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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 March 31, 2004[  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934For 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
    
    28,953,184(Title of Class)
    
    (Outstanding at March 31, 2004)
 Transitional Small Business
Format   Yes __.   No x.




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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 months ended March 31, 2004 and 2003
    
    
    3Consolidated Statements of Condition (Unaudited)
March 31, 2004 and 2003 and December 31, 2003
    
    
    4Consolidated Statements of Changes in Shareholders Equity (Unaudited)
Three months ended March 31, 2004 and 2003
    
    
    5Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 2004 and 2003
    
    
    6Notes to the Consolidated Financial Statements (Unaudited)
    
    
    7-16Item 2.
    
    Managements Discussion and Analysis of FinancialCondition and Results of Operations
    
    
    17-28Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    29-32Item 4.
    
    Controls and Procedures
    
    
    32PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    32Item 2.
    
    Change in Securities
    
    
    33Item 3.
    
    Defaults Upon Senior Securities
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 5.
    
    Other Information
    
    
    33Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    33Signatures
    
    
    
    
    
    
    
    
    33
 Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to Riggs and the Company refer to Riggs
National Corporation and its consolidated subsidiaries. 2




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PART I FINANCIAL INFORMATION ITEM 1.   FINANCIAL STATEMENTS-UNAUDITED RIGGS NATIONAL CORPORATION
    
    THREE MONTHS ENDEDCONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)
    
    MARCH 31,(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
    
    2004
    
    
    2003INTEREST INCOMEInterest and Fees on Loans
    
    $
    39,913
    
    
    $
    41,769Interest and Dividends on Securities Held to Maturity
    
    
    1,550
    
    
    
    -Interest and Dividends on Securities Available for Sale
    
    
    16,496
    
    
    
    18,971Interest on Time Deposits with Other Banks
    
    
    1,226
    
    
    
    1,329Interest on Federal Funds Sold and Reverse Repurchase Agreements
    
    
    232
    
    
    
    2,184Total Interest Income
    
    
    59,417
    
    
    
    64,253INTEREST EXPENSEInterest on Deposits:Savings and NOW Accounts
    
    
    139
    
    
    
    177Money Market Deposit Accounts
    
    
    2,372
    
    
    
    3,393Time Deposits in Domestic Offices
    
    
    2,490
    
    
    
    5,931Time Deposits in Foreign Offices
    
    
    1,094
    
    
    
    1,402Total Interest on Deposits
    
    
    6,095
    
    
    
    10,903Interest on Short-Term Borrowings and Long-Term Debt:Repurchase Agreements and Other Short-Term Borrowings
    
    
    2,228
    
    
    
    1,237FHLB Borrowings and Other Long-Term Debt
    
    
    10,005
    
    
    
    3,913Total Interest on Short-Term Borrowings and Long-Term Debt
    
    
    12,233
    
    
    
    5,150Total Interest Expense
    
    
    18,328
    
    
    
    16,053Net Interest Income
    
    
    41,089
    
    
    
    48,200Provision for Loan Losses
    
    
    -
    
    
    
    926Net Interest Income after Provision for Loan Losses
    
    
    41,089
    
    
    
    47,274NONINTEREST INCOMETrust and Investment Advisory Income
    
    
    9,653
    
    
    
    9,406Service Charges and Fees
    
    
    13,015
    
    
    
    12,067Venture Capital Investment Losses, Net
    
    
    (168
    )
    
    
    (2,222
    )Other Noninterest Income
    
    
    2,807
    
    
    
    2,251Securities Gains, Net
    
    
    226
    
    
    
    4,627Total Noninterest Income
    
    
    25,533
    
    
    
    26,129NONINTEREST EXPENSESalaries and Employee Benefits
    
    
    31,677
    
    
    
    28,466Occupancy, Net
    
    
    5,665
    
    
    
    5,355Data Processing Services
    
    
    1,669
    
    
    
    5,207Furniture, Equipment and Software
    
    
    3,686
    
    
    
    3,060Consultants
    
    
    918
    
    
    
    1,822Other Noninterest Expense
    
    
    16,722
    
    
    
    15,036Total Noninterest Expense
    
    
    60,337
    
    
    
    58,946Income before Taxes and Minority Interest
    
    
    6,285
    
    
    
    14,457Applicable Income Tax Expense
    
    
    1,627
    
    
    
    4,997Minority Interest in Income of Subsidiaries, Net of Taxes
    
    
    743
    
    
    
    3,531Net Income
    
    $
    3,915
    
    
    $
    5,929EARNINGS PER SHARE-                                            Basic
    
    $
    0.14
    
    
    $
    0.21Diluted
    
    
    0.13
    
    
    
    0.20DIVIDENDS DECLARED AND PAID PER SHARE
    
    $
    0.05
    
    
    $
    0.05
 The Accompanying Notes Are An Integral Part Of These Statements 3




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RIGGS NATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF CONDITION(UNAUDITED)
    
    
    
    
    
    
    
    
    
    
    
    
    
    MARCH 31,
    
    
    DECEMBER 31,
    
    
    MARCH 31,(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    2003
    
    
    2003ASSETSCash and Due from Banks
    
    
    
    
    
    $
    160,274
    
    
    $
    325,975
    
    
    $
    122,640Federal Funds Sold and Reverse Repurchase Agreements
    
    
    
    
    
    
    136,000
    
    
    
    -
    
    
    
    670,000Total Cash and Cash Equivalents
    
    
    
    
    
    
    296,274
    
    
    
    325,975
    
    
    
    792,640Time Deposits with Other Banks
    
    
    
    
    
    
    234,573
    
    
    
    287,077
    
    
    
    267,348Securities Held to Maturity (Fair Value of $52,015 at March 31, 2004
and $115,319 at December 31, 2003)
    
    
    
    
    
    
    49,879
    
    
    
    107,891
    
    
    
    -Securities Available for Sale (at Market Value)
    
    
    
    
    
    
    1,932,389
    
    
    
    1,826,818
    
    
    
    2,454,165Venture Capital Investments
    
    
    
    
    
    
    43,278
    
    
    
    43,356
    
    
    
    47,192Loans
    
    
    
    
    
    
    3,198,622
    
    
    
    3,225,154
    
    
    
    3,084,225Reserve for Loan Losses
    
    
    
    
    
    
    (27,783
    )
    
    
    (28,285
    )
    
    
    (25,797
    )Total Net Loans
    
    
    
    
    
    
    3,170,839
    
    
    
    3,196,869
    
    
    
    3,058,428Premises and Equipment, Net
    
    
    
    
    
    
    226,569
    
    
    
    226,502
    
    
    
    203,072Other Assets
    
    
    
    
    
    
    225,474
    
    
    
    355,070
    
    
    
    214,339Total Assets
    
    
    
    
    
    $
    6,179,275
    
    
    $
    6,369,558
    
    
    $
    7,037,184LIABILITIESDeposits:Noninterest-Bearing Demand Deposits
    
    
    
    
    
    $
    986,092
    
    
    $
    673,610
    
    
    $
    744,803Interest-Bearing Deposits:Savings and NOW Accounts
    
    
    
    
    
    
    276,586
    
    
    
    294,546
    
    
    
    346,026Money Market Deposit Accounts
    
    
    
    
    
    
    2,099,890
    
    
    
    2,378,779
    
    
    
    2,096,537Time Deposits in Domestic Offices
    
    
    
    
    
    
    504,165
    
    
    
    585,260
    
    
    
    1,739,208Time Deposits in Foreign Offices
    
    
    
    
    
    
    281,139
    
    
    
    354,037
    
    
    
    363,534Total Interest-Bearing Deposits
    
    
    
    
    
    
    3,161,780
    
    
    
    3,612,622
    
    
    
    4,545,305Total Deposits
    
    
    
    
    
    
    4,147,872
    
    
    
    4,286,232
    
    
    
    5,290,108Repurchase Agreements and Other Short-Term Borrowings
    
    
    
    
    
    
    592,451
    
    
    
    670,382
    
    
    
    493,723Other Liabilities
    
    
    
    
    
    
    180,367
    
    
    
    127,091
    
    
    
    184,275FHLB Borrowings and Other Long-Term Debt
    
    
    
    
    
    
    796,693
    
    
    
    912,333
    
    
    
    428,525Total Liabilities
    
    
    
    
    
    
    5,717,383
    
    
    
    5,996,038
    
    
    
    6,396,631GUARANTEED PREFERRED BENEFICIAL INTERESTS IN JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES
    
    
    
    
    
    
    72,634
    
    
    
    -
    
    
    
    248,584COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYCommon Stock-$2.50 Par Value3/31/2004
    
    
    
    12/31/2003
    
    
    
    3/31/2003Authorized Shares
    
    
    50,000,000
    
    
    
    50,000,000
    
    
    
    50,000,000Issued Shares
    
    
    32,295,505
    
    
    
    31,998,260
    
    
    
    31,850,006Outstanding Shares
    
    
    28,953,184
    
    
    
    28,680,138
    
    
    
    28,533,918Treasury Shares
    
    
    3,342,321
    
    
    
    3,318,122
    
    
    
    3,316,088
    
    
    
    80,739
    
    
    
    79,996
    
    
    
    79,625Additional Paid in Capital
    
    
    
    
    
    
    175,506
    
    
    
    174,396
    
    
    
    171,245Retained Earnings
    
    
    
    
    
    
    202,605
    
    
    
    200,131
    
    
    
    209,367Accumulated Other Comprehensive Income (Loss)
    
    
    
    
    
    
    2,410
    
    
    
    (9,380
    )
    
    
    3,323Treasury Stock
    
    
    
    
    
    
    (72,002
    )
    
    
    (71,623
    )
    
    
    (71,591
    )Total Shareholders Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389,258
    
    
    
    373,520
    
    
    
    391,969Total Liabilities and Shareholders Equity
    
    
    
    
    
    $
    6,179,275
    
    
    $
    6,369,558
    
    
    $
    7,037,184
 The Accompanying Notes Are An Integral Part Of These Statements 4




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RIGGS NATIONAL CORPORATIONCONSOLIDATED 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, 2002
    
    $
    79,530
    
    
    $
    170,747
    
    
    $
    204,865
    
    
    $
    5,468
    
    
    $
    (71,369
    )
    
    $
    389,241Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    5,929
    
    
    
    
    
    
    
    
    
    
    
    5,929Other Comprehensive Loss, Net of Tax:Unrealized Loss on
Securities Available for Sale, Net
of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,859
    )
    
    
    
    
    
    
    (1,859
    )Unrealized Gain on Derivatives,
Net of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483
    
    
    
    
    
    
    
    483Foreign Exchange Translation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (769
    )
    
    
    
    
    
    
    (769
    )Total Other Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,145
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,784Issuance of Common Stock for
Stock Option Plans-37,984 Shares
    
    
    95
    
    
    
    498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    593Common Stock Repurchase-14,290 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (222
    )
    
    
    (222
    )Cash Dividends 
Common Stock, $.05 per Share
    
    
    
    
    
    
    
    
    
    
    (1,427
    )
    
    
    
    
    
    
    
    
    
    
    (1,427
    )Balance, March 31, 2003
    
    $
    79,625
    
    
    $
    171,245
    
    
    $
    209,367
    
    
    $
    3,323
    
    
    $
    (71,591
    )
    
    $
    391,969Balance, December 31, 2003
    
    $
    79,996
    
    
    $
    174,396
    
    
    $
    200,131
    
    
    $
    (9,380
    )
    
    $
    (71,623
    )
    
    $
    373,520Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    3,915
    
    
    
    
    
    
    
    
    
    
    
    3,915Other Comprehensive Income, Net of Tax:Unrealized Gain on
Securities Available for Sale, Net
of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,065
    
    
    
    
    
    
    
    11,065Unrealized Gain on Derivatives,
Net of Reclassification Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    301
    
    
    
    
    
    
    
    301Foreign Exchange Translation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424
    
    
    
    
    
    
    
    424Total Other Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,790Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,705Issuance of Common Stock for
Stock Option and Award Plans-297,245 Shares
    
    
    743
    
    
    
    1,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,389Repurchase of
Trust Preferred Securities, Net
    
    
    
    
    
    
    (536
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (536
    )Common Stock Repurchase-24,199 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (379
    )
    
    
    (379
    )Cash Dividends 
Common Stock, $.05 per Share
    
    
    
    
    
    
    
    
    
    
    (1,441
    )
    
    
    
    
    
    
    
    
    
    
    (1,441
    )Balance, March 31, 2004
    
    $
    80,739
    
    
    $
    175,506
    
    
    $
    202,605
    
    
    $
    2,410
    
    
    $
    (72,002
    )
    
    $
    389,258
 The Accompanying Notes Are An Integral Part Of These Statements 5




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RIGGS NATIONAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)(IN THOUSANDS)THREE MONTHS ENDEDMARCH 31,2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    3,915
    
    
    $
    5,929Adjustments to Reconcile Net Income to Cash
Provided By Operating Activities:Provision for Loan Losses
    
    
    -
    
    
    
    926Losses on Venture Capital Investments
    
    
    168
    
    
    
    2,222Depreciation Expense and Amortization of Leasehold Improvements
    
    
    6,009
    
    
    
    4,473Net Gains on Sales of Securities Available for Sale
    
    
    (226
    )
    
    
    (4,627
    )Decrease (Increase) in Other Assets
    
    
    27
    
    
    
    (467
    )Increase in Other Liabilities
    
    
    52,198
    
    
    
