000
      
      
      
      555,000Total
          Cash and Cash Equivalents
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      276,140
      
      
      
      854,703
      
      
      
      746,227Time
          Deposits with Other Banks
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      258,241
      
      
      
      203,267
      
      
      
      163,937Securities
          Available for Sale (at Market Value)
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      1,782,636
      
      
      
      2,319,917
      
      
      
      2,192,874Venture
          Capital Investments
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      43,956
      
      
      
      49,419
      
      
      
      49,205Loans
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,945,677
      
      
      
      3,007,905
      
      
      
      2,849,558Reserve
          for Loan Losses
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (26,697
      )
      
      
      (25,958
      )
      
      
      (26,140
      )Total
          Net Loans
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,918,980
      
      
      
      2,981,947
      
      
      
      2,823,418Premises
          and Equipment, Net
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      208,624
      
      
      
      190,684
      
      
      
      191,598Other
          Assets
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      373,188
      
      
      
      225,758
      
      
      
      209,799Total
          Assets
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      5,861,765
      
      
      $
      6,825,695
      
      
      $
      6,377,058LIABILITIESDeposits:Noninterest-Bearing
          Demand Deposits
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      629,473
      
      
      $
      683,338
      
      
      $
      614,205Interest-Bearing
          Deposits:Savings
          and NOW Accounts
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      270,901
      
      
      
      331,656
      
      
      
      261,102Money
          Market Deposit Accounts
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,252,195
      
      
      
      2,165,449
      
      
      
      2,133,625Time
          Deposits in Domestic Offices
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      564,430
      
      
      
      1,723,474
      
      
      
      1,723,579Time
          Deposits in Foreign Offices
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      315,125
      
      
      
      335,080
      
      
      
      289,423Total
          Interest-Bearing Deposits
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      3,402,651
      
      
      
      4,555,659
      
      
      
      4,407,729Total
          Deposits
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      4,032,124
      
      
      
      5,238,997
      
      
      
      5,021,934Repurchase
          Agreements and Other Short-Term Borrowings
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      424,036
      
      
      
      470,372
      
      
      
      402,158Other
          Liabilities
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      139,134
      
      
      
      119,976
      
      
      
      219,385FHLB
          Borrowings and Other Long-Term Debt
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      641,525
      
      
      
      358,525
      
      
      
      66,525Total
          Liabilities
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      5,236,819
      
      
      
      6,187,870
      
      
      
      5,710,002GUARANTEED
          PREFERRED BENEFICIAL INTERESTS IN JUNIOR SUBORDINATED DEFERRABLE INTEREST
          DEBENTURES
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      242,109
      
      
      
      248,584
      
      
      
      281,584COMMITMENTS
          AND CONTINGENCIES SHAREHOLDERS EQUITYCommon Stock-$2.50 Par
        Value9/30/2003
      
      
      
      12/31/2002
      
      
      
      9/30/2002Authorized
      
      
      50,000,000
      
      
      
      50,000,000
      
      
      
      50,000,000Issued
      
      
      31,927,187
      
      
      
      31,812,022
      
      
      
      31,807,152Outstanding
      
      
      28,609,065
      
      
      
      28,510,224
      
      
      
      28,505,354Treasury
          Stock
      
      
      3,318,122
      
      
      
      3,301,798
      
      
      
      3,301,798
      
      
      
      79,818
      
      
      
      79,530
      
      
      
      79,518Additional
          Paid in Capital
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      171,984
      
      
      
      170,747
      
      
      
      169,639Retained
          Earnings
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      208,420
      
      
      
      204,865
      
      
      
      204,087Accumulated
          Other Comprehensive Income (Loss)
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (5,762
      )
      
      
      5,468
      
      
      
      3,597Treasury
          Stock
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (71,623
      )
      
      
      (71,369
      )
      
      
      (71,369
      )Total
          Shareholders Equity
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      382,837
      
      
      
      389,241
      
      
      
      385,472Total
          Liabilities and Shareholders Equity
      
      
      
      
      
      
      
      
      
      
      
      
      
      $
      5,861,765
      
      
      $
      6,825,695
      
      
      $
      6,377,058


The Accompanying Notes Are An Integral Part Of These Statements

4



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##### 



RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

COMMON
    
    
    
    
    
    
    
    
    
    ACCUMULATEDSTOCK
    
    ADDITIONAL
    
    
    
    
    
    OTHER
    
    
    
    
    
    TOTAL$2.50
    
    PAID IN
    
    RETAINED
    
    COMPREHENSIVE
    
    TREASURY
    
    SHAREHOLDERS'PAR
    
    CAPITAL
    
    EARNINGS
    
    INCOME (LOSS)
    
    STOCK
    
    EQUITYBalance, December 31, 2001
    
    $
    79,489
    
    
    $
    163,125
    
    
    $
    197,545
    
    
    $
    (7,979
    )
    
    $
    (71,357
    )
    
    $
    360,823Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    10,818
    
    
    
    
    
    
    
    
    
    
    
    10,818Other Comprehensive Income, Net of Tax:Unrealized Gain on
Securities Available for Sale, Net
of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,071
    
    
    
    
    
    
    
    11,071Unrealized Loss on Derivatives,
Net of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (745
    )
    
    
    
    
    
    
    (745
    )Foreign Exchange Translation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    
    
    
    
    1,250Total Other Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,576Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,394Issuance of Common Stock for
Stock Option Plans-11,449 Shares
    
    
    29
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150Repurchase of
Trust Preferred Securities, Net
    
    
    
    
    
    
    6,393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,393Common Stock Repurchase-1,000 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Cash Dividends 
Common Stock, $.15 per Share
    
    
    
    
    
    
    
    
    
    
    (4,276
    )
    
    
    
    
    
    
    
    
    
    
    (4,276
    )Balance, September 30, 2002
    
    $
    79,518
    
    
    $
    169,639
    
    
    $
    204,087
    
    
    $
    3,597
    
    
    $
    (71,369
    )
    
    $
    385,472Balance, December 31, 2002
    
    $
    79,530
    
    
    $
    170,747
    
    
    $
    204,865
    
    
    $
    5,468
    
    
    $
    (71,369
    )
    
    $
    389,241Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    7,837
    
    
    
    
    
    
    
    
    
    
    
    7,837Other Comprehensive Loss, Net of Tax:Unrealized Loss on
Securities Available for Sale, Net
of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,228
    )
    
    
    
    
    
    
    (12,228
    )Unrealized Gain on Derivatives,
Net of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,181
    
    
    
    
    
    
    
    1,181Foreign Exchange Translation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183
    )
    
    
    
    
    
    
    (183
    )Total Other Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,230
    )Total Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,393
    )Issuance of Common Stock for
Stock Option and Award Plans-115,165 Shares
    
    
    288
    
    
    
    1,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,542Repurchase of
Trust Preferred Securities, Net
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Common Stock Repurchase-16,324 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )
    
    
    (254
    )Cash Dividends 
Common Stock, $.15 per Share
    
    
    
    
    
    
    
    
    
    
    (4,282
    )
    
    
    
    
    
    
    
    
    
    
    (4,282
    )Balance, September 30, 2003
    
    $
    79,818
    
    
    $
    171,984
    
    
    $
    208,420
    
    
    $
    (5,762
    )
    
    $
    (71,623
    )
    
    $
    382,837


The Accompanying Notes Are An Integral Part Of These Statements

5



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##### 



RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

NINE MONTHS ENDEDSEPTEMBER 30,2003
    
    2002CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    7,820
    
    
    $
    10,818Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:Provision for Loan Losses
    
    
    2,321
    
    
    
    (268
    )Losses on Venture Capital Investments
    
    
    3,637
    
    
    
    13,743Depreciation Expense and Amortization of Leasehold Improvements
    
    
    12,971
    
    
    
    12,191Net Gains on Sales of Securities Available for Sale
    
    
    (12,557
    )
    
    
    (7,395
    )Increase in Other Assets
    
    
    (10,893
    )
    
    
    (29,273
    )Increase in Other Liabilities
    
    
    22,445
    
    
    
    11,577Total Adjustments
    
    
    17,924
    
    
    
    575Net Cash Provided By Operating Activities
    
    
    25,744
    
    
    
    11,393CASH FLOWS FROM INVESTING ACTIVITIES:Net (Increase) Decrease in Time Deposits with Other Banks
    
    
    (54,974
    )
    
    
    125,527Proceeds from Maturities of Securities Available for Sale
    
    
    7,759,669
    
    
    
    8,303,206Proceeds from Sales of Securities Available for Sale
    
    
    505,740
    
    
    
    470,142Purchases of Securities Available for Sale
    
    
    (7,866,794
    )
    
    
    (9,219,690
    )Purchases of Venture Capital Investments
    
    
    (2,658
    )
    
    
    (7,494
    )Proceeds from Sale of Venture Capital Investments
    
    
    4,485
    
    
    
    866Net Decrease in Loans
    
    
    60,282
    
    
    
    11,325Proceeds from Sale of OREO
    
    
    640
    
    
    
    3,039Net Increase in Premises and Equipment
    
    
    (30,863
    )
    
    
    (6,702
    )Other, Net
    
    
    52
    
    
    
    499Net Cash Provided By (Used In) Investing Activities
    
    
    375,579
    
    
    
    (319,282
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net Increase (Decrease) in Non-Time Deposits
    
    
    (27,874
    )
    
    
    85,787Net Increase (Decrease) in Time Deposits
    
    
    (1,178,999
    )
    
    
    413,864Net Decrease in Short-Term Borrowings
    
    
    (46,336
    )
    
    
    (194,462
    )Proceeds from Federal Home Loan Bank and Other Long-Term Borrowings
    
    
    283,000
    
    
    
    Proceeds from the Issuance of Common Stock
    
    
    1,542
    
    
    
    150Dividend Payments
    
    
    (4,282
    )
    
    
    (4,276
    )Repurchase of Common Stock
    
    
    (254
    )
    
    
    Repurchase
          of Guaranteed Preferred Beneficial Interests in Junior Subordinated
          Deferrable Interest Debentures
    
    
    (6,500
    )
    
    
    (56,940
    )Net Cash (Used In) Provided By Financing Activities
    
    
    (979,703
    )
    
    
    244,123Effect of Exchange Rate Changes
    
    
    (183
    )
    
    
    1,250Net Decrease in Cash and Cash Equivalents
    
    
    (578,563
    )
    
    
    (62,516
    )Cash and Cash Equivalents at Beginning of Period
    
    
    854,703
    
    
    
    808,743Cash and Cash Equivalents at End of Period
    
    $
    276,140
    
    
    $
    746,227SUPPLEMENTAL DISCLOSURES:Trade Dated Securities Purchases
    
    $
    
    
    
    $
    103,655Trade Dated Securities Sales
    
    
    132,443
    
    
    
    Interest Paid
    
    
    48,142
    
    
    
    50,704Income Tax Payments
    
    
    11
    
    
    
    3,546


The Accompanying Notes Are An Integral Part Of These Statements

6



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##### 



RIGGS NATIONAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(TABLES IN THOUSANDS, EXCEPT SHARE AMOUNTS)

NOTE 1. BASIS OF PRESENTATION

The interim consolidated financial statements presented in this Quarterly
Report on Form 10-Q are in conformity with accounting principles generally
accepted in the United States of America and follow general practice within the
banking industry. These principles have been applied on a consistent basis and
include all normal recurring adjustments necessary to fairly present our
results of operations, financial condition and cash flows. The preparation of
financial statements requires the use of estimates and assumptions that affect
the amounts reported. Actual results could differ from those estimates and the
results of operations for the three and nine months ended September 30, 2003
are not necessarily indicative of the results to be expected for all of 2003.
For comparability, certain prior period amounts may have been reclassified to
conform with current period presentation. The financial statements contained
herein should be read in conjunction with the audited financial statements and
accompanying notes in our Annual Report on Form 10-K for the year ended
December 31, 2002.

NOTE 2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES

As noted above, management has prepared the consolidated financial statements
in conformity with accounting principles generally accepted in the United
States of America. Accordingly, management is required to make certain
estimates, judgments and assumptions that it believes to be reasonable based
upon the information available. These estimates, judgments and assumptions
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of net interest income, provision
for loan losses, noninterest income and noninterest expense. The following
accounting policies comprise those that management believes involve estimates,
judgments and assumptions that are the most critical to aid in fully
understanding and evaluating our reported financial results. Because of the
uncertainty inherent in these matters, actual results could differ.

Reserve for Loan Losses

The reserve for loan losses is maintained at a level that we believe is
adequate to absorb probable losses in the loan portfolio. The determination of
the adequacy of the reserve for loan losses is based upon an on-going,
analytical review of the loan portfolio. This analysis requires application of
judgment, evaluation of economic uncertainties and assessment of business
conditions that may change. Because of these and other factors, adjustments to
the reserve for loan losses may be required.

The analytical review of the loan portfolio performed to determine the adequacy
of the reserve for loan losses includes a review of loans with balances over
$500 thousand for impairment, an analysis of historical loss experience by loan
type and, for groups of loans with similar characteristics, an evaluation of
current economic conditions and all other factors we consider pertinent to the
analysis. Impaired loans are defined as specifically reviewed loans for which
it is probable that we will be unable to collect all amounts due in accordance
with the loan agreement. Impaired loans are generally commercial and financial
loans and commercial real estate loans and are usually on non-accrual status.
Each impaired loan with an outstanding balance equal to or greater than $500
thousand has a specific, identified loan loss reserve associated with it.
Impaired loans do not include large groups of smaller balance homogeneous loans
with similar collateral characteristics, such as residential mortgage and home
equity loans. Loss reserves for these types of loans are established on an
aggregate basis using historical loss experience. Balances related to impaired
loans for which there are specific reserves are excluded when applying
historical loss ratios to determine overall loan loss reserve requirements.

The specific reserves for impaired loans are included in the reserve for loan
losses. Impaired loans are valued based upon the fair value of the related
collateral if the loans are collateral dependent. For all other impaired loans,
the specific reserves are based on the present values of expected cash flows
discounted at each loans initial effective interest rate.

Provisions to the reserve for loan losses are charged against, or credited to,
earnings in amounts necessary to maintain an adequate reserve for loan losses
in accordance with the methodology described above. Commercial loans are
charged-off when it is determined that they cannot be fully recovered and
non-commercial loans are generally charged-off or loan foreclosure proceedings
begun upon becoming 120 days delinquent or at such time as permitted by law or
other regulations. Recoveries of loans previously charged-off against the
reserve for loan losses are credited to the reserve.

The Company maintains its reserve for loan losses in accordance with a policy
approved by the Board of Directors. The Company has an established methodology
for analyzing its reserve for loan losses that includes an internal loan
classification policy. The Company periodically evaluates its methodology.
Domestic and international loans are subjected to similar review procedures.

