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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the transition period from __________________________ to __________________________

Commission File Number 0-9756

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

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, par value
$2.50 per share

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K [   ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)2 of the Act). Yes X . No      .

The aggregate market value of the Company’s voting equity held by non-affiliates was $274,625,113 on June 28, 2002, based on the last sales price that day.

The number of shares outstanding of the registrant’s common stock, as of January 31, 2003 was 28,533,918.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Riggs National Corporation’s definitive Proxy Statement dated March 13, 2003 to Shareholders are incorporated by reference into Part III of this Form 10-K. With the exception of the portions of the Proxy Statement specifically incorporated herein by reference, the Proxy Statement is not deemed to be filed as part of this Form 10-K.

FORM 10-K INDEX

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PART I

ITEM 1. BUSINESS

Riggs National Corporation
Riggs National Corporation (“the Company” or “we”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”) and incorporated in the State of Delaware. Founded in 1980, we engage in a variety of banking-related activities through our bank and non-bank subsidiaries. We currently have banking operations or separate subsidiaries in the Washington, D.C. metropolitan area; New Haven, Connecticut; Miami, Florida; London, England; Berlin, Germany; Jersey, Channel Islands and Nassau, Bahamas. Additionally, we provide investment advisory services domestically through subsidiaries registered under the Investment Advisers Act of 1940, as amended. At December 31, 2002, we and our subsidiaries had 1,522 full-time equivalent employees. The Company had assets of $6.83 billion, liabilities of $6.19 billion, and shareholders’ equity of $389.2 million at December 31, 2002.

We have six reportable business segments providing diverse products and services within the financial services industry. Our segments are Banking, International Banking, Riggs & Co., Treasury, Riggs Capital Partners (venture capital) and Other, which are described in Note 17 of Notes to Consolidated Financial Statements.

Key elements of our business strategy are: the continued focus on growth opportunities through the additional accumulation of assets under management in our wealth management division (Riggs & Co.); the orientation of our retail banking branches toward money management relationships; the development and specialization of banking products and services in specific growth industries; and the continuation of our pre-eminent embassy banking operations coupled with growth in the international private banking business lines. As a complement to internally developed programs, we may also pursue alliances or acquisitions that further our strategic goals. In addition to pursuing our strategic goals, we will continue to serve the varied financial needs of the Washington, D.C. metropolitan area.

Riggs Bank National Association
Our principal subsidiary is Riggs Bank N.A. (“Riggs Bank” or the “Bank”), a national banking association founded in 1836 and organized under the national banking laws of the United States in 1896. Riggs Bank had assets of $6.59 billion, deposits of $5.25 billion and stockholder’s equity of $453.0 million at December 31, 2002.

Riggs Bank operates 28 branches and an investment advisory subsidiary in Washington, D.C.; 14 branches in Virginia; six branches in Maryland; a second investment advisory subsidiary in New Haven, Connecticut; a commercial bank and a portfolio management services company in London, England; an Edge Act (federally-chartered corporation allowed to engage only in international banking or other financial transactions related to international business) subsidiary in Miami, Florida; branch offices in London (England), Berlin (Germany) and Nassau (Bahamas); and two bank and trust companies, one in the Bahamas and the other in Jersey (Channel Islands).

As a commercial bank, Riggs Bank provides a wide array of financial products and services primarily to customers in the Washington, D.C. metropolitan area and, to a lesser extent, throughout the United States and internationally.

Riggs Bank’s Corporate & Institutional Banking Group provides services to customers ranging from small businesses to major multinational companies and non-profit organizations. These services include lines of credit, secured and unsecured term loans, letters of credit, credit support facilities, foreign currency transactions, and cash management.

Riggs Bank’s wealth management division, Riggs & Co., provides fiduciary and administrative services, including financial management and tax planning for individuals, investment and accounting services for governmental, corporate and non-profit organizations, as well as estate planning and trust administration.

Riggs Bank provides domestic investment advisory services through Riggs Investment Advisors Inc. (“RIA”) and J. Bush & Co. Incorporated, both of which are wholly-owned subsidiaries incorporated in the state of Delaware and registered under the Investment Advisers Act of 1940, as amended. Internationally, we provide these services through Riggs and Co. International Ltd. (“RCIL”).

Riggs Bank’s Community Banking Group provides a variety of traditional services including checking, NOW, savings and money market accounts, personal loans and lines of credit, certificates of deposit and individual retirement accounts, and investment sales. Additionally, the Community Banking Group provides 24-hour banking services through its telebanking operations and a network of 142 automated teller machines (“ATMs”) that is linked to national and regional ATM networks.

Riggs Bank’s International Banking Group furnishes a variety of financial services, including issuing letters of credit in connection with trade and other transactions, taking deposits, foreign currency exchange, private banking and cash management. Customers include embassies and foreign

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missions in Washington, D.C. and elsewhere, foreign governments, central banks, and other banks. Because of these relationships, we have also developed other secondary customer relationships that may be perceived as closely aligned with our primary customers. These services are provided through both domestic and international offices.

International operations of Riggs Bank include:

	•		Riggs Bank Europe Ltd. (“RBEL”), located in London (England), which provides corporate banking, expatriate and embassy banking services. RBEL’s main office is located in the West End of London. It also has a branch in Berlin (Germany);
	•		Riggs & Co. International Ltd., located in London (England) provides portfolio management services to international customers;
	•		Riggs Bank London Branch, which has four locations in London, provides banking services to embassy and private banking clients;
	•		Riggs Bank and Trust Company (Channel Islands) Limited, located in Jersey, which provides offshore banking and trust services to international clients;
	•		Riggs Bank and Trust Company (Bahamas) Limited, which provides trust services for international private banking customers; and
	•		Riggs Bank Nassau Branch, which provides limited offshore banking services.

Riggs Capital
Riggs Capital issued 150,000 shares of 8.625% guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures (“trust preferred securities”), Series A, with a liquidation preference of $1,000 per share, in December 1996. The securities qualify as tier I capital with certain limitations. At December 31, 2002, $91.6 million of the Series A securities remained outstanding.

Riggs Capital II issued 200,000 shares of 8.875% guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures, Series C, with a liquidation preference of $1,000 per share, in March 1997. The securities also qualify as tier I capital with certain limitations. At December 31, 2002, $157.0 million of the Series C securities remained outstanding.

See Notes 10 and 11 of Notes to Consolidated Financial Statements.

Riggs Capital Partners
Riggs Capital Partners LLC (“RCP”) and Riggs Capital Partners II (“RCP II”), our venture capital subsidiaries, specialize in equity investments, typically in privately-held, high-tech and growth companies. As of December 31, 2002, the fair value of combined venture capital investments of RCP and RCP II was $49.4 million.

Supervision and Regulation
The Company and the Bank are subject to the comprehensive supervision of and regulation by the Board of Governors of the Federal Reserve System (the “Board”) and the Office of the Comptroller of the Currency (the “OCC”). To a lessor degree other domestic and foreign regulatory agencies impact the Company and its subsidiaries.

Payment of Dividends
Riggs National Corporation (the “Parent Company” or “RNC”) is the consolidated entity but is also a distinct legal entity separate from its subsidiaries. The majority of RNC’s cash revenue is from dividends paid to it by the Bank. The Bank is subject to laws and regulations that limit the amount of dividends that it can pay. In addition, both RNC and the Bank are subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintain capital at or above regulatory minimums. Banking regulators have indicated that banking organizations should generally pay dividends only if (1) the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends and (2) the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition. The Company does not expect that any of these laws, regulations or policies will materially affect either the ability of the Bank to pay dividends to RNC or the ability of the Company to pay dividends to its shareholders during 2003.

Neither a depository institution nor its holding company may make any capital distribution (or, also, in the case of the depository institution, pay any management fee to its holding company) if the depository institution or the holding company would thereafter be undercapitalized. Undercapitalized depository institutions and holding companies are subject to increased regulatory monitoring and growth limitations and are required to submit capital restoration plans. Both the Bank and the Company are considered “well capitalized” under federal banking regulations.

Capital Adequacy
The Board, the Federal Deposit Insurance Corporation (“FDIC”) and the OCC have issued substantially similar risk-based and leverage capital guidelines applicable to banking organizations they supervise. Under the risk-based capital guidelines, the Company and the Bank are each required to maintain a minimum ratio of total capital to risk-based assets (including certain off-balance sheet activities) of 8%. At least half of the total

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capital must be comprised of common equity, retained earnings, qualifying perpetual preferred stock and certain hybrid capital instruments, less certain intangibles (“tier I capital”). The remainder may consist of certain subordinated debt, certain hybrid capital instruments, qualifying preferred stock and a limited amount of the loan loss allowance (“tier II capital” which, together with tier I capital, comprises “total capital”). To be considered well-capitalized under the risk-based capital guidelines, an institution must maintain a total risk-weighted capital ratio of at least 10% and a tier I risk-weighted capital ratio of 6% or greater. An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. At December 31, 2002 the Company and the Bank both qualified as “well-capitalized” (see Note 10 of Notes to Consolidated Financial Statements).

In 2002 federal banking regulators implemented rules governing the regulatory capital treatment of equity investments in nonfinancial companies, such as our venture capital investments. These rules require maintenance of capital on equity investments that increase with the level of those investments as a percentage of tier I capital. The rule has not had a material effect on our capital ratios.

Deposit Insurance Assessments
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), the FDIC adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The risk-based system assigns an institution to one of three capital categories: (i) well-capitalized, (ii) adequately capitalized, or (iii) undercapitalized. These three categories are substantially similar to the prompt corrective action categories, with the “undercapitalized” category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes.

Under the risk-based assessment system, there are nine assessment risk classifications (i.e., 3 supervisory subgroups within each capital group) to which different assessment rates are applied. Assessment rates for deposit insurance currently range from 0 to 27 basis points per $100 of deposits.