    6,501Total Adjustments
    
    
    58,176
    
    
    
    9,028Net Cash Provided By Operating Activities
    
    
    62,091
    
    
    
    14,957CASH FLOWS FROM INVESTING ACTIVITIES:Net Decrease (Increase) in Time Deposits with Other Banks
    
    
    52,504
    
    
    
    (64,081
    )Proceeds from Maturities of Securities Available for Sale
    
    
    845,148
    
    
    
    2,704,580Proceeds from Sales of Securities Available for Sale
    
    
    330,789
    
    
    
    175,666Purchases of Securities Available for Sale
    
    
    (1,142,308
    )
    
    
    (2,953,267
    )Purchases of Securities Held to Maturity
    
    
    (14,331
    )
    
    
    -Purchases of Venture Capital Investments
    
    
    (813
    )
    
    
    (897
    )Proceeds from Sale of Venture Capital Investments
    
    
    723
    
    
    
    901Net Decrease
(Increase) in Loans
    
    
    26,246
    
    
    
    (77,942
    )Proceeds from Sale of OREO
    
    
    (80
    )
    
    
    504Net Increase in Premises and Equipment
    
    
    (6,055
    )
    
    
    (5,074
    )Other, Net
    
    
    48
    
    
    
    (47
    )Net Cash Provided By (Used In) Investing Activities
    
    
    91,871
    
    
    
    (219,657
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net Increase in Non-Time Deposits
    
    
    15,633
    
    
    
    6,923Net (Decrease) Increase in Time Deposits
    
    
    (153,993
    )
    
    
    44,188Net Decrease in Short-Term Borrowings
    
    
    (88,931
    )
    
    
    (8,649
    )Proceeds from Federal Home Loan Bank and Other Long-Term Borrowings
    
    
    50,000
    
    
    
    102,000Proceeds from the Issuance of Common Stock
    
    
    748
    
    
    
    593Dividend Payments
    
    
    (1,441
    )
    
    
    (1,427
    )Repurchase of Common Stock
    
    
    (379
    )
    
    
    (222
    )Repurchase of Guaranteed Preferred Beneficial Interests
in Junior Subordinated Deferrable Interest Debentures
    
    
    (5,724
    )
    
    
    -Net Cash (Used In) Provided By Financing Activities
    
    
    (184,087
    )
    
    
    143,406Effect of Exchange Rate Changes
    
    
    424
    
    
    
    (769
    )Net Decrease in Cash and Cash Equivalents
    
    
    (29,701
    )
    
    
    (62,063
    )Cash and Cash Equivalents at Beginning of Period
    
    
    325,975
    
    
    
    854,703Cash and Cash Equivalents at End of Period
    
    $
    296,274
    
    
    $
    792,640SUPPLEMENTAL DISCLOSURES:Trade Dated Securities Purchases
    
    $
    10,003
    
    
    $
    59,460Interest Paid
    
    
    11,341
    
    
    
    14,131
 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 the Companys 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 months ended March 31, 2004 are not necessarily indicative of the
results to be expected for all of 2004. For comparability, certain prior period amounts may have been reclassified to conform with the current period
presentation. The financial statements contained herein should be read in conjunction with the audited financial statements and accompanying notes
in the Companys Annual Report on Form 10-K for the year ended December 31, 2003. NOTE 2.            CRITICAL ACCOUNTING POLICIES AND ESTIMATES As noted above, management of the Company has prepared the consolidated financial statements included in this Form 10-Q in conformity with
accounting principles generally accepted in the United States of America applied on a consistent basis and which follow general practice within the
banking industry. Accordingly, management of the Company 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, the provision for loan losses, noninterest income and
noninterest expense during the periods presented. Based on its consideration of accounting policies that involve the most complex and subjective
estimates and assumptions, as well as its analysis of whether and to what extent such estimates and assumptions will have a material impact on the
Companys financial condition or results of operations, management has identified the following critical accounting policies. Due to uncertainty
inherent in these matters, actual results of future operations could differ from the estimates, judgments and assumptions used in applying these
critical accounting policies. Reserve for Loan Losses
The reserve for loan losses is maintained at a level deemed 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, subjective 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 $250 thousand for impairment, an analysis of historical loss experience by loan type, an evaluation of current economic conditions and other
factors considered pertinent to the analysis. Impaired loans are defined as those credits where the Company has determined it probable that all
amounts due in accordance with the loan agreements will not be collected or recovered from the disposition of collateral. 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 $250 thousand has a specific, identified loan loss reserve associated with it or has been written down to its estimated
net realizable value. Impaired loans do not include 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
and other factors deemed relevant to the analysis. Balances related to impaired loans for which there are specific reserves are excluded when applying
historical loss ratios to determine loan loss reserves. The specific reserves for
impaired loans, if any, 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. 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 are credited to the reserve for loan losses. 7




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 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 the
appropriateness of its loan loss methodology to ascertain that it produces accurate assessments of probable loan losses. Domestic and international
loans are subjected to similar review procedures. While the Company believes its credit monitoring procedures are adequate, credit losses are, however, inherent to the business, and it is possible
there may be unidentified losses in the loan portfolio at March 31, 2004 that may become apparent at a later date pursuant to additional internal
analysis or pursuant to comment following regulatory examination. 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 March 31, 2004, the Company valued its venture capital portfolio at $43.3 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; an offer to
purchase; and analysis and commentary from a funds Investment Manager/General Partner. The largest investment in the venture capital portfolio
is valued at $3.7 million at March 31, 2004. Since the Company has no present intention to sell or liquidate the venture capital portfolio, the valuation of venture capital investments is subject
to uncertainty 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 investments within a short period of time, the actual proceeds from the sale could differ
significantly from the recorded carrying value. The market for the type of venture capital investments Riggs holds has since 2000 been impacted by
a slow economy, a depressed domestic equity market in which, notwithstanding the recent recovery of stock prices, the values of publicly traded
companies have declined. Because of these market conditions, there has been a decline in the number of initial public offerings and acquisitions of
private companies by publicly traded firms. The gradual improvement in these sectors has begun to afford the Company better liquidation
opportunities and it continues to actively manage the portfolio to maximize current valuations. 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 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
The Company records a provision for income taxes based upon the amount 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. Establishing a valuation allowance results in
an increase in income tax expense. Unrealized losses in venture capital operations have resulted in the maintenance of $12.0 million of deferred tax assets as of March 31, 2004. 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 the venture capital portfolio and the lack of current suitability of alternatives to generate capital
gains, Riggs has established a valuation allowance of $6.9 million against the deferred tax asset at March 31, 2004. The Company believes that the
unreserved deferred tax asset balance of $5.1 million at March 31, 2004, which includes a deferred tax asset related to realized losses of $3.2 million,
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. Management has identified several alternative business strategies that could produce sufficient capital gains
to allow the unreserved deferred tax asset balance to be realized. 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 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. Contingencies
The Company evaluates gain and loss contingencies in accordance with Statement of Financial Accounting Standard No. 5 (Accounting for Contingencies) and,
when necessary, FASB Interpretation No. 14 (Reasonable Estimation of the Amount of a Loss, an interpretation of FASB Statement No. 5). Gain contingencies are not recognized in the financial statements until the gain is realized but the Company
does evaluate the need to disclose such contingent gains in the notes to the financial statements.  Loss contingencies are categorized as remote,
reasonably possible or probable of occurring.  Contingent losses for which chances of occurrence are remote are neither
recognized nor disclosed in the financial statements.  Possible contingent losses are those events which may or may not occur.  Reasonably possible loss contingencies are not recorded in the financial statements but,
if material, are disclosed in the notes to the financial statements.  Loss contingencies that are more likely than not to occur are deemed probable
of occurring.  Probable loss contingencies that are material are recorded as liabilities in the financial statements at
the estimated amount of the loss if such loss can be reasonably estimated.  If no reasonable estimate of the loss can be made, but a range of possible
losses can be reasonably ascertained, the minimum estimated loss will be accrued and the Company describes in its disclosure the remaining loss
contingency. 8




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 3.            EARNINGS PER SHARE Earnings per share computations are as follows: THREE MONTHS ENDED
    
    THREE MONTHS ENDEDMARCH 31, 2004
    
    MARCH 31, 2003BASIC
    
    
    DILUTED
    
    
    BASIC
    
    
    DILUTEDEPS
    
    
    EPS
    
    
    EPS
    
    
    EPSNet Income Available to Common Shareholders
    
    $
    3,915
    
    
    $
    3,915
    
    
    $
    5,929
    
    
    $
    5,929Weighted-Average Shares Outstanding
    
    
    28,845,364
    
    
    
    28,845,364
    
    
    
    28,528,109
    
    
    
    28,528,109Weighted-Average Dilutive Effect
of Stock-Based Compensation Plans
    
    
    n/a
    
    
    
    1,055,682
    
    
    
    n/a
    
    
    
    437,289Adjusted Weighted-Average Shares Outstanding
    
    
    28,845,364
    
    
    
    29,901,046
    
    
    
    28,528,109
    
    
    
    28,965,398Earnings Per Share
    
    $
    0.14
    
    
    $
    0.13
    
    
    $
    .21
    
    
    $
    .20
 Approximately 2.4 million and 3.7 million stock options were outstanding at the end of March 2004 and 2003, 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 three-month periods ended March 31, 2004 and 2003 and, therefore, the effect would be antidilutive. The weighted average
exercise price for these options was $20.52 per share and $18.79 per share at the end of the same respective periods. Stock-Based Employee Compensation Plans
At March 31, 2004 the Company had five stock-option plans which are described more fully in Note 14 of Notes to Consolidated Financial
Statements in its 2003 Annual Report on 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. The Company has also awarded time vested and performance based shares. Expense related to time-vested and
performance-based stock awards are reflected in the Consolidated Statements of Income. 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. THREE MONTHS ENDED MARCH 31,(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
    
    2004
    
    
    2003Net income, as reported
    
    
    $3,915
    
    
    
    $5,929Add: Stock-based employee compensation expense included in reported
net income, net of related tax effects
    
    
    331
    
    
    
    210Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects
    
    
    (900
    )
    
    
    (911
    )Pro forma net income
    
    
    $3,346
    
    
    
    $5,228Earnings per share:Basic-as reported
    
    
    $0.14
    
    
    
    $0.21Basic-pro forma
    
    
    $0.12
    
    
    
    $0.18Diluted-as reported
    
    
    $0.13
    
    
    
    $0.20Diluted-pro forma
    
    
    $0.11
    
    
    
    $0.18
 9




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 4.            OTHER COMPREHENSIVE INCOME (LOSS) BEFORE -
    
    
    TAXTAX
    
    
    (EXPENSE)
    
    
    NET-OF-TAXAMOUNT
    
    
    BENEFIT
    
    
    AMOUNTTHREE MONTHS ENDED MARCH 31, 2003:Foreign Currency Translation Adjustments
    
    $
    (1,183
    )
    
    $
    414
    
    
    $
    (769
    )Unrealized Gains on Securities:Unrealized Holding Gains (Losses) Arising During Period
    
    
    1,767
    
    
    
    (618
    )
    
    
    1,149Reclassification Adjustment for Gains Realized in Net Income
    
    
    (4,627
    )
    
    
    1,619
    
    
    
    (3,008
    )Net Unrealized Gains on Securities
    
    
    (2,860
    )
    
    
    1,001
    
    
    
    (1,859
    )Unrealized Gains on Derivatives:Unrealized Holding Gains (Losses) Arising During Period
    
    
    743
    
    
    
    (260
    )
    
    
    483Reclassification Adjustment for Gains Realized in Net Income
    
    
    -
    
    
    
    -
    
    
    
    -Net Unrealized Losses on Derivatives
    
    
    743
    
    
    
    (260
    )
    
    
    483Other Comprehensive Income (Loss)
    
    $
    (3,300
    )
    
    $
    1,155
    
    
    $
    (2,145
    )THREE MONTHS ENDED MARCH 31, 2004:Foreign Currency Translation Adjustments
    
    $
    652
    
    
    $
    (228
    )
    
    $
    424Unrealized Losses on Securities:Unrealized Holding Gains (Losses) Arising During Period
    
    
    17,121
    
    
    
    (5,909
    )
    
    
    11,212Reclassification Adjustment for Gains Realized in Net Income
    
    
    (226
    )
    
    
    79
    
    
    
    (147
    )Net Unrealized Losses on Securities
    
    
    16,895
    
    
    
    (5,830
    )
    
    
    11,065Unrealized Gains on Derivatives:Unrealized Holding Gains (Losses) Arising During Period
    
    
    463
    
    
    
    (162
    )
    
    
    301Reclassification Adjustment for Gains Realized in Net Income
    
    
    -
    
    
    
    -
    
    
    
    -Net Unrealized Gains on Derivatives
    
    
    463
    
    
    
    (162
    )
    
    
    301Other Comprehensive Income (Loss)
    
    $
    18,010
    
    
    $
    (6,220
    )
    
    $
    11,790
 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)THREE MONTHS ENDED MARCH 31, 2003:Balance, December 31, 2002
    
    $
    (4,154
    )
    
    $
    12,746
    
    
    $
    (3,124
    )
    
    $
    5,468Period Change
    
    
    (769
    )
    
    
    (1,859
    )
    
    
    483
    
    
    
    (2,145
    )Balance, March 31, 2003
    
    $
    (4,923
    )
    
    $
    10,887
    
    
    $
    (2,641
    )
    