7



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

While the Company believes its credit monitoring procedures are adequate,
credit losses are inherent to our business and it is possible there may be
unidentified losses in the loan portfolio at September 30, 2003 that may become
apparent at a later date pursuant to our analysis or pursuant to comment
following regulatory examination. In addition, collateral values, which are
valued in the loan underwriting process, may deteriorate such that a loss
exposure develops after the loan is made. The establishment of loan loss
reserves for problem credits that are currently unidentified or unanticipated
would negatively impact future earnings. A charge, if any is needed, would
generally be recorded in the segment in which the loan is recorded.

Venture Capital Investments

Venture capital investments are accounted for at fair value with gains and
losses included in noninterest income in the Consolidated Statements of Income.

At September 30, 2003, the Company valued its venture capital portfolio at
$44.0 million. This valuation was arrived at using a variety of factors
including, but not limited to: market prices, where available and discounted,
if necessary, to reflect trading history, lock-up provisions, lack of market
liquidity and other factors; cost, if there is no readily determinable market
price and there has not been a material event, such as a follow-on round of
financing or strategic sale; a value higher than cost if indicated by
additional financing which fulfills certain requirements; and analysis and
commentary from a funds Investment Manager/General Partner.

Since the Company has no present intention to sell or liquidate the venture
capital portfolio, the valuation of venture capital investments is subject to
uncertainties in that it does not represent a negotiated value between the
Company, as seller, and an independent, willing buyer that has the necessary
knowledge and financial ability to complete the purchase. Additionally, if the
Company attempted to sell its venture capital portfolio, particularly if it
deemed it necessary to liquidate the investment within a short period of time,
the actual proceeds from the sale could differ significantly from the carrying
value. The market for the type of venture capital investments we hold has been
impacted over the last several years by a slowing economy, a depressed domestic
equity market in which the values of publicly traded technology companies have
declined drastically, and, because of these market conditions, a decline in the
number of initial public offerings and acquisitions of private companies by
publicly traded firms. Although these and other factors have been assessed in
determining current values, because of the subjectivity in determining values,
it is possible that the Company would experience a material loss if it chose to
liquidate its venture capital portfolio, particularly if it attempted to do so
quickly. The loss, if any, would be recorded in the Riggs Capital Partners
segment.

Deferred Taxes

We record a provision for income taxes based upon the amounts of current taxes
payable (or refundable) and the change in net deferred tax assets or
liabilities during the year. Deferred tax assets and liabilities are recognized
for the tax effects of differing carrying values of assets and liabilities for
tax and financial statement reporting purposes that will reverse in future
periods. When substantial uncertainty exists concerning the recoverability of a
deferred tax asset, the carrying value of the asset is reduced by a valuation
allowance which results in an increase in income tax expense.

Realized and unrealized losses in our venture capital operations have resulted
in the establishment of $14.3 million of deferred tax assets as of September
30, 2003. These assets can be utilized to reduce taxes payable on future
capital gains but must be utilized within five years of the year in which the
loss is realized for tax return purposes. Because of continuing losses in our
venture capital portfolio and the lack of current suitability of alternatives
to generate capital gains, Riggs has established a valuation allowance of $6.7
million against the deferred tax asset at September 30, 2003. Of this amount,
$1.4 million was established in 2003. The Company believes that the unreserved
deferred tax asset balance of $7.6 million at September 30, 2003 will be
realized through generation of future net capital gains within its venture
capital operations or the implementation of alternative business strategies
that generate net capital gains. The Company realized $1.5 million of such
capital gains in the third quarter which included the September 2003 sale of
the Riggs Funds for a net gain of $1.2 million.

If sufficient net capital gains within the Companys venture capital operations
are not realized in a timely manner, or if business conditions or other factors
make it impossible, impractical or imprudent to implement the identified
alternative strategies, an additional valuation allowance, resulting in a
charge against income, for that portion of the deferred tax asset which will
not be utilized, will be recorded in the Other segment.

Impairment of Long-Lived Assets

The Company tests for impairment in the carrying value of any asset or group of
assets, other than intangible assets, whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
Intangible assets are tested for impairment annually.

Prior to 2003, the Company recorded $9.4 million in impairment charges in the
Banking segment related to a long-term, fixed-price, non-cancelable project
contract due to cost overruns that could not be passed on to subcontractors or
other parties to the contract. This contract involves the construction,
implementation and maintenance of a computer system which became operative in
September 2003 and will be utilized by the

8



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

federal government in its cash management and reporting. The contract continues
to have significant uncertainties as to the on-going operating costs
of the new system and the willingness of the counterparty to fund these costs.
Since the recoverability of these costs is dependent upon the
willingness of the contractual counterparty to fund them, there may be
additional impairment associated with this contract. The amount of such
losses, if any, cannot be reasonably estimated at this time. At September 30,
2003, the Company has an asset of $10.3 million related to this
contract.

In June 2003 the Company wrote-down the carrying value of a London property
held for sale by $3.8 million. The amount of the write-down was
determined by an independent appraisal of the property. This write-down
generated a $1.3 million deferred tax asset against which a $1.3 million
valuation allowance was established. These transactions were in addition to the
write-down on the same property in December 2002 of $1.3 million
and the corresponding valuation allowance established for $230 thousand.

NOTE 3.  EARNINGS PER SHARE

Earnings per share computations are as follows:

THREE MONTHS ENDED
    
    THREE MONTHS ENDEDSEPTEMBER 30, 2003
    
    SEPTEMBER 30, 2002BASIC
    
    DILUTED
    
    BASIC
    
    DILUTEDEPS
    
    EPS
    
    EPS
    
    EPSNet Income Available to Common
Shareholders
    
    $
    139
    
    
    $
    139
    
    
    $
    5,391
    
    
    $
    5,391Weighted-Average Shares Outstanding
    
    
    28,580,404
    
    
    
    28,580,404
    
    
    
    28,505,393
    
    
    
    28,505,393Weighted-Average Dilutive Effect
of Stock Option Plans
    
    
    n/a
    
    
    
    667,777
    
    
    
    n/a
    
    
    
    295,240Adjusted Weighted-Average Shares
Outstanding
    
    
    28,580,404
    
    
    
    29,248,181
    
    
    
    28,505,393
    
    
    
    28,800,633Earnings Per Share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    .19
    
    
    $
    .19


NINE MONTHS ENDED
    
    NINE MONTHS ENDEDSEPTEMBER 30, 2003
    
    SEPTEMBER 30, 2002BASIC
    
    DILUTED
    
    BASIC
    
    DILUTEDEPS
    
    EPS
    
    EPS
    
    EPSNet Income Available to Common
Shareholders
    
    $
    7,837
    
    
    $
    7,837
    
    
    $
    10,818
    
    
    $
    10,818Weighted-Average Shares Outstanding
    
    
    28,547,817
    
    
    
    28,547,817
    
    
    
    28,504,684
    
    
    
    28,504,684Weighted-Average Dilutive Effect
of Stock Option Plans
    
    
    n/a
    
    
    
    513,778
    
    
    
    n/a
    
    
    
    357,899Adjusted Weighted-Average Shares
Outstanding
    
    
    28,547,817
    
    
    
    29,061,595
    
    
    
    28,504,684
    
    
    
    28,862,583Earnings Per Share
    
    $
    .27
    
    
    $
    .27
    
    
    $
    .38
    
    
    $
    .37


Approximately 3.7 million and 3.8 million stock options were outstanding at the
end of September 2003 and 2002, respectively, but were not included
in the computation of diluted earnings per share because the exercise prices of
these options were greater than the average market price of the
common shares for the nine-month period and, therefore, the effect would be
antidilutive. The weighted average exercise price for these options was
$18.78 per share and $18.79 per share at the end of the same respective
periods.

9



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Stock-Based Employee Compensation Plans

At September 30, 2003 the Company had five stock-based compensation plans which
are described more fully in Note 14 of Notes to Consolidated
Financial Statements in our 2002 Form 10-K. The Company accounts for these
plans under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, SFAS 148,
Accounting for Stock-Based Compensation-Transition and Disclosure,
an amendment of FASB Statement 123, and related Interpretations. There is no
stock-based compensation expense for these plans reflected in
the Consolidated Statements of Income as all options granted under these plans
had an exercise price equal to the market value of the underlying
common stock on the date of grant.

In April 2003 the Company awarded 181,813 shares of its common stock to certain
key executives. The award, which qualifies for variable
accounting, will be earned if certain performance targets are met and vest
through December 2005. At September 30, 2003 the Company anticipates
that 40% of the awarded shares will be earned and has accrued expense based
upon this estimate. For the nine months ended September 30, 2003, we
recorded $168 thousand of expense related to this award.

In July 2002 the Company awarded shares of its common stock to certain key
executives (see Note 14 of Notes to Consolidated Financial
Statements in our 2002 Form 10-K). These time-vested awards qualify for fixed
accounting and vest in equal amounts through December 2006. For
the three and nine months ended September 30, 2003 we recorded $229 thousand
and $910 thousand of expense, respectively, related to this award.

Periodic expense related to stock-based employee-compensation plans reflects
the addition of new participants and the withdrawal of participants
from the plans. At September 30, 2003, 178,658 shares related to the
performance plan described above remain outstanding.

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions
of SFAS 123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.

NINE MONTHS ENDED SEPTEMBER 30,(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
    
    2003
    
    2002Net income, as reported
    
    $
    7,837
    
    
    $
    10,818Add: Stock-based employee compensation
expense included in reported
net income, net of related tax effects
    
    
    701
    
    
    
    210Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects
    
    
    (3,551
    )
    
    
    (2,082
    )Pro forma net income
    
    $
    4,987
    
    
    $
    8,946Earnings per share:Basic-as reported
    
    $
    0.27
    
    
    $
    0.38Basic-pro forma
    
    $
    0.17
    
    
    $
    0.31Diluted-as reported
    
    $
    0.27
    
    
    $
    0.37Diluted-pro forma
    
    $
    0.17
    
    
    $
    0.31Weighted-Average Fair Value
of Options and Awards Granted
    
    $
    5.72
    
    
    $
    6.30Weighted-Average Assumptions:Expected Lives (Years)
    
    
    9.00
    
    
    
    9.00Risk-Free Interest Rate
    
    
    4.17
    %
    
    
    4.97
    %Expected Volatility
    
    
    34.35
    %
    
    
    38.70
    %Expected Dividends (Year to Date Per Share)
    
    $
    0.15
    
    
    $
    0.15


The fair values of stock options outstanding are used to determine the proforma
impact of the options on compensation expense in the periods in
which the options vest.

10



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 4. OTHER COMPREHENSIVE INCOME (LOSS)

BEFORE -
    
    TAXTAX
    
    (EXPENSE)
    
    NET-OF-TAXAMOUNT
    
    BENEFIT
    
    AMOUNTNINE MONTHS ENDED SEPTEMBER 30, 2002:Foreign Currency Translation Adjustments
    
    $
    1,923
    
    
    $
    (673
    )
    
    $
    1,250Unrealized Gains on Securities:Unrealized Holding Gains Arising During Period
    
    
    24,428
    
    
    
    (8,550
    )
    
    
    15,878Reclassification Adjustment for Gains Realized in Net Income
    
    
    (7,395
    )
    
    
    2,588
    
    
    
    (4,807
    )Net Unrealized Gains on Securities
    
    
    17,033
    
    
    
    (5,962
    )
    
    
    11,071Unrealized Gains on Derivatives:Unrealized Holding Losses Arising During Period
    
    
    (3,402
    )
    
    
    1,191
    
    
    
    (2,211
    )Reclassification Adjustment for Gains Realized in Net Income
    
    
    2,256
    
    
    
    (790
    )
    
    
    1,466Net Unrealized Losses on Derivatives
    
    
    (1,146
    )
    
    
    401
    
    
    
    (745
    )Other Comprehensive Income
    
    $
    17,810
    
    
    $
    (6,234
    )
    
    $
    11,576NINE MONTHS ENDED SEPTEMBER 30, 2003:Foreign Currency Translation Adjustments
    
    $
    (282
    )
    
    $
    99
    
    
    $
    (183
    )Unrealized Losses on Securities:Unrealized Holding Gains Arising During Period (1)
    
    
    (6,223
    )
    
    
    2,157
    
    
    
    (4,066
    )Reclassification Adjustment for Gains Realized in Net Income
    
    
    (12,557
    )
    
    
    4,395
    
    
    
    (8,162
    )Net Unrealized Losses on Securities (1)
    
    
    (18,780
    )
    
    
    6,552
    
    
    
    (12,228
    )Unrealized Gains on Derivatives:Unrealized Holding Gains Arising During Period
    
    
    1,817
    
    
    
    (636
    )
    
    
    1,181Reclassification Adjustment for Gains Realized in Net Income
    
    
    
    
    
    
    
    
    
    
    Net Unrealized Gains on Derivatives
    
    
    1,817
    
    
    
    (636
    )
    
    
    1,181Other Comprehensive Loss
    
    $
    (17,245
    )
    
    $
    6,015
    
    
    $
    (11,230
    )


(1) Tax (expense) benefit reflects a blended tax rate of 35% for the gain
(loss) recorded in the U.S. and 30% for the gain (loss) recorded in the U.K.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BALANCES

FOREIGN
    
    UNREALIZED
    
    UNREALIZED
    
    ACCUMULATEDCURRENCY
    
    GAIN (LOSS)
    
    GAIN (LOSS)
    
    OTHERTRANSLATION
    
    ON
    
    ON
    
    COMPREHENSIVEADJUSTMENTS
    
    SECURITIES
    
    DERIVATIVES
    
    INCOME (LOSS)NINE MONTHS ENDED SEPTEMBER 30, 2002:Balance, December 31, 2001
    
    $
    (5,679
    )
    
    $
    (69
    )
    
    $
    (2,231
    )
    
    $
    (7,979
    )Period Change
    
    
    1,250
    
    
    
    11,071
    
    
    
    (745
    )
    
    
    11,576Balance, September 30, 2002
    
    $
    (4,429
    )
    
    $
    11,002
    
    
    $
    (2,976
    )
    
    $
    3,597NINE MONTHS ENDED SEPTEMBER 30, 2003:Balance, December 31, 2002
    
    $
    (4,154
    )
    
    $
    12,746
    
    
    $
    (3,124
    )
    
    $
    5,468Period Change
    
    
    (183
    )
    
    
    (12,228
    )
    
    
    1,181
    
    
    
    (11,230
    )Balance, September 30, 2003
    
    $
    (4,337
    )
    
    $
    518
    
    
    $
    (1,943
    )
    
    $
    (5,762
    )


11



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NOTE 5: SEGMENT PROFITABILITY

Our reportable segments are strategic business units that provide diverse
products and services within the financial services industry. We have six
reportable segments: Banking, International Banking, Riggs & Co. (wealth
management), Treasury, Riggs Capital Partners (venture capital) and Other.