The capital and supervisory subgroup to which an institution is assigned by the FDIC is confidential and may not be disclosed. The Bank’s rate of deposit insurance assessments will depend upon the category and subcategory to which the bank is assigned by the FDIC. Any increase in insurance assessments could have an adverse effect on the earnings of insured institutions, including the Bank.

Under the Deposit Insurance Funds Act of 1996, insurance on deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of deposit insurance.

Related Party Transactions
There are legal restrictions on the extent to which RNC and our non-bank subsidiaries may borrow or otherwise obtain credit from the Bank. Subject to certain limited exceptions, the Bank may not extend credit to RNC or to any other affiliates in an amount which exceeds 10% of RNC’s capital stock and surplus and may not extend credit in the aggregate to such affiliates in an amount which exceeds 20% of its capital stock and surplus. Further, there are legal requirements as to the type, amount and quality of collateral that must secure such extension of credit by the Bank to RNC or to other affiliates. Finally, extensions of credit and other transactions between the Bank and RNC or other affiliates must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the Bank as those prevailing at the time for comparable transactions with non-affiliated companies.

Other Safety and Soundness Regulations
Under the BHCA, bank holding companies may not directly or indirectly acquire the ownership or control of 5% or more of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the Board. They also must obtain Board approval before merging or consolidating with any other bank holding company. The BHCA also restricts the types of businesses and activities in which a bank holding company and its subsidiaries may engage. Generally, activities are limited to banking and activities found by the Board to be closely related to banking.

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Under Board policy, RNC is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where RNC might not do so absent such policy. In addition, any capital loans by RNC to the Bank are subordinate to deposits and to certain other indebtedness of the Bank. In the event of the Company’s bankruptcy, a commitment by it to a federal bank regulatory agency to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

The Bank and other financial institutions must disclose their policies on sharing customer information with third parties and also disclose the nature of the firms with whom they share this data. Further, the Bank must allow customers the ability to choose not to have their information disclosed to any third parties other than those that perform services for the Bank.

The Bank Secrecy Act of 1970 (“BSA”) was designed to deter money laundering and the use of secret foreign bank accounts, establish regulatory reporting standards for currency transactions, and improve detection and investigation of criminal, tax and other regulatory violations. It and subsequent laws and regulations require the Bank to take steps to prevent the use of the Bank or its systems to facilitate the flow of illegal or illicit money. Those steps include ensuring effective Board and management oversight, the establishment of sound policies and procedures, developing effective monitoring and reporting capabilities, ensuring adequate training and establishing a comprehensive internal audit of BSA compliance activities.

In recent years, federal regulators have increased the attention paid to compliance with the provisions of BSA and related laws, with particular attention paid to “Know Your Customer” practices, which are now known commonly as “Enhanced Due Diligence.” Banks have been encouraged, by both regulators and by various industry groups, to enhance their identification procedures prior to accepting new customers in order to deter criminal elements from using the banking system to move and hide their illicit profits.

On October 26, 2001, the President signed into law the USA PATRIOT Act of 2001 that increases certain responsibilities for banks to, among other things, enhance due diligence in monitoring accounts related to certain terrorist activities. The USA PATRIOT Act also applies BSA procedures to broker-dealers. The Bank also is responsible for compliance with restrictions from the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”). Accordingly, our Bank restricts transactions with certain countries except as permitted by OFAC or in accordance with a license from OFAC.

Because our headquarters is in Washington, D.C., and also because of our pre-eminent embassy banking and growing international private banking operations, we, as well as regulatory authorities, closely monitor our compliance with these laws and regulations.

Competition and Environment
The Company faces significant competitive pressure from local, regional, national and international banking institutions as well as thrifts, finance companies, credit unions, brokerage and insurance companies and other financial intermediaries. Many of the Company’s competitors are larger and have greater financial resources than we have. While competitive pressures are intense, there have been no significant events or trends that have impacted our ability to generate loans and deposits. The Company may be impacted, however, by future changes in social, political or economic environments, including but not limited to events transpiring in the Middle East and concerns about domestic and foreign terrorism, or a deterioration of the public’s confidence in the banking system or the Company. Many of these factors are beyond our ability to control.

While we are not wholly dependent on any individual loan, deposit or wealth management customer, we do have a large depository relationship with the U.S. Government and its agencies. A withdrawal of these funds by this depositor would impact the Company’s short-term liquidity position. In addition, the simultaneous withdrawal of funds by a combination of large depositors, which include sovereign governments and individuals based in the Middle East and Africa, or the simultaneous repayments of loans by a combination of such large borrowers, would negatively impact our operating results (see “Management’s Discussion and Analysis-Financial Position and Liquidity-Cross-Border Outstandings”).

Additional Information
The Company files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (the Exchange Act). The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov.

Beginning in 2003, the Company also will make available free of charge on or through its Internet website (http://www.riggsbank.com) the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after the Company electronically files such materials with, or furnishes them to, the SEC.

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EXECUTIVE OFFICERS OF THE REGISTRANT

*

Executive officers of Riggs National Corporation, including certain executive officers of Riggs Bank N.A., as of December 31, 2002.

EXPERIENCE OF MANAGEMENT

Robert L. Allbritton has been Chairman of the Board and Chief Executive Officer of the Corporation and Chairman of the Board of Riggs Bank N.A. since 2001. He also serves as a director of Perpetual Corporation (indirect owner of Allbritton Communications Company and 99.7% owner of ALLNEWSCO, Inc.), Chairman and Chief Executive Officer of Allbritton Communications Company and Chairman and director of ALLNEWSCO, Inc.

Timothy C. Coughlin has served as President of the Corporation since 1992. He has been a director of the Corporation since 1988, Chairman of Riggs Investment Advisors Inc. since 2001, and was a Director of Riggs Bank N.A. from 1983 to 1996.

Joseph M. Cahill was appointed General Counsel of the Corporation in 2000 and has served as Executive Vice President and General Counsel of Riggs Bank N.A. since 2001. Mr. Cahill also served as Executive Director of Legal Affairs of Riggs Bank N.A. from 1998 to 2001, Litigation Manager of Riggs Bank N.A. from 1996 to 1997, and Associate Litigation Manager from 1993 to 1995.

William A. Craig, Executive Vice President, has served as head of Human Resources since 2000. Prior to joining Riggs, Mr. Craig served as Senior Vice President and Chief Administrative Officer at Merchant’s Inc., and held similar positions at Perpetual Financial Corporation, Woodward and Lothrop, and Giant Food.

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Stanley M. Dore, III, has served as Senior Vice President and Risk Manager since January 2001 and as Director of Risk Management, Riggs Bank N.A. since November 2000. He also served in various management roles at Sallie Mae, Inc. from 1989 to 2000, most recently as Head of Corporate Risk Management.

Henry A. Dudley, Jr., Executive Vice President, has served as President of Riggs & Co., which includes the Trust Division and Private Banking, since 2001. He also has served as Chief Trust Officer of the Bank since 1994.

Jeffrey T. Glynn has served as Executive Vice President-Community Banking since April of 2000. Mr. Glynn has served in various management positions with Riggs during the past 8 years. He held the position of Senior Vice President of RiggsDirect, the Bank’s telephone banking group, from 1995 to 2000.

Lawrence I. Hebert, has served as President and Chief Executive Officer of Riggs Bank N.A. since 2001. He has served as a director of Riggs National Corporation since 1988 and as a director of Riggs Bank N.A. from 1981-1988, from 1989-1996, and since 2001. Mr. Hebert also serves as President and a director of Perpetual Corporation (indirect owner of Allbritton Communications Company and 99.7% owner of ALLNEWSCO, Inc.), director of ALLNEWSCO, Inc., and President of Westfield News Advertiser, Inc. Prior to joining Riggs, Mr. Hebert served as Chairman and Chief Executive Officer of Allbritton Communications Company.

Mark N. Hendrix, has served as Executive Vice President and Chief Marketing Officer of Riggs Bank N.A. since 1998. Prior to joining Riggs, Mr. Hendrix served as Director of Marketing Communications for Barnett Banks, Inc.

Shaun V. Kelley, has served as Executive Vice President and Chief Credit Officer since 2001. Prior to joining Riggs, Mr. Kelley was at First Union National Bank in Northern Virginia, serving as Managing Director of the Private Capital Management Group from 2000 to 2001, and as Senior Vice President and Senior Credit Officer from 1993 to 2000.

Raymond M. Lund has served as Executive Vice President-International Banking Group since 1996. Mr. Lund has served in various management positions during the past 13 years, including Head of the International and Domestic Private Banking Divisions.

Henry D. Morneault, has served as Executive Vice President and Chairman of Riggs & Co. since 2001. Mr. Morneault joined Riggs from FleetBoston Financial, where he was Group Manager and Managing Director of the Media and Entertainment Group.

Eartha C. Morris has served as Executive Vice President of Operations since April of 2000. Ms. Morris has served in various management positions within Riggs during the past 10 years. Prior to joining Riggs, Ms. Morris held similar positions at James Madison Ltd., Equitable Bank, Provident Bank and First American Bank.

Robert C. Roane, Executive Vice President, has served as Chief Operating Officer of Riggs Bank N.A. since May of 1999. Mr. Roane has served in various management positions with Riggs during the past 24 years.

Terrie G. Spiro, Executive Vice President, has served as Head of Corporate & Institutional Banking since 2001. Prior to joining Riggs, Ms. Spiro spent 12 years in President and CEO positions at Tysons Financial Corporation and Heritage Bancorp.

Steven T. Tamburo has served as Chief Financial Officer and Treasurer of the Corporation and Executive Vice President and Chief Financial Officer of Riggs Bank N.A. since 2001. Mr. Tamburo also served as Deputy Chief Financial Officer of the Corporation and as Senior Vice President and Deputy Chief Financial Officer of Riggs Bank N.A. from 2000 to 2001, as Senior Vice President and Controller of Riggs Bank N.A. from 1999 to 2000, and as Group Vice President-Management and Regulatory Reporting-Riggs Bank N.A. from 1998 to 1999. Prior to joining Riggs, Mr. Tamburo was a Senior Manager in the financial services practice at KPMG.