    $
    3,323THREE MONTHS ENDED MARCH 31, 2004:Balance, December 31, 2003
    
    $
    (2,687
    )
    
    $
    (5,203
    )
    
    $
    (1,490
    )
    
    $
    (9,380
    )Period Change
    
    
    424
    
    
    
    11,065
    
    
    
    301
    
    
    
    11,790Balance, March 31, 2004
    
    $
    (2,263
    )
    
    $
    5,862
    
    
    $
    (1,189
    )
    
    $
    2,410
 10




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 5:            SEGMENT INFORMATION The Companys reportable segments are strategic business units that provide diverse products and services within the financial services industry. Riggs
has five reportable segments: Banking, International Banking, Treasury, Riggs Capital Partners (venture capital) and Other. Except for the utilization of funds transfer pricing and cost allocation methodologies, the accounting policies for the segments are substantially the
same as those described in Note 1 of Notes to Consolidated Financial Statements in the Companys 2003 Annual Report on Form 10-K. Riggs
accounts 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 the Companys 2003 Annual Report on 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 are not restated, however, to reflect changes in revenue and cost allocations or
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. Beginning in the first quarter of 2004, the segment previously reported as Riggs & Co. is, due to an organizational
realignment, included in the Banking segment. Prior periods have been adjusted to reflect this change. Reconciliations are provided from the segment totals to the 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 the segments: Banking
The Banking segment provides both community and wholesale banking services. Community banking includes traditional branch banking operations,
private banking to high net worth individuals, small business banking, trust and broker-dealer services, mortgage and consumer lending and merchant
card services. Wholesale banking provides banking services for middle market and commercial real estate customers, not-for-profit organizations,
government contractors and embassy and diplomatic customers. Wholesale banking also provides cash management services, investment
management services (through Riggs Investment Advisors) and (through its Multi-Employer Property Trust unit) trustee to a commingled real estate fund. The Banking segment operations at March 31, 2004 are primarily conducted through 48 branch offices and 145 ATMs in and around Washington,
D.C. International Banking
The International Banking segment includes the Washington-based embassy banking business, the London banking subsidiary, Riggs Bank Europe Ltd.
(RBEL) and an Edge Act chartered subsidiary in Miami. Among the services provided are letters of credit, foreign exchange, taking of deposits, private
banking and cash management. The International Banking segment also includes an 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. 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 segment reporting. 11




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Riggs Capital Partners
Riggs Capital Partners represent the Companys venture capital operations, which specialize in equity investments in privately-held high-tech and
high-growth companies. Other
The Other segment consists of 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
    
    
    
    
    
    
    CAPITAL
    
    
    
    
    
    
    
    
    
    
    NATIONALMARCH 31, 2004
    
    BANKING
    
    
    BANKING
    
    
    TREASURY
    
    
    PARTNERS
    
    
    OTHER
    
    
    RECONCILIATION
    
    
    CORPORATIONNET INTEREST INCOMEInterest Income
    
    $
    36,403
    
    
    $
    5,750
    
    
    $
    17,502
    
    
    $
    1
    
    
    $
    5,335
    
    
    $
    (5,574
    )
    
    $
    59,417Interest Expense
    
    
    3,003
    
    
    
    4,053
    
    
    
    6,496
    
    
    
    -
    
    
    
    10,350
    
    
    
    (5,574
    )
    
    
    18,328Funds Transfer Income (Expense)
    
    
    2,899
    
    
    
    7,715
    
    
    
    (10,617
    )
    
    
    -
    
    
    
    3
    
    
    
    
    
    
    
    -Net Interest Income (Loss)
    
    
    36,299
    
    
    
    9,412
    
    
    
    389
    
    
    
    1
    
    
    
    (5,012
    )
    
    
    
    
    
    
    41,089Provision for Loan Losses
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    
    
    
    -Net Interest Income (Loss) after Provision
    
    $
    36,299
    
    
    $
    9,412
    
    
    $
    389
    
    
    $
    1
    
    
    $
    (5,012
    )
    
    $
    -
    
    
    $
    41,089NONINTEREST INCOMENoninterest Income-External
Customers
    
    $
    21,651
    
    
    $
    1,586
    
    
    $
    1,359
    
    
    $
    (168
    )
    
    $
    1,105
    
    
    
    
    
    
    $
    25,533Intersegment Noninterest Income
    
    
    626
    
    
    
    1,796
    
    
    
    -
    
    
    
    -
    
    
    
    477
    
    
    
    (2,899
    )
    
    
    -Total Noninterest Income
    
    $
    22,277
    
    
    $
    3,382
    
    
    $
    1,359
    
    
    $
    (168
    )
    
    $
    1,582
    
    
    $
    (2,899
    )
    
    $
    25,533NONINTEREST EXPENSEDirect Depreciation and Amortization
    
    $
    1,146
    
    
    $
    285
    
    
    $
    1
    
    
    $
    3
    
    
    $
    2,795
    
    
    
    
    
    
    $
    4,230Direct Expense
    
    
    22,659
    
    
    
    8,638
    
    
    
    1,104
    
    
    
    154
    
    
    
    26,451
    
    
    
    (2,899
    )
    
    
    56,107Overhead and Support
    
    
    19,565
    
    
    
    4,280
    
    
    
    476
    
    
    
    -
    
    
    
    (24,321
    )
    
    
    
    
    
    
    -Total Noninterest Expense
    
    $
    43,370
    
    
    $
    13,203
    
    
    $
    1,581
    
    
    $
    157
    
    
    $
    4,925
    
    
    $
    (2,899
    )
    
    $
    60,337Income (Loss) Before Taxes and
Minority Interest
    
    $
    15,206
    
    
    $
    (409
    )
    
    $
    167
    
    
    $
    (324
    )
    
    $
    (8,355
    )
    
    $
    -
    
    
    $
    6,285Taxes
    
    $
    5,321
    
    
    $
    537
    
    
    $
    59
    
    
    $
    -
    
    
    $
    (4,290
    )
    
    
    
    
    
    $
    1,627Minority Interest
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (3
    )
    
    
    746
    
    
    
    
    
    
    
    743Net Income (Loss)
    
    $
    9,885
    
    
    $
    (946
    )
    
    $
    108
    
    
    $
    (321
    )
    
    $
    (4,811
    )
    
    $
    -
    
    
    $
    3,915Total Average Assets
    
    $
    3,656,410
    
    
    $
    648,995
    
    
    $
    2,411,997
    
    
    $
    45,501
    
    
    $
    683,326
    
    
    $
    (1,204,649
    )
    
    $
    6,241,580
 12




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED THREE MONTHS
    
    
    
    
    
    
    
    
    
    
    
    
    
    RIGGS
    
    
    
    
    
    
    
    
    
    
    RIGGSENDED
    
    
    
    
    
    INTERNATIONAL
    
    
    
    
    
    
    CAPITAL
    
    
    
    
    
    
    
    
    
    
    NATIONALMARCH 31, 2003
    
    BANKING
    
    
    BANKING
    
    
    TREASURY
    
    
    PARTNERS
    
    
    OTHER
    
    
    RECONCILIATION
    
    
    CORPORATIONNET INTEREST INCOMEInterest Income
    
    $
    39,848
    
    
    $
    5,340
    
    
    $
    22,474
    
    
    $
    4
    
    
    $
    8,328
    
    
    $
    (11,741
    )
    
    $
    64,253Interest Expense
    
    
    8,412
    
    
    
    4,839
    
    
    
    5,014
    
    
    
    -
    
    
    
    9,529
    
    
    
    (11,741
    )
    
    
    16,053Funds Transfer Income (Expense)
    
    
    7,181
    
    
    
    9,431
    
    
    
    (18,388
    )
    
    
    (786
    )
    
    
    2,562
    
    
    
    
    
    
    
    -Net Interest Income (Loss)
    
    
    38,617
    
    
    
    9,932
    
    
    
    (928
    )
    
    
    (782
    )
    
    
    1,361
    
    
    
    
    
    
    
    48,200Provision for Loan Losses
    
    
    (1,322
    )
    
    
    399
    
    
    
    -
    
    
    
    -
    
    
    
    (3
    )
    
    
    
    
    
    
    (926
    )Net Interest Income (Loss) after Provision
    
    $
    37,295
    
    
    $
    10,331
    
    
    $
    (928
    )
    
    $
    (782
    )
    
    $
    1,358
    
    
    $
    -
    
    
    $
    47,274NONINTEREST INCOMENoninterest Income-External
Customers
    
    $
    21,525
    
    
    $
    1,563
    
    
    $
    5,227
    
    
    $
    (2,185
    )
    
    $
    (1
    )
    
    
    
    
    
    $
    26,129Intersegment Noninterest Income
    
    
    1,457
    
    
    
    1,750
    
    
    
    -
    
    
    
    -
    
    
    
    520
    
    
    
    (3,727
    )
    
    
    -Total Noninterest Income
    
    $
    22,982
    
    
    $
    3,313
    
    
    $
    5,227
    
    
    $
    (2,185
    )
    
    $
    519
    
    
    $
    (3,727
    )
    
    $
    26,129NONINTEREST EXPENSEDirect Depreciation and Amortization
    
    $
    1,033
    
    
    $
    320
    
    
    $
    3
    
    
    $
    4
    
    
    $
    2,335
    
    
    
    
    
    
    $
    3,695Direct Expense
    
    
    26,961
    
    
    
    8,173
    
    
    
    978
    
    
    
    222
    
    
    
    22,644
    
    
    
    (3,727
    )
    
    
    55,251Overhead and Support
    
    
    19,085
    
    
    
    3,525
    
    
    
    747
    
    
    
    94
    
    
    
    (23,451
    )
    
    
    
    
    
    
    -Total Noninterest Expense
    
    $
    47,079
    
    
    $
    12,018
    
    
    $
    1,728
    
    
    $
    320
    
    
    $
    1,528
    
    
    $
    (3,727
    )
    
    $
    58,946Income (Loss) Before Taxes and
Minority Interest
    
    $
    13,198
    
    
    $
    1,626
    
    
    $
    2,571
    
    
    $
    (3,287
    )
    
    $
    349
    
    
    $
    -
    
    
    $
    14,457Taxes
    
    $
    3,833
    
    
    $
    602
    
    
    $
    902
    
    
    $
    -
    
    
    $
    (340
    )
    
    
    
    
    
    $
    4,997Minority Interest
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (17
    )
    
    
    3,548
    
    
    
    
    
    
    
    3,531Net Income (Loss)
    
    $
    9,365
    
    
    $
    1,024
    
    
    $
    1,669
    
    
    $
    (3,270
    )
    
    $
    (2,859
    )
    
    $
    -
    
    
    $
    5,929Total Average Assets
    
    $
    3,453,101
    
    
    $
    604,930
    
    
    $
    3,369,373
    
    
    $
    61,209
    
    
    $
    788,666
    
    
    $
    (1,501,375
    )
    
    $
    6,775,904
 NOTE 6:            ACCOUNTING FOR DERIVATIVES See Note 1 of Notes to Consolidated Financial Statements in the Annual Report on Form 10K for a discussion of the Companys accounting policies
related to derivatives. The Company has the following hedging instruments at March 31, 2004: Fair Value Hedges - The Company enters 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 March 31, 2004 and 2003 Riggs had no fair value hedges. Cash Flow Hedges - Riggs uses interest rate swaps to hedge its exposure to variability in expected future cash outflows on floating rate liabilities
attributable to changes in interest rates. At March 31, 2004, Riggs had 7 such interest rate swaps with a total notional value of $47.2 million
compared to 6 swaps with a total notional of $42.7 million at March 31, 2003. The Company also uses foreign currency forward contracts to hedge
the foreign exchange risk associated with principal and interest payments on loans denominated in a foreign currency. At March 31, 2004, there
were no foreign currency forward contracts compared to 2 such contracts with a total notional value of $7.9 million at March 31, 2003. For the three months ended March 31, 2004 and 2003, there was no impact to Other Noninterest Income in the Consolidated Statements of Income
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 March 31, 2004, there are no
deferred net losses on derivative instruments in Accumulated Other Comprehensive Income to be reclassified as expense during the next twelve
months compared to $15 thousand of deferred net losses at March 31, 2003. The maximum term over which Riggs was hedging its exposure to the
variability of cash flows was 15 months as of March 31, 2004 and 27 months as of March 31, 2003. 13




