-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uf7747AA1CkVMPIMsSuy8Rf67+UCsLmArHDOzhvT98ElCU/tgOfy2DdjRwmvh1+P Fzqg0K7K7fSDLg6pumGJRg== 0000916641-95-000391.txt : 19951119 0000916641-95-000391.hdr.sgml : 19951119 ACCESSION NUMBER: 0000916641-95-000391 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRESTAR FINANCIAL CORP CENTRAL INDEX KEY: 0000101880 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 540722175 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07083 FILM NUMBER: 95592858 BUSINESS ADDRESS: STREET 1: 919 E MAIN ST STREET 2: PO BOX 26665 CITY: RICHMOND STATE: VA ZIP: 23261 BUSINESS PHONE: 8047825000 MAIL ADDRESS: STREET 1: 919 EAST MAIN STREET STREET 2: P O BOX 26665 CITY: RICHMOND STATE: VA ZIP: 23261-6665 FORMER COMPANY: FORMER CONFORMED NAME: UNITED VIRGINIA BANKSHARES INC DATE OF NAME CHANGE: 19871115 10-Q 1 CRESTAR 10-Q United States Securities And Exchange Commission Washington, DC 20549 Form 10-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 30, 1995 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 1-7083 . Crestar Financial Corporation (Exact name of registrant as specified in its charter) Virginia 54-0722175 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 919 E. Main Street, P.O. Box 26665, Richmond, Virginia 23261-6665 (Address of principal executive offices) (Zip Code) (804)782-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 31, 1995 Common Stock, $5 par value 37,666,280 Crestar Financial Corporation And Subsidiaries Form 10-Q For The Quarter Ended September 30, 1995 Part I. Financial Information Item 1. Financial Statements: Page Consolidated Balance Sheets.................................. Consolidated Statements Of Income............................ Consolidated Statements Of Cash Flows........................ Consolidated Statements Of Changes In Shareholders' Equity... Notes To Consolidated Financial Statements................... Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations: Financial Commentary......................................... Part II. Other Information Item 6. Exhibits And Reports On Form 8-K: There were no reports on Form 8-K filed during the three months ended September 30, 1995. Consolidated Balance Sheets Crestar Financial Corporation And Subsidiaries
Dollars in thousands September 30, December 31, Assets 1995 1994 1994 Cash and due from banks $ 706,673 $ 690,992 $ 907,627 Securities held to maturity (note 2) 826,212 944,626 907,368 Securities available for sale (note 3) 1,807,656 1,866,204 1,621,973 Money market investments (note 4) 618,164 1,327,457 452,556 Mortgage loans held for sale 446,781 334,281 209,525 Loans - net of unearned income (note 5): Business Loans: Commercial 3,048,637 2,917,826 3,093,122 Real estate - income property 779,906 759,572 744,888 Real estate - construction 171,218 221,646 184,583 Consumer Loans: Instalment 2,077,087 1,763,961 1,810,038 Bank card 1,576,302 1,224,093 1,477,285 Real estate - mortgage 2,016,357 1,760,773 1,975,721 --------- --------- --------- Loans - net of unearned income of $775 and $1,465 at September 30, 1995 and 1994, respectively; $1,369 at December 31, 1994 9,669,507 8,647,871 9,285,637 Less: Allowance for loan losses (note 6) (223,430) (225,890) (219,189) - -------- -------- -------- Loans - net 9,446,077 8,421,981 9,066,448 --------- --------- --------- Premises and equipment - net 332,949 320,829 316,896 Customers' liability on acceptances 8,430 4,866 6,464 Intangible assets - net 156,226 108,061 107,211 Foreclosed properties - net (notes 5 and 7) 14,614 23,644 18,629 Other assets 398,411 407,416 395,333 ------- ------- ------- Total Assets $14,762,193 $14,450,357 $14,010,030 =========== =========== =========== Liabilities Demand deposits $ 2,185,849 $ 2,116,154 $ 2,238,399 Interest checking deposits 1,800,297 1,865,839 1,916,411 Money market deposit accounts 2,486,407 2,367,640 2,342,222 Regular savings deposits 1,209,025 1,460,391 1,394,146 Domestic time deposits 3,126,897 3,108,745 2,955,756 Certificates of deposit $100,000 and over 62,991 67,352 66,218 ------ ------ ------ Total deposits 10,871,466 10,986,121 10,913,152 Short-term borrowings (note 8) 1,873,127 1,905,049 1,380,806 Liability on acceptances 8,430 4,866 6,464 Other liabilities 370,260 218,998 216,581 Long-term debt (note 9) 380,237 218,564 366,962 - ------- ------- ------- Total Liabilities 13,503,520 13,333,598 12,883,965 ========== ========== ========== Shareholders' Equity Preferred stock. Authorized 2,000,000 shares; none issued - - - Common stock, $5 par value. Authorized 100,000,000 shares; outstanding 37,709,106 and 37,597,723 at September 30, 1995 and 1994, respectively; 37,331,213 at December 31, 1994 188,546 187,989 186,656 Capital surplus 346,725 276,424 281,207 Retained earnings 726,036 683,133 694,757 Net unrealized loss on securities available for sale (2,634) (30,787) (36,555) ------ ------- ------- Total Shareholders' Equity 1,258,673 1,116,759 1,126,065 --------- --------- --------- Total Liabilities And Shareholders' Equity $14,762,193 $14,450,357 $14,010,030 =========== =========== ===========