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ITEM 2. PROPERTIES

We own properties located in Washington, D.C., which house our executive offices, 14 of our branches, and certain operational units of Riggs Bank. We also own an office building in Maryland, where additional operational units of Riggs Bank are located. Further, we own an office building in London (England), and lease various properties in: Washington, D.C.; London (England), Berlin (Germany), Jersey (Channel Islands), Miami (Florida), New Haven (Connecticut), northern Virginia and Maryland. Additional information concerning our facilities can be found in Notes 1 and 6 of Notes to Consolidated Financial Statements.

The facilities the Company owns and leases are generally adequate to meet the needs of its customers.

The net cost, or cost reduced by depreciation and amortization, of properties attributable to each of our segments is: $25.0 million in the Banking segment; $16.7 million in the International Banking segment; $2.1 million in Riggs & Co.; $0.1 million in Riggs Capital Partners and $146.8 million in the Other segment.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of business we are involved in various types of litigation and disputes which may lead to litigation. The Company, based upon an assessment of the facts and circumstances of actual, threatened and unasserted legal actions, and, when deemed necessary, after consultation with outside counsel, has determined that pending legal actions will not have a material impact on its financial condition or future operations (see Note 9 of Notes to Consolidated Financial Statements).

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

No matters were submitted to security holders for vote during the fourth quarter of 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The common stock of the Company is traded on The Nasdaq National Market under the symbol: “RIGS.”

A history of the Company’s stock prices and dividends is as follows:

QUARTERLY STOCK INFORMATION

(1)		The stock information listed above represents high and low bid prices as reported on the NASDAQ National Market System.
(2)		For a discussion of regulatory restrictions on our ability to pay dividends, see Note 10 of Notes to Consolidated Financial Statements.

As of January 31, 2003, there were 1,867 shareholders of record.

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ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following information along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related Notes included in this Form 10-K.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is included in Items 7 and 8 to this Annual Report on Form 10-K and is incorporated herein by reference.

RIGGS NATIONAL CORPORATION

For a better understanding of the significant factors that influenced our performance during the past three years, you are advised that you should read all of the following discussion and analysis and our consolidated financial statements and related notes included in this Annual Report on Form 10-K. The following discussion and analysis contains forward-looking statements that are subject to risk, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

OVERVIEW

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. We conduct our activities through six reportable segments: Banking, International Banking, Riggs & Co. (wealth management),

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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.

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

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

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

In December 2001, the Company announced plans to implement a series of actions intended to enhance its financial performance and customer service and better position it for the current and long-term economic environment. This effort to “Enhance Performance and Service” (“Project EPS”) consists of a technology initiative, a re-design of operational processes and a realignment of our European operations to focus on private banking and embassy banking. We intend to standardize and upgrade our technology systems and infrastructure, which will enable us to both operate more efficiently and provide better service to our customers. During 2002 we have selected a new core systems vendor, designed a new, more efficient infrastructure, introduced new services, identified ways to improve efficiency and sold RBEL’s commercial and trade finance loans. The technology upgrade is expected to be substantially completed in the second half of 2003. Our 2001 year-end results were adversely impacted by restructuring and other charges amounting to $40.0 million (see Note 2 of Notes to Consolidated Financial Statements). Of this amount, $34.1 million was included in noninterest expense, with $5.9 million recorded in applicable income tax expense. During 2002, Project EPS continued to adversely impact noninterest expense by a total of $7.5 million which included additional impairment and other charges. Through the implementation of our restructuring plan announced in 2001, we were able to eliminate many of the anticipated employee positions such that our workforce dropped from 1,613 full-time equivalent positions at December 31, 2001 to 1,522 at December 31, 2002.

For the year ended December 31, 2002, the Company had net income of $13.0 million, or $0.45 per diluted share, compared to a net loss of $23.4 million, or $(0.82) per diluted share, in 2001. Our 2001 results were adversely impacted by restructuring and other charges, as noted previously. Return on average assets was .21% in 2002 compared to (0.42)% in 2001 and return on average equity was 3.48% in 2002 compared to (5.92)% in 2001.

During 2002, the Company generated modest improvements over the prior year in noninterest income, net interest income and asset quality, as well as a reduction in losses related to venture capital investments. Excluding special charges in 2001, noninterest expense in 2002 was slightly higher than in the previous year as a result of higher pension and other employee benefit related expenses and increased project expense related to the Project EPS initiative.

Net interest income after provision for loan losses increased $3.8 million, or 2% from the prior year. Noninterest income increased by $8.1 million, or 9% in 2002 compared to 2001 due principally to venture capital investment losses that were lower by $16.3 million. Noninterest expense decreased by $26.0 million, or 10% from the prior year due primarily to the previously mentioned $34.1 million in restructuring and other charges that were taken in 2001. Excluding these charges, noninterest expense increased by approximately $8.2 million, or 4% from 2001, primarily due to increases in other employee benefit expenses of $4.4 million, consulting expenses of $1.8 million, and credit card processing charges of $1.0 million. Included in other noninterest expense for 2002 were impairment charges of $1.3 million on a property at our London operations and $1.0 million on a technology contract. In addition, we recorded $1.1 million to exit long-term maintenance contracts, also in London. The provision for loan losses was $421 thousand, a $2.1 million or 83% decrease from 2001. Nonperforming assets at December 31, 2002 were $670 thousand compared to $3.7 million at December 31, 2001. Riggs remains a well-capitalized institution which currently has minimal nonperforming assets.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management has prepared the consolidated financial statements included in this Form 10-K 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 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 and expense during the periods presented. The following accounting policies comprise those that management believes involve estimates, judgments and assumptions that are the most critical to aid in fully understanding and evaluating our reported financial results. Because of the uncertainty inherent in these matters, actual results could differ from estimates, judgments and assumptions we use in applying these critical accounting policies.

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

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

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

Provisions to the reserve for loan losses are charged against, or credited to, earnings in amounts necessary to maintain an adequate reserve for loan losses. 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.

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 reviews its 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 our business, and it is possible there may be unidentified losses in the loan portfolio at December 31, 2002 that may become apparent at a later date pursuant to our 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 Operations.

At December 31, 2002, the Company valued its venture capital portfolio at $49.4 million. This valuation was arrived at using a variety of factors including, but not limited to: market prices, where available, and discounted, if necessary, to reflect trading history, lock-up provisions, lack of market liquidity and other factors; cost, if there is no readily determinable market price and there has not been a material event, such as a follow-on round of financing or strategic sale; a value higher than cost if indicated by additional financing which fulfills certain requirements; and analysis and commentary from a fund’s Investment Manager/General Partner.

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

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

Unrealized losses in our venture capital operations have resulted in the establishment of $11.8 million of deferred tax assets as of December 31, 2002. Of this amount, $4.1 million of these assets was established in 2002. These assets can be utilized to reduce taxes payable on future capital gains but must be utilized within five years of the year in which the loss is realized for tax return purposes. Because of continuing losses in our venture capital portfolio and the lack of current suitability of alternatives to generate capital gains, Riggs has established a valuation allowance of $5.4 million against the deferred tax asset at December 31, 2002. Of the $5.4 million, $2.6 million was established in 2002. The Company believes that the unreserved deferred tax asset balance of $7.6 million at December 31, 2002, which includes a deferred tax asset related to realized losses of $1.1 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 we expect could produce sufficient capital gains to allow the 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 the identified alternative strategies, an additional valuation allowance, resulting in a charge against income, for that portion of the deferred tax asset which will not be utilized, will be recorded in the Other segment.

Impairment of Long-Lived Assets
The Company tests for impairment in the carrying value of any asset or group of assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In the fourth quarter of 2002, we recorded a $1.3 million write-down to the carrying value of a London facility that is currently being marketed for sale. This write-down was taken to align the carrying value to the estimated net realizable value.

In 2001 the Company recorded an $8.4 million charge related to a long-term, fixed-price, non-cancelable project contract due to cost overruns that could not be passed on to subcontractors or other parties to the contract. This contract involves the construction, implementation and maintenance of a computer system to be utilized by the federal government in its cash management and reporting.

The contract continues to have significant uncertainties as to the costs to complete the contract and revenues resulting from the contract. In the fourth quarter of 2002, we recorded an additional $1.0 million impairment charge in the Banking segment due to additional system requirements. This additional impairment charge was determined by discounting the probability-weighted estimated future cash flows. We are continuing to negotiate with the contractual counterparty to limit the scope of the project and for additional funding. Since the recoverability of future costs may be dependent upon the willingness of the contractual counterparty to fund future costs, there may be additional impairment associated with this contract. The amount of such losses, if any, cannot be estimated at this time. At December 31, 2002, the Company has an asset of $5.4 million related to this contract.

RESULTS OF OPERATIONS

Net Interest Income
The difference between interest income and interest expense is net interest income. Net interest income is the Company’s largest revenue source representing 67%, 69% and 62% of all revenues in 2002, 2001 and 2000, respectively. Net interest income is affected by changes in the level of interest rates and the composition of interest-earning assets and interest-bearing liabilities. While the Company can impact net interest income

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through its product pricing and promotional decisions, many factors, such as the overall condition of the economy, monetary policy, tax laws, credit demand and competition place the outcome of net interest income beyond the control of the Company (see Tables A and B of this Form 10-K).

Net interest income on a taxable equivalent basis was $196.8 million in 2002, a $2.9 million or 2% increase from 2001 net interest income of $193.8 million. Net interest income increased primarily because of a larger decrease in interest expense (from $110.8 million to $66.7 million) than in interest income (from $304.7 million to $263.5 million). Decreases in general levels of interest rates were the major contributors to the declines in both interest income and interest expense. In 2002 the Federal Reserve decreased its federal funds target rate from 175 basis points to 125 basis points and in 2001 it decreased its federal funds target rate from 650 basis points to 175 basis points. As interest rates decreased in 2002, the Company found it increasingly difficult to pass on these decreases to its deposit customers due to market forces even though volume increased as customers sought to place their money in more secure, insured fixed-income products. In contrast, loans and other assets have repriced more quickly. The increase in net interest income in 2001 on a taxable equivalent basis was $294 thousand compared to 2000 net interest income of $193.5 million.