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 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 March 31, 2004, $227 thousand of net losses
related to the existing net investment forward exchange contract are included in Accumulated Other Comprehensive Income compared to $506
thousand of net losses at March 31, 2003. The corresponding notional values for these periods was $77.7 million and $72.0 million, respectively. As of March 31, 2004 and 2003 the Company 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 $116 thousand and $591 thousand at March 31, 2004 and 2003,
respectively. The impact on the Consolidated Statements of Income from these swaps was a gain of $85 thousand for the first three months of
2004 and a loss of $10 thousand for the same period in 2003. At March 31, 2004, Riggs had 8 interest rate contracts and 8 forward contracts with
a total notional value of $32.6 million compared to 24 interest rate contracts and 8 forward contracts with a total notional value of $88.5 million
at March 31, 2003. These instruments are marked to market through current period earnings. NOTE 7:     CONSENT ORDER, NOTIFICATION OF POSSIBLE ASSESSMENT OF CIVIL MONEY PENALTIES AND OTHER REGULATORY MATTERS In July 2003, the 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 to ensure compliance and improve the monitoring of compliance with the Bank
Secrecy Act and related rules and regulations (BSA). The Consent Order allows the OCC to take whatever future actions it deems necessary to fulfill
its regulatory responsibilities. These actions could include a civil money penalty. The OCC advised the Bank that primarily as a direct result of its BSA
criticisms, it expected to designate the Bank as being in a troubled
condition. The OCC has now formally advised the Bank that it is designated as
being in a troubled condition. A bank that is classified as being in a
troubled condition must have any new director or executive officer approved
in advance by the OCC and is subject, along with its holding company, to
restrictions on making severance payments to the Banks directors, officers and
employees under the Federal Deposit Insurance Corporations golden parachute rule. On March 2, 2004, the OCC advised the Bank that it was considering whether to institute a civil money penalty action against the Bank and that
such action would be based upon the OCCs allegations that the Bank (1) violated the BSA and related rules and regulations, (2) failed to comply with the
Consent Order discussed above and (3) failed to implement adequate controls to ensure that the Bank operates in a safe and sound manner with respect to
BSA compliance. The amount of the civil money penalty being considered was not specified by the OCC. Many of the regulatory violations alleged by the OCC
predate the Consent Order. Under OCC procedures, the Bank is afforded the opportunity to submit information bearing on the appropriate amount
of any penalty to be assessed before the imposition of such a penalty. The Bank made its submission to the OCC in April 2004. Also on March 2, 2004, the Bank was advised by the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the
Treasury that it was evaluating whether it is appropriate for FinCEN to assess a civil monetary penalty and/or take additional enforcement action
against the Bank for alleged apparent willful violations of the BSA and related rules and regulations. FinCEN generally categorizes its concerns as (1)
failure to establish and implement an adequate anti-money laundering program, (2) failure to properly prepare and file suspicious activity reports,
and (3) failure to file accurate currency transaction reports. The amount of the civil money penalty being considered was not specified by FinCEN.
Under FinCENs procedures, before it makes a determination as to the existence and willfulness of the Banks violations, the Bank is allowed to
submit further information that is relevant to FinCENs evaluation of whether a civil money penalty and/or additional enforcement action is
warranted for the alleged violations. The Bank made its submission to FinCEN in April 2004.  As also previously disclosed, the OCC and FinCEN are
considering the imposition of civil money penalties against Riggs
for various BSA related matters. Riggs has now
concluded that it is probable that the OCC and FinCEN will seek to
impose a civil money penalty against the Bank. Riggs has
enquired but to date has not been advised by the OCC or FinCEN
of the proposed amount or the potential range of amounts of any
such penalty. In accordance with FAS 5 and FIN 14, the Company
has considered all information available to determine if an amount
or ranges of amounts of a potential penalty can be reasonably
estimated. In the absence of such advice from the OCC and
FinCEN, the Company believes that there is not a reasonable basis
to quantify a specific amount or range of amounts. Accordingly,
as of March 31, 2004 no accrual has been recorded. The ultimate
amount of any penalty, which is expected to be known in the
second quarter, could be material to the financial condition and/or results
of operations of the Company. The Bank has
been advised by the OCC that it intends to modify the Banks existing Consent
Order or impose a new Consent Order on the Bank that is intended to enhance the
existing enforcement action. The Bank has not been provided with any
modification or new order. The OCC is also continuing to review the involvement of employees, officers and
directors of the Bank in connection with its compliance with anti-money
laundering laws and regulations and its Consent Order with the OCC and is
considering whether to institute a civil money penalty proceeding against such
individuals. In connection with that review, the Banks directors and certain
officers, as well as two former officers, have been afforded the opportunity by
the OCC to submit information to the OCC and have done so. The Federal Reserve has advised Riggs that it will request the Company and
Riggs International Banking Corporation, a Miami-based Edge Act corporation
subsidiary of the Bank regulated by the Federal Reserve, to enter into an
enforcement order. Although Riggs has not been provided with any order, Riggs
understands that the enforcement order may include a requirement that the
Company obtain the prior approval of the Federal Reserve prior to declaring and
paying dividends, including dividends on its trust preferred securities, and
interest at the holding company level. The Federal Reserve has approved Riggs
first quarter common stock dividend. The entry by Riggs
into the enforcement order may, depending upon the terms, result in it being
considered to be in a troubled condition as well with the same consequences
at the holding company level as at the Bank level. Riggs expects these regulatory actions to increase its costs of doing business
but cannot quantify the amount of the increases. 14




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 8:            RELATED PARTY TRANSACTIONS Prior to and during the three months ended March 31, 2004 the Company 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 the Companys Annual
Report on Form 10-K for the year ended December 31, 2003. At March 31, 2004, the Company had $206.2 million of debt payable to Riggs Capital
II, an unconsolidated subsidiary. NOTE 9:            NEW FINANCIAL ACCOUNTING STANDARDS On March 9, 2004, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 105 (SAB 105), Application of Accounting
Principles to Loan Commitments. SAB No. 105 provides guidance regarding loan commitments accounted for as derivative instruments, and is
effective for quarters beginning April 1, 2004. The Company is currently retaining substantially all of the loans it originates and therefore SAB No.
105 is not expected to have a material impact. NOTE 10:          SUBSEQUENT EVENTS On April 7, 2004 and April 28, 2004, Company shareholders filed substantially
similar purported derivative actions in the Court of Chancery of the State of
Delaware in and for New Castle County against the Companys Board of Directors.
The complaints each allege that the Board violated its fiduciary duties in
relation to a variety of matters, including, among others, the compliance by
the Bank with various anti-money laundering laws and various aspects of the
Banks international and embassy businesses. The lawsuits each seek, on behalf
of the Company, among other things, monetary damages and certain types of
equitable relief. In light of the changed global risk environment post 9/11 and the Companys
strategy of building its domestic banking business in the growing Greater
Washington, D.C. marketplace, the Companys Board of Directors has authorized
the implementation of managements plan for substantially reducing Riggs risk
exposure. The plan involves, among other things, Riggs exiting or selling most
of its international banking businesses and focusing its embassy banking
relationships on a more select client base. Accordingly, Riggs will pursue a
buyer for its London and Channel Islands operations, close its Miami office,
sell the corporate aircraft used in support of its international operations,
and exit embassy banking accounts that do not meet strict risk-related criteria
recently adopted by its Board and management. Riggs said that it expects to
substantially curtail its international business activity by the end of the
third quarter of 2004, although it expects to maintain the Banks London
branch, which has assets of approximately $200 million, to service customers
who meet Riggs risk criteria. Riggs expects to incur a one-time, pre-tax charge of between approximately $15
million and $21 million in the second quarter of 2004 in connection with
exiting or selling these businesses and relationships. In addition, the Company will expense employee
severance and retention benefits over the period that the operations are wound down. Riggs believes that these and previously initiated actions could reduce
deposits by up to approximately $1.05 billion, including the previously
disclosed approximately $360 million of deposits from a relationship that Riggs
terminated, and assets by up to approximately $185 million. The Bank expects
to fund this reduction in deposits through its principal sources of liquidity,
which consist of its customer deposit base, its portfolio of free (i.e., not
pledged as collateral) securities, other liquid assets such as federal funds
sold and borrowings under a Federal Home Loan Bank and Federal
Reserve lines of credit. The Bank
plans to supplement these liquidity sources with the sale of brokered deposits.
As of March 31, 2004, the Bank had approximately $937 million of free
securities, approximately $371 million in federal funds sold and other
short-term investments, and approximately $455 million remaining on its Federal
Home Loan Bank and Federal Reserve lines of credit for total liquid assets and lines of
approximately $1.76 billion. The Federal Reserve has advised Riggs that it will request the Company and
Riggs International Banking Corporation, a Miami-based Edge Act corporation
subsidiary of the Bank regulated by the Federal Reserve, to enter into an
enforcement order. Although Riggs has not been provided with any order, Riggs
understands that the enforcement
order may include a requirement that the Company obtain the prior approval of
the Federal Reserve prior to declaring and paying dividends, including
dividends on its trust preferred securities, and interest at the holding
company level. The Federal Reserve has approved Riggs first quarter common
stock dividend being announced today. The entry by Riggs into the enforcement
order may, depending upon the terms, result in it being considered to be in a
troubled condition as well with the same consequences at the holding company
level as at the Bank level. The Bank serves as trustee for the MEPT. The MEPT governing document
provides for amendment of the trust. Such amendments may include the naming of
a new trustee and subsequent transitioning of the trusteeship from Riggs to
another entity. Based on recent conversations with participants in the trust,
Riggs has reason to believe that this transition may occur. The transition
would result in a reduction of revenue of approximately $8.5 million annually,
partially offset by any consideration received and by approximately $2.0
million in annual expense reductions. 15




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED NOTE 11:            NET PERIODIC PENSION COST The Companys net periodic costs for the pension plan and postretirement health and life insurance benefits are as follows: Components of Net Period Benefit Cost
(IN THOUSANDS) RIGGS NATIONAL CORPORATIONThree months ended March 31Other PostPension
    
    Retirement Benefits2004
    
    
    2003
    
    
    2004
    
    
    2003Service cost
    
    $
    60
    
    
    $
    60
    
    
    $
    122
    
    
    $
    130Interest cost
    
    
    1,591
    
    
    
    1,580
    
    
    
    428
    
    
    
    416Expected return on plan assets
    
    
    (1,925
    )
    
    
    (1,964
    )
    
    
    -
    
    
    
    -Amortization of Transition Amount
    
    
    -
    
    
    
    -
    
    
    
    89
    
    
    
    89Amortization of prior service cost
    
    
    (29
    )
    
    
    (30
    )
    
    
    (531
    )
    
    
    (609
    )Amortization of the net (gain) loss
    
    
    1,273
    
    
    
    1,329
    
    
    
    590
    
    
    
    672Net periodic benefit cost
    
    $
    970
    
    
    $
    975
    
    
    $
    698
    
    
    $
    698
 The Company did not make any contributions to the pension plan during the three month periods ending March 31, 2004 and 2003. The Company
has not yet determined whether it will make a contribution to the pension plan in 2004. 16




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##### 



ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 the Companys current expectations and projections about future results, performance, prospects and opportunities,
and include, without limitation, the references in this 10-Q to earnings from venture capital, implementation of business strategies, hedging activities
and the Companys trust and investment advisory income. The Company has 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 and are subject to a number of risks, uncertainties and other factors that could cause actual results,
performance, prospects or opportunities in 2004 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 the 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, investigations, 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. Do not place undue reliance on any forward-looking statements. Except as required by federal securities law, the Company undertakes 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. OVERVIEW The following discussion and analysis should be read along with the consolidated financial statements and related notes included in this Quarterly
Report on Form 10-Q. As noted above, the following discussion and analysis contains forward-looking statements that are subject to risks,
uncertainties and other factors that could cause the Companys actual results, performance, prospects or opportunities to differ materially from
those expressed in, or implied by, these 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 five reportable segments: Banking, International Banking, 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 145 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), 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. In light of the changed global risk environment post 9/11 and the Companys
strategy of building its domestic banking business in the growing Greater
Washington, D.C. marketplace, the Companys Board of Directors has authorized
the implementation of managements plan for substantially reducing Riggs risk
exposure. The plan involves, among other things, Riggs exiting or selling most
of its international banking businesses and focusing its embassy banking
relationships on a more select client base. Accordingly, Riggs will pursue a
buyer for its London and Channel Islands operations, close its Miami office,
sell the corporate aircraft used in support of its international operations,
and exit embassy banking accounts that do not meet strict risk-related criteria
recently adopted by its Board and management. Riggs said that it expects to
substantially curtail its international business activity by the end of the
third quarter of 2004, although it expects to maintain the Banks London
branch, which has assets of approximately $200 million, to service customers
who meet Riggs risk criteria. Riggs expects to incur a one-time, pre-tax charge of between approximately $15
million and $21 million in the second quarter of 2004 in connection with
exiting or selling these businesses and relationships. In addition,
the Company will expense employee severance and retention benefits
over the period the operations are wound down. Riggs believes that these and previously initiated actions could reduce
deposits by up to approximately $1.05 billion, including the previously
disclosed approximately $360 million of deposits from a relationship that Riggs
terminated, and assets by up to approximately $185 million. The Bank expects
to fund this reduction in deposits through its principal sources of liquidity,
which consist of its customer deposit base, its portfolio of free (i.e., not
pledged as collateral) securities, other liquid assets such as federal funds
sold and borrowings under a Federal Home Loan Bank and Federal
Reserve lines of credit. The Bank
plans to supplement these liquidity sources with the sale of brokered deposits.
As of March 31, 2004, the Bank had approximately $937 million of free
securities, approximately $371 million in federal funds sold and other
short-term investments, and approximately $455 million remaining on its Federal
Home Loan Bank  and Federal Reserve lines of credit for total liquid assets and lines of
approximately $1.76 billion. For a discussion of the more significant risk factors that impact Riggs, or could impact Riggs, see Item 7 of the 2003 Annual Report on Form 10-K. CRITICAL ACCOUNTING POLICIES AND ESTIMATES See Note 2 of Notes to
Consolidated Financial Statements contained in this Quarterly report
on form 10Q for a discussion of the Companys more significant accounting policies and estimates. 17