See accompanying notes to consolidated financial statements. Consolidated Statements Of Income Crestar Financial Corporation And Subsidiaries
In thousands, except per share data Three Months Ended Sept. 30, Nine Months Ended Sept.30, Income From Earning Assets 1995 1994 1995 1994 Interest and fees on loans $ 212,001 $ 180,842 $ 633,792 $ 504,830 Interest on taxable securities held to maturity 11,575 11,937 37,377 35,924 Interest on tax-exempt securities held to maturity 979 1,105 2,969 3,730 Interest and dividends on securities available for sale 26,043 31,352 72,592 102,470 Income on money market investments 3,498 9,047 14,397 19,854 Interest on mortgage loans held for sale 7,539 5,197 16,476 18,074 --------- --------- --------- --------- Total income from earning assets 261,635 239,480 777,603 684,882 --------- --------- --------- --------- Interest Expense Interest checking deposits 9,968 10,544 30,910 30,690 Money market deposit accounts 24,549 17,966 71,342 47,337 Regular savings deposits 8,404 10,177 27,031 27,891 Domestic time deposits 40,925 33,101 113,322 95,711 Certificates of deposit $100,000 and over 925 733 2,736 1,791 --------- --------- --------- --------- Total interest on deposits 84,771 72,521 245,341 203,420 Short-term borrowings 17,339 13,197 51,917 33,190 Long-term debt 8,041 4,484 24,075 13,399 --------- --------- --------- --------- Total interest expense 110,151 90,202 321,333 250,009 Net Interest Income 151,484 149,278 456,270 434,873 Provision for loan losses (note 6) 14,000 8,100 37,600 26,982 --------- --------- --------- --------- Net Credit Income 137,484 141,178 418,670 407,891 --------- --------- --------- --------- Noninterest Income Service charges on deposit accounts 22,833 20,640 66,189 62,535 Trust and investment advisory income 15,581 13,244 44,270 42,688 Bank card-related income 12,101 10,321 35,078 27,296 Other income 21,312 19,521 63,972 61,089 Securities gains (losses) (69) 12 (3,529) (1,755) --------- --------- --------- --------- Total noninterest income 71,758 63,738 205,980 191,853 --------- --------- --------- --------- Net Credit And Noninterest Income 209,242 204,916 624,650 599,744 --------- --------- --------- --------- Noninterest Expense Personnel expense 75,816 77,631 228,440 228,420 Occupancy expense - net 10,586 11,098 32,162 31,953 Equipment expense 6,919 6,370 20,835 18,367 Other expense 41,149 43,354 128,506 130,973 --------- --------- --------- --------- Total noninterest expense 134,470 138,453 409,943 409,713 --------- --------- --------- --------- Income Before Income Taxes 74,772 66,463 214,707 190,031 Income tax expense (note 10) 26,366 22,859 73,326 63,337 --------- --------- --------- --------- Net Income $ 48,406 $ 43,604 $ 141,381 $ 126,694 ========= ========= ========= ========= Earnings Per Common Share $ 1.27 $ 1.15 $ 3.71 $ 3.34 ========= ========= ========= =========
See accompanying notes to consolidated financial statements. Consolidated Statements Of Cash Flows Crestar Financial Corporation And Subsidiaries
In thousands Nine Months Ended Sept. 30, 1995 1994 Operating Activities Net Income $ 141,381 $ 126,694 Adjustments to reconcile net income to net cash provided by operating activities: Provisions for loan losses, foreclosed properties and other losses 37,890 27,185 Depreciation and amortization of premises and equipment 26,381 24,541 Securities losses 3,529 1,755 Amortization of intangible assets 9,655 6,186 Deferred income tax expense 6,259 664 Gain on foreclosed properties (1,699) (856) Gain on sales of mortgage servicing rights (5,900) (14,132) Net decrease (increase) in trading account (3,565) 7,538 Origination of loans held for sale (1,464,256) (1,957,053) Proceeds from sales of loans held for sale 1,227,000 2,229,146 Net decrease in accrued interest receivable, prepaid expenses and other assets 3,351 24,205 Net increase (decrease) in accrued interest payable, accrued expenses and other liabilities 30,049 (53,152) Other, net 5,027 14,372 ----------- ----------- Net cash provided by operating activities 15,102 437,093 ----------- ----------- Investing Activities Proceeds from maturities and calls of securities held to maturity 128,204 204,142 Proceeds from maturities and calls of securities available for sale 283,020 385,096 Proceeds from sales of securities available for sale 1,355,753 1,511,787 Purchases of securities held to maturity (48,083) (562,311) Purchases of securities available for sale (1,415,896) (496,360) Net increase in money market investments (162,043) (642,632) Principal collected on non-bank subsidiary loans 16,227 8,942 Loans originated by non-bank subsidiaries (123,110) (192,910) Net decrease in other loans 96,470 2,998 Purchases of premises and equipment (41,640) (28,115) Proceeds from sales of foreclosed properties 22,668 30,623 Proceeds from sales of mortgage servicing rights 8,305 24,168 Aquisitions of net assets of financial institutions (12,245) 23,703 Other, net (8,123) (7,856) ----------- ----------- Net cash provided by