Net interest margin, or net interest income on a taxable equivalent basis divided by average earning assets, was 3.59% in 2002 compared to 3.91% and 3.87% in 2001 and 2000, respectively. The margin was reduced from 2001 to 2002 as the 50 basis point decrease in general levels of interest rates combined with the increase in average earning assets of $519.9 million to lower the ratio.

The amount of deposits that the U.S. Government and its agencies place on deposit at Riggs Bank was a significant reason for the margin decline. At December 31, 2002, those deposits totaled $1.13 billion. Because these deposits have a lower spread relationship than that obtainable in the general marketplace, the more kept on deposit at Riggs Bank by these entities, the lower margin Riggs Bank is generally able to achieve. Conversely, the lower the amount of deposits that these institutions keep on deposit with us, generally, the higher the margin we attain. These deposits have a lower spread relationship since they must be collateralized by government securities, which generally yield less than loans of comparable maturities.

Interest income on a tax equivalent basis in 2002 was $263.5 million, a decline of $41.2 million, or 14%, from $304.7 million in 2001. As shown in Table B of this Form 10-K, most of the decrease is attributable to a decline in market interest rates which had already contributed to the $52.2 million decrease from 2000 to 2001. In 2002, interest income declined in loans, time deposits with other banks, and federal funds sold and repurchase agreements, increasing only in securities available for sale as a result of an increase in volume.

Average earning assets in 2002 increased by $519.9 million from 2001. Average loan balances decreased by $34.6 million in 2002 compared to 2001 primarily as a result of the $66.4 million decrease in average foreign loans. Over the past year we have realigned our RBEL operations to focus on expatriate and embassy banking rather than corporate lending. Consequently, we sold $138.3 million in loans and loan commitments at RBEL in 2002. More than offsetting the decline in average loans was an increase in average securities available for sale of $596.0 million. The average rate earned on all earning assets in 2002 was 4.81%, a decline of 1.33% from the prior year.

Average earning assets in 2001 declined by $47.4 million from 2000. Average loan balances decreased by $192.8 million in 2001 compared to 2000. Approximately 45% of this decrease in average loans was attributable to the Company’s decision in 2000 to exit from its out-of-market syndicated loan portfolio and an additional 11% is attributable to the de-emphasis on the commercial lending function in London. Decreases in the average loan portfolio were partially offset by a $38.2 million increase in average securities available for sale and a $107.2 million increase in average time deposits, federal funds sold and reverse repurchase agreement balances. The average rate earned on all earning assets was 6.14%, a 99 basis point decline from 2000. The Company’s decision in 2000 to exit from the syndicated loan market was made to reduce the overall credit exposure in the portfolio and to concentrate on those customers with a higher potential for using multiple banking relationships. We have no current plans to participate in the syndicated loan market in 2003.

The Company anticipated that the decline in average earning assets and loans in 2001 could continue into 2002 and initiated measures to strengthen its lending function. The Company’s ability to increase its loan portfolio is usually dependent, however, upon many factors including the general state of the economy and the ability to price loans so as to adequately compensate the Company for the additional risk undertaken. In addition, loan and other earning asset growth is constrained by the requirement that the Company and the Bank maintain certain capital ratios (see Table N of this Form 10-K and Note 10 of Notes to Consolidated Financial Statements). Because the loan portfolio continued to decline in 2002, we purchased $320.5 million of residential mortgage loans at a premium of $5.4 million. The Company also increased its overall balance of average earning assets through the $596.0 million increase in average securities discussed previously.

Return on average assets was .21% for the year ended December 31, 2002, compared to (.42)% for the same period a year ago. Return on average shareholders’ equity was 3.48% for the year ended December 31, 2002 compared to (5.92)% for the same period in 2001. Both of these ratios improved in 2002 because of the previously noted restructuring and other charges recorded in 2001.

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The composition of average earning assets for the past three years is as follows:

The decrease in average loans over the past three years reflects our decisions to decrease our exposure in both the syndicated loan business and commercial lending in London. The decreases in loans have been offset by increases in our securities available for sale portfolio.

Interest expense decreased by $44.1 million from 2001 to 2002. All of this decrease was due to declining rates, partially offset by a $576.7 million increase in interest bearing funds. The average cost of all interest-bearing funds decreased to 1.40% in 2002 from 2.65% in 2001. Interest expense declined in all categories of deposits, foreign and domestic, as well as in repurchase agreements and other short-term borrowings. Interest expense on long-term debt increased slightly.

In 2002, average interest-bearing deposit balances increased by $612.1 million, or 17% from 2001. The average cost of interest bearing deposits was 1.25% in 2002 compared to 2.40% in 2001.

Interest expense decreased by $52.5 million from 2000 to 2001. Approximately 98% of this decrease was due to declining rates and the balance was due to a $70.6 million, or 2% decrease in average interest-bearing funds. The average cost of all interest-bearing funds decreased to 2.65% in 2001 from 3.84% in 2000.

The composition of average interest-bearing liabilities for the past three years is as follow:

Provision for Loan Losses
The provision for loan losses in 2002 was $421 thousand compared to $2.5 million in 2001, a decrease of $2.1 million. This compares to a provision for loan losses in 2000 of $18.8 million, representing a $16.3 million difference from the $2.5 million provision taken in 2001 (see Note 1 of Notes to Consolidated Financial Statements and “Critical Accounting Policies and Estimates-Reserve for Loan Losses”).

Noninterest Income
Excluding net securities gains, noninterest income increased by $10.7 million, or 15% in 2002 from 2001. Including net securities gains, noninterest income increased by $8.1 million, or 9% from the prior year. The increase in noninterest income was primarily attributable to a $14.8 million decrease in the value of the Company’s venture capital investments in 2002 compared to a $31.1 million decrease in the prior year. Also contributing to the increase was a $1.8 million increase in service charges and fee income. Partially offsetting these improvements was a $7.6 million, or 15% decrease in trust and investment advisory income, primarily due to a decrease in the value of assets under management, along with numerous other complex factors, and a $2.6 million decrease in net securities gains. Noninterest income represented 33% of the Company’s total 2002 revenue, which is comprised of net interest income plus noninterest income.

Securities gains were $9.5 million and $12.0 million in 2002 and 2001, respectively. The securities gains in 2002 were recorded in conjunction with the Company’s shortening of the duration of its portfolio. Substantially all of the prior year’s securities gains were attributable to the sale of Concord EFS, Inc., a company in which we had an equity investment for many years.

As noted previously, the year to year decline in trust and investment advisory income was the result of lower market value of assets under management which decreased 6% from $6.91 billion as of December 31, 2001 to $6.48 billion as of December 31, 2002. Another factor impacting this business activity was the general uncertainty concerning the performance of the stock market. New and existing clients were more inclined to seek less volatile investments, such as fixed income products, which typically have lower fee schedules than equity products.

The decline in trust and investment advisory income also was adversely impacted by the second quarter 2002 renegotiation of a 10-year agreement

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with the real estate advisor to the Multi-Employer Property Trust (“MEPT”), an open commingled real estate fund. This advisor now will perform all asset management services for the fund, but we will continue to act as trustee, investment manager and custodian, and will provide portfolio- level financial and valuation reporting. The new agreement, which became effective July 15, 2002, resulted in a reduction in revenue of approximately $1.8 million from 2001. The annualized impact is expected to be approximately $6.5 million.

Trust and investment advisory income impacts the Riggs & Co. segment while venture capital losses impact the Riggs Capital Partners segment. Securities gains impact the Treasury segment. Service charges and fee income primarily impacts the Banking segment.

Excluding net securities gains, noninterest income decreased by $44.4 million, or 38% in 2001 from 2000. Including net securities gains, noninterest income decreased by $32.7 million, or 28% from the prior year. The decrease in noninterest income was primarily attributable to a $31.1 million loss in the value of the Company’s venture capital investments in 2001 compared to a gain of $10.6 million in the prior year. Also contributing to the decrease was a $4.9 million decrease in trust and investment advisory income that was due principally to a decline in the value of assets under management. Partially offsetting these decreases was a $2.1 million, or 5% increase in service charges and fees and an $11.7 million increase in net securities gains. As noted previously, substantially all of the securities gains were attributable to the merger of and subsequent sale of stock in a company in which we had an equity investment for many years. Noninterest income represented 31% of the Company’s total revenue in 2001.

Noninterest Expense
Noninterest expense decreased by $26.0 million, or 10%, to $240.4 million in 2002 compared to $266.3 million in 2001. Approximately $34.1 million of this decrease is attributable to the restructuring and other charges that we recorded in 2001 as described in Note 2 of Notes to Consolidated Financial Statements. Excluding those 2001 special charges, noninterest expense increased $8.2 million from year to year. This increase was primarily due to increased consulting expenses of $1.8 million related to the Project EPS initiative, higher pension and other employee benefit costs, as well as several impairment charges. Partially offsetting these increases was a $4.2 million decrease in salaries and wages, of which approximately $3.6 million is attributable to a charge taken in 2001 to terminate an employment contract.

In 2002 we increased our matching of employee 401(k) Plan contributions from $0.50 for every dollar contributed (up to 6% of eligible wages) to a dollar-for-dollar match (up to 6% of eligible wages). This change in matching resulted in an increase in pension and other employee benefits expense of $2.1 million in 2002 compared to 2001. Pension and other employee benefits costs affect all segments with the exception of Riggs Capital Partners.