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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 $3.9 million, or $0.13 per diluted share, for the first quarter of 2004 compared to net income of $5.9
million, or $0.20 per diluted share, in the first quarter of 2003. The decrease in earnings in the first quarter of 2004 was due primarily to decreases
in net interest income which decreased $7.1 million. Noninterest income, which decreased $596 thousand year to year, and noninterest expense,
which increased from $58.9 million in 2003 to $60.3 million in the current quarter, also contributed to lower earnings. Return on average assets
was .25% for the three months ended March 31, 2004 compared to .35% for the same period a year ago and return on average shareholders
equity was 4.15% for the three months ended March 31, 2004 compared to 6.13% for the same period in March 2003. 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 $42.3
million in the first quarter of 2004, a $7.1 million (or 14.4%) decrease from the $49.4 million for the same quarter in 2003. This decrease was
attributable to both a decrease in interest income on interest-earning assets and an increase in interest expense on interest-bearing liabilities. Despite
a small increase in the rate earned on earning assets, from 4.30% in 2003 to 4.34% in 2004, interest income on a tax equivalent basis declined $4.8
million, or 7%, in the first quarter of 2004 compared to the first quarter of 2003. As further discussed below, this decline in interest income is
attributable to a $547.1 million decrease in average interest-earning assets from the first quarter of 2003 to the comparable period of 2004.
Similarly, and as discussed below, average interest-bearing liabilities also declined from the first quarter of 2003 to the comparable period of 2004.
Average first quarter interest-bearing liabilities declined by $438.0 million from 2003 to 2004 while the rate on these liabilities increased from 1.19%
to 1.47%. Net interest income in 2004 compared to 2003 was adversely impacted by a mid-year change in 2003 in the methodology by which the U.S. Treasury
compensates financial agent banks, such as Riggs. Prior to July 14, 2003, and therefore including the first quarter of 2003, Riggs as a financial agent
bank was compensated by net interest earned on interest-bearing U.S. Treasury deposits. These deposits required collateral to be pledged against the
deposits. Hence, for the first quarter of 2003 the methodology by which the U.S. Treasury compensated financial agent banks affected the
average balance of interest-earning assets, interest bearing liabilities and, as a result, net interest income. Beginning on July 14, 2003 and through
February 28, 2004, Riggs utilized non-interest bearing U.S. Treasury deposits to purchase a non-marketable, U.S. Treasury-issued depositary
compensation security (DCS) for the same amount as the U.S. Treasury deposits. The DCS and deposit balances were netted in the Consolidated
Statements of Financial Condition and in accordance with FIN 39 (Offsetting of Amount Related to Certain Contracts) and therefore were not
included in either average interest-earnings assets or average interest-bearing liabilities during the first quarter of 2004. Effective March 2004, the
U.S. Treasury neither maintains funds at Riggs to compensate it as a financial agent bank nor does Riggs hold a U.S. Treasury DCS. Rather,
commencing in March 2004, Riggs invoices the U.S. Treasury on a monthly basis for services performed as a financial agent bank. Income earned by
Riggs in its capacity as a financial agent bank in the first quarter of 2004 was $2.3 million and is reflected as a component of noninterest income. The
average balance of deposits maintained by the U.S. Treasury to compensate Riggs as a financial agent bank during the first quarter of 2003 was
approximately $1.13 billion. During the first quarter of 2003, guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures were reported, net of
the amount of these securities which had been repurchased by the Company, as minority interest. Accordingly, the expense of these debentures was
included in the Consolidated Statement of Income for the period ended March 31, 2003 as minority interest in income of subsidiaries, net of taxes.
During the first quarter of 2003, therefore, these debentures had no impact on the reported net interest income of the Company. On October 1,
2003, however, the Company adopted FIN 46R (Consolidation of Variable Interest Entities) and therefore ceased consolidating Riggs Capital and
Riggs Capital II, the business trusts which had issued its Series A and Series C debentures. On April 26, 2004, banking regulators extended its interim
rule until July 1, 2004 which allows entities with variable interest entities, including Riggs, to include these variable interest entities in risk-based
capital requirement calculations. Riggs Capital II, the issuer of $200 million of 8.875% Series C debentures, remains an unconsolidated entity at March 31, 2004 and, accordingly, the
$206.2 million of Riggs National Corporation (Parent Company) debt payable to Riggs Capital II is a liability to the Company at this date. Interest
on this debt for the first quarter of 2004 in the amount of $4.6 million is included in long-term interest expense in the Consolidated Statement of
Income. At March 31, 2004, the Company owned $49.9 million of the Series C debentures which are classified as securities held to maturity on the
Consolidated Statements of Condition. The average of Series C debentures owned by the Company during the first quarter of 2004 was $48.8 million
and the income earned on these securities was $1.1 million. Therefore the deconsolidation of Riggs Capital II had a $3.5 million adverse impact on
net interest income in the quarter ended March 31, 2004 when compared to the first quarter of 2003. 18




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##### 



ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED Riggs Capital, the issuer of $150 million of 8.625% Series A debentures, was also deconsolidated upon the adoption of FIN 46R in 2003. In February
2004, however, the Company, which had been acquiring these securities, acquired sufficient Series A debentures so that it owned more than 50% of
all such debentures and, accordingly, reconsolidated this entity as the Company is the primary beneficiary of Riggs Capital. As a result, the debt
payable by Riggs National Corporation (Parent Company) to Riggs Capital at March 31, 2004 and the related interest expense since reconsolidation
have been eliminated in consolidation. Interest expense on this debt which was incurred prior to reconsolidation amounted to $1.1 million and is
included in interest expense on long-term debt in the Consolidated Statements of Income for the quarter ended March 31, 2004. Prior to
reconsolidation, the Series A debentures owned by the Company were classified as held to maturity securities in the Consolidated Statements of
Condition. These securities had an average balance of $29.9 million for the first quarter of 2004 and $0.5 million of interest income on these
securities is included in interest income for the quarter prior to reconsolidation. Therefore the deconsolidation of Riggs Capital had a $0.6 million
adverse impact on net interest income in the first quarter of 2004 compared to the comparable quarter of the prior year. At March 31, 2004, the Series A debentures outstanding are netted against the Series A debentures owned by the Company and reflected in the
Consolidated Statements of Condition as guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures. An analysis of the changes in interest income and expense attributable to volume and rate changes follows: NET INTEREST INCOME CHANGES (1) THREE MONTHS ENDEDMARCH 31, 2004 VS. 2003(TAX-EQUIVALENT BASIS)
    
    DUE TO
    
    
    DUE TO
    
    
    TOTAL(IN THOUSANDS)
    
    RATE
    
    
    VOLUME
    
    
    CHANGEInterest Income:Loans, Including Fees
    
    $
    (5,175
    )
    
    $
    3,205
    
    
    $
    (1,970
    )Securities Available for Sale
    
    
    (360
    )
    
    
    (2,001
    )
    
    
    (2,361
    )Securities Held to Maturity
    
    
    -
    
    
    
    1,550
    
    
    
    1,550Time Deposits with Other Banks
    
    
    (225
    )
    
    
    122
    
    
    
    (103
    )Federal Funds Sold and Reverse
Repurchase Agreements
    
    
    (365
    )
    
    
    (1,587
    )
    
    
    (1,952
    )Total Interest Income
    
    
    (6,125
    )
    
    
    1,289
    
    
    
    (4,836
    )Interest Expense:Interest-Bearing Deposits
    
    
    (2,671
    )
    
    
    (2,137
    )
    
    
    (4,808
    )Repurchase Agreements and Other
Short-Term Borrowings
    
    
    475
    
    
    
    516
    
    
    
    991FHLB Borrowings and Other Long-Term Debt
    
    
    937
    
    
    
    5,155
    
    
    
    6,092Total Interest Expense
    
    
    (1,259
    )
    
    
    3,534
    
    
    
    2,275Net Interest Income
    
    $
    (4,866
    )
    
    $
    (2,245
    )
    
    $
    (7,111
    )
  (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. 19




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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 the Companys average Statements of Condition and changes to its margin for the quarters ended March 31 follows: THREE MONTHS ENDED
    
    THREE MONTHS ENDEDMARCH 31, 2004
    
    MARCH 31, 2003(TAX-EQUIVALENT BASIS) (1)
    
    AVERAGE
    
    
    INCOME/
    
    
    
    
    
    
    AVERAGE
    
    
    INCOME/(IN THOUSANDS)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSLoans (2)
    
    $
    3,229,263
    
    
    $
    41,016
    
    
    
    5.11
    %
    
    $
    3,006,181
    
    
    $
    42,986
    
    
    
    5.80
    %Securities Held to Maturity
    
    
    77,764
    
    
    
    1,550
    
    
    
    8.02
    
    
    
    -
    
    
    
    -
    
    
    
    -Securities Available for Sale (3)
    
    
    1,978,569
    
    
    
    16,610
    
    
    
    3.38
    
    
    
    2,230,124
    
    
    
    18,971
    
    
    
    3.45Time Deposits with Other Banks
    
    
    243,763
    
    
    
    1,226
    
    
    
    2.02
    
    
    
    223,126
    
    
    
    1,329
    
    
    
    2.42Federal Funds Sold and Reverse Repurchase Agreements
    
    
    93,000
    
    
    
    232
    
    
    
    1.00
    
    
    
    710,000
    
    
    
    2,184
    
    
    
    1.25Total Earning Assets and Average Rate Earned (5)
    
    
    5,622,359
    
    
    
    60,634
    
    
    
    4.34
    
    
    
    6,169,431
    
    
    
    65,470
    
    
    
    4.30Reserve for Loan Losses
    
    
    (28,233
    )
    
    
    
    
    
    
    
    
    
    
    (25,608
    )Cash and Due from Banks
    
    
    176,250
    
    
    
    
    
    
    
    
    
    
    
    167,005Other Assets
    
    
    471,204
    
    
    
    
    
    
    
    
    
    
    
    465,076Total Assets
    
    $
    6,241,580
    
    
    
    
    
    
    
    
    
    
    $
    6,775,904LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS EQUITYInterest-Bearing Deposits
    
    $
    3,570,812
    
    
    $
    6,095
    
    
    
    0.69
    %
    
    $
    4,607,395
    
    
    $
    10,903
    
    
    
    0.96
    %Repurchase Agreements and Other Short-Term Borrowings
    
    
    608,912
    
    
    
    2,228
    
    
    
    1.47
    
    
    
    450,128
    
    
    
    1,237
    
    
    
    1.11FHLB Borrowings and Other Long-Term Debt
    
    
    835,335
    
    
    
    10,005
    
    
    
    4.82
    
    
    
    395,503
    
    
    
    3,913
    
    
    
    4.01Total Interest-Bearing Funds and Average Rate Paid
    
    
    5,015,059
    
    
    
    18,328
    
    
    
    1.47
    
    
    
    5,453,026
    
    
    
    16,053
    
    
    
    1.19Demand Deposits (4)
    
    
    642,027
    
    
    
    
    
    
    
    
    
    
    
    557,074Other Liabilities
    
    
    124,629
    
    
    
    
    
    
    
    
    
    
    
    124,874Guaranteed Preferred Beneficial Interests in Junior
Subordinated Deferrable Interest Debentures
    
    
    80,769
    
    
    
    
    
    
    
    
    
    
    
    248,584Shareholders Equity
    
    
    379,096
    
    
    
    
    
    
    
    
    
    
    
    392,346Total Liabilities, Minority Interest and
Shareholders Equity
    
    $
    6,241,580
    
    
    
    
    
    
    
    
    
    
    $
    6,775,904NET INTEREST INCOME AND SPREAD
    
    
    
    
    
    $
    42,306
    
    
    
    2.87
    %
    
    
    
    
    
    $
    49,417
    
    
    
    3.11
    %NET INTEREST MARGIN ON EARNING ASSETS
    
    
    
    
    
    
    
    
    
    
    3.03
    %
    
    
    
    
    
    
    
    
    
    
    3.25
    %
  (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. 20




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##### 



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 ENDEDMARCH 31,2004
    
    
    2003Total Loans
    
    
    58
    %
    
    
    49
    %Securities Available for Sale
    
    
    35
    
    
    
    36Securities Held to Maturity
    
    
    1
    
    
    
    -Time Deposits with Other Banks
    
    
    4
    
    
    
    4Federal Funds Sold &
Reverse Repurchase Agreements
    
    
    2
    
    
    
    11Total Average Earning Assets
    
    
    100
    %
    
    
    100
    %Interest-Bearings Deposits
    
    
    71
    %
    
    
    84
    %Repurchase Agreements &
Other Short-Term Borrowings
    
    
    12
    
    
    
    9Long-Term Debt
    
    
    17
    
    
    
    7Total Average Interest Bearing Liabilities
    
    
    100
    %
    
    
    100
    %
 NONINTEREST INCOME Noninterest income for the first quarter of 2004 totaled $25.5 million, a decrease of 2% from the $26.1 million in the first quarter of 2003. This
decrease resulted primarily from a $4.4 million reduction in securities gains, partially offset by a reduction in venture capital losses of $2.1 million
year to year and increase in service charges of $948 thousand. The increase in service charges and fees was partly 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 March 31, 2004
were $2.3 million. There was no comparable DCS income in the first quarter of 2003. Deposit service charges and overdraft fees declined by
approximately $800 thousand primarily due to a reduction in the number of low balance accounts as a result of the implementation of higher fees.
Trust and investment advisory income increased by $247 thousand in the first quarter of 2004 compared to the first quarter of 2003 primarily
because of greater assets under management. Significant securities gains were recorded in the first quarter of 2003 as the Company sold high-coupon
mortgage-backed securities that were prepaying rapidly. 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 March 31, 2004 was $60.3 million, an increase of $1.4 million from the $58.9 million reported
for the three months ended March 31, 2003. The $1.4 million or 2% increase in noninterest expense from the first quarter of 2003 is comprised of
the following: Salaries and Employee Benefits
    