investing activities 99,507 261,275 ----------- ----------- Financing Activities Net decrease in demand, interest checking, money market and regular savings deposits (412,846) (269,558) Net decrease in certificates of deposit (99,797) (477,635) Net increase in short-term borrowings 390,293 82,098 Proceeds from sales of branch deposits (80,895) -- Proceeds from issuance of long-term debt 1,995 158 Principal payments on long-term debt (18,620) (5,606) Cash dividends paid (49,356) (42,496) Common stock purchased and retired (68,390) (29,571) Proceeds from the issuance of common stock 22,053 18,582 ----------- ----------- Net cash used by financing activities (315,563) (724,028) Cash and Cash Equivalents Decrease in cash and cash equivalents (200,954) (25,660) Cash and cash equivalents at beginning of year 907,627 716,652 ----------- ----------- Cash and cash equivalents at end of quarter $ 706,673 $ 690,992 =========== ===========
Cash and cash equivalents consist of cash and due from banks. See accompanying notes to consolidated financial statements. Consolidated Statements Of Changes In Shareholders' Equity Crestar Financial Corporation And Subsidiaries
Dollars in thousands Shareholders' Equity Shares of Common Stock 1995 1994 1995 1994 Balance, July 1 $1,229,004 $1,104,684 37,733,761 37,717,023 Net Income 48,406 43,604 - - Cash dividends declared on common stock (16,969) (15,092) - - Change in net unrealized loss on securities available for sale 657 (9,956) - - Common stock purchased and retired (7,101) (10,213) (135,000) (214,700) Common stock issued: For acquisition of financial institution (72) - - - For dividend reinvestment plan 3,639 2,862 72,184 62,561 For stock compensation plans 59 - 1,123 - Upon exercise of stock options (including tax benefit of $198 in 1995; $154 in 1994) 1,050 870 37,038 32,839 ---------- ---------- ---------- ---------- Balance, September 30 $1,258,673 $1,116,759 37,709,106 37,597,723 ========== ========== ========== ========== Balance, January 1 $1,126,065 $1,062,477 37,331,213 37,515,671 Net Income 141,381 126,694 - - Cash dividends declared on common stock (49,356) (42,496) - - Cumulative effect of change in accounting for securities available for sale - 32,209 - - Change in net unrealized gain or loss on securities available for sale 33,921 (62,996) - - Common stock purchased and retired (68,390) (30,490) (1,529,200) (684,400) Common stock issued: For acquisition of financial institutions 52,562 12,588 1,317,789 264,208 For dividend reinvestment plan 10,030 8,279 227,885 185,928 For thrift and profit sharing plan 8,263 4,993 207,272 115,770 For other stock compensation plans 437 78 9,965 1,859 Upon exercise of stock options (including tax benefit of $957 in 1995; $1,022 in 1994) 3,760 5,310 144,182 186,477 Upon conversion of debentures - 113 - 12,210 ---------- ---------- ---------- ---------- Balance, September 30 $1,258,673 $1,116,759 37,709,106 37,597,723 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (1) General The consolidated financial statements conform to generally accepted accounting principles and to general practices within the banking industry. The accompanying interim statements are unaudited; however, in the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements, including adjustments related to completed acquisitions, have been included. All adjustments are of a normal nature. Certain reclassifications have been made to the prior years' consolidated financial statements to conform to the 1995 presentation. The notes included herein should be read in conjunction with the notes to consolidated financial statements included in the Corporation's 1994 Annual Report and Form 10-K and the Corporation's First Quarter 1995 and Second Quarter 1995 Financial Supplement and Form 10-Qs. Effective January 1, 1995, Crestar adopted Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122). In accordance with SFAS 122, the cost of mortgage loans purchased or originated with a definitive plan to sell the loans and retain the mortgage servicing rights is allocated between the loans and the servicing rights based on their estimated fair values at the purchase or origination date. A definitive plan to sell the loans exists if purchase commitments, which include estimates of selling price, are obtained either prior to the purchase or origination date, or within a reasonable period thereafter. The estimated fair value of mortgage loans is determined by reference to quoted prices in active secondary markets. The estimated fair value of mortgage servicing rights is determined by reference to the bid and ask prices of recent trades of comparable servicing rights or is determined based on the expected future cash flows, discounted at a rate commensurate with the risks involved. These recognition provisions have been applied prospectively to transactions occurring on or after January 1, 1995. For the purpose of evaluating and measuring impairment, SFAS 122 requires that capitalized mortgage servicing rights be stratified according to the risk characteristics