In July 2002, the Company awarded 370,000 shares of its common stock to certain key executives under the terms of a plan approved by shareholders in April 2002. This award will vest in equal amounts through December 2006. For the year ended 2002, we recorded $646 thousand of expense related to this award which is recorded in pension and other employee benefits in the Consolidated Statements of Operations. We anticipate recording approximately $1.3 million of expense in each of the next four calendar years. To obtain this award, however, the individual to whom it was granted must be employed by the Company on the date of distribution each year. Projected expense amounts, therefore, could vary.

During 2002 we recorded several impairment charges amounting to $4.5 million. First, as part of our overall technology upgrade, we wrote off $1.1 million in costs related to prior development of an information system to support bank tellers, which will not be compatible with our future technology. We wrote down a property in London in the amount of $1.3 million after we determined that its value was impaired due to a depressed real estate market. That amount was determined after consultation with real estate experts. In London, we also incurred a charge of $1.1 million to exit long-term maintenance contracts. Domestically, we wrote down a long-term, fixed price, non-cancelable technology contract by $1.0 million due to cost overruns that probably will not be passed on to subcontractors or other parties to the contract.

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

Noninterest expense increased by $42.0 million, or 19% to $266.3 million in 2001 compared to $224.4 million in 2000. Approximately $34.1 million of this increase, or 81% is attributable to the restructuring and other charges described in Note 2 of Notes to Consolidated Financial Statements. Other significant changes from the prior year include an additional $5.3 million or 6% increase in salaries and wages, a $1.9 million increase in pension and other employee benefits that is primarily attributable to a $2.4 million increase in the actuarially determined domestic pension plan expense and a $2.1 million increase in consultants and outsourcing fees, which is primarily due to increased management fees related to an additional venture capital partnership. Decreases in advertising and public relations expense of $1.2 million partially offset these increases.

In 2002, the Company reduced its workforce by 6%, from 1,613 full-time equivalent positions at December 31, 2001 to 1,522 at December 31, 2002 (see Note 2 of Notes to Consolidated Financial Statements). At December 31, 2000 we employed 1,558 full-time equivalent employees.

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FINANCIAL POSITION AND LIQUIDITY

Earning Assets
Loans, securities available for sale and other short-term investments are the Company’s primary earning assets. At December 31, 2002, 2001 and 2000, these assets represented approximately 90%, 90% and 88% of the Company’s total assets and 90%, 90% and 89% of the Company’s average assets for those years, respectively.

Loans represent the largest earning asset category. At December 31, 2002, 2001 and 2000, loans were 49%, 52% and 59% of earning assets and 52%, 58% and 62% of average earning assets for those years, respectively. The decreases in these ratios reflect our strategy over this time period to exit the syndicated loan business and continued de-emphasis of commercial lending at RBEL, as well as growth in the securities portfolio to secure the additional U.S. Government Agency deposits.

Securities available for sale, the next largest component of earning assets, were 38%, 31% and 25% of earning assets at December 31, 2002, 2001 and 2000, respectively, and represented 35%, 26% and 25% of average earning assets for those years.

The third component of the Company’s earning assets mix, short-term investments, was 13%, 17% and 16% of earning assets at December 31, 2002, 2001 and 2000, respectively, and represented 13%, 16% and 13% of average earning assets for the those years.

Loans
Loans are generated in the Banking segment through both retail and commercial banking activities and in the International Banking segment through embassy banking and RBEL (see Tables C and D of this Form 10-K).

Total loans at December 31, 2002 were $3.01 billion, a $139.3 million, or 5% increase from December 31, 2001. The largest increase occurred in commercial and financial, and commercial real estate loans, which increased $134.5 million and $65.2 million, respectively. Partially offsetting these increases was a $156.6 million decrease in foreign loans, as we continue to de-emphasize commercial lending at RBEL. As part of this strategy, we sold $138.3 million in loans and loan commitments at RBEL in 2002.

Total loans at December 31, 2001 were $2.87 billion, a $72.1 million, or 2% decrease from December 31, 2000. That decrease was due in part to the Company’s decision to limit its exposure on syndicated loans. Approximately $87.6 million of the 2001 decrease was attributable to this business strategy. At December 31, 2002, 2001 and 2000, less than 1% of loans were held pending sale. See Table I of this Form 10-K for the distribution of year-end loans.

Cross-Border Outstandings
We extend credit to borrowers domiciled outside of the United States primarily through our International Banking segment. Cross-border outstandings include loans, acceptances, interest-bearing deposits with other banks, investments and other monetary assets. In addition, cross- border outstandings include guarantees issued on behalf of non-local third parties and local currency outstandings to the extent they are not funded by local currency borrowings. While we routinely review these assets, monitor the international economic climate and assess the impact of any changes on foreign domiciled borrowers, the economic value and recoverability of these assets may be affected by changing economic and political conditions in the respective countries. In addition, some of our loans are to sovereign entities, some of which might be subject to deteriorating economic conditions, political and social upheaval, currency depreciation or devaluation, as well as nationalization or expropriation of assets or other factors over which we have no control. If, for any reason, a loan to such a borrower became past due or a problem credit, collection efforts would be made more difficult because of the sovereign status of the borrower.

Several sovereign entities also maintain significant depository relationships with the Company. The simultaneous withdrawal of funds by several of these depositors could in the short-term negatively impact our liquidity position (see “Business-Competition and Environment”).

At December 31, 2002, we had no cross-border outstandings exceeding 1% of our total assets to countries experiencing difficulties in repaying their external debt. At December 31, 2002, we had no loans in either a nonperforming, past-due or potential problem loan status to a country with cross- border outstandings in excess of 1% of our total assets. At December 31, 2001 and 2000, the United Kingdom was the only foreign country with cross-border outstandings in excess of 1% of our total assets that had loans in either a nonperforming, past-due or potential problem loan status (see Tables E and F of this Form 10-K and Note 15 of Notes to Consolidated Financial Statements).

Short-Term Investments
Short-term investments are managed in our Treasury segment and include time deposits with other banks, federal funds sold and reverse repurchase agreements. These investments are liquid assets with original maturities generally of less than 90 days. Short-term investments are generally lower- yielding assets that are highly interest-rate sensitive. The amount of funds available for short-term investments is a function of daily movements in our securities, loan and deposit portfolios, combined with our overall interest-rate risk management strategy. Liquidity also is available through

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credit facilities with the Federal Home Loan Bank of Atlanta (“FHLB”). We have available secured and unsecured lines of credit with various parties in the amount of $743.8 million that could be drawn upon to meet potential funding requirements. The FHLB can cancel at any time any unused portion of the credit facilities. Any borrowings under these facilities are subject to the negotiated terms.

At December 31, 2002, short-term investments totaled $813.3 million, a decrease of $105.2 million from 2001. At December 31, 2001, short- term investments totaled $918.5 million, an increase of $157.6 million when compared to year-end 2000. Average short-term investments was $722.6 million, $764.1 million and $656.9 million for 2002, 2001 and 2000, respectively. The average yield on short-term investments was 1.63% in 2002, 3.74% in 2001 and 6.37% in 2000.

Securities Available for Sale
All of the Company’s securities at December 31, 2002, 2001 and 2000 are classified as available for sale and are managed by the Treasury segment as part of the Company’s liquidity and interest-rate risk management programs. Securities are reflected on the Consolidated Statements of Condition at fair value. Any unrecognized differences between amortized cost and fair value are reported net of applicable taxes as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

At December 31, 2002, 2001 and 2000, the portfolio totaled $2.32 billion, $1.72 billion and $1.24 billion and yielded an average of 3.74%, 5.27%, and 6.26%, respectively.

The percentage composition at fair value of the securities portfolio at December 31 is as follows:

Gross unrealized gains and gross unrealized losses at December 31, 2002 were $19.6 million and $20 thousand, respectively.

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

At December 31, 2002, 2001 and 2000, 21%, 43% and 31% of the portfolio matures within one year and the portfolio duration is 1.0, 1.8, and 3.2 years, respectively. Although most of our contractual maturity dates are greater than one year, many of our securities have call features which allow the issuer to call the securities away from the Bank. Because of the low level of interest rates many of these securities are now more likely to be called rather than mature and this is reflected in the duration calculation. In addition, the Bank owns mortgage-backed securities which allow the borrowers of the underlying mortgages to prepay their mortgages. Because of the interest rate environment, prepayments on our mortgage- backed securities is expected to be rapid and this is also factored into the overall portfolio duration calculation (see Note 3 of Notes to Consolidated Financial Statements).

Venture Capital Investments
Venture capital investments amounted to $49.4 million at December 31, 2002 and $56.3 million at the close of the prior year. The Company recorded a substantially unrealized loss of $14.8 million on its venture capital investments in 2002 that is primarily attributable to unrealized losses in the fair value of its venture capital investments. In 2001, the Company recorded a $31.1 million loss, substantially unrealized, on these investments (see Note 1 of Notes to Consolidated Financial Statements).

The losses in 2002 and 2001 are attributable to several factors. First, there has been a general slowing of the domestic economy that was exacerbated by the terrorist attacks in September 2001 and continued uncertainty about potential military conflict. This slowing resulted in large corporations reducing their spending on information technology assets, which in turn affected the financial performance and valuations of information technology asset vendors to which the Company’s venture capital portfolio was exposed. Second, the domestic stock market in general declined in 2002 and 2001 and, in particular, the valuations of publicly-traded technology companies declined dramatically. As a result, the Company reduced the carrying value of a number of privately-held investments in order to better align its valuations with those of comparable publicly-traded companies. Third, initial public offerings (“IPOs”) and acquisitions by public companies of private companies has declined significantly from prior years. Since venture capital investors typically look to the IPO process and acquisitions as a means of liquidating investments, the lack of such markets was detrimental to the value of investments held.