    $
    3.2
    
    millionOccupancy, Net
    
    
    0.3Data Processing Services
    
    
    (3.5
    )Furniture, Equipment and Software
    
    
    0.6Consultants
    
    
    (0.9
    )Other Noninterest Expense
    
    
    1.7$
    1.4
    
    million
 21




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##### 



ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED The $3.2 million increase in salaries and employee benefits is composed of a $2.9 million increase in salary expense, or 13% over the comparable
quarter of the prior year, and a $299 thousand increase in employee benefit costs, or 4% increase over the first quarter of 2003. It includes
approximately $658 thousand in employee severance benefits related to a reduction in the Companys workforce that was implemented in February
2004. Contract labor costs increased $1.3 million from the comparable quarter of 2003 primarily because of costs incurred to operate Cashlink II, a
computer system built and maintained by the Company and utilized by the federal government in its cash management and reporting. Net occupancy costs rose $310 thousand, or 6%, in the first quarter of 2004 compared with the first quarter of 2003 primarily due to increases in
real estate tax expense ($171 thousand or 38%), bank premises depreciation ($86 thousand or 4%) and utility expenses ($49 thousand or 10%). Real
estate tax expense increased primarily as a result of increased assessments on several of the Companys larger branch facilities and a $88 thousand
real estate credit received in 2003 but not in 2004. Data processing expense decreased by $3.5 million, or 68%, in the first quarter of 2004 compared to the first quarter of 2003 as a result of changing
third party service providers. This change was implemented in the third and fourth quarters of 2003 as part of the Companys previously reported
Enhancing Performance and Service project (Project EPS). Because of this change, and the different ways service providers invoice the Company for
services performed, many of the costs in categories of noninterest expense other than data processing services during the quarter ended March 31,
2004 were contained in data processing services in the first quarter of 2003. Furniture, equipment and software expense for the first quarter of 2004 increased by $626 thousand, or 20%, from the comparable 2003 period. The
primary components of the change are increased equipment depreciation ($505 thousand or 32%) and equipment maintenance ($88 thousand or
13%). Both of these increases are attributable to new equipment and related maintenance agreements procured in conjunction with Project EPS. Consultant expense decreased $904 thousand, or 50%, from the first quarter of 2003 to the first quarter of 2004 primarily due to the completion of
Project EPS in late-2003. Included in the first quarter of 2004 are $708 thousand related to the Companys continuing Bank Secrecy Act (BSA)
compliance matters. See Consent Order, Notification of Possible Assessment of Civil Money Penalties and Other Regulatory Matters. The Company anticipates that consulting expenses will increase in the second quarter of
2004 because of continuing BSA concerns. Other noninterest expense in the first quarter of 2004 was $16.7 million, a $1.7 million or 11% increase from the first quarter of 2003. The largest
component of this increase was a $1.0 million increase in the software amortization expense which is the result of the implementation of new
computer software upon the completion of Project EPS in late-2003. In addition, legal fees increased $274 thousand or 65%, from the first quarter
of 2004 to the comparable quarter of 2003 primarily because of the Companys continuing efforts to address regulatory concerns regarding its BSA
compliance program and procedures. See Consent Order, Notification of Possible Assessment of Civil Money Penalties and Other Regulatory Matters. The Company anticipates that legal fees will remain above 2003 amounts
in the second quarter of 2004 because of these continuing BSA concerns. EFFECTIVE TAX RATES The effective tax rate on Income Before Taxes and Minority Interest
for the three month period ended March 31, 2004 was 25.9% compared to 34.6% during the same period of
the prior year. The primary reason for the rate reduction was a reduction in losses in venture capital
operations and accordingly, a reduction in the valuation allowance required to be established during the first quarter against the
related deferred tax asset. A valuation allowance of $826 thousand was established in the first quarter of 2003, and no valuation
allowance as yet has been established in 2004 with respect to losses on venture capital. 22




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##### 



ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED FINANCIAL CONDITION SECURITIES Securities available for sale totaled $1.93 billion as of March 31, 2004, compared to $1.83 billion as of year-end 2003 and $2.45 billion as of
March 31, 2003. The activity for the first three months of 2004 included purchases of securities available for sale totaling $1.14 billion, which were
offset by maturities and calls, principal payments and sales of securities available for sale totaling $1.18 billion. The weighted-average duration
and yield for the portfolio, adjusted for anticipated prepayments, were approximately 1.9 years and 3.60%, respectively, as of March 31, 2004. As
of March 31, 2003, the weighted-average duration and yield were approximately 1.1 years and 3.62%, respectively. The balance of securities available for sale decreased from March 31, 2003 primarily because of the previously described change, occurring in July
2003, in the methodology utilized by the U.S. Treasury to compensate its financial agent banks. Under the old methodology Riggs was required to
collateralize the U.S. Treasury deposits using securities from its investment portfolio. Under the DCS methodology this is no longer required.
Effective March 2004, the U.S. Treasury does not maintain funds at Riggs to compensate it as a financial agent bank nor is Riggs required to hold a
DCS. Rather, Riggs now invoices the U.S. Treasury for the services it performs as a financial agent bank. Details on securities available for sale follow: MARCH 31, 2004GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    FAIR(IN THOUSANDS)
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    VALUEU.S. Treasury Securities
    
    $
    4,000
    
    
    $
    -
    
    
    $
    -
    
    
    $
    4,000State and Municipal Securities
    
    
    26,831
    
    
    
    248
    
    
    
    90
    
    
    
    26,989Government Agencies Securities
    
    
    626,080
    
    
    
    2,352
    
    
    
    23
    
    
    
    628,409Mortgage-Backed Securities
    
    
    1,218,720
    
    
    
    7,989
    
    
    
    1,609
    
    
    
    1,225,100Other Securities
    
    
    47,742
    
    
    
    149
    
    
    
    -
    
    
    
    47,891Total Securities Available for Sale
    
    $
    1,923,373
    
    
    $
    10,738
    
    
    $
    1,722
    
    
    $
    1,932,389
  MARCH 31, 2003GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    FAIR(IN THOUSANDS)
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    VALUEU.S. Treasury Securities
    
    $
    4,999
    
    
    $
    -
    
    
    $
    -
    
    
    $
    4,999Government Agencies Securities
    
    
    1,332,523
    
    
    
    4,670
    
    
    
    11
    
    
    
    1,337,182Mortgage-Backed Securities
    
    
    1,046,991
    
    
    
    12,706
    
    
    
    614
    
    
    
    1,059,083Other Securities
    
    
    52,903
    
    
    
    -
    
    
    
    2
    
    
    
    52,901Total Securities Available for Sale
    
    $
    2,437,416
    
    
    $
    17,376
    
    
    $
    627
    
    
    $
    2,454,165
  DECEMBER 31, 2003GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    FAIR(IN THOUSANDS)
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    VALUEU.S. Treasury Securities
    
    $
    25,103
    
    
    $
    -
    
    
    $
    29
    
    
    $
    25,074State and Municipal Securities
    
    
    24,917
    
    
    
    145
    
    
    
    44
    
    
    
    25,018Government Agencies Securities
    
    
    720,212
    
    
    
    506
    
    
    
    3,191
    
    
    
    717,527Mortgage-Backed Securities
    
    
    1,012,635
    
    
    
    1,547
    
    
    
    6,933
    
    
    
    1,007,249Other Securities
    
    
    51,831
    
    
    
    119
    
    
    
    -
    
    
    
    51,950Total Securities Available for Sale
    
    $
    1,834,698
    
    
    $
    2,317
    
    
    $
    10,197
    
    
    $
    1,826,818
 23




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##### 



ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED Realized gains from the sale of securities totaled $231 thousand for the quarter ended March 31, 2004, and realized losses totaled $5 thousand. For
the quarter ended March 31, 2003, realized gains were $4.6 million with no realized losses. Substantially all of the 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 the available for sale securities is either guaranteed by the government or a AAA rated entity. As a result, 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 March 31, 2004 loans outstanding totaled $3.20 billion, with residential mortgage/home equity, commercial and financial and real estate-
commercial/construction comprising 49%, 16% and 26% of the portfolio, respectively. At March 31, 2003 these percentages were 54%, 18%
and 18%, respectively. The residential mortgage/home equity loans are generally fully secured with approximately 7% having a loan to value ratio of
90% or greater. As indicated in the following table, total loans increased from $3.08 billion at March 31, 2003. Since that time, the increases were primarily in
the real estate-commercial/construction and home equity loan portfolios. These increases were partially offset by decreases in commercial and
financial, residential real estate and foreign loans. As of March 31, 2004 foreign loans outstanding totaled $220.0 million, a decrease of $40.0 million from March 31, 2003. This decrease is primarily
attributable to the Companys continuing de-emphasis of commercial lending at RBEL. At March 31, 2004 the commercial loans remaining in the
London operations amounted to $15.9 million. At March 31, 2004, residential mortgage loans of approximately $94 million were held by Riggs Bank
and Trust Company Limited (Jersey, Channel Islands). Riggs periodically purchases residential mortgage loans to utilize liquidity. Since March 2003, the Company has purchased $94.4 million of these
loans at a net premium of approximately $1.4 million. The Company does not anticipate purchasing residential mortgage loans during the remainder
of 2004. COMPOSITION OF LOAN PORTFOLIO MARCH 31,
    
    DECEMBER 31,
    
    MARCH 31,2004
    
    2003
    
    2003(IN THOUSANDS)Commercial and Financial
    
    $
    521,188
    
    
    
    16
    %
    
    $
    581,223
    
    
    
    18
    %
    
    $
    555,942
    
    
    
    18
    %Real Estate  Commercial/Construction
    
    
    821,232
    
    
    
    26
    
    
    
    815,004
    
    
    
    25
    
    
    
    558,676
    
    
    
    18Residential Mortgage
    
    
    1,242,501
    
    
    
    39
    
    
    
    1,155,603
    
    
    
    36
    
    
    
    1,371,555
    
    
    
    45Home Equity
    
    
    327,078
    
    
    
    10
    
    
    
    306,599
    
    
    
    10
    
    
    
    268,008
    
    
    
    9Consumer
    
    
    62,784
    
    
    
    2
    
    
    
    64,403
    
    
    
    2
    
    
    
    61,183
    
    
    
    2Foreign
    
    
    220,007
    
    
    
    7
    
    
    
    299,055
    
    
    
    9
    
    
    
    260,033
    
    
    
    8Total Loans
    
    $
    3,194,790
    
    
    
    100
    %
    
    $
    3,221,887
    
    
    
    100
    %
    
    $
    3,075,397
    
    
    
    100
    %Net Deferred Loan Fees,
Premiums and Discounts
    
    
    3,832
    
    
    
    
    
    
    
    3,267
    
    
    
    
    
    
    
    8,828Loans
    
    $
    3,198,622
    
    
    
    
    
    
    $
    3,225,154
    
    
    
    
    
    
    $
    3,084,225
 24




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##### 



ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED RESERVE FOR LOAN LOSSES Changes in the reserve for loan losses are summarized as follows: THREE MONTHS ENDEDMARCH 31,(IN THOUSANDS)
    
    2004
    
    
    2003Balance, January 1
    
    $
    28,285
    
    
    $
    25,958Provision for loan losses
    
    
    -
    
    
    
    926Loans charged-off
    
    
    908
    
    
    
    1,421Less: Recoveries on charged-off loans
    
    
    362
    
    
    
    386Net loan charge-offs
    
    
    546
    
    
    
    1,035Foreign exchange translation adjustments
    
    
    44
    
    
    
    (52
    )Balance, March 31
    
    $
    27,783
    
    
    $
    25,797
 The reserve amount is determined based on the risk of loss in the loan portfolio. For the three month period ended March 31, 2004 the Company
had no consolidated loan loss provision and for the three month period ended March 31, 2003, Riggs had a consolidated loan loss provision of $926
thousand. The Companys reserve for loan losses decreased by approximately $500 thousand, or 2%, from December 31, 2003 to March 31, 2004
while nonperforming assets, as noted below, decreased by approximately $300 thousand, or 12%, during the same period. 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 the 2003 Annual
Report on Form 10-K. ASSET QUALITY NONPERFORMING ASSETS Nonperforming assets, which include nonaccrual loans, renegotiated loans, other real estate (net of reserves) and repossessed assets, totaled $2.1
million as of March 31, 2004, a $292 thousand decrease from the year-end 2003 total of $2.3 million and a $2.3 million decrease from the March 31,
2003 total of $4.4 million. Of the $2.1 million balance at March 31, 2004, $116 thousand is recorded in the Banking segment and $1.9 million is in
the International Banking segment. The decrease in nonperforming assets from March 31, 2003 was mainly due to activity in the London based
portfolio, which recorded $2.3 million in charge-offs and $980 thousand in sales and repayments in its commercial loan portfolio. These reductions
were partially offset by additions to the nonperforming asset portfolio of $475 thousand. There were no renegotiated loans at March 31, 2004 and
2003, and December 31, 2003. As of March 31, 2004 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 $2.3 million from March 31, 2003 to $9.0 million at March 31, 2004 and
decreased $3.2 million from December 31, 2003. 25