of the underlying loans. For Crestar, such characteristics include loan type. Impairment is recognized through a valuation allowance for each stratum. The amount of impairment recognized is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Fair value in excess of the amount capitalized, net of amortization, is not recognized subsequent to the initial measurement of impairment. These impairment provisions apply to all capitalized mortgage servicing rights. The initial adoption of these impairment provisions did not require an increase to Crestar's valuation allowance. The effect of Crestar's adoption of SFAS 122 on the consolidated financial statements for the three month and nine month periods ended September 30, 1995 was an increase in mortgage origination income of $985,000 and $2,660,000, respectively, with a corresponding increase in capitalized, originated mortgage servicing rights. Such additional income resulted from a lower adjusted cost basis, and corresponding greater gains, on originated mortgage loans sold with servicing rights retained during the first nine months of 1995. In accordance with SFAS 122, no retroactive application of its provisions has been made to the consolidated financial statements for periods prior to January 1, 1995. Mortgage servicing rights of $21,902,000 and $18,156,000 at September 30, 1995 and 1994, respectively, were included in Other assets in the consolidated balance sheet. The amount capitalized during the three months and nine months ended September 30, 1995 in connection with purchasing or originating mortgage servicing rights was $4.8 million and $12.5 million, respectively. At September 30, 1995, mortgage servicing rights were net of a related valuation allowance of $269,000. The activity in such valuation allowance, which had a balance of $213,000 at June 30, 1995 and a balance of $174,000 at December 31, 1994, was not material to the consolidated financial statements for the three months and nine months ended September 30, 1995. The fair value of capitalized mortgage servicing rights was approximately $37 million at September 30, 1995. Such fair value was estimated using a discounted cash flow method, with discount rates based on secondary market sources, adjusted for prepayment estimates and differences in servicing and credit costs. For the nine months ended September 30, 1995 and 1994, mortgage servicing income was net of amortization of mortgage servicing rights of $4.1 million and $5.1 million, respectively. For the three months ended September 30, 1995 and 1994, mortgage servicing income was net of amortization of mortgage servicing rights of $1.4 million and $1.7 million, respectively. Intangible assets consisted of goodwill and deposit based intangibles, having a combined balance of $155,721,000 and $107,466,000 at September 30, 1995 and 1994, respectively, and favorable lease rights of $505,000 and $595,000, respectively. Accumulated amortization of goodwill was $30,380,000 and $21,662,000 at September 30, 1995 and 1994, respectively. (2) Securities Held To Maturity The amortized cost (carrying values) and estimated market values of securities held to maturity at September 30 follow:
In thousands 1995 1994 Amortized Market Amortized Market Cost Value Cost Value U.S. Treasury and Federal agencies $ 58,210 $ 58,052 $ 10,360 $ 10,146 Mortgage-backed obligations of Federal agencies 527,414 525,973 645,333 624,798 Other taxable securities 178,369 176,148 219,877 211,581 States and political subdivisions 62,219 63,161 69,056 69,276 ------ ------ ------ ------ Total securities held to maturity $826,212 $823,334 $944,626 $915,801 ======== ======== ======== ========
(3) Securities Available For Sale The amortized cost and estimated market values (carrying values) of securities available for sale at September 30 follow:
In thousands 1995 1994 Amortized Market Amortized Market Cost Value Cost Value U.S. Treasury and Federal agencies $ 350,082 $ 348,324 $ 999,647 $ 978,776 Mortgage-backed obligations of Federal agencies 947,288 945,895 704,834 680,160 Other mortgage-backed obligations 413,809 412,663 152,666 149,834 Other taxable securities 5,140 5,092 5,622 5,598 Common and preferred stocks 95,465 95,682 51,677 51,836 ------ ------ ------ ------ Total securities available for sale $1,811,784 $1,807,656 $1,914,446 $1,866,204 ========== ========== ========== ==========
(4) Money Market Investments Money market investments at September 30 included:
In thousands 1995 1994 Federal funds sold $475,800 $ 738,580 Securities purchased under agreements to resell 127,000 586,000 Trading account securities 7,139 257 U.S. Treasury 5,587 2,336 Domestic time deposits and other 2,638 284 ----- --- Total money market investments $618,164 $1,327,457 ======== ==========
(5) Nonperforming Assets And Impaired Loans Nonperforming assets at September 30 are shown below. Loans that are both (a) past due 90 days or more and (b) not deemed nonaccrual due to an assessment of collectibility are specifically excluded from the definition of nonperforming assets.