The accounting policies for the segments are substantially the same as those
described in Note 1 of Notes to Consolidated Financial Statements in our 2002
Form 10-K. We account for intercompany transactions as if the transactions were
to third parties under market conditions. Overhead and support expenses are
allocated to each operating segment based on number of employees, service usage
and other factors relevant to the expense incurred. Geographic financial
information is provided in Note 15 of Notes to Consolidated Financial
Statements in our 2002 Form 10-K.

Revenue and expense allocation formulas and funds transfer pricing
methodologies may change. If necessary, prior periods are restated to reflect
material changes in the components of the segments. Prior periods, however, are
not restated to reflect changes in our revenue and cost allocations and funds
transfer pricing methodologies. In addition, revenues and expenses which are
unusual or noncontrollable may be reflected in the Other segment, which is
consistent with internal financial reporting, if management believes such
presentation most accurately represents the remaining operating segments
performance.

Reconciliations are provided from the segment totals to our consolidated
financial statements. The reconciliations of noninterest income and noninterest
expense offset as these items result from intercompany transactions and the
reconciliation of total average assets represents the elimination of
intercompany transactions.

Following are brief descriptions of our segments:

Banking

The Banking segment provides traditional banking services to retail, corporate
and commercial customers. This segment includes Corporate & Institutional
Banking, which concentrates its business in the corporate, commercial real
estate, government contracting and not-for-profit sectors. Its services include
lines of credit, secured and unsecured term loans, letters of credit, credit
support facilities and cash management. Also included within this segment is
our Community Banking Group. Community Banking provides traditional retail
banking services, such as deposit taking and mortgage and home equity lending,
and it continually expands its alternative delivery channels such as automated
teller machines and the telephone customer sales and service center. It
primarily conducts its business through 48 branches and 142 ATM locations in
the Washington, D.C., metropolitan area.

International Banking

The International Banking segment includes our Washington, D.C., based embassy
banking business, the London based banking subsidiary, Riggs Bank Europe Ltd.
(RBEL), and a branch in Berlin. Among the services provided are letters of
credit, foreign exchange, taking of deposits, private banking and cash
management. The International Banking segment also includes our international
private-client services division, which has offices in London and in Jersey
(Channel Islands), and Riggs Bank & Trust Company (Channel Islands), which
provides credit, treasury and investment management services to affluent
international clients.

Riggs & Co.

Riggs & Co. is the domestic private client and institutional services division
that provides trust, private banking and investment management services to a
broad customer base. Other services provided consist of tax planning, estate
planning, and trust administration. Included in this division are our
full-service broker-dealer subsidiary, Riggs Securities Inc., our portfolio
management business, and our investment management group, Riggs Investment
Advisors, Inc. (RIA).

Treasury

The Treasury segment is responsible for asset and liability management
throughout the Company including management of the securities portfolio,
foreign exchange activities, wholesale funding, overall management of interest
rate risk and facilitation of the funds transfer pricing component for
segments.

12



---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Riggs Capital Partners

Riggs Capital Partners represent our venture capital subsidiaries, which
specialize in equity investments in privately-held high-tech and high-growth
companies.


Other

The Other segment consists of our unallocated parent company income and
expense, net interest income from unallocated equity, long-term debt,
trust preferred securities, foreclosed real estate activities and other revenue
or expenses not attributable to one of the other segments.


THREE MONTHS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RIGGS
    
    
    
    
    
    
    
    
    
    RIGGSENDED
    
    
    
    
    
    INTERNATIONAL
    
    RIGGS&
    
    
    
    
    
    CAPITAL
    
    
    
    
    
    RECON-
    
    NATIONALSEPTEMBER 30, 2003
    
    BANKING
    
    BANKING
    
    COMPANY
    
    TREASURY
    
    PARTNERS
    
    OTHER
    
    CILIATION
    
    CORPORATIONNET INTEREST INCOMEInterest Income
    
    $
    33,860
    
    
    $
    5,339
    
    
    $
    1,331
    
    
    $
    16,010
    
    
    $
    3
    
    
    $
    8,286
    
    
    $
    (11,966
    )
    
    $
    52,863Interest Expense
    
    
    4,551
    
    
    
    4,431
    
    
    
    554
    
    
    
    5,846
    
    
    
    
    
    
    
    9,486
    
    
    
    (11,966
    )
    
    
    12,902Funds Transfer Income (Expense)
    
    
    3,009
    
    
    
    9,957
    
    
    
    2,439
    
    
    
    (18,203
    )
    
    
    (679
    )
    
    
    3,477
    
    
    
    
    
    
    
    Net Interest Income (Loss)
    
    
    32,318
    
    
    
    10,865
    
    
    
    3,216
    
    
    
    (8,039
    )
    
    
    (676
    )
    
    
    2,277
    
    
    
    
    
    
    
    39,961Provision for Loan Losses
    
    
    (664
    )
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (580
    )Net Interest Income (Loss) after Provision
    
    $
    31,654
    
    
    $
    10,949
    
    
    $
    3,216
    
    
    $
    (8,039
    )
    
    $
    (676
    )
    
    $
    2,277
    
    
    $
    
    
    
    $
    39,381NONINTEREST INCOMENoninterest Income-External
Customers
    
    $
    12,163
    
    
    $
    1,506
    
    
    $
    11,073
    
    
    $
    2,089
    
    
    $
    (941
    )
    
    $
    2,765
    
    
    
    
    
    
    $
    28,655Intersegment Noninterest Income
    
    
    674
    
    
    
    1,672
    
    
    
    748
    
    
    
    
    
    
    
    
    
    
    
    495
    
    
    
    (3,589
    )
    
    
    Total Noninterest Income
    
    $
    12,837
    
    
    $
    3,178
    
    
    $
    11,821
    
    
    $
    2,089
    
    
    $
    (941
    )
    
    $
    3,260
    
    
    $
    (3,589
    )
    
    $
    28,655NONINTEREST EXPENSEDirect Depreciation and Amortization
    
    $
    955
    
    
    $
    217
    
    
    $
    72
    
    
    $
    1
    
    
    $
    3
    
    
    $
    2,375
    
    
    
    
    
    
    $
    3,623Direct Expense
    
    
    17,209
    
    
    
    8,376
    
    
    
    7,243
    
    
    
    936
    
    
    
    197
    
    
    
    32,193
    
    
    
    (3,589
    )
    
    
    62,565Overhead and Support
    
    
    18,391
    
    
    
    5,401
    
    
    
    5,808
    
    
    
    1,006
    
    
    
    133
    
    
    
    (30,739
    )
    
    
    
    
    
    
    Total Noninterest Expense
    
    $
    36,555
    
    
    $
    13,994
    
    
    $
    13,123
    
    
    $
    1,943
    
    
    $
    333
    
    
    $
    3,829
    
    
    $
    (3,589
    )
    
    $
    66,188Income (Loss) Before Taxes and
Minority Interest
    
    $
    7,936
    
    
    $
    133
    
    
    $
    1,914
    
    
    $
    (7,893
    )
    
    $
    (1,950
    )
    
    $
    1,708
    
    
    $
    
    
    
    $
    1,848Taxes
    
    $
    1,793
    
    
    $
    90
    
    
    $
    676
    
    
    $
    (2,740
    )
    
    $
    
    
    
    $
    (1,652
    )
    
    
    
    
    
    $
    (1,833
    )Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,542
    
    
    
    
    
    
    
    3,542Net Income (Loss)
    
    $
    6,143
    
    
    $
    43
    
    
    $
    1,238
    
    
    $
    (5,153
    )
    
    $
    (1,950
    )
    
    $
    (182
    )
    
    $
    
    
    
    $
    139Total Average Assets
    
    $
    3,359,371
    
    
    $
    674,419
    
    
    $
    248,531
    
    
    $
    2,661,223
    
    
    $
    58,793
    
    
    $
    833,907
    
    
    $
    (1,752,855
    )
    
    $
    6,083,389


13



---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED



THREE MONTHS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RIGGS
    
    
    
    
    
    
    
    
    
    RIGGSENDED
    
    
    
    
    
    INTERNATIONAL
    
    RIGGS &
    
    
    
    
    
    CAPITAL
    
    
    
    
    
    RECON-
    
    NATIONALSEPTEMBER 30, 2002
    
    BANKING
    
    BANKING
    
    COMPANY
    
    TREASURY
    
    PARTNERS
    
    OTHER
    
    CILIATION
    
    CORPORATIONNET INTEREST INCOMEInterest Income
    
    $
    40,800
    
    
    $
    6,932
    
    
    $
    1,547
    
    
    $
    22,510
    
    
    $
    54
    
    
    $
    8,468
    
    
    $
    (15,389
    )
    
    $
    64,922Interest Expense
    
    
    11,482
    
    
    
    6,742
    
    
    
    1,031
    
    
    
    4,121
    
    
    
    
    
    
    
    9,530
    
    
    
    (15,389
    )
    
    
    17,517Funds Transfer Income (Expense)
    
    
    4,186
    
    
    
    10,356
    
    
    
    2,889
    
    
    
    (20,041
    )
    
    
    (894
    )
    
    
    3,504
    
    
    
    
    
    
    
    Net Interest Income (Loss)
    
    
    33,504
    
    
    
    10,546
    
    
    
    3,405
    
    
    
    (1,652
    )
    
    
    (840
    )
    
    
    2,442
    
    
    
    
    
    
    
    47,405Provision for Loan Losses
    
    
    (4,700
    )
    
    
    3,886
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (586
    )
    
    
    
    
    
    
    (1,400
    )Net Interest Income (Loss) after Provision
    
    $
    28,804
    
    
    $
    14,432
    
    
    $
    3,405
    
    
    $
    (1,652
    )
    
    $
    (840
    )
    
    $
    1,856
    
    
    $
    
    
    
    $
    46,005NONINTEREST INCOMENoninterest Income-External
Customers
    
    $
    11,366
    
    
    $
    1,261
    
    
    $
    10,980
    
    
    $
    6,555
    
    
    $
    (3,067
    )
    
    $
    35
    
    
    
    
    
    
    $
    27,130Intersegment Noninterest Income
    
    
    653
    
    
    
    2,097
    
    
    
    570
    
    
    
    
    
    
    
    
    
    
    
    641
    
    
    
    (3,961
    )
    
    
    Total Noninterest Income
    
    $
    12,019
    
    
    $
    3,358
    
    
    $
    11,550
    
    
    $
    6,555
    
    
    $
    (3,067
    )
    
    $
    676
    
    
    $
    (3,961
    )
    
    $
    27,130NONINTEREST EXPENSEDirect Depreciation and Amortization
    
    $
    927
    
    
    $
    304
    
    
    $
    123
    
    
    $
    3
    
    
    $
    7
    
    
    $
    2,225
    
    
    
    
    
    
    $
    3,589Direct Expense
    
    
    16,836
    
    
    
    9,983
    
    
    
    8,148
    
    
    
    855
    
    
    
    698
    
    
    
    23,157
    
    
    
    (3,961
    )
    
    
    55,716Overhead and Support
    
    
    13,426
    
    
    
    3,234
    
    
    
    3,175
    
    
    
    648
    
    
    
    125
    
    
    
    (20,608
    )
    
    
    
    
    
    
    Total Noninterest Expense
    
    $
    31,189
    
    
    $
    13,521
    
    
    $
    11,446
    
    
    $
    1,506
    
    
    $
    830
    
    
    $
    4,774
    
    
    $
    (3,961
    )
    
    $
    59,305Income (Loss) Before Taxes and
Minority Interest
    
    $
    9,634
    
    
    $
    4,269
    
    
    $
    3,509
    
    
    $
    3,397
    
    
    $
    (4,737
    )
    
    $
    (2,242
    )
    
    $
    
    
    
    $
    13,830Taxes
    
    $
    2,659
    
    
    $
    1,504
    
    
    $
    1,239
    
    
    $
    1,188
    
    
    $
    (1,658
    )
    
    $
    (508
    )
    
    
    
    
    
    $
    4,424Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    4,039
    
    
    
    
    
    
    
    4,015Net Income (Loss)
    
    $
    6,975
    
    
    $
    2,765
    
    
    $
    2,270
    
    
    $
    2,209
    
    
    $
    (3,055
    )
    
    $
    (5,773
    )
    
    $
    
    
    
    $
    5,391Total Average Assets
    
    $
    3,257,062
    
    
    $
    635,959
    
    
    $
    230,602
    
    
    $
    3,216,404
    
    
    $
    72,454
    
    
    $
    750,523
    
    
    $
    (1,922,740
    )
    
    $
    6,240,264


14



---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

NINE MONTHS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RIGGS
    
    
    
    
    
    
    
    
    
    RIGGSENDED
    
    
    
    
    
    INTERNATIONAL
    
    RIGGS &
    
    
    
    
    
    CAPITAL
    
    
    
    
    
    RECON-
    
    NATIONALSEPTEMBER 30, 2003
    
    BANKING
    
    BANKING
    
    COMPANY
    
    TREASURY
    
    PARTNERS
    
    OTHER
    
    CILIATION
    
    CORPORATIONNET INTEREST INCOMEInterest Income
    
    $
    109,678
    
    
    $
    16,414
    
    
    $
    3,999
    
    
    $
    59,371
    
    
    $
    11
    
    
    $
    24,952
    
    
    $
    (35,989
    )
    
    $
    178,436Interest Expense
    
    
    18,281
    
    
    
    14,901
    
    
    
    1,964
    
    
    
    16,858
    
    
    
    
    
    
    
    28,544
    
    
    
    (35,989
    )
    
    
    44,559Funds Transfer Income (Expense)
    
    
    9,163
    
    
    
    30,049
    
    
    
    7,811
    
    
    
    (53,240
    )
    
    
    (2,208
    )
    
    
    8,425
    
    
    
    
    
    
    
    Net Interest Income (Loss)
    
    
    100,560
    
    
    
    31,562
    
    
    
    9,846
    
    
    
    (10,727
    )
    
    
    (2,197
    )
    
    
    4,833
    
    
    
    
    
    
    
    133,877Provision for Loan Losses
    
    
    (2,627
    )
    
    
    390
    
    
    
    (81
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (2,321
    )Net Interest Income (Loss) after
Provision
    
    $
    97,933
    
    
    $
    31,952
    
    
    $
    9,765
    
    
    $
    (10,727
    )
    
    $
    (2,197
    )
    
    $
    4,830
    
    
    $
    
    
    
    $
    131,556NONINTEREST INCOMENoninterest Income-External
Customers
    
    $
    34,011
    
    
    $
    4,635
    
    
    $
    32,224
    
    
    $
    14,749
    
    
    $
    (3,526
    )
    
    $
    2,776
    
    
    
    
    
    
    $
    84,869Intersegment Noninterest Income
    
    
    2,128
    
    
    
    4,853
    
    
    
    2,243
    
    
    
    
    
    
    
    
    
    
    