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Because of these factors and an uncertain economic outlook, the Company in 2002 reduced its agreement to fund the operating costs of the venture capital partnerships for 2003 from $2.6 million to $750 thousand. In 2001, the Company had reduced this agreement for 2002 from $4.0 million to $2.6 million. Also in 2001, the Company reduced its agreement to fund venture capital investments from a total of $200.0 million to $130.0 million. At December 31, 2002, the Company, since the inception of the venture capital segment, had funded approximately $101.0 million of venture capital investments. As previously noted, the Company established a $5.4 million valuation allowance against total deferred tax assets of $11.8 million relating to venture capital losses. The Company has concluded that it is more likely than not that the remaining deferred tax assets which are attributable to losses from venture capital operations will be realized through capital gains generated by its venture capital operations or through such gains generated elsewhere within the Company.

Commitments and Liquidity
At December 31, 2002, the Company had approximately $1.04 billion of loan commitments outstanding and was contingently liable for $124.0 million of letters of credit. The Company also is contractually obligated to fund $15.9 million of venture capital investments and has various other contractual obligations arising in the normal course of business (see Note 9 of Notes to Consolidated Financial Statements).

At December 31, 2002, the Company has the necessary liquidity to meet these obligations. As noted previously, the Company maintains a significant short-term investment portfolio and has approximately $743.8 million of unused credit lines. The securities available for sale portfolio has a short duration. In addition, deposits, the Company’s primary funding source, have been a very stable and low-cost source of funds. We operate with higher levels of liquidity than our peers do and our deposit base has been very stable for the three years ended December 31, 2002.

However, changes in the stability of the economic, social or political environments, or a deterioration of the public’s confidence in the banking system in general or the Company in particular, could be very detrimental. At December 31, 2002, the United States government directly or through its agencies and departments had deposits with the Company of approximately $1.13 billion. A withdrawal of these funds by this depositor, for whatever reason, would significantly impact the Company’s short-term liquidity position. The simultaneous withdrawal of funds by a combination of large depositors also would have an adverse impact on Company operations. In addition, the FHLB has the authority to cancel the Company’s unused lines of credit.

Another potential constraint on liquidity is regulatory limitations on dividends that the Bank can pay to the Company. Generally, such dividends are limited to the earnings of the Bank for the current and prior two years less any dividend payments during the same period. However, dividends payable by the Bank and its subsidiaries are further limited by requirements for the maintenance of adequate capital and the underlying strength of the Bank. Any restrictions on dividends that the Bank can pay to the Company could adversely impact the holding company’s cash flow and its ability to fund future debt payments and dividends. Since regulatory authorities maintain that a holding company should be a source of financial strength for its subsidiary bank, dividends paid by the Bank to the Company, or by the Company to its shareholders, might be restricted if the regulators conclude that the Company’s operating condition so warrants.

ASSET QUALITY

Credit Risk Administration
Since the loan portfolio is the Company’s largest component of earning assets, one of the Company’s primary objectives is to maintain a high quality loan portfolio. This is achieved through promulgation of and adherence to loan underwriting standards and regular evaluation of credit risk within the portfolio. The potential for loss is, however, inherent to the lending process. We attempt to minimize this risk by stressing the integrity, financial strength and liquidity of borrowers and, if integral to the granting of credit, the stability of supporting collateral values. The credit administration function establishes credit policies including those related to credit underwriting, limits on the ability of an individual loan officer or group of loan officers to extend credit, policies addressing concentrations of credit risk and internal credit scoring. The credit administration function reports to a chief credit officer who works with the various business units to ensure the integrity of established procedures and policies. In addition, we maintain a loan review group that monitors compliance with these policies and thereby further ensures the integrity of the credit process (see Notes 1 and 4 of Notes to Consolidated Financial Statements).

Provision and Reserve for Loan Losses
The adequacy of the reserve for loan losses is determined based on our analysis of the composition of the loan portfolio, the level and trend of loan delinquencies, the financial condition of specific delinquent or problem borrowers and related guarantors, historical charge-off rates, general economic and industry-specific conditions and all other factors deemed relevant, including supervisory comment during the examination process. Based upon this analysis, which is performed quarterly and reviewed by a standing committee, we record a provision to maintain the reserve for loan losses at a level adequate to absorb probable losses in the portfolio.

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For loan pools with homogeneous characteristics, such as residential mortgage, home equity and consumer loans, provisions are determined using historical loss factors. For non-homogeneous loans, the Company allocates specific reserves for loan losses to individual loans in the highest risk categories and provides for the remainder using historical factors. In addition, the Company maintains a qualitative component in its reserve for loan losses. This portion of the reserve is adjusted when the Company concludes that (1) recent charge-off experience may not be indicative of future experience, (2) either adverse general economic or industry-specific conditions are not manifested as specific problem credits or in delinquency ratios, or (3) we have knowledge of specific potentially adverse events or conditions of a borrower. The Company maintains its reserve for loan losses in accordance with a Board of Directors approved policy.

Based upon the above, the Company recorded a loan loss provision of $421 thousand in 2002. At December 31, 2002, the reserve for loan losses was $26.0 million, or approximately .86% of loans and 153.6% of the Company’s nonaccrual, renegotiated, 90 days past due and other potential problem credits. The 2002 foreign reserve for loan losses was $4.9 million, or approximately 2% of foreign loans. Reserve coverage was greatly improved as nonperforming assets decreased from $3.7 million at December 31, 2001 to $670 thousand a year later. Foreign nonperforming assets represent approximately 87% of consolidated nonperforming assets. The foreign loan loss provision in 2002 was approximately $(4.2) million and the domestic provision was $4.6 million. The foreign reversal was taken as those reserves were no longer necessary since foreign nonperforming assets decreased by $2.0 million, or 77%, from the prior year end, aggregate loan balances decreased due to significant pay-downs and maturities, and we sold $138.3 million in commercial loans and commitments at our London operations.

We recorded loan loss provisions of $2.5 million and $18.8 million in 2001 and 2000, respectively. The 2001 provision was comprised of a $5.9 million foreign provision and a $(3.4) domestic provision. The domestic provision was the result of a reduction in domestic nonperforming loans from $34.3 million at December 31, 2000 to $472 thousand a year later. The 2000 provision included $11.0 million for the discovery of a borrower’s fraud in a commercial credit in the International Banking segment as well as a $3.9 million loss incurred on the sale of a syndicated loan in the Banking segment. These provisions were also the result of additions to nonperforming loans during these years and increased loan charge-offs. The reserve for loan losses to loans at December 31, 2001 and 2000 was 1.03% and 1.23%, respectively. At December 31, 2001 and 2000, the reserve for loan losses was 188.7% and 64.8%, respectively, of the Company’s nonaccrual, renegotiated, 90 days past due and other potential problem credits.

During the three years ended December 31, 2002, the reserve for loan losses as a percentage of loans has decreased from 1.23% to .86%. During this same period, nonaccrual, renegotiated, 90 days past due and other potential problem credits decreased from $55.9 million to $16.9 million. In addition, 50% of the Company’s portfolio is secured by residential real estate at December 31, 2002. Traditionally, net losses on such loans have been minimal (see Table H of this Form 10-K).

Foreign exchange translation adjustments in the reserve for loan losses were $717 thousand and $(204) thousand in 2002 and 2001, respectively. These adjustments relate to reserves recorded in British pounds sterling, and are made to account for changes in our reserve for loan losses resulting from fluctuating foreign exchange rates.

The estimated allocation of the reserve for loan losses by loan category is detailed in Table I of this Form 10-K and represents our assessment of existing conditions and risk factors within these categories. Changes in the risk characteristic and loan amounts within the loan portfolio affect the overall level of required reserves.

During 2002, the commercial and financial allocation of the reserve for loan losses increased $872 thousand from 2001. The increased allocation was based on the growth in the balance of these loans discussed previously under “Loans” along with a refinement in our reserve allocation methodologies (see Notes 1, 4 and 15 of Notes to Consolidated Financial Statements).

Nonperforming Assets
Nonperforming assets include nonaccrual loans, renegotiated loans, other real estate owned and other repossessed assets. Nonaccrual loans are loans for which recognition of interest income has been discontinued. Impaired loans are nonaccrual loans for which it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement (see Tables J and K of this Form 10-K).

We evaluate each past due commercial loan (commercial and financial loans and commercial real estate loans) and discontinue the accrual of interest based on the delinquency status, an evaluation of any collateral and the financial condition of the borrower. If there is doubt as to the collection of either principal or interest, or when interest or principal is 90 days past due and the commercial loan is not well-secured and in the process of collection, it is placed into nonaccrual status. A nonaccrual loan may be restored to accrual status when interest and principal payments are brought current and the collection of future payments is not in doubt.

Nonaccrual loans totaled $548 thousand at December 31, 2002, a decrease of $825 thousand from December 31, 2001. The decrease in nonaccrual loans was primarily attributable to payoffs of $567 thousand and charge-offs of $583 thousand, mostly on foreign commercial loans, partially

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offset by additions to the foreign portfolio of $462 thousand.

Income recognition on non-commercial loans is discontinued and the 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. At this point, any uncollected interest is eliminated from income.

Renegotiated loans are those where there have been extensions of the original repayment period or a reduction of the obligation to pay principal or interest because of a deterioration in the borrower’s financial position. At December 31, 2002, 2001 and 2000, none of the renegotiated loans was accruing interest. There were no renegotiated loans at December 31, 2002 as the remaining two loans in that category were paid off and charged-off, respectively, compared with balances of $529 thousand at year-end 2001 and $853 thousand at December 31, 2000.

Loans are transferred to other real estate and other repossessed assets owned when collateral securing the loans is acquired through foreclosure. Other real estate and other repossessed assets owned totaled $122 thousand on December 31, 2002, compared to $1.8 million on December 31, 2001 and $1.1 million at December 31, 2000. In 2002 our only remaining real estate owned property, with a balance of $600 thousand, was sold. At our operations in London, other assets owned activity included sales, write-offs and additions that netted to a $1.0 million decrease in the portfolio. The 2002 ending balance consists entirely of these other assets, which are automobiles and other equipment that secured problem loans which were seized as part of the loan liquidation efforts of the Company in that location (see Notes 1 and 4 of Notes to Consolidated Financial Statements).