In thousands 1995 1994 Nonaccrual loans $60,935 $62,934 Foreclosed properties - net 14,614 23,644 ------ ------ Total nonperforming assets $75,549 $86,578 ======= =======
Non-cash additions to foreclosed properties were $6.0 million and $9.7 million in the first nine months of 1995 and 1994, respectively. Effective January 1, 1995, Crestar adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114), and No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures" (SFAS 118). In accordance with SFAS 114, impaired loans are measured and reported based on the present value of expected cash flows discounted at the loan's effective interest rate, or at the fair value of the loan's collateral if the loan is deemed "collateral dependent." A valuation allowance is required to the extent that the measure of the impaired loans is less than the recorded investment. Impaired loans are specifically reviewed loans for which it is probable that the creditor will be unable to collect all amounts due according to the terms of the loan agreement. The specific factors that influence management's judgment in determining when a loan is impaired include evaluation of the financial strength of the borrower and the net realizable value of the collateral. A specifically reviewed loan is not impaired during a period of "minimum delay" in payment, regardless of the amount of shortfall, if the ultimate collectibility of all amounts due is expected. Crestar defines "minimum delay" as past due less than 90 days. SFAS 114 does not apply to larger groups of homogeneous loans such as consumer instalment, bank card and real estate mortgage loans, which are collectively evaluated for impairment. Impaired loans are therefore primarily business loans, which include commercial loans and income property and construction real estate loans. Crestar applies the measurement methods described above to these loans on a loan-by-loan basis. Smaller balance populations of business loans, which are not specifically reviewed in accordance with Crestar's normal credit review procedures, are also excluded from the application of SFAS 114. Crestar's impaired loans are non-accrual loans, as generally loans are placed in nonaccrual status on the earlier of the date that principal or interest amounts are 90 days or more past due or the date that collection of such amounts is judged uncertain based on an assessment of collectibility. Impaired loans and the allocated valuation allowance at September 30, 1995 were:
In thousands Related Loan Valuation Balance Allowance Impaired with valuation allowance $27,950 $3,640 Impaired without valuation allowance - - ------- ------ Total impaired loans $27,950 $3,640 ======= ======
Collateral dependent loans, which were measured at the fair value of the collateral, constituted $23,770,000 or 85% of impaired loans at September 30, 1995. Remaining impaired loans of $4,180,000 were measured based on the present value of expected cash flows. The valuation allowance for impaired loans at September 30, 1995, and activity related thereto for the three months and nine months ended September 30, 1995, is included in the allowance for loan losses discussed in note (6). Crestar's charge-off policy for impaired loans is consistent with its policy for loan charge-offs to the allowance: impaired loans are charged-off when an impaired loan, or a portion thereof, is considered uncollectible or is transferred to foreclosed properties. SFAS 118 allows a creditor to use existing methods for recognizing interest income on an impaired loan. Consistent with Crestar's method for non-accrual loans, interest receipts on impaired loans are recognized as interest income or are applied to principal when the ultimate collectibility of principal is in doubt. The average recorded investment in impaired loans, the amount of interest income recognized, and the amount of interest income recognized on a cash basis during 1995 were:
In thousands Nine Months Ended Sept. 30, 1995 Average recorded investment in impaired loans $37,350 Interest income recognized during impairment - Interest income recognized on a cash basis during impairment -
The balance of impaired loans at January 1, 1995 totaled approximately $40 million. The initial adoption of SFAS 114 and SFAS 118 did not require an increase to Crestar's allowance for loan losses. The impact of SFAS 114 and SFAS 118 was immaterial to Crestar's consolidated financial statements as of and for the three months and nine months ended September 30, 1995. In accordance with SFAS 114, no retroactive application of its provisions has been made to the consolidated financial statements for periods prior to January 1, 1995. (6) Allowance For Loan Losses Transactions in the consolidated allowance for loan losses for the three months and nine months ended September 30 were:
In thousands Three Months Nine Months 1995 1994 1995 1994 Beginning balance $222,882 $226,666 $219,189 $210,958 -------- -------- -------- -------- Charge-offs (22,168) (14,438) (59,595) (49,127) Recoveries 8,816 5,583 20,880 21,390 ----- ----- ------ ------ Net charge-offs (13,352) (8,855) (38,715) (27,737) Provision for loan losses 14,000 8,100 37,600 26,982 Allowance from acquisitions - net (100) (21) 5,356 15,687 ---- --- ----- ------ Net increase (decrease) 548 (776) 4,241 14,932 --- ---- ----- ------ Ending balance $223,430 $225,890 $223,430 $225,890 ======== ======== ======== ========