    1,535
    
    
    
    (10,759
    )
    
    
    Total Noninterest Income
    
    $
    36,139
    
    
    $
    9,488
    
    
    $
    34,467
    
    
    $
    14,749
    
    
    $
    (3,526
    )
    
    $
    4,311
    
    
    $
    (10,759
    )
    
    $
    84,869NONINTEREST EXPENSEDirect Depreciation and Amortization
    
    $
    2,821
    
    
    $
    826
    
    
    $
    273
    
    
    $
    6
    
    
    $
    11
    
    
    $
    7,074
    
    
    
    
    
    
    $
    11,011Direct Expense
    
    
    53,068
    
    
    
    28,506
    
    
    
    24,890
    
    
    
    2,905
    
    
    
    637
    
    
    
    80,360
    
    
    
    (10,759
    )
    
    
    179,607Overhead and Support
    
    
    51,808
    
    
    
    13,351
    
    
    
    13,146
    
    
    
    2,522
    
    
    
    334
    
    
    
    (81,161
    )
    
    
    
    
    
    
    Total Noninterest Expense
    
    $
    107,697
    
    
    $
    42,683
    
    
    $
    38,309
    
    
    $
    5,433
    
    
    $
    982
    
    
    $
    6,273
    
    
    $
    (10,759
    )
    
    $
    190,618Income (Loss) Before Taxes and
Minority Interest
    
    $
    26,375
    
    
    $
    (1,243
    )
    
    $
    5,923
    
    
    $
    (1,411
    )
    
    $
    (6,705
    )
    
    $
    2,868
    
    
    $
    
    
    
    $
    25,807Taxes
    
    $
    6,683
    
    
    $
    997
    
    
    $
    2,052
    
    
    $
    (472
    )
    
    $
    
    
    
    $
    (1,907
    )
    
    
    
    
    
    $
    7,353Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    10,638
    
    
    
    
    
    
    
    10,617Net Income (Loss)
    
    $
    19,692
    
    
    $
    (2,240
    )
    
    $
    3,871
    
    
    $
    (939
    )
    
    $
    (6,684
    )
    
    $
    (5,863
    )
    
    $
    
    
    
    $
    7,837Total Average Assets
    
    $
    3,286,031
    
    
    $
    661,348
    
    
    $
    241,536
    
    
    $
    3,023,274
    
    
    $
    59,747
    
    
    $
    809,619
    
    
    $
    (1,635,296
    )
    
    $
    6,446,259


15



---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED



NINE MONTHS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RIGGS
    
    
    
    
    
    
    
    
    
    RIGGSENDED
    
    
    
    
    
    INTERNATIONAL
    
    RIGGS &
    
    
    
    
    
    CAPITAL
    
    
    
    
    
    RECON-
    
    NATIONALSEPTEMBER 30, 2002
    
    BANKING
    
    BANKING
    
    COMPANY
    
    TREASURY
    
    PARTNERS
    
    OTHER
    
    CILIATION
    
    CORPORATIONNET INTEREST INCOMEInterest Income
    
    $
    118,689
    
    
    $
    22,331
    
    
    $
    4,504
    
    
    $
    70,575
    
    
    $
    165
    
    
    $
    25,818
    
    
    $
    (47,822
    )
    
    $
    194,260Interest Expense
    
    
    31,557
    
    
    
    21,258
    
    
    
    3,188
    
    
    
    13,858
    
    
    
    
    
    
    
    28,861
    
    
    
    (47,822
    )
    
    
    50,900Funds Transfer Income (Expense)
    
    
    8,928
    
    
    
    29,090
    
    
    
    8,840
    
    
    
    (55,268
    )
    
    
    (2,768
    )
    
    
    11,178
    
    
    
    
    
    
    
    Net Interest Income (Loss)
    
    
    96,060
    
    
    
    30,163
    
    
    
    10,156
    
    
    
    1,449
    
    
    
    (2,603
    )
    
    
    8,135
    
    
    
    
    
    
    
    143,360Provision for Loan Losses
    
    
    (4,700
    )
    
    
    4,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268Net Interest Income (Loss) after
Provision
    
    $
    91,360
    
    
    $
    35,131
    
    
    $
    10,156
    
    
    $
    1,449
    
    
    $
    (2,603
    )
    
    $
    8,135
    
    
    $
    
    
    
    $
    143,628NONINTEREST INCOMENoninterest Income-External
Customers
    
    $
    32,554
    
    
    $
    3,472
    
    
    $
    35,973
    
    
    $
    9,951
    
    
    $
    (13,488
    )
    
    $
    245
    
    
    
    
    
    
    $
    68,707Intersegment Noninterest Income
    
    
    2,055
    
    
    
    7,780
    
    
    
    1,798
    
    
    
    
    
    
    
    
    
    
    
    1,924
    
    
    
    (13,557
    )
    
    
    Total Noninterest Income
    
    $
    34,609
    
    
    $
    11,252
    
    
    $
    37,771
    
    
    $
    9,951
    
    
    $
    (13,488
    )
    
    $
    2,169
    
    
    $
    (13,557
    )
    
    $
    68,707NONINTEREST EXPENSEDirect Depreciation and Amortization
    
    $
    2,776
    
    
    $
    902
    
    
    $
    375
    
    
    $
    9
    
    
    $
    21
    
    
    $
    6,569
    
    
    
    
    
    
    $
    10,652Direct Expense
    
    
    51,728
    
    
    
    30,951
    
    
    
    27,274
    
    
    
    2,677
    
    
    
    2,108
    
    
    
    64,119
    
    
    
    (13,557
    )
    
    
    165,300Overhead and Support
    
    
    39,228
    
    
    
    9,295
    
    
    
    9,494
    
    
    
    1,727
    
    
    
    328
    
    
    
    (60,072
    )
    
    
    
    
    
    
    Total Noninterest Expense
    
    $
    93,732
    
    
    $
    41,148
    
    
    $
    37,143
    
    
    $
    4,413
    
    
    $
    2,457
    
    
    $
    10,616
    
    
    $
    (13,557
    )
    
    $
    175,952Income (Loss) Before Taxes and
Minority Interest
    
    $
    32,237
    
    
    $
    5,235
    
    
    $
    10,784
    
    
    $
    6,987
    
    
    $
    (18,548
    )
    
    $
    (312
    )
    
    $
    
    
    
    $
    36,383Taxes
    
    $
    9,525
    
    
    $
    1,940
    
    
    $
    3,724
    
    
    $
    2,440
    
    
    $
    (6,492
    )
    
    $
    1,423
    
    
    
    
    
    
    $
    12,560Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101
    )
    
    
    13,106
    
    
    
    
    
    
    
    13,005Net Income (Loss)
    
    $
    22,712
    
    
    $
    3,295
    
    
    $
    7,060
    
    
    $
    4,547
    
    
    $
    (11,955
    )
    
    $
    (14,841
    )
    
    $
    
    
    
    $
    10,818Total Average Assets
    
    $
    3,104,889
    
    
    $
    681,389
    
    
    $
    228,281
    
    
    $
    3,113,398
    
    
    $
    74,495
    
    
    $
    781,350
    
    
    $
    (2,025,752
    )
    
    $
    5,958,050


NOTE 6: ACCOUNTING FOR DERIVATIVES

Under the provisions of SFAS 133, Accounting for Derivative Investments and
Hedging Activities, which was amended by SFAS 138 and SFAS 149, (see further
discussion in Note 10, New Financial Accounting Standards) all derivatives
are recognized as assets or liabilities in the Consolidated Statements of
Condition and are measured at fair value through adjustments to either Other
Comprehensive Income or current earnings, depending on the purpose of the
derivative. When a derivative contract is entered into, we first determine
whether or not it qualifies as an asset or liability, (2) a hedge of actual or
forecasted cash flows or (3) a hedge of a net investment in a foreign
operation. Changes in the fair value of a derivative that is designated a fair
value hedge and qualifies as a highly effective hedge, along with any gain or
loss on the hedged asset or liability attributable to the hedged risk, are
recorded in current period earnings. The effective portion of changes in fair
value of a derivative that is designated a cash flow hedge and that qualifies
as a highly effective hedge is recorded in Other Comprehensive Income until
such time as periodic settlements on a variable rate hedged item are recorded
in earnings. The ineffective portion of changes in fair value of cash flow
derivatives is recorded in current period earnings. Changes in the fair value
of a derivative designated as a foreign currency hedge and that qualifies as a
highly effective hedge are either recorded in current earnings, Other
Comprehensive Income, or both, depending on whether the transaction is a fair
value hedge or a cash flow hedge. If a derivative is used as a hedge of a net
investment in a foreign operation, changes in its fair value, to the extent
effective as a hedge, are recorded in Other Comprehensive Income. (See Note 4
for the impact to Other Comprehensive Income.)

The Company has the following hedging instruments at September 30, 2003:

Fair Value Hedges  We enter into pay fixed, receive floating interest rate
swaps to hedge changes in fair value of fixed rate loans attributable to
changes in benchmark interest rates. At September 30, 2003 and 2002 we had no
fair value hedges.

Cash Flow Hedges  We use interest rate swaps to hedge the exposure to
variability in expected future cash outflows on floating rate liabilities
attributable to changes in interest rates. At September 30, 2003, we have 7
such interest rate
swaps with a total notional value of $46.6 million compared to 6 swaps with a
total notional of $42.7 million at September 30, 2002. We also use foreign
currency forward contracts to hedge the

16



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

foreign exchange risk associated with principal and interest payments on loans
denominated in a foreign currency. At September 30, 2003 there was 1 contract
with a notional value of $517 thousand compared to 4 contracts with a total
notional value of $14.8 million at September 30, 2002. The reduction in the
number of these contracts is related to the prior year sale of loans at RBEL
(see Loans in Managements Discussion and Analysis). For the nine months
ended September 30, 2003 and 2002, there was no impact to Other Noninterest
Income in the Consolidated Statements of Operations for the ineffective portion
of all cash flow hedges.

Gains or losses on derivatives that are reclassified from Accumulated Other
Comprehensive Income to income are included in the line in the
Consolidated Statement of Operations in which the income or expense related to
the hedged item is recorded. At September 30, 2003, $11 thousand of deferred
net losses on derivative instruments in Accumulated Other Comprehensive Income
is expected to be reclassified as expense during the next twelve months
compared to $135 thousand of deferred net gains at September 30, 2002. The
maximum term over which we were hedging our exposure to the variability of cash
flows was 21 months as of September 30, 2003 and 33 months as of September 30,
2002.

The Company uses forward exchange contracts to hedge substantially all of its
net investment in a foreign subsidiary. The purpose of this hedge is to protect
against adverse movements in currency exchange rates, in this case for pounds
sterling. At September 30, 2003, $1.3 million of net losses related to the
existing net investment forward exchange contract are included in Accumulated
Other Comprehensive Income compared to to $572 thousand of net losses at
September 30, 2002. The corresponding notional values for these periods was
$70.1 million and $72.4 million, respectively.

As of September 30, 2003 and 2002 we had certain derivative instruments used to
manage interest rate risk that were not designated to specific hedge
relationships. The carrying value of these items is a net liability of $280
thousand and $755 thousand at September 30, 2003 and 2002, respectively. The
impact to the Consolidated Statements of Operations from these swaps was a gain
of $322 thousand for the first nine months of 2003 and a gain of $514 thousand
for the same period in 2002. At September 30, 2003 we had 12 interest rate
contracts and 7 forward contracts with a total notional value of $57.1 million
compared to 28 interest rate contracts and 5 forward contracts with a total
notional value of $101.0 million at September 30, 2002. These instruments are
marked to market through current period earnings.

NOTE 7: REGULATORY MATTERS

In July 2003, Riggs Bank entered into a Stipulation and Consent to the Issuance
of a Consent Order and a Consent Order (collectively the Consent Order) with
the Office of the Comptroller of the Currency (OCC). The provisions of the
Consent Order are effective until such time as they are amended, suspended,
waived or terminated by the OCC.

The Consent Order requires the Bank to take various actions within one hundred
and fifty (150) days to ensure compliance and improve the monitoring of
compliance with the Bank Secrecy Act (BSA) and related rules and regulations.
It is the Companys intent to fully cooperate with the OCC on this matter and
the Company began implementing, prior to entering into the Consent Order,
procedures and programs to ensure compliance with BSA.

The Consent Order allows the OCC to take whatever future actions it deems
necessary to fulfill its regulatory responsibilities. These actions could
include the imposition of a monetary penalty, including a civil monetary
penalty. The amount of such monetary penalty, if any, cannot be estimated at
this time.

NOTE 8: RELATED PARTY TRANSACTIONS

Prior to and during the nine months ended September 30, 2003 we entered into
various transactions with officers and directors of the Company and its
affiliates as well as with their associates. These transactions were of a
similar nature to those described in our Annual Report on Form 10-K for the
year ended December 31, 2002.

NOTE 9: NEW FINANCIAL ACCOUNTING STANDARDS

SFAS 148, Accounting for Stock-Based Compensation-Transition and Disclosure,
an amendment of FASB Statement 123, was issued in December 2002. It amends
SFAS 123, Accounting for Stock Based Compensation to provide alternative
methods of transition for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee compensation. It also
amends the disclosure provision of that statement to require prominent
disclosure about the effects on reported net income of an entitys accounting
policy decisions with respect to stock-

Note 10: SUBSEQUENT EVENTS

On November 12, 2003, the Company learned that it was, along with major
financial institutions, named a defendant in two consumer class action
lawsuits. The first of these lawsuits was filed by David Peterson and others on
October 1, 2003 in the Superior Court of the District of Columbia. The second
suit was filed on November 4, 2003 by Pablo Curet et al in the Thirteenth
Judicial Circuit Court in and for Hillsborough County, Florida. These lawsuits
allege that the defendants, including the Company and Riggs Bank, violated a
number of state antitrust laws since merchants were required to accept Visa and
MasterCard debit cards as a condition of accepting Visa and MasterCard credit
cards. The plaintiffs assert that fees paid by the merchants on debit card
purchases were artificially inflated and these costs were passed along to the
consumers. The plaintiffs seek, among other things, unspecified compensatory
damages related to these alleged overcharges and punitive, double, treble or
such other damages as may be awarded under applicable state law. The Company is
evaluating the merits of these lawsuits. The Company, accordingly, has not
established any liability related to these matters at September 30, 2003.



17



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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

based employee compensation. Finally, this statement amends APB Opinion 28,
Interim Financial Reporting, to require disclosure about those
effects in interim financial information. This interim disclosure is contained
in Note 3, Earnings Per Share of this Form 10-Q. We currently do not
anticipate changing to the fair value based method of accounting for stock
based compensation.

SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activity, was issued in May 2003. It amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities. It accomplishes this by requiring that contracts with
comparable characteristics be accounted for similarly. The statement is
effective for contracts entered into or modified after June 30, 2003, with
minor exceptions, and should be applied prospectively. Adoption of this
statement did not have a material impact on the Company.