Past-Due and Potential Problem Loans
The 90 days past due loan category amounted to $11.0 million, $13.3 million, and $11.1 million at December 31, 2002, 2001 and 2000, respectively. The balances for all three years are primarily attributable to secured residential real estate loans that are in the process of collection and are accruing interest.

Potential problem loans are defined as loans that are currently performing but which have certain attributes that may lead to nonaccrual or past due status in the foreseeable future. At December 31, 2002, we identified $5.3 million of potential problem loans compared to $436 thousand of such loans at December 31, 2001 and $8.7 million at December 31, 2000. The current year balance consists primarily of a commercial lease financing loan of $4.8 million at our London operation. At December 31, 2002, this loan is performing but is considered to be a potential problem credit because the borrower is in technical violation of a loan covenant. We are closely monitoring this credit.

Foreign loans and other credits may be adversely affected by social, economic and political instabilities, including military confrontations. The Company cannot estimate the losses, if any, associated with any such instabilities (see Note 15 of Notes to Consolidated Financial Statements).

DEPOSITS AND FUNDING SOURCES

Deposits, short-term borrowings, FHLB and long-term debt and trust preferred securities are our principal funding sources. For 2002, these funding sources averaged $5.57 billion, an increase of $524 million from the $5.04 billion for 2001. In 2000, these funding sources averaged $5.15 billion.

Deposits
Deposit balances are the primary funding source of the Company. The average deposit balance at December 31, 2002 was $4.75 billion and for each of the two years ending December 31, 2001 and 2000 was $4.13 billion. Average interest bearing deposits were $4.24 billion, $3.62 billion and $3.59 billion in 2002, 2001 and 2000, respectively. Average demand deposits were $509.5 million, $509.6 million and $546.6 million in 2002, 2001 and 2000. As a means of reducing deposit reserve requirements, we periodically sweep excess demand funds into money market accounts. The average balances transferred, which are not included in demand deposits in Table A of this Form 10-K, were $468.4 million in 2002 compared to $440.2 million and $377.7 million in 2001 and 2000, respectively.

The average cost of interest-bearing deposits was 1.25%, 2.40% and 3.44% in 2002, 2001 and 2000, respectively. The change in the cost of these funds is primarily attributable to actions of the Federal Reserve. From December 31, 2000 to year-end 2002, the Federal Reserve lowered its target federal funds rate by 525 basis points, from 6.50% to 1.25%.

Short-Term Borrowings
Short-term borrowings consist primarily of repurchase agreements and, to a lesser extent, federal funds purchased and short-term FHLB borrowings. These obligations are an additional source of funds used to meet liquidity and interest-rate risk management objectives. On average, short-term borrowings were $451.1 million, $493.3 million and $599.7 million for 2002, 2001 and 2000, respectively. The cost of these funds was 1.54%, 3.53% and 5.58% for 2002, 2001 and 2000 (see Note 8 of Notes to Consolidated Financial Statements).

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FHLB Borrowings and Other Long-Term Debt
The $358.5 million balance of long-term debt at December 31, 2002 consists of $66.5 million subordinated debentures due in 2009 and $292.0 million in FHLB advances. The $66.5 million balance of long-term debt at December 31, 2001 and 2000 consists of the subordinated debentures only. These debentures have a fixed interest rate of 9.65% and are not callable in advance of maturity. The effective cost of this debt is 9.73%. The FHLB advances were taken in December 2002. They have maturity dates through 2007 and carry a blended interest rate of 2.83%. Average long-term debt was $73.4 million in 2002, compared to $66.5 million in 2001 and 2000.

Because of its strong capital position, in 2002 the Bank completed a $400.0 million leverage strategy by purchasing mortgage-backed securities, funded primarily with advances of varying maturities from the FHLB of Atlanta noted above. The goal of this strategy is to increase net interest income. The assets purchased had an average yield of 4.33% and an average life of 4.14 years. The funding sources had an opportunity cost of 2.52% and an average life of 2.33 years (see Note 8 of Notes to Consolidated Financial Statements).

Minority Interest in Trust Preferred Securities
Trust preferred securities totaled $248.6 and $350.0 million at December 31, 2002 and 2001, respectively. Included in these securities are $157.0 million of 8.875% securities issued in 1997 and $91.6 million of 8.625% securities issued in 1996. The securities were issued by two of our wholly- owned subsidiaries and are classified on the Consolidated Statements of Condition as guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures. The related expense is included on the Consolidated Statements of Operations as part of minority interest in income of subsidiaries, net of taxes. Dividends are paid semi-annually and these securities cannot be redeemed for ten years from the date of issuance. The securities have a final maturity of 30 years from their issuance date. Dividends are cumulative and deferrable for a period not to exceed five years. These securities qualify as tier I capital, with certain limitations. Amounts not included in tier I capital are included in tier II capital (see Note 11 of Notes to Consolidated Financial Statements).

During 2002 the Company repurchased, for cash, $43.0 million of the 8.875% securities and $58.4 million of the 8.625%, with a blended coupon rate of 8.73%. These repurchases will result in future after-tax annual savings of $5.8 million in minority interest expense. These repurchases were at a discount and resulted in a direct after-tax increase to shareholders’ equity of $7.4 million. Since cash was utilized to repurchase the trust preferred securities, this cash will be unavailable for alternative investments. We continue to evaluate the repurchase of additional trust preferred securities. The repurchase of the trust preferred securities primarily impacts the Other segment.

If the SFAS 149, “Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity” ballot draft, issued as a draft on January 22, 2003, becomes effective as currently written, beginning in the third quarter of 2003 these guaranteed preferred beneficial interests in junior subordinated deferrable interest debentures will no longer be classified as minority interest on the Consolidated Statements of Condition, but will be classified as long-term debt. The related interest expense, currently classified as minority interest, net of taxes, on our Consolidated Statements of Operations, will be reported as interest expense, thereby decreasing net interest income.

Sensitivity to Market and Other Risk
As previously noted, the Company is exposed to various business risks. Two types of “market risk” that could materially impact the operating results of the Company are interest rate risk and foreign currency exchange exposure. Though our Asset/Liability Committee (“ALCO”) closely monitors our exposure to these risks, shortcomings in assumptions utilized or modeling techniques employed may prevent or limit the Company from controlling or mitigating such risks.

We manage our interest-rate risk through the use of an income simulation model, which forecasts the impact on net interest income of a variety of different interest rate scenarios. A “most likely” interest rate scenario is forecasted based upon an analysis of current market conditions and expectations. The model then evaluates the impact on net interest income of rates moving significantly higher or lower than the “most likely” scenario. “Most likely” is defined as the outlook of the Bank’s Treasury Group on the path of future interest rates. As of December 31, 2002, the most likely interest rate scenario calls for the federal funds target rate to be flat at 1.25% through December 2003. The federal funds target rate then rises gradually to 4.00% by April 2005, 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 December 31, 2002 are shown in Table M of this Form 10-K. 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.

As of December 31, 2002, 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 3%. 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 4%. The results of the simulation for December 31, 2002 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

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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 our 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 the Company. Along with financial derivative instruments, the income simulation model includes assumptions about short-term financial instruments, investment securities, loans, deposits, and other borrowings.

Though we find that the methodologies previously discussed provide a meaningful representation of our 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 our risk sensitivity, and, therefore, our net interest income. As with any method of measuring interest-rate risk, certain shortcomings are inherent in our model. As such, the predictive value of our model is not guaranteed.

At December 31, 2002 and 2001, our cumulative one year gap was $(51.0) million and $(750.0) million, respectively. A small negative gap, such as that which exists at December 31, 2002, indicates that the Company’s interest rate position is balanced. A negative gap position indicates that the Company would be adversely impacted by rising interest rates since interest bearing deposits would reprice more quickly than interest earning assets.

At December 31, 2002, we had a foreign currency exchange contract for a notional amount of $75.4 million to hedge the investment we have in RBEL. We had $34.4 million in commitments to purchase foreign currency and $120.2 million in commitments to sell foreign currency. Most of these commitments were undertaken to hedge intercompany loans. In addition, interest rate swaps were used to hedge interest rate risk. Some were used to hedge the fair value of fixed rate assets while others were used to hedge cash flows of variable rate liabilities. There were 32 such agreements at December 31, 2002, totaling $135.8 million in notional principal balance (see Note 19 of Notes to Consolidated Financial Statements).

We believe our current interest rate sensitivity level is appropriate considering our economic outlook and conservative approach taken in the review and monitoring of our sensitivity position (see Note 19 of Notes to Consolidated Financial Statements).

In addition to interest-rate and market risk, we are exposed to customer relationship risk, which may be increased because we have foreign customers. As with credit risk, we strive to monitor and minimize this risk exposure. Nonetheless, these customers may be subject to deteriorating economic conditions, political and social upheaval, currency depreciation or devaluation, as well as nationalization and expropriation of assets or other factors over which we have no control. These customers also may have national goals and strategies, with political overtones, which could conflict with ours and therefore have a future negative impact on the Company.

Some of our foreign loans are loans to sovereign entities. If, for any reason, such a loan became past due or a problem credit, collection efforts would be made more difficult because of the sovereign status of the borrower.

CAPITAL RESOURCES

One of our fundamental objectives is to maintain a level of capitalization that promotes depositor and investor confidence. In addition to maintaining conservative loan underwriting standards, the Company places an emphasis on capital strength and our ability to withstand unfavorable economic conditions and business losses. We maintained a strong capital position at December 31, 2002 and 2001, even after the operating loss incurred in 2001.

The Company’s policy is to ensure that the Bank is capitalized in accordance with regulatory guidelines. As discussed, the Bank is subject to minimum capital ratios as prescribed by the OCC, which are essentially the same as those prescribed by the Federal Reserve Board for bank holding companies.