(7) Allowance For Foreclosed Properties Transactions in the allowance for losses on foreclosed properties for the three months and nine months ended September 30 were:
In thousands Three Months Nine Months 1995 1994 1995 1994 Beginning balance $5,374 $9,166 $7,180 $5,574 ------ ------ ------ ------ Provision for foreclosed properties - (156) (500) (801) Write-downs (150) 979 (4,150) (323) Allowance from acquisitions - net - - 2,694 5,539 ----- ----- Net increase (decrease) (150) 823 (1,956) 4,415 ---- --- ------ ----- Ending balance $5,224 $9,989 $5,224 $9,989 ====== ====== ====== ======
(8) Short-Term Borrowings Short-term borrowings, exclusive of deposits, with maturities of less than one year at September 30 were:
In thousands 1995 1994 Federal funds purchased $1,318,928 $1,522,138 Securities sold under repurchase agreements 388,254 231,368 Notes payable 164,003 149,347 Other 1,942 2,196 ----- ----- Total short-term borrowings $1,873,127 $1,905,049 ========== ==========
The Corporation paid $293,231,000 and $235,134,000 in interest on deposits and short-term borrowings in the first nine months of 1995 and 1994, respectively. (9) Long-Term Debt Long-term debt at September 30 included:
In thousands 1995 1994 8 3/4% Subordinated notes due 2004 $149,644 $ - 8 1/4% Subordinated notes due 2002 125,000 125,000 8 5/8% Subordinated notes due 1998 49,974 49,963 7-8 1/4% Mortgage indebtedness maturing through 2009 9,557 12,378 8 5/8-14 3/8% Capital lease obligations maturing through 2006 1,150 1,502 4 3/8-8% Federal Home Loan Bank obligations payable through 2015 15,976 11,109 6 1/4-11 1/4% Collateralized mortgage obligation bonds maturing through 2019 28,936 18,612 ------- ------- Total long-term debt $380,237 $218,564 ======== ========
The Corporation paid $22,164,000 and $15,126,000 in interest on long-term debt in the first nine months of 1995 and 1994, respectively. There were no new capital lease agreements in the third quarter of 1995. (10) Income Taxes The current and deferred components of income tax expense allocated to continuing operations in the accompanying consolidated statements of income for the three months and nine months ended September 30 were:
In thousands Three Months Nine Months 1995 1994 1995 1994 Current: Federal $26,915 $23,986 $64,698 $61,171 State and local 752 620 2,369 1,502 --- --- ----- ----- Total current tax expense 27,667 24,606 67,067 62,673 ------ ------ ------ ------ Deferred: Federal (1,514) (1,609) 5,716 489 State and local 213 (138) 543 175 --- ---- --- --- Total deferred tax expense (benefit) (1,301) (1,747) 6,259 664 ------ ------ ----- --- Total income tax expense $26,366 $22,859 $73,326 $63,337 ======= ======= ======= =======
The differences between the amounts computed by applying the statutory federal income tax rate to income before income taxes and the actual income tax expense allocated to operations for the three months and nine months ended September 30 were:
In thousands Three Months Nine Months 1995 1994 1995 1994 Income before income taxes $74,772 $66,463 $214,707 $190,031 ------- ------- -------- -------- Tax expense at statutory rate 26,170 23,262 75,147 66,511 ------ ------ ------ ------ Increase (decrease) in taxes resulting from: Tax-exempt interest and dividends (1,752) (1,861) (5,617) (5,419) Nondeductible interest expense 166 119 480 331 Amortization of goodwill 929 827 2,569 1,333 State income taxes 627 314 1,893 1,090 Other - net 226 198 (1,146) (509) --- --- ------ ---- Total increase (decrease) in taxes 196 (403) (1,821) (3,174) --- ---- ------ ------ Total income tax expense $26,366 $22,859 $ 73,326 $ 63,337 ------- ------- -------- -------- Effective tax rate 35.3% 34.4% 34.2% 33.3% ==== ==== ==== ====
The Corporation made income tax payments of $45,924,000 and $56,405,000 during the first nine months of 1995 and 1994, respectively. At September 30, 1995, the Corporation had a net deferred income tax asset of $87,182,000. There was no valuation allowance relating to the net deferred income tax asset. Crestar has sufficient taxable income in the available carryback periods and future taxable income from reversing taxable differences to realize substantially all of its deferred income tax assets. Management believes, based on the Corporation's history of generating significant earnings and expectations of future earnings, that it is more likely than not that all recorded deferred income tax assets will be realized. (11) Commitments And Contingencies In the normal course of business, there are outstanding commitments, contingent liabilities and other financial instruments that are not reflected in the accompanying consolidated financial statements. These include commitments to extend credit, standby letters of credit, interest rate caps, floors and collars, swaps, and forward contracts. These items involve varying degrees of credit and interest rate risk in excess of amounts recorded in the consolidated balance sheets. Commitments to extend credit are legally binding agreements to lend to a customer which typically contain clauses that permit cancellation of the commitment in the event of credit deterioration of the borrower. Similar to direct lending, these commitments are subject to the Corporation's loan approval and review procedures and policies. Based upon management's review, Crestar may require the customer to provide various types of collateral as security for the agreement, including balances on