SFAS 150, Accounting for Certain Financial Instruments with Characteristics of
Liabilities and Equity was issued on May 30, 2003. It establishes
standards for classification as liabilities those financial instruments that
have characteristics of both debt and equity, including those financial
instruments that are mandatorily redeemable on a fixed or determinable date.
However, on November 7, 2003 the FASB Staff Position No. 150-3
was issued which nullifies the FASBs previous conclusions as expressed in SFAS
150 and defers the effective date for the classification and
measurement requirements of SFAS 150. Accordingly, the financial statements
contained herein do not reflect the adoption of SFAS 150.

In November 2002 the Financial Accounting Standards Board issued Interpretation
No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantors, including Indirect Guarantees of Indebtedness of
Others: an Interpretation of FASB Statements No. 5, 57 and 107 and
rescission of FASB Interpretation No. 34. Under FIN 45 a liability must be
recognized at the inception of certain guarantees whether or not
payment is probable. When the guarantor has assumed a stand-ready obligation,
the fair value of the guarantee must be recorded as a liability.
This interpretation was effective at December 31, 2002, with the disclosure
provisions of FIN 45 effective in 2002 and the accounting provisions
effective in 2003. At September 30, 2003 a liability of $280 thousand existed
for the stand-by letters of credit.

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46 (FIN 46), Consolidation of Variable Interest Entities:
an interpretation of ARB No. 51. This interpretation addresses the issue of
consolidation of variable interest entities, which were previously
commonly referred to as special-purpose entities (SPEs). Generally, in a
variable interest entity the equity investment at risk is not sufficient to
allow the entity to function without subordinated financial support from other
parties that absorb some of the expected losses and the equity
investors do not have the essential characteristics of a controlling financial
interest. According to FIN 46, if a business has a controlling financial
interest in a variable interest entity, the assets, liabilities and operating
results of the variable interest entity should be consolidated with the
business,
even if the business does not have voting control of the variable interest
entity. FIN 46 is to be applied immediately to variable interest entities
created after January 31, 2003 and to interests in variable interest entities
acquired after that date. FIN 46 was also to be applied to the first interim
or fiscal periods beginning after June 15, 2003 for those variable interest
entities in which a business holds an interest that was acquired before
February 1, 2003. On October 9, 2003, however, the Financial Accounting
Standards Board delayed implementation of FIN 46 as it related to
variable interest entities created before February 1, 2003 to interim or fiscal
periods ending after December 15, 2003. In addition, on October 31,
2003, the Financial Accounting Standards Board issued a proposed interpretation
of FIN 46 which alters several of the provisions of FIN 46 as
originally published. The comment period deadline for the proposed
interpretation is December 1, 2003.

18



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

The following discussion and analysis should be read along with our
consolidated financial statements and related notes included in this Quarterly
Report on Form 10-Q. The following discussion and analysis contains
forward-looking statements that are subject to risks, uncertainties and other
factors that could cause our actual results, performance, prospects or
opportunities to differ materially from those expressed in, or implied by,
these
forward-looking statements. See Cautionary Note Regarding Forward-Looking
Statements.

Riggs National Corporation is a bank holding company headquartered in
Washington, D.C. The Company engages in a variety of banking and
financial services including community, commercial and international banking,
trust and investment management services and venture capital
investing. Riggs conducts its activities through six reportable segments:
Banking, International Banking, Riggs & Co. (wealth management), Treasury,
Riggs Capital Partners (venture capital) and Other. With the exception of
venture capital investing the activities of the Company are conducted
through its principal operating subsidiary, Riggs Bank, and its subsidiaries
and divisions. Venture capital investing is performed through two
subsidiaries of the Company, Riggs Capital Partners and Riggs Capital Partners
II.

The Company has 48 branch locations and 142 ATMs in the metropolitan
Washington, D.C. area and a bank in the United Kingdom. It has
additional operations or subsidiaries in London (England), Miami (Florida),
Berlin (Germany), Jersey (Channel Islands) and Nassau (Bahamas). The
Company serves an array of customers including individuals, partnerships,
corporations, foundations, not-for-profit organizations and foreign
embassies and delegations.

The Company faces significant competitive pressure from local, regional,
national and international banking institutions as well as thrifts, finance
companies, credit unions, brokerage and insurance companies and other financial
intermediaries. Many of the Companys competitors are larger and
have greater financial resources than we have. Riggs competes on the basis of
its reputation, localized decision-making, interest rates, convenient
locations, hours of operation and quality of customer service.

The Company also is affected by prevailing economic conditions, including
federal monetary and fiscal policies, federal regulation of financial
institutions and the perceptions of customers regarding stability of financial
markets and the financial services industry. These factors affect the
operations of all of the Companys segments. The International Banking segment
also is affected by the political, social and economic environments
in those countries in and with which it does business. While the Company
strives to monitor and minimize risk, the Company does in fact fund
customers that have alternative, and in some instances competing, goals and
strategies. These competitive frictions may have future negative
consequences to the Company. In addition, the Companys international presence
exposes it to various political risks and the further risk that the
general public may look unfavorably upon some of its foreign customer
relationships.

ENHANCING PERFORMANCE AND SERVICE

In September 2003 the Company substantially completed implementation of new
technologies involving many of our core domestic banking and
financial management systems. This initiative was undertaken to replace
outdated systems and reduce costs and represents the culmination of a
project begun in 2001 to enhance financial performance and service (Project
EPS). In addition to the technology initiative, the project included
operational redesign, implementation of new fee structures and realignment of
our European operations to focus on private and embassy banking. We
are currently reassessing the technology options available in Europe.

The Company expects to capitalize approximately $44.5 million of costs related
to the domestic portion of Project EPS which will be amortized,
depending on the nature of the cost, over periods from three to seven years. In
addition, expense incurred on Project EPS totaled $4.3 million for the
quarter ended September 30, 2003. For the nine months ended September 30, 2003,
expenses totaled $8.7 million and for the project life to date
they have totaled $13.1 million. Management believes the annual net incremental
pre-tax earnings provided by the domestic Project EPS will be
approximately $8.6 million.

19



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

RESULTS OF OPERATIONS

The Company recorded net income of $139 thousand, or $0.00 per diluted share,
for the third quarter of 2003 compared to net income of $5.4
million, or $0.19 per diluted share, in the third quarter of 2002. The decrease
in earnings in the third quarter of 2003 was due primarily to decreases
in net interest income which decreased $7.4 million. Noninterest expense, which
increased from $59.3 million in 2002 to $66.2 million in the
current quarter, also contributed to lower earnings. Partially offsetting these
decreases to earnings was a $1.5 million increase in noninterest income.
Return on average assets was .01% for the three months ended September 30, 2003
compared to .34% for the same period a year ago and return on
average shareholders equity was 0.15% for the three months ended September 30,
2003 compared to 5.60% for the same period in September, 2002.

For the nine months ended September 30, 2003 we recorded net income of $7.8
million, or $0.27 per diluted share, compared to net income of
$10.8 million, or $0.37 per diluted share, in the first nine months of 2002.
The decrease in earnings in the first nine months of 2003 compared to the
prior year was due primarily to a decrease in net interest income of $9.5
million and increases in noninterest expense of $14.7 million. Offsetting
these earnings decreases were reductions in venture capital losses, which
amounted to $3.6 million compared to $13.7 million for the nine months
ended in 2002 and increases in securities gains of $5.2 million. Return on
average assets was .16% for the nine months ended September 30, 2003,
compared to .24% for the same period a year ago. Return on average
shareholders equity was 2.72% compared to 3.90% for the nine months ended
September 30, 2002.

NET INTEREST INCOME

Net interest income on a tax-equivalent basis (net interest income plus an
amount equal to the tax savings on tax-exempt interest) totaled $41.2
million in the third quarter of 2003, a decrease of $7.3 million (or 15.0%)
from the $48.5 million for the same quarter in 2002. The decrease was
primarily due to a decrease in interest income (from $66.0 million to $54.1
million). Decreases in yields earned on loans and securities were the
major contributors to the decline in interest income, as prepayments on
mortgage loans and mortgage-backed securities increased significantly
resulting in more rapid amortization of purchase premiums. Offsetting this
decrease in interest income was a $4.6 million decrease from the
comparable period of the prior year due primarily to a lower rate environment.

Since mid-December 2002 the Company has borrowed $419.0 million from the FHLB
at rates ranging from .52% to 3.70%. Beginning in the second
quarter of 2003 the Company increased its long-term borrowings through term
repurchase agreements. At September 30, 2003, the Company had
outstanding $156.0 million of these long-term repurchase agreements with rates
ranging from .56% to 3.02%. The Company uses both types of
advances to fund the purchase of mortgage-backed securities as part of a
leverage strategy to utilize our strong capital position. The goal of this
strategy is to increase net interest income. The average rate of FHLB
borrowings outstanding at September 30, 2003 was 2.56% and the average rate
of outstanding long-term repurchase agreements was 1.95%. As interest rates
have continued to decrease within the past year, loans and other assets
have prepaid and repriced quickly. Due to market forces, however, the Company
has found it increasingly difficult to pass on these rate decreases to
its deposit customers.

Beginning in mid-July 2003, the United States Department of the Treasury
(Treasury) changed the method by which it compensates financial
agent banks. Whereas under the prior compensation methodology, Riggs was
compensated by net interest earned on Treasury deposit balances,
which was reflected in net interest income, under the new compensation
methodology, Riggs will use zero cost Treasury deposits to purchase a
Treasury-issued depository compensation security (DCS). The DCS and deposit
balances are netted in the Statements of Financial Condition in
accordance with FIN 39 (Offsetting of Amounts Related to Certain Contracts)
and income earned on the DCS is reflected in the Statements of
Operations as non-interest income. For the quarter ended September 30, 2003 the
amount of such income was $1.4 million.

For the nine months ended September 30, 2003, net interest income on a
tax-equivalent basis totaled $137.5 million, a decrease of $8.6 million
(or 6.0%) from the $146.1 million for the same period in 2002. The decrease was
primarily due to a larger decrease in interest income (from
$197.0 million to $182.1 million) than in interest expense (from $50.9 million
to $44.6 million). As it was for the three month period, decreases
in yields earned on loans and securities were the major contributors to the
decline in interest income. Market forces affecting net interest income
for the three month period have also affected the nine-month period.

20



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

For the three months ended September 30, 2003 compared to the same quarter in
the prior year, net interest margin decreased from 3.40% to
3.01%. For the nine months ended September 30, 2003, net interest margin was
3.16%, a decrease of 47 basis points from the same period a year
ago. While the decrease in interest rates and yields on the Companys assets
was a significant reason for the margin decline in both periods, caused
both by market forces and sales of mortgage-backed securities, the change in
the U.S. Treasurys compensation methodology discussed previously
also played a major role.

An analysis of the changes in interest income and expense attributable to
volume and rate changes follows:

NET INTEREST INCOME CHANGES (1)

THREE MONTHS ENDED
    
    NINE MONTHS ENDEDSEPTEMBER 30, 2003 VS. 2002
    
    SEPTEMBER 30, 2003 VS. 2002(TAX-EQUIVALENT BASIS)
    
    DUE TO
    
    DUE TO
    
    TOTAL
    
    DUE TO
    
    DUE TO
    
    TOTAL(IN THOUSANDS)
    
    RATE
    
    VOLUME
    
    CHANGE
    
    RATE
    
    VOLUME
    
    CHANGEInterest Income:Loans, Including Fees
    
    $
    (8,678
    )
    
    $
    942
    
    
    $
    (7,736
    )
    
    $
    (19,510
    )
    
    $
    6,784
    
    
    $
    (12,726
    )Securities Available for Sale
    
    
    (2,233
    )
    
    
    (1,054
    )
    
    
    (3,287
    )
    
    
    (10,031
    )
    
    
    8,171
    
    
    
    (1,860
    )Time Deposits with Other Banks
    
    
    234
    
    
    
    340
    
    
    
    574
    
    
    
    1,798
    
    
    
    374
    
    
    
    2,172Federal Funds Sold and Reverse
Repurchase Agreements
    
    
    (701
    )
    
    
    (802
    )
    
    
    (1,503
    )
    
    
    (1,907
    )
    
    
    (601
    )
    
    
    (2,508
    )Total Interest Income
    
    
    (11,378
    )
    
    
    (574
    )
    
    
    (11,952
    )
    
    
    (29,650
    )
    
    
    14,728
    
    
    
    (14,922
    )Interest Expense:Interest-Bearing Deposits
    
    
    (5,108
    )
    
    
    (1,914
    )
    
    
    (7,022
    )
    
    
    (13,398
    )
    
    
    563
    
    
    
    (12,835
    )Repurchase Agreements and Other
Short-Term Borrowings
    
    
    (928
    )
    
    
    88
    
    
    
    (840
    )
    
    
    (1,518
    )
    
    
    (230
    )
    
    
    (1,748
    )FHLB Borrowings and Other
Long-Term Debt
    
    
    (1,678
    )
    
    
    4,925
    
    
    
    3,247
    
    
    
    (3,161
    )
    
    
    11,403
    
    
    
    8,242Total Interest Expense
    
    
    (7,714
    )
    
    
    3,099
    
    
    
    (4,615
    )
    
    
    (18,077
    )
    
    
    11,736
    
    
    
    (6,341
    )Net Interest Income
    
    $
    (3,664
    )
    
    $
    (3,673
    )
    
    $
    (7,337
    )
    
    $
    (11,573
    )
    
    $
    2,992
    
    
    $
    (8,581
    )




|(1) | - | The dollar amount of changes in interest income and interest expense
attributable to changes in rate/volume (change in rate multiplied by change in
volume) has been allocated between
rate and volume variances based on the percentage relationship of such
variances to each other. Income and rates are computed on a tax-equivalent
basis using a Federal income tax
rate of 35% and local tax rates as applicable.
|--- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

An analysis of the changes in our average Statements of Condition and changes
to our margin for the quarters ended September 30 follows:

THREE MONTHS ENDED
    
    THREE MONTHS ENDEDSEPTEMBER 30, 2003
    
    SEPTEMBER 30, 2002(TAX-EQUIVALENT BASIS) (1)
    
    AVERAGE
    
    INCOME/
    
    
    
    
    
    AVERAGE
    
    INCOME/(IN THOUSANDS)
    
    BALANCE
    
    EXPENSE
    
    RATE
    
    BALANCE
    
    EXPENSE
    
    RATEASSETSLoans (2)
    
    $
    2,968,304
    
    
    $
    37,790
    
    
    
    5.05
    %
    
    $
    2,906,844
    
    
    $
    45,526
    
    
    
    6.21
    %Securities Available for Sale (3)
    
    
    1,939,805
    
    
    
    14,250
    
    
    
    2.91
    
    
    