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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 MARCH 31,
    
    
    DECEMBER 31,
    
    
    MARCH 31,(IN THOUSANDS)
    
    2004
    
    
    2003
    
    
    2003NONPERFORMING ASSETS:Nonaccrual Loans (1)
    
    $
    2,051
    
    
    $
    2,308
    
    
    $
    4,264Other Real Estate and Repossessed Assets, Net
    
    
    5
    
    
    
    40
    
    
    
    97Total Nonperforming Assets
    
    $
    2,056
    
    
    $
    2,348
    
    
    $
    4,36130-89 DAYS PAST-DUE LOANS (2)
    
    $
    41,834
    
    
    $
    32,043
    
    
    $
    25,92490+ DAYS PAST-DUE LOANS (3)
    
    $
    8,951
    
    
    $
    12,178
    
    
    $
    11,283POTENTIAL PROBLEM LOANS
    
    $
    1,265
    
    
    $
    814
    
    
    $
    119
  (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 the Companys primary source of funds. Deposits totaled $4.15 billion as of March 31, 2004, a decrease of $138.4 million from $4.29
billion at December 31, 2003 and a decrease of $1.14 billion from $5.29 billion at March 31, 2003. Compared to the March 31, 2003 balance,
deposits decreased significantly in time deposits in domestic offices, primarily due to the previously described change in how the U.S. Treasury
compensates financial agent banks. The amount of DCS purchased in mid-July 2003 upon implementation of the new methodology was
approximately $1.11 billion. Except for demand deposits, which increased $241.3 million from March 31, 2003 and $312.5 million from December
31, 2003, balances in all other categories decreased in both periods. As a means of reducing deposit reserve requirements, Riggs periodically sweeps excess demand funds into money market accounts. The average
balances transferred for the three months ended March 31, 2004 and 2003, which are not included in demand deposits in the Average Statement of
Condition, were $476.8 million and $472.0 million, respectively. FHLB BORROWINGS AND OTHER LONG-TERM DEBT Long-term debt at March 31, 2004 consisted of $66.5 million, 9.65% fixed rate, subordinated debentures due in 2009, $329.0 million in FHLB
advances, $195.0 million in long-term repurchase agreements, and $206.2 million in debt payable to Riggs Capital II, the issuer of the Series C trust
preferred securities. At March 31, 2003, long-term debt consisted of the $66.5 million subordinated debentures and $394.0 million in FHLB advances,
and at December 31, 2003 long-term debt included the $66.5 million in debentures, $279.0 in FHLB advances, $206.0 million in long-term
repurchase agreements, and $360.8 in debt payable to issuers of trust preferred securities.
The subordinated debentures cannot be called, and at March 31, 2004 qualify at 100% as tier II capital for
regulatory purposes. Once the remaining maturity term is less than five years, the amount includible in tier
II capital is discounted. After June 16, 2004, the amount includible will decrease to 80%. Every twelve months
thereafter the portion includible decreases to 60%, 40% and 20%, respectively.
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 at March 31 have maturity dates through 2007 and carry a blended rate
of 2.48%. Of the $329.0 million, $25.0 million is callable in 2004 and $75.0 million of these advances is callable in 2005. The long-term repurchase
agreements at March 31, 2004 also have maturity dates through 2007 and carry a blended interest rate of 1.63%. $100.0 million of long-term
repurchase agreements is callable in 2004. The Company adopted FIN46R (Consolidation of Variable Interest Entities) on October 1, 2003. At the time of the adoption of FIN 46R and at
December 31, 2003, Riggs owned $60.3 million of the Series A trust preferred securities and $47.6 million of the Series C trust preferred securities. In
the financial statements for the first three quarters of 2003, including the quarter ended March 31, 2003, the amount of trust preferred securities
owned by Riggs was netted against the outstanding debt of Riggs Capital and Riggs Capital II and reported as minority interest in the Consolidated 26




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ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED Statements of Condition. The interest earned by the Company on the trust preferred securities it owned was reflected in the Consolidated Statements
of Operations as a reduction of minority interest in income of subsidiaries, net of taxes. Beginning with the quarter ended December 31, 2003, the
trust preferred securities owned by Riggs are classified as securities held to maturity in the Consolidated Statements of Condition and $360.8 million
of debt that the Company has that is payable to Riggs Capital and Riggs Capital II is included in long-term debt. Beginning the fourth quarter of 2003,
interest earned on the trust preferred securities that the Company owns is reflected as a component of interest income and the cost of the debt
payable to Riggs Capital and Riggs Capital II is included in interest expense. During the first quarter of 2004 the Company acquired sufficient Series A securities so that it owned more than 50% of all such securities and,
accordingly, the Company reconsolidated the subsidiary that issued the securities beginning in February 2004 as the Company was deemed to be the
primary beneficiary of Riggs Capital. At March 31, 2004, the Series A securities are reflected in the Consolidated Statements of Financial Condition,
net of the Series A securities Riggs owns, as guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures. Since
reconsolidation the cost of these securities are reflected in the Consolidated Statements of Income as minority interest in income of subsidiaries,
net of taxes. At March 31, 2004, the amount of the Series C, 8.875% securities classified as held to maturity is $49.9 million. See also Shareholders
Equity and Regulatory Capital below. LIQUIDITY AND CAPITAL RESOURCES Liquidity Riggs maintains liquidity to meet the needs of depositors, borrowers and creditors. The 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 March 31, 2004, the Companys
liquid assets, 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 $2.46 billion (40% of total assets). This compares to $2.44 billion (38% of total assets) as of December 31,
2003 and $3.48 billion (49% of total assets) as of March 31, 2003. As of March 31, 2004, $885.9 million of the Companys assets were pledged
to secure deposits and other borrowings. At March 31, 2004, the Bank had approximately $937 million of unencumbered
securities , approximately $371 million in federal funds sold and other short-term investments and
approximately $455 million remaining on its Federal Home Loan Bank and Federal Reserve lines of credit for
total liquid assets and lines of credit of approximately $1.76 billion.
Riggs has additional liquidity avaliable to it through the brokered certificate of deposit market. FHLB advances have maturity dates through 2007 and bear rates of interest from .62% to 3.70 %. In the third quarter of 2003 the Company also
began borrowing under long-term repurchase agreements. At March 31, 2004, Riggs has outstanding $195.0 million of these repurchase agreements,
which have maturity dates through 2007 and bear interest rates from .60% 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. Because of continuing regulatory BSA concerns, during the first quarter of 2004 the Bank informed two large international banking customers that it
was terminating its relationship with them. At March 31, 2004, these customers and related parties had approximately $465.0 million of deposits, or
approximately 11% of the total deposits. For additional discussion of liquidity, see the Overview of this Item 2. Shareholders Equity and Regulatory Capital Total shareholders equity as of March 31, 2004 was $389.3 million, an increase of $15.7 million from year-end 2003 and a decrease of $2.7 million
from a year ago. The increase from year-end was primarily the result of net unrealized gains on our investment portfolio of $11.1 million, net
income of $3.9 million, and $2.4 million from the issuance of stock. These increases were partially offset by cash payments of dividends of $1.4
million and trust preferred and common stock repurchases totaling $915 thousand. The decrease from March 31, 2003 was primarily the result of
net unrealized investment losses of $5.0 million, dividend payments of $5.7 million, and a net loss of $1.0 million. These decreases were partially
offset by the issuance of common stock of $6.0 million and foreign exchange translation adjustments in the amount of $2.7 million. 27




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ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS, CONTINUED Book value per common share was $13.44 as of March 31, 2004 compared to $13.02 as of year-end 2003 and $13.74 as of March 31, 2003. The
changes in book value from March 31 of the prior year and from year-end 2003 were primarily the result of the aforementioned changes in equity. Following are the Companys regulatory capital ratios and those of Riggs Bank National Association (Riggs Bank N.A.), the Companys principal
operating subsidiary, as of March 31, 2004 and 2003, and December 31, 2003. It should be noted that the Companys trust preferred securities, which
at March 31, 2004 carried a blended interest rate of 8.79%, 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 March 31, 2004, of 1.00%. Both Riggs and Riggs Bank N.A. are
classified as well-capitalized for purposes of federal banking regulations. Because of FIN 46R and the deconsolidation of one of the two entities that has issued trust preferred securities, regulatory authorities may conclude
at a future date that the trust preferred securities should no longer be included as a component of tier I regulatory capital. The Company has
determined that it and the Bank would continue to be well capitalized at March 31, 2004 without including the trust preferred securities as a
component of regulatory capital. The Company cannot, however, estimate the amount of any OCC or FinCEN assessment related to BSA matters. If
such assessments are large, capital ratios may be adversely impacted to a significant degree. During the first quarter of 2004 the Company purchased for cash $19.3 million of trust preferred securities. The average rate on these securities was
8.65% and Riggs paid a premium of $805 thousand. These first quarter purchases will result in annualized interest expense savings of $197 thousand
and after-tax minority interest expense savings of $954 thousand. TO BE WELLCAPITALIZEDUNDER PROMPTCORRECTIVEMARCH 31,
    
    
    MARCH 31,
    
    
    DECEMBER 31,
    
    
    REQUIRED
    
    
    ACTION2004
    
    
    2003
    
    
    2003
    
    
    MINIMUMS
    
    
    PROVISIONSRIGGS NATIONAL CORPORATION:Tier I
    
    
    13.14
    %
    
    
    13.89
    %
    
    
    12.52
    %
    
    
    4.00
    %
    
    
    6.00
    %Combined Tier I and Tier II
    
    
    18.03
    
    
    
    19.80
    
    
    
    17.81
    
    
    
    8.00
    
    
    
    10.00Leverage
    
    
    8.19
    
    
    
    7.46
    
    
    
    8.41
    
    
    
    4.00
    
    
    
    5.00RIGGS BANK N.A.:Tier I
    
    
    11.62
    %
    
    
    12.54
    %
    
    
    11.08
    %
    
    
    4.00
    %
    
    
    6.00
    %Combined Tier I and Tier II
    
    
    12.36
    
    
    
    13.27
    
    
    
    11.82
    
    
    
    8.00
    
    
    
    10.00Leverage
    
    
    7.40
    
    
    
    6.76
    
    
    
    7.52
    
    
    
    4.00
    
    
    
    5.00
 The ratios of total shareholders equity to total assets were 6.30%, 5.86%, and 5.57% at March 31, 2004, December 31, 2003 and March 31, 2003,
respectively. SUBSEQUENT EVENTS On April 7, 2004 and April 28, 2004, Company shareholders filed substantially
similar purported derivative actions in the Court of Chancery of the State of
Delaware in and for New Castle County against the Companys Board of Directors.
The complaints each allege that the Board violated its fiduciary duties in
relation to a variety of matters, including, among others, the compliance by
the Bank with various anti-money laundering laws and various aspects of the
Banks international and embassy businesses. The lawsuits each seek, on behalf
of the Company, among other things, monetary damages and certain types of
equitable relief. In light of the changed global risk environment post 9/11 and the Companys
strategy of building its domestic banking business in the growing Greater
Washington, D.C. marketplace, the Companys Board of Directors has authorized
the implementation of managements plan for substantially reducing Riggs risk
exposure. The plan involves, among other things, Riggs exiting or selling most
of its international banking businesses and focusing its embassy banking
relationships on a more select client base. Accordingly, Riggs will pursue a
buyer for its London and Channel Islands operations, close its Miami office,
sell the corporate aircraft used in support of its international operations,
and exit embassy banking accounts that do not meet strict risk-related criteria
recently adopted by its Board and management. Riggs said that it expects to
substantially curtail its international business activity by the end of the
third quarter of 2004, although it expects to maintain the Banks London
branch, which has assets of approximately $200 million, to service customers
who meet Riggs risk criteria. Riggs expects to incur a one-time, pre-tax charge of between approximately $15
million and $21 million in the second quarter of 2004 in connection with
exiting or selling these businesses and relationships.
In addition, the Company will expense employee severance and retention
benefits over the period that the operations are wound down. Riggs believes that these and previously initiated actions could reduce
deposits by up to approximately $1.05 billion, including the previously
disclosed approximately $360 million of deposits from a relationship that Riggs
terminated, and assets by up to approximately $185 million. The Bank expects
to fund this reduction in deposits through its principal sources of liquidity,
which consist of its customer deposit base, its portfolio of free (i.e., not
pledged as collateral) securities, other liquid assets such as federal funds
sold and borrowings under a Federal Home Loan Bank and Federal Reserve lines of credit. The Bank
plans to supplement these liquidity sources with the sale of brokered deposits.
As of March 31, 2004, the Bank had approximately $937 million of free
securities, approximately $371 million in federal funds sold and other
short-term investments, and approximately $455 million remaining on its Federal
Home Loan Bank and Federal Reserve lines of credit for total liquid assets and lines of
approximately $1.76 billion. The Federal Reserve has advised Riggs that it will request the Company and
Riggs International Banking Corporation, a Miami-based Edge Act corporation
subsidiary of the Bank regulated by the Federal Reserve, to enter into an
enforcement order. Although Riggs has not been provided with any order, Riggs
understands that the enforcement
order may include a requirement that the Company obtain the prior approval of
the Federal Reserve prior to declaring and paying dividends, including
dividends on its trust preferred securities, and interest at the holding
company level. The Federal Reserve has approved Riggs first quarter common
stock dividend being announced today. The entry by Riggs into the enforcement
order may, depending upon the terms, result in it being considered to be in a
troubled condition as well with the same consequences at the holding company
level as at the Bank level. The Bank serves as trustee for the MEPT. The MEPT governing document
provides for amendment of the trust. Such amendments may include the naming of
a new trustee and subsequent transitioning of the trusteeship from Riggs to
another entity. Based on recent conversations with participants in the trust,
Riggs has reason to believe that this transition may occur. The transition
would result in a reduction of revenue of approximately $8.5 million annually,
partially offset by any consideration received and by approximately $2.0
million in annual expense reductions.
 28