deposit, investment securities, real estate and inventory. Crestar receives a commitment fee for entering into such agreements. Legally binding, unfunded commitments to extend credit were $6.2 billion and $5.3 billion at September 30, 1995 and 1994, respectively. Standby letters of credit, which are conditional commitments to extend credit, guarantee the performance of customers to a third party. Crestar's outstanding standby letters of credit were $351 million and $380 million at September 30, 1995 and 1994, respectively. The Corporation services mortgage loans other than those included in the accompanying consolidated financial statements and, in some cases, accepts a recourse liability on the serviced loans. Recourse obligations of $1.0 billion at September 30, 1995 include $135 million of contractual recourse liability accepted by Crestar on mortgage loan sales to the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC). For the period extending over the life of the loans, FNMA and FHLMC have the right to sell any loans which become delinquent back to Crestar. Crestar maintains an allowance (included in Other liabilities in the consolidated balance sheet), which had a balance of $2.3 million at September 30, 1995, based on estimates of future losses on this contractual recourse liability. The remaining notional balance of recourse obligations of $888 million at September 30, 1995, results from the origination and acquisition by Crestar of mortgage servicing rights on Federal Housing Association and Veterans' Association loans, which are serviced under programs of the Government National Mortgage Association (GNMA). Approximately $627 million of this notional balance was insured by agencies of the Federal government or private insurance companies at September 30, 1995. As a financial institution, Crestar entails a degree of interest rate risk as a provider of banking services to its customers. This risk can be managed through derivative interest rate contracts, such as interest rate swaps, caps and floors. Changes in the fair value of such derivatives are generally offset by changes in the implied fair value of the underlying hedged asset or liability. As hedges against interest rate risk at September 30, 1995, Crestar was participating in interest rate swaps of $1.14 billion, of which $943.7 million and $200 million were used to convert floating rate commercial and real estate income property loans, respectively, to fixed rates. Unrealized gross gains and gross losses on such swaps were $323,000 and $8.3 million, respectively, at September 30, 1995. Notional balances of $593.7 million of such swaps were indexed amortizing swaps, whose notional values may amortize more slowly as rates rise. Crestar also had $245 million of purchased interest rate cap and $250 million of purchased interest rate floor agreements outstanding at September 30, 1995, which were used to minimize interest rate risk associated with floating rate money market deposits and commercial loans, respectively. Unrealized gross gains and gross losses on such caps and floors were $4.3 million and $1.3 million, respectively, at September 30, 1995. In addition, Crestar serves as a financial intermediary in interest rate swap, cap, floor and collar agreements, providing interest rate risk management services to customers. At September 30, 1995, Crestar had $81.1 million in offsetting swap, $74.3 million in offsetting cap, and $37.5 million in offsetting collar agreements. The notional amount of these over-the-counter traded interest rate swaps, caps, floors and collars does not fully represent Crestar's credit and market exposure, which the Corporation believes is a combination of current replacement cost (any unrealized gain plus accrued receivable) of approximately $10.2 million, less collateral held of approximately $4.3 million, plus an amount for additional market movement. Four counterparties constituted 18%, 17%, 13% and 11% of the estimated credit and market exposure of $83.0 million at September 30, 1995. During the third quarter of 1995, Crestar terminated an interest rate swap, having a notional balance of $100 million, which hedged floating rate commercial loans. The realized loss on termination of $1.6 million has been deferred as an other asset in the consolidated balance sheet; such realized loss will be amortized as a yield adjustment to floating rate commercial loans over 13 months, the remaining expected life of the swap. At September 30, 1995, Crestar had unamortized, realized losses of $3.7 million on terminated interest rate swaps deferred and classified as an other asset in the consolidated balance sheet. Crestar had $564.0 million of forward agreements outstanding at September 30, 1995, which are primarily used to reduce the interest rate risk arising from changes in market rates from the time residential mortgage lending commitments are made until those commitments are funded. Certain litigation is pending against Crestar. Management, after reviewing this litigation with legal counsel, is of the opinion that these matters, when resolved, will not have a material effect on the accompanying consolidated financial statements. Financial Commentary Crestar Financial Corporation And Subsidiaries Overview (Tables 1, 2 and 14) Crestar Financial Corporation (Crestar) reported net income of $48.4 million for the quarter ended September 30, 1995, an increase of $4.8 million or 11% over net