    2,070,804
    
    
    
    17,537
    
    
    
    3.36Time Deposits with Other Banks
    
    
    264,234
    
    
    
    1,358
    
    
    
    2.04
    
    
    
    191,810
    
    
    
    784
    
    
    
    1.62Federal Funds Sold and Reverse Repurchase Agreements
    
    
    260,250
    
    
    
    666
    
    
    
    1.02
    
    
    
    493,738
    
    
    
    2,169
    
    
    
    1.74Total Earning Assets and Average Rate Earned (5)
    
    
    5,432,593
    
    
    
    54,064
    
    
    
    3.95
    
    
    
    5,663,196
    
    
    
    66,016
    
    
    
    4.62Reserve for Loan Losses
    
    
    (26,387
    )
    
    
    
    
    
    
    
    
    
    
    (25,393
    )Cash and Due from Banks
    
    
    190,296
    
    
    
    
    
    
    
    
    
    
    
    169,633Other Assets
    
    
    486,887
    
    
    
    
    
    
    
    
    
    
    
    432,828Total Assets
    
    $
    6,083,389
    
    
    
    
    
    
    
    
    
    
    $
    6,240,264LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS EQUITYInterest-Bearing Deposits
    
    $
    3,771,599
    
    
    $
    7,135
    
    
    
    0.75
    %
    
    $
    4,445,897
    
    
    $
    14,157
    
    
    
    1.26
    %Repurchase Agreements and Other Short-Term
Borrowings
    
    
    443,654
    
    
    
    902
    
    
    
    0.81
    
    
    
    421,142
    
    
    
    1,742
    
    
    
    1.64FHLB Borrowings and Other Long-Term Debt
    
    
    560,083
    
    
    
    4,865
    
    
    
    3.45
    
    
    
    66,525
    
    
    
    1,618
    
    
    
    9.73Total Interest-Bearing Funds and Average Rate Paid
    
    
    4,775,336
    
    
    
    12,902
    
    
    
    1.07
    
    
    
    4,933,564
    
    
    
    17,517
    
    
    
    1.41Demand Deposits (4)
    
    
    561,787
    
    
    
    
    
    
    
    
    
    
    
    514,900Other Liabilities
    
    
    128,854
    
    
    
    
    
    
    
    
    
    
    
    127,360Minority Interest in Preferred Stock of Subsidiaries
    
    
    246,237
    
    
    
    
    
    
    
    
    
    
    
    282,735Shareholders Equity
    
    
    371,175
    
    
    
    
    
    
    
    
    
    
    
    381,705Total Liabilities, Minority Interest and
Shareholders Equity
    
    $
    6,083,389
    
    
    
    
    
    
    
    
    
    
    $
    6,240,264NET INTEREST INCOME AND SPREAD
    
    
    
    
    
    $
    41,162
    
    
    
    2.88
    %
    
    
    
    
    
    $
    48,499
    
    
    
    3.21
    %NET INTEREST MARGIN ON EARNING ASSETS
    
    
    
    
    
    
    
    
    
    
    3.01
    %
    
    
    
    
    
    
    
    
    
    
    3.40
    %




|(1) | - | Income and rates are computed on a tax-equivalent basis using a Federal
income tax rate of 35% and local tax rates as applicable.                                          
|--- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | - | Loans held for sale and nonperforming loans are included in average
balances used to determine rates.                                                                      
|(3) | - | The averages and rates for the securities available for sale portfolio
are based on amortized cost.                                                                        
|(4) | - | Demand deposit balances for all periods presented exclude certain
accounts transferred to the money market classification to reduce the level of
deposit reserves required.
|(5) | - | Includes loans held for sale but excludes venture capital investments.                                                                                                     

22



---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

An analysis of the changes in our average Statements of Condition and changes
to our margin for the nine months ended September 30 follows:

NINE MONTHS ENDED
    
    NINE MONTHS ENDEDSEPTEMBER 30, 2003
    
    SEPTEMBER 30, 2002(TAX-EQUIVALENT BASIS) (1)
    
    AVERAGE
    
    INCOME/
    
    
    
    
    
    AVERAGE
    
    INCOME/(IN THOUSANDS)
    
    BALANCE
    
    EXPENSE
    
    RATE
    
    BALANCE
    
    EXPENSE
    
    RATEASSETSLoans (2)
    
    $
    2,999,854
    
    
    $
    122,218
    
    
    
    5.45
    %
    
    $
    2,850,615
    
    
    $
    134,944
    
    
    
    6.33
    %Securities Available for Sale (3)
    
    
    2,125,409
    
    
    
    51,702
    
    
    
    3.25
    
    
    
    1,822,584
    
    
    
    53,562
    
    
    
    3.93Time Deposits with Other Banks
    
    
    248,725
    
    
    
    4,171
    
    
    
    2.24
    
    
    
    213,534
    
    
    
    1,999
    
    
    
    1.25Federal Funds Sold and Reverse Repurchase Agreements
    
    
    444,370
    
    
    
    3,970
    
    
    
    1.19
    
    
    
    494,271
    
    
    
    6,478
    
    
    
    1.75Total Earning Assets and Average Rate Earned (5)
    
    
    5,818,358
    
    
    
    182,061
    
    
    
    4.18
    
    
    
    5,381,004
    
    
    
    196,983
    
    
    
    4.89Reserve for Loan Losses
    
    
    (25,921
    )
    
    
    
    
    
    
    
    
    
    
    (26,991
    )Cash and Due from Banks
    
    
    178,109
    
    
    
    
    
    
    
    
    
    
    
    168,787Other Assets
    
    
    475,713
    
    
    
    
    
    
    
    
    
    
    
    435,250Total Assets
    
    $
    6,446,259
    
    
    
    
    
    
    
    
    
    
    $
    5,958,050LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS EQUITYInterest-Bearing Deposits
    
    $
    4,193,297
    
    
    $
    27,767
    
    
    
    0.89
    %
    
    $
    4,133,987
    
    
    $
    40,602
    
    
    
    1.31
    %Repurchase Agreements and Other Short-Term
Borrowings
    
    
    433,318
    
    
    
    3,696
    
    
    
    1.14
    
    
    
    453,409
    
    
    
    5,444
    
    
    
    1.61FHLB Borrowings and Other Long-Term Debt
    
    
    499,037
    
    
    
    13,096
    
    
    
    3.51
    
    
    
    66,525
    
    
    
    4,854
    
    
    
    9.73Total Interest-Bearing Funds and Average Rate Paid
    
    
    5,125,652
    
    
    
    44,559
    
    
    
    1.16
    
    
    
    4,653,921
    
    
    
    50,900
    
    
    
    1.46Demand Deposits (4)
    
    
    558,346
    
    
    
    
    
    
    
    
    
    
    
    509,862Other Liabilities
    
    
    129,069
    
    
    
    
    
    
    
    
    
    
    
    117,283Minority Interest in Preferred Stock of Subsidiaries
    
    
    247,806
    
    
    
    
    
    
    
    
    
    
    
    305,693Shareholders Equity
    
    
    385,386
    
    
    
    
    
    
    
    
    
    
    
    371,291Total Liabilities, Minority Interest and
Shareholders Equity
    
    $
    6,446,259
    
    
    
    
    
    
    
    
    
    
    $
    5,958,050NET INTEREST INCOME AND SPREAD
    
    
    
    
    
    $
    137,502
    
    
    
    3.02
    %
    
    
    
    
    
    $
    146,083
    
    
    
    3.43
    %NET INTEREST MARGIN ON EARNING ASSETS
    
    
    
    
    
    
    
    
    
    
    3.16
    %
    
    
    
    
    
    
    
    
    
    
    3.63
    %




|(1) | - | Income and rates are computed on a tax-equivalent basis using a Federal
income tax rate of 35% and local tax rates as applicable.                                          
|--- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | - | Loans held for sale and nonperforming loans are included in average
balances used to determine rates.                                                                      
|(3) | - | The averages and rates for the securities available for sale portfolio
are based on amortized cost.                                                                        
|(4) | - | Demand deposit balances for all periods presented exclude certain
accounts transferred to the money market classification to reduce the level of
deposit reserves required.
|(5) | - | Includes loans held for sale but excludes venture capital investments.                                                                                                     

23



---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

The composition of average earning assets and average interest-bearing
liabilities is as follows:

THREE MONTHS ENDEDSEPTEMBER 30,2003
    
    2002Total Loans
    
    
    55
    %
    
    
    51
    %Securities Available for Sale
    
    
    36
    
    
    
    37Time Deposits with Other Banks
    
    
    5
    
    
    
    3Federal Funds Sold &
Reverse Repurchase Agreements
    
    
    4
    
    
    
    9100
    %
    
    
    100
    %Interest-Bearings Deposits
    
    
    79
    %
    
    
    90
    %Repurchase Agreements &
Other Short-Term Borrowings
    
    
    9
    
    
    
    9Long-Term Debt
    
    
    12
    
    
    
    1100
    %
    
    
    100
    %


NINE MONTHS ENDEDSEPTEMBER 30,2003
    
    2002Total Loans
    
    
    52
    %
    
    
    53
    %Securities Available for Sale
    
    
    37
    
    
    
    34Time Deposits with Other Banks
    
    
    4
    
    
    
    4Federal Funds Sold &
Reverse Repurchase Agreements
    
    
    7
    
    
    
    9100
    %
    
    
    100
    %Interest-Bearings Deposits
    
    
    85
    %
    
    
    89
    %Repurchase Agreements &
Other Short-Term Borrowings
    
    
    8
    
    
    
    10Long-Term Debt
    
    
    7
    
    
    
    1100
    %
    
    
    100
    %


NONINTEREST INCOME

Noninterest income for the third quarter of 2003 totaled $28.7 million, an
increase of 6% from the $27.1 million in the third quarter of 2002. This
increase resulted primarily from a $2.2 million reduction in venture capital
losses compared to the prior year and increases in service charges and fees
of $1.2 million and in other noninterest income of $3.8 million.

The increase in service charges and fees was due to the previously described
change in how the U.S. Treasury compensates financial agent banks such
as Riggs. The earnings on the DCS for the quarter ended September 30, 2003 were
$1.4 million. Other noninterest income increased due to $2.2
million in income from key man insurance coverage and $1.2 million in gains
from the previously announced sale of the Riggs Funds. The increased
service charges and fees, other noninterest income and lower venture capital
losses were partially offset by a decline in trust and investment advisory
income of $1.1 million and by securities gains which were $4.6 million less
than the prior years quarter.

For the nine months ended September 30, 2003, noninterest income totaled $84.9
million, an increase of 24% from the $68.7 million in the first
nine months of 2002. This increase resulted primarily from securities gains of
$12.6 million compared to securities gains of $7.4 million in the first
nine months of 2002 and a $10.1 million reduction in venture capital losses
compared to the prior year. Securities gains resulted from the sale of
mortgage-backed securities which were often purchased at a premium which was,
because of declining rates, being amortized into income on an
accelerated basis, thus reducing yield. We also had an increase in service
charges and fees of $2.8 million, reflecting the successful implementation of
several Project EPS-related fee initiatives and increased advisory and foreign
exchange fees. Other noninterest income, which increased $3.5 million
to $11.2 million, also contributed to the increase. This category increased
partially due to the reasons described previously for the increase in the

24



---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

three month period. The increased securities gains and lower venture capital
losses were partially offset by a decline in trust and investment advisory
income of $5.3 million.

The declines in trust and investment advisory income for the three and nine
month periods were primarily attributable to the second quarter 2002
renegotiation of a 10-year agreement with the real estate advisor to the
Multi-Employer Property Trust, an open commingled real estate fund, which
resulted in a reduction in revenue for this business activity for the quarter
ended September 30, 2003 of approximately $637 thousand from the
same quarter of 2002 and of approximately $3.8 million for the nine months then
ended.

Trust and investment advisory income impacts the Riggs & Company segment while
venture capital losses impact the Riggs Capital Partners segment.
Securities gains impact the Treasury segment and service charge income
primarily impacts the Banking segment.

NONINTEREST EXPENSE

Noninterest expense for the three months ended September 30, 2003 was $66.2
million, an increase of $6.9 million from the $59.3 million reported
for the three months ended September 30, 2002. The increase was primarily due
to increases in salaries and other employee benefits of $2.6 million
and in external consultants fees of $2.5 million. The increase in salaries and
other employee benefits is primarily due to compensation for contract
labor and overtime for non-exempt employees for work directly related to
Project EPS. The external consultants costs relate to Project EPS and the
Companys comprehensive BSA audit and compliance effort.

For the nine months ended September 30, 2003, noninterest expense was $190.6
million, an increase of $14.7 million from the $176.0 million
reported for the comparable period in 2002. The increase was due principally to
consulting expenses which increased by $6.8 million to $11.0 million
for the nine months ended September 30, 2003 and to increases in salaries and
other employee benefits of $3.6 million. Consulting expenses and
salaries and other employee benefits increased for the reasons described above
for the three months ended September 30, 2003. A $3.8 million write-down
in the second quarter of 2003 of a property held for sale in London also
contributed to the increase. The amount of the write-down was based
upon an independent appraisal of the propertys value.

The real property write-down and the consulting expenses primarily affect the
Other segment.

In July 2002 the Company awarded shares of its common stock to certain key
executives. This award vests in equal amounts through December
2006. In the first nine months of 2003 we recorded $910 thousand of expense
related to this award which is recorded in salaries and employee benefits
in the Consolidated Statements of Income. We anticipate recording an additional
$292 thousand of expense related to this award during the remainder
of 2003 and approximately $1.2 million of expense in each of the next three
calendar years. To obtain this award, however, the individual to whom
it was granted must be employed by the Company on the date of distribution each
year. Projected expense amounts, therefore, could vary.

We periodically perform strategic reviews of our business operations including,
but not limited to, operating segments, sub-segments, products,
delivery channels and back-office operations to endeavor to ensure that levels
of performance are adequate or can be modified in such a way and
within a reasonable timeframe so as to meet expected requirements. If it is
determined that our requirements cannot be met in a satisfactory way and
timeframe, we may in the future sell, wind-down, abandon or take any other
measures deemed necessary and prudent for the long-term benefit of
the Company.

EFFECTIVE TAX RATES

The effective tax rate on Income Before Taxes and Minority Interest for the
nine month period ended September 30, 2003 was 28.5% compared
to 34.5% during the same period of the prior year. The primary reason for the
decrease was the recognition of greater than anticipated research and
development tax credits associated with internal technology projects, as
discussed in the following paragraph. Also, the previously mentioned gains
from key man life insurance are not tax effected.

25



---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

Upon filing of its 2002 federal income tax return in September 2003, the
Company accrued approximately $1.2 million of net research and experimentation
tax credits. Approximately half of this amount pertains to 2002 expenditures
and the balance is applicable to 2003 expenditures. The majority of these are
attributable to Project EPS and the previously mentioned computer system to be
utilized by the federal government in its cash management and reporting.