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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK SENSITIVITY TO MARKET RISK Riggs is exposed to various market risks which are discussed in the Companys Annual Report on Form 10-K. Interest-rate risk is a pervasive risk
which may have a material impact on the Companys financial performance especially during periods of rapid and/or significant interest rate changes.
Because of this, the Company has established an Asset/Liability Committee to manage interest-rate risk. The role of this committee is to manage the
asset/liability mix of the Companys operations in an effort to provide a stable net interest margin while maintaining desired levels of liquidity and
capital. This entails the management of 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. Riggs also has risk associated with foreign currency exchange which it attempts to mitigate
through various hedges. See Note 6-Accounting for Derivatives. Riggs manages its 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 March 31, 2004, the most
likely interest rate scenario calls for the federal funds target rate to be flat at 1.00% until 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. The models results as of March 31, 2004 are shown following. 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. 29




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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED INTEREST-RATE SENSITIVITY ANALYSIS (1) MOVEMENTS IN INTEREST RATES FROM MARCH 31, 2004SIMULATED IMPACT OVER
    
    SIMULATED IMPACT OVERNEXT TWELVE MONTHS
    
    NEXT THIRTY-SIX MONTHS(In Thousands)
    
    +100BP
    
    
    -100BP
    
    
    +300BP
    
    
    -300BPSimulated Impact Compared With a
Most Likely Scenario:Net Interest Income Increase/(Decrease)
    
    
    (4.1
    )%
    
    
    1.5
    %
    
    
    (8.0
    )%
    
    
    2.0
    %Net Interest Income Increase/(Decrease)
    
    $
    (6,618
    )
    
    $
    2,350
    
    
    $
    (38,720
    )
    
    $
    9,483
 (1) Key Assumptions:
Assumptions with respect to the models projections of the effect of changes in interest rates on Net Interest Income include: 1.
    
    Target balances for various asset and liability classes, which are solicited from the management of the various units of the Corporation.2.
    
    Interest rate scenarios which are generated by ALCO for the most likely scenario and are dictated by ALCOs policy for the alternative scenarios.3.
    
    Spread relationships between various interest rate indices, which are generated by the analysis of historical relationships and ALCO consensus.4.
    
    Assumptions about the effect of embedded options and prepayment speeds: instruments that are callable are assumed to be called at the first opportunity if an
interest rate scenario makes it advantageous for the owner of the call to do so. Prepayment assumptions for mortgage products are derived from accepted
industry sources.5.
    
    Reinvestment rates for funds replacing assets or liabilities that are assumed (through early withdrawal, prepayment, calls, etc.) to run off the balance sheet, which are
generated by the spread relationships.6.
    
    Maturity strategies with respect to assets and liabilities, which are solicited from the management of the various units of the Corporation. As of March 31, 2004, the forecasted impact of rates rising or falling 100 basis points versus the most likely
scenario over a 12-month time period was a change in net interest income not exceeding 5%, the Company guideline for a 12-month time horizon. For a 300 basis point movement in rates versus
the most likely scenario over a 36-month period, the impact on net interest income did not exceed 10%, the Company guideline for a 36-month time horizon.
The results of the simulation for March 31, 2004 indicated that the Bank was liability sensitive due to a large portion of its assets being comprised of fixed-rate instruments.
Earnings benefit in a declining rate environment from increasing spreads on fixed-rate assets but are offset somewhat by floors on deposit rates
and faster prepayment rates on mortgage loans and mortgage backed securities. In managing interest-rate risk, ALCO uses financial derivative instruments, such as interest-rate swaps. Financial derivatives are employed to
assist in the management and/or reduction of our interest-rate risk and can effectively alter the interest-rate sensitivity of portions of the Statements
of Condition for specified periods of time. Along with financial derivative instruments, the income simulation model includes short-term financial
instruments, investment securities, loans, deposits, and other borrowings. Though the methodologies previously discussed provide a meaningful representation of the Companys interest-rate and market risk sensitivity,
factors other than changes in the interest-rate environment, such as levels of non-earning assets, and changes in the composition of earning assets,
may affect thr risk sensitivity, and, therefore, our net interest income. As with any method of measuring interest-rate risk, certain shortcomings are
inherent in the model. As such, the predictive value of our model is not guaranteed. 30




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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED COMMITMENTS AND CONTINGENCIES 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 March 31, 2004 and 2003, and December 31, 2003 are: MARCH 31,
    
    MARCH 31,
    
    DECEMBER 31,2004
    
    2003
    
    2003Commitments to extend credit
    
    $
    1,485,477
    
    
    $
    1,128,914
    
    
    $
    1,327,070Commercial letters of credit
    
    
    31,787
    
    
    
    67,129
    
    
    
    46,273Stand-by letters of credit
    
    
    45,200
    
    
    
    61,340
    
    
    
    60,115
 At March 31, 2004, a liability of $61 thousand existed in the Consolidated Statement of Condition for the stand-by letters of credit compared to
$72 thousand at March 31, 2003 and $167 thousand at December 31, 2003. 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 $8.7 million and $12.7 million at March 31, 2004 and
2003, respectively. CONSENT ORDER, NOTIFICATION OF POSSIBLE ASSESSMENT OF CIVIL MONEY PENALTIES AND OTHER REGULATORY MATTERS In July 2003, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order and a Consent Order (collectively the Consent
Order) with the 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 to ensure compliance and improve the monitoring of compliance with BSA and
related rules and regulations. 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 civil money penalty. The OCC advised the Bank that primarily as a direct result of its BSA
criticisms, it expected to designate the Bank as being in a troubled
condition. The OCC has now formally advised the Bank that it is designated as
being in a troubled condition. A bank that is classified as being in a
troubled condition must have any new director or executive officer approved
in advance by the OCC and is subject, along with its holding company, to
restrictions on making severance payments to the Banks directors, officers and
employees under the Federal Deposit Insurance Corporations golden parachute rule. On March 2, 2004, the OCC advised the Bank that it was considering whether to institute a civil money penalty action against the Bank and that
such action would be based upon the OCCs allegations that the
Bank (1) violated the BSA  and related rules and regulations, (2) failed to comply with the
Consent Order discussed above and (3) failed to implement adequate controls to ensure that the Bank operates in a safe and sound manner with respect to
BSA compliance. The amount of the civil money penalty being considered was not specified by the OCC. Many of the regulatory violations alleged by the OCC predate
the Consent Order. Under OCC procedures, the Bank is afforded the opportunity to submit information bearing on the appropriate amount of any
penalty to be assessed before the imposition of such a penalty. The Bank made its submission to the OCC in April 2004. Also on March 2, 2004, the Bank was advised by the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the
Treasury that it was evaluating whether it is appropriate for FinCEN to assess a civil monetary penalty and/or take additional enforcement action
against the Bank for alleged apparent willful violations of the BSA and related rules and regulations. FinCEN generally categorizes its concerns as (1)
failure to establish and implement an adequate anti-money laundering program, (2) failure to properly prepare and file suspicious activity reports,
and (3) failure to file accurate currency transaction reports. The amount of the civil money penalty being considered was not specified by FinCEN.
Under FinCENs procedures, before it makes a determination as to the existence and willfulness of the Banks violations, the Bank is allowed to
submit further information that is relevant to FinCENs evaluation of whether a civil money penalty and/or additional enforcement action is
warranted for the alleged violations. The Bank made its submission to FinCEN in April 2004. As also previously disclosed, the OCC and FinCEN are
considering the imposition of civil money penalties against Riggs
for various BSA related matters. Riggs has now
concluded that it is probable that the OCC and FinCEN will seek to
impose a civil money penalty against the Bank. Riggs has
enquired but to date has not been advised by the OCC or FinCEN
of the proposed amount or the potential range of amounts of any
such penalty. In accordance with FAS 5 and FIN 14, the Company
has considered all information available to determine if an amount
or ranges of amounts of a potential penalty can be reasonably
estimated. In the absence of such advice from the OCC and
FinCEN, the Company believes that there is not a reasonable basis
to quantify a specific amount or range of amounts. Accordingly,
as of March 31, 2004 no accrual has been recorded. The ultimate
amount of any penalty, which is expected to be known in the
second quarter, could be material to the financial condition and/or results
of operations of the Company. The Bank has
been advised by the OCC that it intends to modify the Banks existing Consent
Order or impose a new Consent Order on the Bank that is intended to enhance the
existing enforcement action. The Bank has not been provided with any
modification or new order. The OCC is also continuing to review the involvement of employees, officers and
directors of the Bank in connection with its compliance with anti-money
laundering laws and regulations and its Consent Order with the OCC and is
considering whether to institute a civil money penalty proceeding against such
individuals. In connection with that review, the Banks directors and certain
officers, as well as two former officers, have been afforded the opportunity by
the OCC to submit information to the OCC and have done so. The Federal Reserve has advised Riggs that it will request the Company and
Riggs International Banking Corporation, a Miami-based Edge Act corporation
subsidiary of the Bank regulated by the Federal Reserve, to enter into an
enforcement order. Although Riggs has not been provided with any order, Riggs
understands that the enforcement order may include a requirement that the
Company obtain the prior approval of the Federal Reserve prior to declaring and
paying dividends, including dividends on its trust preferred securities, and
interest at the holding company level. The Federal Reserve has approved Riggs
first quarter common stock dividend. The entry by Riggs
into the enforcement order may, depending upon the terms, result in it being
considered to be in a troubled condition as well with the same consequences
at the holding company level as at the Bank level. Riggs expects these regulatory actions to increase its costs of doing business
but cannot quantify the amount of the increases. 31




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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED On April 7, 2004 and April 28, 2004, Company shareholders filed substantially
similar purported derivative actions in the Court of Chancery of the State of
Delaware in and for New Castle County against the Companys Board of Directors.
The complaints each
allege that the Board violated its fiduciary duties in relation to a variety of
matters, including, among others, the compliance by the Bank with various
anti-money laundering laws and various aspects of the Banks international and
embassy businesses. The lawsuits each seek, on behalf of the Company, among
other things, monetary damages and certain types of equitable relief. 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. RIGGS NATIONAL CORPORATION PART II OTHER INFORMATION ITEM 1.
    
    LEGAL PROCEEDINGSIn the normal course of business we are involved in various types of litigation and disputes that may lead to litigation. The Company
believes that these pending or unasserted legal actions will not have a material impact on its financial condition or future operations.On April 7, 2004 and April 28, 2004, Company shareholders filed substantially
similar purported derivative actions in the Court of Chancery of the State of
Delaware in and for New Castle County against the Companys Board of Directors.
The complaints each
allege that the Board violated its fiduciary duties in relation to a variety of
matters, including, among others, the compliance by the Bank with various
anti-money laundering laws and various aspects of the Banks international and
embassy businesses. The lawsuits each seek, on behalf of the Company, among
other things, monetary damages and certain types of equitable relief.
 32




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##### 



ITEM 2.
    
    CHANGES IN SECURITIESNot applicable.ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIESNot applicable.ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNot applicable.ITEM 5.
    
    OTHER INFORMATIONNot applicable.ITEM 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K
 (a)
    
    ExhibitsThe exhibits listed on page 34 are incorporated by reference or filed herewith in response to this item.(b)
    
    Reports on Form 8-KOn January 21, 2004, the Company furnished a Form 8-K to announce earnings for the quarter and year ended
December 31, 2003.On February 18, 2004, the Company filed a Form 8-K to announce a reduction in labor force.
 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:
    
    April 29, 2004
    
    /s/ ROBERT L. ALLBRITTONRobert L. Allbritton
Chairman of the Board and Chief Executive OfficerDate:
    
    April 29, 2004
    
    /s/ STEVEN T. TAMBUROSteven T. Tamburo
Treasurer
(Chief Financial Officer)
 33




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EXHIBIT
    
    DESCRIPTION
    
    PAGESNO.(10.1)
    
    Amended and Restated Deferred Compensation Plan, dated January 21, 2004
    
    
    35-47(10.2)
    
    Third Amendment to the Operating Agreement of Riggs Capital Partners II, LLC, dated January 21, 2004
    
    
    49-50(10.3)
    
    Fifth Amendment to the Operating Agreement of Riggs Capital Partners, LLC, dated January 21, 2004
    
    
    51-52(10.4)
    
    Letter Agreement with Tim Coughlin, dated February 27, 2004
    
    
    53-54(31.1)
    
    Chief Executive Officer Section 302 Certification of Quarterly Report on Form 10-Q
    
    
    55(31.2)
    
    Chief Financial Officer Section 302 Certification of Quarterly Report on Form 10-Q
    
    
    56(32.1)
    
    Chief Executive Officer Section 906 Certification of Quarterly Report on Form 10-Q
    
    
    57(32.2)
    
    Chief Financial Officer Section 906 Certification of Quarterly Report on Form 10-Q
    
    
    58
 (Exhibits omitted are not required or not applicable.) 34