Total shareholders’ equity at December 31, 2002 was $389.2 million, a $28.4 million increase from year-end 2001. The increase was primarily the result of net income of $13.0 million, unrealized securities gains of $12.8 million, and a $7.4 million increase in paid in capital due to the previously described trust preferred securities repurchases. These increases were partially offset by $5.7 million in dividend payments for the year. Shareholders’ equity at December 31, 2001 was $360.8 million, a $21.9 million decrease from year-end 2000. The decrease was the result of the $(23.4) million operating loss the Company incurred in 2001.

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Banking regulators have issued risk-based capital guidelines for banks and bank holding companies. These requirements provide minimum total, tier I, and leverage capital ratios that measure capital adequacy. The total capital ratio measures combined tier I and tier II capital to risk- weighted assets. The tier I capital ratio measures tier I capital to risk-weighted assets. The leverage capital ratio measures tier I capital to quarterly average assets. At December 31, 2002 and 2001, the Company’s and Bank’s capital ratios significantly exceeded the “well-capitalized” levels under each of the regulatory ratios (see Table N of this Form 10-K and Note 10 of Notes to Consolidated Financial Statements).

FORWARD-LOOKING STATEMENTS
Certain information contained in this Annual Report, including, without limitation, the information appearing under the captions “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These statements comprising all statements herein that are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our interpretation of what we believe to be significant factors affecting our businesses, including many assumptions regarding future events. References to the words “will,” anticipate,” “believe,” “intend,” “estimated,” “expect,” “should,” “goal,” and similar expressions used herein indicate such forward-looking statements. Our actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied by, these forward- looking statements as a result of various risk, uncertainties and other factors, including the Company’s ability to successfully implement its business strategies, the weakening of the domestic economy, social, economic or political instability, both domestic and foreign, changes in credit quality and interest rates, the impact of competitive products, services and pricing, customer business requirements, Congressional legislations, the timing of technology enhancements for products and operating systems, volatility of venture capital portfolios, the collectivity of loans and similar matters.

You should not place undue reliance on any forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

New Financial Accounting Standards
SFAS 145, “Rescission of FASB Statements 4, 44, and 64, Amendment of FASB Statement 13, and Technical Corrections as of April 2002,” was issued in May 2002. SFAS 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that Statement, FASB Statement 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” This Statement also rescinds FASB Statement 44, “Accounting for Intangible Assets of Motor Carriers” and amends FASB Statement 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meaning, or describe their applicability under changed conditions. This statement will not have a material impact on the Company.

SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities,” was issued in June 2002. It addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” Unlike EITF 94-3, SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, instead of at the date of an entity’s commitment to an exit plan. This statement does not affect the Company at the present time, but will be complied with when and if it becomes necessary.

SFAS 147, “Acquisitions of Certain Financial Institutions, an amendment of FASB Statements 72 and 144 and FASB Interpretation 9,” was issued in July 2002. It removes acquisitions of financial institutions from the scope of both FASB Statement 72 and FASB Interpretation 9, except for transactions between two or more mutual enterprises. Instead, it requires that acquisitions of financial institutions be accounted for in accordance with SFAS 141, Business Combinations, and SFAS 142, Goodwill and Other Intangible Assets. This statement does not affect the Company at the present time, but will be complied with when and if it becomes necessary.

SFAS 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement 123,” was issued in December 2002. It amends SFAS 123, “Accounting for Stock Based Compensation” to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provision of that statement to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, this statement amends APB Opinion 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. This statement does not affect the Company at the present time as we currently have no plans to change to the fair value based method.

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On January 22, 2003, the FASB directed its staff to prepare a ballot draft of SFAS 149, “Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity.” The final Statement is expected to be issued in early 2003. SFAS 149 establishes standards for issuers’ classification as liabilities in the statement of financial position of financial instruments that have characteristics of both liabilities and equity, including financial instruments that are mandatorily redeemable on a fixed or determinable date. Our trust preferred securities, currently classified on our consolidated Statements of Condition as a minority interest item, meet that description. SFAS 149 will be effected by reporting the cumulative effect of a change in an accounting principle for contracts created before the issuance date of this statement and still existing at the beginning of the reporting period. We will begin reporting our trust preferred securities as a liability once SFAS 149 becomes effective. The related interest expense, currently classified as minority interest, net of taxes, on our Consolidated Statements of Operations, will be reported as interest expense, thereby decreasing net interest income.

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

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities: an interpretation of ARB No. 51.” This interpretation addresses the issue of consolidation of variable interest entities, which were previously commonly referred to as special-purpose entities (“SPEs”). Generally, in a variable interest entity the equity investment at risk is not sufficient to allow the entity to function without subordinated financial support from other parties that absorb some of the expected losses and the equity investors do not have the essential characteristics of a controlling financial interest, as defined. According to FIN 46, if a business has a controlling financial interest in a variable interest entity, the assets, liabilities and operating results of the variable interest entity should be consolidated with the business, even if the business does not have voting control of the variable interest entity. FIN 46 applies immediately to variable interest entities created after January 31, 2003 and to interests in variable interest entities acquired after that date. FIN 46 also applies to the first interim or fiscal periods beginning after June 15, 2003 for those variable interest entities in which a business holds an interest that was acquired before February 1, 2003. Riggs is currently evaluating the impact FIN 46 will have on its operations.

FOURTH QUARTER 2002 VS. FOURTH QUARTER 2001

For the quarter ending December 31, 2002, the Company reported net income of $2.2 million, or $.08 per share, compared to a net loss of $32.8 million, or $1.15 per diluted share, in the fourth quarter of 2001. The primary reason for the increase was the previously described restructuring and other charges in 2001 which amounted to approximately $40.0 million. Also contributing to the increase from the prior year were decreased venture capital losses. In the fourth quarter of 2002, venture capital losses were $1.1 million compared to losses of $9.4 million in the comparable quarter of 2001.

Net interest income was $49.4 million in the fourth quarter of 2002 compared to $47.9 million in the comparable quarter of the prior year, an increase of 3%. Average earning assets were $5.77 billion and $5.27 billion and the net interest margin was 3.48% and 3.66% for the fourth quarter of 2002 and 2001, respectively.

The Company provided $689 thousand and $1.6 million for loan losses in the fourth quarter of 2002 and 2001, respectively.

Noninterest income totaled $24.7 million in the fourth quarter of 2002, an increase of $7.2 million from the $17.5 million in the comparable quarter of the prior year primarily due to the decreases in venture capital losses noted previously. Also contributing to the increase was an additional $1.4 million in securities gains, from $627 thousand in the fourth quarter of 2001 to $2.1 million in the fourth quarter of 2002. Trust and investment advisory income was $9.3 million and $12.7 million for the fourth quarters of 2002 and 2001, respectively. The decrease is attributable to the decline in the value of assets under management and to the previously mentioned renegotiated agreement with the real estate advisor to MEPT. As a result of that renegotiation, revenues related to this business activity were $1.8 million for the quarter ended December 31, 2002, a decrease of $1.6 million from the comparable period of 2001.

Noninterest expense for the 2002 fourth quarter was $64.4 million, compared to $95.1 million in the year-ago quarter, a decrease of 32%. Our fourth quarter 2001 noninterest expense includes $34.1 million in restructuring and other charges, detailed in Note 2 of Notes to Consolidated Financial Statements. Fourth quarter 2002 noninterest expense includes a $1.3 million write-down of a property in London, a $1.0 million impairment charge related to a long-term, fixed price, non-cancelable technology contract and a $1.1 million charge to exit long-term maintenance contracts.

25

TABLE A:

THREE-YEAR AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES⁽¹⁾

[Additional columns below]

[Continued from above table, first column(s) repeated]

(in thousands)									2000
					AVERAGE				INCOME/				YIELDS/
(IN THOUSANDS)					BALANCE				EXPENSE				RATE
ASSETS
Loans (2)
	Commercial-Taxable				$	441,016			$	33,835				7.67	%
	Commercial-Tax-Exempt					150,085				10,589				7.06
	Commercial Real Estate					430,796				34,163				7.93
	Residential Mortgage					1,200,692				86,826				7.23
	Home Equity					336,539				25,771				7.66
	Consumer					69,740				8,981				12.88
	Foreign					457,774				35,757				7.81
Total Loans						3,086,642				235,922				7.64	%
Securities Available for Sale (3)						1,263,546				79,098				6.26
Time Deposits with Other Banks						354,213				22,724				6.42
Federal Funds Sold and Reverse Repurchase Agreements						302,692				19,093				6.31
Total Earning Assets and Average Rate Earned (4)						5,007,093				356,837				7.13
Less: Reserve for Loan Losses						38,341
Cash and Due from Banks						136,912
Premises and Equipment, Net						201,175
Other Assets						298,191
		Total Assets			$	5,605,030
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY
Interest-Bearing Deposits
	Savings and NOW Accounts				$	218,423			$	2,123				0.97	%
	Money Market Deposit Accounts					1,862,071				39,242				2.11
	Time Deposits in Domestic Offices					930,421				46,764				5.03
	Time Deposits in Foreign Offices					576,845				35,313				6.12
Total Interest-Bearing Deposits						3,587,760				123,442				3.44
	Short-Term Borrowings:
	Federal Funds Purchased and Repurchase Agreements					453,116				25,915				5.72
	Other Short-Term Borrowings					146,625				7,479				5.10
	Long-Term Debt					66,525				6,472				9.73
		Total Interest-Bearing Funds				4,254,026				163,308				3.84
			& Average Rate Incurred
	Demand Deposits (5)					546,569
	Other Liabilities					98,058
	Minority Interest in Preferred
			Stock of Subsidiaries			350,000
	Shareholders’ Equity					356,377
		Total Liabilities, Minority Interest and Shareholders’ Equity			$	5,605,030
NET INTEREST INCOME AND SPREAD									$	193,529				3.29	%
NET INTEREST MARGIN ON EARNING ASSETS														3.87	%