FINANCIAL CONDITION

SECURITIES

Securities available for sale totaled $1.78 billion as of September 30, 2003,
compared to $2.32 billion as of year-end 2002 and $2.19 billion as of September
30, 2002. The activity for the first nine months of 2003 included purchases of
securities available for sale totaling $7.87 billion, which were more than
offset by maturities and calls, principal payments and sales of securities
available for sale totaling $8.27 billion. The weighted-average duration and
yield for the portfolio, adjusted for anticipated prepayments, were
approximately 2.1 years and 3.61%, respectively, as of September 30, 2003. As
of September 30, 2002, the weighted-average duration and yield were
approximately .6 years and 3.73%, respectively.

The balance of securities available for sale decreased from both year-end 2002
and September 30, 2002 primarily because of the previously described change in
the methodology utilized by the United States Treasury to compensate its
financial agent banks. Under the old methodology we were required to purchase
securities to collateralize any United States Treasury or Agency deposit. Under
the new DCS methodology this is no longer required.

Details on securities available for sale follow:

SEPTEMBER 30, 2003GROSS
    
    GROSSAMORTIZED
    
    UNREALIZED
    
    UNREALIZED
    
    FAIR(IN THOUSANDS)
    
    COST
    
    GAINS
    
    LOSSES
    
    VALUEU.S. Treasury Securities
    
    $
    30,120
    
    
    $
    23
    
    
    $
    1
    
    
    $
    30,142Government Agencies Securities
    
    
    768,000
    
    
    
    895
    
    
    
    539
    
    
    
    768,356Mortgage-Backed Securities
    
    
    931,780
    
    
    
    3,137
    
    
    
    2,761
    
    
    
    932,156Other Securities
    
    
    51,906
    
    
    
    76
    
    
    
    
    
    
    
    51,982Total Securities Available for Sale
    
    $
    1,781,806
    
    
    $
    4,131
    
    
    $
    3,301
    
    
    $
    1,782,636


SEPTEMBER 30, 2002GROSS
    
    GROSSAMORTIZED
    
    UNREALIZED
    
    UNREALIZED
    
    FAIR(IN THOUSANDS)
    
    COST
    
    GAINS
    
    LOSSES
    
    VALUEU.S. Treasury Securities
    
    $
    134,987
    
    
    $
    
    
    
    $
    
    
    
    $
    134,987Government Agencies Securities
    
    
    1,471,613
    
    
    
    4,019
    
    
    
    2
    
    
    
    1,475,630Mortgage-Backed Securities
    
    
    521,970
    
    
    
    12,919
    
    
    
    
    
    
    
    534,889Other Securities
    
    
    47,378
    
    
    
    
    
    
    
    10
    
    
    
    47,368Total Securities Available for Sale
    
    $
    2,175,948
    
    
    $
    16,938
    
    
    $
    12
    
    
    $
    2,192,874


DECEMBER 31, 2002AMORTIZED
    
    UNREALIZED
    
    UNREALIZED
    
    FAIR(IN THOUSANDS)
    
    COST
    
    GAINS
    
    LOSSES
    
    VALUEU.S. Treasury Securities
    
    $
    4,998
    
    
    $
    
    
    
    $
    
    
    
    $
    4,998Government Agencies Securities
    
    
    1,268,874
    
    
    
    4,499
    
    
    
    9
    
    
    
    1,273,364Mortgage-Backed Securities
    
    
    970,386
    
    
    
    15,109
    
    
    
    11
    
    
    
    985,484Other Securities
    
    
    56,049
    
    
    
    22
    
    
    
    
    
    
    
    56,071Total Securities Available for Sale
    
    $
    2,300,307
    
    
    $
    19,630
    
    
    $
    20
    
    
    $
    2,319,917


26



---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

Realized gains from the sale of securities totaled $1.4 million for the quarter
ended September 30, 2003 and there were no realized losses. For the quarter
ended September 30, 2002, realized gains were $6.0 million and realized losses
were $10 thousand.

Substantially all of our available for sale securities have been issued by the
U.S. Treasury, an agency of the U.S. Government or a government sponsored
entity (such as the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation) and, therefore, the repayment of substantially all
of our securities is either guaranteed by the government or a AAA rated entity.
As a result, we believe that timely payment of principal and interest is
reasonably assured and any unrealized gain or loss is, therefore, attributable
to changes in market interest rates.

LOANS

As of September 30, 2003 loans outstanding totaled $2.95 billion, with
residential mortgage/home equity, commercial and financial and real
estate-commercial/construction comprising 50%, 18% and 22% of the portfolio,
respectively. At September 30, 2002 these percentages were 50%, 19% and 19%,
respectively. The residential mortgage/home equity loans are fully secured with
approximately 9% having a loan to value ratio of 90% or greater.

As indicated in the following table, total loans increased from $2.85 billion
at September 30, 2002. Since that time, the increases were primarily in the
real estate-commercial/construction and residential real estate loan
portfolios. These increases were partially offset by decreases in commercial
and financial, home equity and foreign loans.

As of September 30, 2003 foreign loans outstanding totaled $249.8 million, a
decrease of $44.3 million from September 30, 2002. This decrease is primarily
attributable to the Companys continuing de-emphasis of commercial lending at
RBEL. During the third and fourth quarters of 2002 we sold $138.3 million of
these loans and loan commitments and at September 30, 2003 the commercial loans
remaining at London amounted to $23.6 million.

We periodically purchase residential mortgage loans to utilize liquidity. Since
September 2002, we have purchased $450.9 million of these loans at a net
premium of approximately $9.7 million. This premium was the primary reason for
the $5.2 million change in the balance of net deferred loan fees, premiums and
discounts.

COMPOSITION OF LOAN PORTFOLIO

SEPTEMBER 30,
    
    SEPTEMBER 30,
    
    DECEMBER 31,2003
    
    2002
    
    2002(IN THOUSANDS)Commercial and Financial
    
    $
    515,657
    
    
    
    18
    %
    
    $
    531,381
    
    
    
    19
    %
    
    $
    613,786
    
    
    
    20
    %Real Estate  Commercial/Construction
    
    
    656,546
    
    
    
    22
    
    
    
    555,650
    
    
    
    19
    
    
    
    559,384
    
    
    
    19Residential Mortgage
    
    
    1,174,846
    
    
    
    41
    
    
    
    1,106,925
    
    
    
    40
    
    
    
    1,225,211
    
    
    
    41Loans Available for Sale
    
    
    288
    
    
    
    
    
    
    
    5,838
    
    
    
    
    
    
    
    1,247
    
    
    
    Home Equity
    
    
    276,789
    
    
    
    9
    
    
    
    290,635
    
    
    
    10
    
    
    
    279,737
    
    
    
    9Consumer
    
    
    67,072
    
    
    
    2
    
    
    
    65,482
    
    
    
    2
    
    
    
    65,437
    
    
    
    2Foreign
    
    
    249,825
    
    
    
    8
    
    
    
    294,152
    
    
    
    10
    
    
    
    259,290
    
    
    
    9Total Loans
    
    $
    2,941,023
    
    
    
    100
    %
    
    $
    2,850,063
    
    
    
    100
    %
    
    $
    3,004,092
    
    
    
    100
    %Net Deferred Loan Fees,
Premiums and Discounts
    
    
    4,654
    
    
    
    
    
    
    
    (505
    )
    
    
    
    
    
    
    3,813Loans
    
    $
    2,945,677
    
    
    
    
    
    
    $
    2,849,558
    
    
    
    
    
    
    $
    3,007,905


27



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

NINE MONTHS ENDEDSEPTEMBER 30,(IN THOUSANDS)
    
    2003
    
    2002Balance, January 1
    
    $
    25,958
    
    
    $
    29,540Provision for loan losses
    
    
    2,321
    
    
    
    (268
    )Loans charged-off
    
    
    3,565
    
    
    
    5,155Less: Recoveries on charged-off loans
    
    
    1,928
    
    
    
    1,363Net loan charge-offs
    
    
    1,637
    
    
    
    3,792Foreign exchange translation adjustments
    
    
    55
    
    
    
    660Balance, September 30
    
    $
    26,697
    
    
    $
    26,140


The reserve amount is determined based on the risk of loss in the loan
portfolio. For the nine month period ended September 30, 2003 we had a
consolidated loan loss provision of $2.3 million. A domestic provision of $580
thousand was made in the third quarter to provide loss coverage for the
downgrade of a $16.8 million commercial loan. Due to the overall improvement in
asset quality, the Company recorded a negative loan loss provision of $268
thousand during the first nine months of 2002.

Foreign loans and other credits may be adversely affected by sudden political
instabilities, including military confrontations. The Company cannot estimate
the losses, if any, associated with any such instability. See Note 15 of Notes
to Consolidated Financial Statements in our 2002 Form 10-K.

Provisions to the reserve for loan losses are charged against, or credited to,
earnings in amounts necessary to maintain an adequate reserve for loan losses.
Commercial loans are charged off when it is determined that the loan cannot be
fully recovered. Consumer loans are charged off upon becoming 120 days
delinquent. Residential real estate loans are charged off to the extent
necessary when foreclosure occurs.

ASSET QUALITY

NONPERFORMING ASSETS

Nonperforming assets, which include nonaccrual loans, renegotiated loans, other
real estate (net of reserves) and repossessed assets, totaled $4.1 million as
of September 30, 2003, a $3.5 million increase from the year-end 2002 total of
$670 thousand and a $2.7 million increase from the September 30, 2002 total of
$1.4 million. Of the $4.1 million balance at September 30, 2003, $230 thousand
is recorded in our Banking segment and $3.9 million is in our International
Banking segment. The increase in nonperforming assets from year-end 2002 was
mainly due to commercial loans in the amount of $4.5 million at our London
operations being placed in the nonaccrual category and to $1.3 million
classified as other assets owned, partially offset by payments and charge-offs
on these assets totaling $2.7 million.

The $173 thousand balance in other assets owned is comprised of repossessed
equipment and automobiles from our commercial lease financing business in
London, which is part of the International Banking segment. At September 30,
2003 we continued to have no real estate held as other assets.

As of September 30, 2003 the Company had no specific reserves for loan losses.

PAST-DUE AND POTENTIAL PROBLEM LOANS

Past-due loans consist of residential real estate loans, commercial and
industrial loans and consumer loans that are in the process of collection and
that are accruing interest. Loans past-due over 90 days decreased $516 thousand
from December 31, 2002 to $10.5 million at September 30, 2003 and decreased
$1.1 million from September 30, 2002.

28



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

NONPERFORMING ASSETS AND PAST-DUE LOANS

SEPTEMBER 30,
    
    DECEMBER 31,
    
    SEPTEMBER 30,(IN THOUSANDS)
    
    2003
    
    2002
    
    2002NONPERFORMING ASSETS:Nonaccrual Loans (1)
    
    $
    3,950
    
    
    $
    548
    
    
    $
    196Renegotiated Loans
    
    
    
    
    
    
    
    
    
    
    255Other Real Estate and Repossessed Assets, Net
    
    
    173
    
    
    
    122
    
    
    
    937Total Nonperforming Assets
    
    $
    4,123
    
    
    $
    670
    
    
    $
    1,38830-89 DAYS PAST-DUE LOANS (2)
    
    $
    37,326
    
    
    $
    35,593
    
    
    $
    41,57190+ DAYS PAST-DUE LOANS (3)
    
    $
    10,529
    
    
    $
    11,045
    
    
    $
    11,660POTENTIAL PROBLEM LOANS
    
    $
    860
    
    
    $
    5,302
    
    
    $
    242


|(1) |  | Loans that are in default in either principal or interest for 90 days or
more that are not well-secured and in the process of collection, or that are,
in managements opinion,
doubtful as to the collectibility of either interest or principal.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Loans contractually past due 30-89 days or more in principal or interest.                                                                                                                                                                         
|(3) |  | Loans contractually past due 90 days or more in principal or interest that
are well-secured and in the process of collection.                                                                                                                     

DEPOSITS

Deposits are our primary and most stable source of funds. Deposits totaled
$4.03 billion as of September 30, 2003, a decrease of $1.21 billion from
$5.24 billion at December 31, 2002 and a decrease of $989.8 million from $5.02
billion at September 30, 2002. Compared to the December 31,
2002 and September 30, 2002 balances, deposits decreased significantly in time
deposits in domestic offices, primarily due to the previously described
change in how the United States Department of the Treasury (Treasury)
compensates financial agent banks. The amount of DCS purchased in mid-July 2003
upon implementation of the new methodology was approximately $1.1 billion.

As a means of reducing deposit reserve requirements, we periodically sweep
excess demand funds into money market accounts. The average balances
transferred for the three months ended September 30, 2003 and 2002, which are
not included in demand deposits in our averages tables, were $497.6
million and $465.4 million, respectively. For the nine months ended September
30, 2003 and 2002, the average balances transferred were $487.1
million and $465.7 million, respectively.

FHLB BORROWINGS AND OTHER LONG-TERM DEBT

Long-term debt at September 30, 2003 consisted of $66.5 million, 9.65% fixed
rate, subordinated debentures due in 2009, $419.0 million in FHLB
advances, and $156.0 million in long-term repurchase agreements. At September
30, 2002, long-term debt consisted solely of the $66.5 million
subordinated debentures whereas at December 31, 2002 the balance also included
$292.0 million in FHLB advances. The debentures cannot be called,
and qualify as tier II capital for regulatory purposes. Issuance costs related
to this debt are being amortized over the life of the debentures as a
component of interest expense, making the effective cost of this debt 9.73%.
The FHLB advances have maturity dates through 2007 and carry a
blended rate at September 30, 2003 of 2.56%. Of the $419.0 million, $50.0
million is callable in 2004 and $25.0 million of these advances is callable
in 2005. The long-term repurchase agreements also have maturity dates through
2007 and carry a blended interest rate of 1.95%. $50.0 million of
long-term repurchase agreements is callable in 2004. The Company uses both of
these types of advances to fund the purchase of mortgage-backed
securities as part of a leverage strategy to utilize our strong capital
position. The goal of this strategy is to increase net interest income.

29



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##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

LIQUIDITY

We seek to maintain sufficient liquidity to meet the needs of depositors,
borrowers and creditors at a reasonable cost. Our Asset/Liability Committee
(ALCO) actively analyzes and manages liquidity in coordination with other areas
of the organization (see Item 3-Sensitivity to Market Risk). As
of September 30, 2003 our liquid assets on a consolidated basis, which include
cash and due from banks, Government obligations and other securities,
federal funds sold, reverse repurchase agreements and time deposits at other
banks, totaled $2.28 billion (32% of total assets). This compares to
$3.35 billion (49% of total assets) as of December 31, 2002 and $3.07 billion
(48% of total assets) as of September 30, 2002. The previously
described methodology change by which the United States Treasury compensates
financial agent banks adversely impacted our liquidity ratio. As of
September 30, 2003, $627.4 million of our assets were pledged to secure
deposits and other borrowings. This compares to pledged assets of $1.69
billion as of December 31, 2002, and $1.69 billion as of September 30, 2002,
again reflecting the way the Treasury compensates financial agent
banks.

Our liquidity position is maintained by a stable source of funds from our core
deposit relationships. We also have a line of credit available through
our membership in the FHLB Atlanta. As of September 30, 2003, December 31, 2002
and September 30, 2002 short-term credit lines and the FHLB
Atlanta line of credit available totaled approximately $593.4 million, $743.8
million, and $1.02 billion, respectively. As of September 30, 2003,
December 31, 2002 and September 30, 2002 the amounts outstanding under these
lines were $433.5 million, $312.4 million, and $20.7 million,
respectively.

During the first nine months of 2003 we borrowed $127.0 million from our credit
line at the FHLB. These borrowings were in addition to the $292.0
million we borrowed in December 2002. These advances have maturity dates
through 2007 and bear rates of interest from .52% to 3.70%.
In the third quarter of 2003 we also borrowed $156.0 million in repurchase agreements
from broker-dealers. These borrowings have maturity dates through
2007 and bear interest rates from .56% to 3.02%. Both the FHLB borrowings and
long-term reverse repurchase agreements are discussed in further
detail in FHLB Borrowings and Other Long-Term Debt in this Managements
Discussion and Analysis.

As of September 30, 2003 the Company believes it has sufficient liquidity to
meet its future funding needs. However there are many factors which
impact liquidity that are beyond our ability to control or influence and,
therefore, we cannot represent that future liquidity will remain adequate.

SHAREHOLDERS EQUITY AND REGULATORY CAPITAL

Total shareholders equity as of September 30, 2003 was $382.8 million, a
decrease of $6.4 million from year-end 2002 and a decrease of $2.6 million
from a year ago. The decrease from year-end was primarily the result of net
unrealized losses on our investment portfolio of $12.2 million and
cash payments on dividends of $4.3 million, partially offset by net income of
$7.8 million. The decrease from September 30, 2002 was primarily the
result of net unrealized investment losses of $10.5 million and dividend
payments of $5.7 million. These decreases were partially offset by net income
of $10.0 million and the issuance of common stock in the amount of $1.6
million.

Book value per common share was $13.38 as of September 30, 2003 compared to
$13.65 as of year-end 2002 and $13.52 as of September 30, 2002.
The decreases in book value from September 30 of the prior year and from
year-end 2002 were primarily the result of the net unrealized securities
losses and dividends paid as described in the preceding paragraph.

Following are our regulatory capital ratios and those of our banking
subsidiary, Riggs Bank National Association (Riggs Bank N.A.) as of September
30, 2003 and 2002, and December 31, 2002. For comparative purposes, it should
be noted that our trust preferred securities, which at September
30, 2003 carried a blended interest rate of 8.78%, are included in the
calculations for Tier I, as allowed, and Combined Tier I and Tier II capital
ratios.
This rate is significantly higher than the target federal funds rate at
September 30, 2003, of 1.00%.

30



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED

As a result of FASB Financial Interpretation No. 46 (FIN 46)and subsequent
related issuances by the Financial Accounting Standards Board, the two
trusts formed by us to issue our trust preferred securities may, beginning in
the fourth quarter, no longer be consolidated thus raising the issue of
whether the debentures issued by these trusts will continue to be recognized as
regulatory capital. On July 2, 2003, however, the Federal Reserve issued
instructions, stating that Organizations should continue to include trust
preferred securities...in their Tier I capital for regulatory capital
purposes...until notice is given to the contrary. The Company is closely monitoring this
issue. See also Note 9-New Financial Accounting Standards.

During the third quarter of 2003 we purchased for cash $6.5 million of trust
preferred securities. The average rate on these securities was 8.80% and
we paid a premium of $25 thousand. These third quarter purchases will result in
annualized after-tax minority interest expense savings of $371
thousand.

Both Riggs and Riggs Bank N.A. are classified as well-capitalized for
purposes of federal banking regulations.

SEPTEMBER 30,
    
    SEPTEMBER 30,
    
    DECEMBER 31,
    
    REQUIRED2003
    
    2002
    
    2002
    
    MINIMUMSRIGGS NATIONAL CORPORATION:Tier I
    
    
    13.63
    %
    
    
    14.90
    %
    
    
    14.13
    %
    
    
    4.00
    %Combined Tier I and Tier II
    
    
    19.26
    
    
    
    22.42
    
    
    
    20.25
    
    
    
    8.00Leverage
    
    
    8.31
    
    
    
    7.97
    
    
    
    7.85
    
    
    
    4.00RIGGS BANK N.A.:Tier I
    
    
    12.10
    %
    
    
    14.48
    %
    
    
    12.76
    %
    
    
    4.00
    %Combined Tier I and Tier II
    
    
    12.85
    
    
    
    15.29
    
    
    
    13.52
    
    
    
    8.00Leverage
    
    
    7.44
    
    
    
    7.79
    
    
    
    7.17
    
    
    
    4.00


The ratios of total shareholders equity to total assets were 6.53%, 5.70%, and
6.04% at September 30, 2003, December 31, 2002 and September
30, 2002, respectively.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SENSITIVITY TO MARKET RISK

We are exposed to various market risks. Some of these risks are discussed in
our Annual Report on Form 10-K. We have determined that interest-rate
risk may have a material impact on our financial performance, and we have
established the Asset/Liability Committee to manage interest-rate
risk. The role of this committee is to manage the asset/liability mix of our
operations in an effort to provide a stable net interest margin while
maintaining liquidity and capital. This entails the management of our overall
risk in conjunction with the acquisition and deployment of funds
based upon ALCOs view of both current and prospective market and economic
conditions. We also have risk associated with foreign currency
exchange which we attempt to mitigate through various hedges. See Note
6-Accounting for Derivatives.

We manage our interest-rate risk through the use of an income simulation model,
which forecasts the impact on net interest income of a variety of
different interest rate scenarios. A most likely interest rate scenario is
forecasted based upon an analysis of current market conditions and
expectations. The model then evaluates the impact on net interest income of
rates moving significantly higher or lower than the most likely
scenario. Most likely is defined as the outlook of the Banks Treasury Group
on the path of future interest rates. As of September 30, 2003, the most
likely interest rate scenario calls for the federal funds target rate to be
flat at 1.00% through August 2004. The federal funds target rate then rises
gradually to 3.75% by June 2006, holding at that level for the remainder of the
forecast horizon. The results are compared to risk tolerance limits
set by corporate policy. Current policy establishes limits for possible changes
in net interest income for 12 and 36 month horizons. The interest rate
scenarios monitored by ALCO are based upon a 100 basis point (1%) gradual
increase or decrease in rates over a 12-month time period versus the
most likely scenario and a 300 basis point (3%) gradual increase or decrease in
rates over a 36-month time period versus the most likely scenario.

At the end of 2002, based on modeling results, Riggs Bank was liability
sensitive. Net interest income was forecasted to improve slightly in the
gradually falling rate scenarios compared to the most-likely outcome. These
scenarios included a steepening yield curve. Net interest income was
forecast to be lower than most-likely in the scenarios where rates gradually
increase by 100 basis points above the most likely for 12 months and 300
basis points for 36 months. At the end of 2002, Riggs Bank owned a significant
portion of assets that gave the issuer/borrower the opportunity to

31



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED

refinance the obligation without a prepayment penalty. These assets included
callable agency securities, mortgage-backed securities and mortgage loans. At
the same time, due to the low level of short-term interest rates, deposit rates
were very low making it difficult to grow our deposit base. In the fourth
quarter of 2002, therefore, the Bank embarked on a leverage strategy whereby
the Bank purchased $400.0 million of mortgage-backed securities and funded the
investments with term advances from the Federal Home Loan Bank of Atlanta. In
2003, the Bank entered into three additional leverage strategies for a total of
$300.0 million funded with term fixed rate liabilities.

As 2003 progressed, interest rates fell. While the Federal Reserve only lowered
the federal funds target from 1.25% to 1.00% in June, intermediate rates fell
significantly during May and June, in many cases by 1% or more, as the Federal
Reserve mentioned their concern with deflation. This flattening of the yield
curve allowed many assets owned by the Bank to be refinanced at lower yields.
The flattening of the yield curve was unexpected. The entire callable security
portfolio was called during the second quarter.

Mortgage-backed securities, many that were purchased at premiums, began to
prepay faster than anticipated. This caused the Bank to amortize the premiums
faster than expected and reduced the yield. Bulk mortgage loans, many purchased
from mortgage loan originators and at premiums, were also being prepaid faster
than expected again causing the premium to be amortized faster than expected
and causing the yield to be below expectations. Internally generated mortgage
loans also repaid faster than expected and new loans were being booked at
yields significantly below the rates on the prepaying loans. Due to already low
levels of short-term interest rates, the drop in asset yields caused by the
flattening of the yield curve could not be matched by a drop in deposit costs.
In addition, the term funding supporting the leverage strategies was generally
at fixed rates and not repayable prior to scheduled maturity dates. Net
interest income declined and margin was compressed.

By the end of September 2003, interest rates had risen back into the range that
existed from October 2002 to April 2003. The yields on many assets booked in
the second and third quarters of 2003 are below current rates. This has caused
the duration of the mortgage loans, mortgage-backed securities and callable
securities to lengthen. From current interest rate levels, the Bank is more
susceptible to rising interest rates as the call provisions in many of our
assets are now out of the money. The borrower/issuer does not have an economic
incentive to refinance the obligation. Rising rates will cause these assets to
remain on the Banks books thereby inhibiting our ability to redeploy the funds
into higher earning assets. A drop in rates will have a limited impact
initially on margin but a significant drop in rates along the yield curve would
again cause the Banks assets to be refinanced at a time when the Bank cannot
lower its deposit costs in a meaningful way. Additionally, as noted above, the
Bank maintains fixed rate term liabilities supporting the leverage strategies.

COMMITMENTS

Various commitments to extend credit are made in the normal course of banking
business. Commitments to extend credit and letters of credit outstanding as of
September 30, 2003 and 2002, and December 31, 2002 are:

SEPTEMBER 30,
    
    SEPTEMBER 30,
    
    DECEMBER 31,2003
    
    2002
    
    2002Commitments to extend credit
    
    $
    1,326,017
    
    
    $
    1,030,362
    
    
    $
    1,039,724Commercial letters of credit
    
    
    54,962
    
    
    
    42,365
    
    
    
    70,479Stand-by letters of credit
    
    
    69,494
    
    
    
    61,916
    
    
    
    53,540


At September 30, 2003 a liability of $280 thousand existed in the Consolidated
Statement of Condition for the stand-by letters of credit. No liability was
recorded at September 30, 2002 or December 31, 2002 as such amounts were
immaterial.

The above commitment amounts are not reflected in the Consolidated Statements
of Condition and many of the commitments will expire without being drawn upon.
Such commitments are issued only upon careful evaluation of the financial
condition of the customer.

The Company also was committed to fund venture capital investments in the
amount of $11.5 million and $18.4 million at September 30, 2003 and 2002,
respectively.

As described in Note 9 of the Companys 2002 Form 10-K, and as updated in the
Companys first and second quarter 2003 Forms 10-Q, the Company has various
other off-balance sheet commitments and contingencies.

32



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##### 



ITEM 4. CONTROLS AND PROCEDURES

Any control system, no matter how well designed and operated, can provide only
reasonable (not absolute) assurance that its objectives will be met.
Furthermore, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected.

Disclosure Controls and Procedures

The Companys management, with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Companys disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(Exchange Act)) as of the end of the period covered by this report. Based on
such evaluation, the Companys Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, the Companys
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act.

Internal Control over Financial Reporting

There have not been any changes in the Companys internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements (as such
term is defined in Section 21E of the Securities Exchange Act of 1934, as
amended) that reflect our current expectations and projections about our future
results, performance, prospects and opportunities, and include, without
limitation, the references in this 10-Q to earnings from venture capital,
implementation of our business strategies, hedging activities and our trust and
investment advisory income. We have attempted to identify these forward-looking
statements by using words such as may, will, expect, anticipate,
believe, intend, estimate, could or similar expressions. These
forward-looking statements are based on information currently available to us
and are subject to a number of risks, uncertainties and other factors that
could cause our actual results, performance, prospects or opportunities in 2003
and beyond to differ materially from those expressed in, or implied by, these
forward-looking statements. These risks include, but are not limited to,
certain risks and uncertainties that may affect the operations, performance,
development, growth projections and results of our business. More specifically,
these risks include the growth of (or decline in) the economy, changes in
credit quality or interest rates, changes in value of venture capital
investments in the technology and other sectors, timing of technology
enhancements for products and operating systems, the impact of competitive
products, services and pricing, customer business requirements, Congressional
legislation, regulatory oversight, general economic conditions-both domestic
and international-and similar matters. In addition, the continuing impact of
the September 11, 2001 terrorist attacks on the U.S. and global economy, the
possibility of additional attacks, and international political conditions also
may be an important factor or make the occurrence of one or more of the
aforementioned risks or factors more likely.

You should not place undue reliance on any forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, changed
circumstances or any other reason after the date of this Quarterly Report on
Form 10-Q.

33



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##### 



RIGGS NATIONAL CORPORATION

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business we are involved in various types of
litigation and disputes that may lead to litigation. The Company believes
that pending or unasserted legal actions will not have a material impact
on its financial condition or future operations.

ITEM 2. CHANGES IN SECURITIES

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The exhibits listed on page 35 are incorporated by
reference or filed herewith in response to this item.

(b) Reports on Form 8-K

On October 24, 2003, the Company furnished a Form
8-K to announce earnings for the quarter ended
September 30, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.

RIGGS NATIONAL CORPORATION

Date:
    
    November 18, 2003
    
    /s/ ROBERT L. ALLBRITTONRobert L. AllbrittonChairman of the Board and Chief Executive OfficerDate:
    
    November 18, 2003
    
    /s/ STEVEN T. TAMBUROSteven T. TamburoTreasurer(Chief Financial Officer)


34



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##### 



EXHIBIT NO.
      
      DESCRIPTION
      PAGES(31.1)
      
      Chief Executive
          Officer Section 302 Certification of Quarterly Report on Form 10-Q
      
      
      36(31.2)
      
      Chief Financial
          Officer Section 302 Certification of Quarterly Report on Form 10-Q
      
      
      37(32.1)
      
      Chief Executive
          Officer Section 906 Certification of Quarterly Report on Form 10-Q
      
      
      38(32.2)
      
      Chief Financial
          Officer Section 906 Certification of Quarterly Report on Form 10-Q
      
      
      39


(Exhibits omitted are not required or not applicable.)

35