income reported in the third quarter of 1994. For the first nine months, earnings were $141.4 million in 1995, an increase of 12% from the $126.7 million reported in 1994. These increases reflected the continued positive effects of growth in noninterest income and stringent control of operating expenses. Earnings per common share were $1.27 for the third quarter of 1995, compared to $1.15 in 1994. For the first nine months of 1995, earnings per common share were $3.71, an increase of 11% from the $3.34 per share recorded in the first nine months of 1994. The predominant items affecting the change in earnings per share are given in Table 2. Each item is net of applicable federal income taxes. Crestar's subsidiaries provide banking and non-banking services throughout Virginia, Maryland and Washington, D.C., which compose Crestar's primary market area. This market area is characterized as economically diverse and stable. Business growth has continued to be strong in Crestar's market area during the current year, as evidenced by strong job creation and low unemployment rates. Crestar's market area is characterized by active competition in all principal areas where the Corporation provides services. In addition to banks, other firms competing in the market area include savings associations, consumer finance companies, national credit card companies, insurance companies, trust companies, securities brokerage firms, credit unions and mortgage banking companies. Mergers And Acquisitions On November 10, Crestar completed its previously announced purchase of the deposits and customer accounts, plus selected loans, of six branches of the Chase Manhattan Bank of Maryland. The transaction brings to Crestar approximately $450 million in deposits and $245 million in primarily consumer loans. The transaction was recorded as a purchase. The results of operations, subsequent to November 10, of the assets and liabilities purchased will be reflected in Crestar's fourth quarter 1995 and subsequent results. In April, Crestar announced an agreement to acquire Loyola Capital Corporation (Loyola), a $2.5 billion-asset thrift institution headquartered in Baltimore, Maryland. Loyola is the holding company for Loyola F.S.B., which operates 35 branches, primarily in central Maryland and Maryland's Eastern Shore, including 15 branches in the Baltimore metropolitan area. Loyola has total deposits of approximately $1.5 billion and total loans of approximately $2.1 billion. Under terms of the merger agreement, Loyola shareholders will receive Crestar common stock in exchange for their Loyola holdings. The transaction, which was approved by Loyola shareholders on October 17, is expected to be completed in late December 1995. Under the terms of the merger agreement, each common share of Loyola will be exchanged for a maximum of 0.75 common shares of Crestar common stock. At September 30, 1995, Loyola had 8,122,861 common shares outstanding. The Loyola acquisition will be accounted for as a pooling-of-interests transaction. After completion of the merger, the previous historical consolidated financial statements of Crestar, including results for 1994 and the first nine months of 1995, will be retroactively restated to include the prior results of Loyola. Unlike purchase-method accounting, these restated financial statements will therefore reflect results of operations as if Crestar and Loyola had always been combined. In connection with the merger with Loyola, Crestar anticipates recording in the fourth quarter various non-recurring charges of up to approximately $16 million, on an after-tax basis, for settlement of obligations under existing employment contracts, severance pay, early retirement and related employee benefits, branch closing costs and other expenses related to the merger. In addition, pending the outcome of proposed legislation in Congress, the fourth quarter may include an after-tax charge of approximately $11 million for the tax liability arising from the recapture of the tax bad debt reserves of Loyola. Under interstate banking and branching legislation enacted by Congress, previously existing restrictions on interstate bank acquisitions were abolished, effective September 29, 1995. Bank holding companies from any state are now able to acquire banks and bank holding companies located in any other state. Effective June 1, 1997, the law will allow interstate bank mergers, subject to earlier "opt-in" or "opt-out" action by individual states. The law also allows interstate branch acquisitions and new branch activity if permitted by the host state. Virginia and Maryland have adopted early "opt-in" legislation that allows interstate bank mergers, effective July 1, 1995 and September 29, 1995, respectively. These laws also permit interstate branch acquisitions and new branching in Virginia and Maryland by out-of-state banks if reciprocal treatment is accorded in the state of the acquiring bank or bank holding compay. Similar legislation is being considered in the District of Columbia. The new legislation has not yet had any significant effect on acquisition or branching activity in the region in which Crestar operates. Profitability Measures And Capital Resources (Table 1) Increased earnings in both the third quarter and the first nine months of 1995 resulted in improvements in most key profitability measures over 1994. Return on average assets was 1.38% in the third quarter and 1.35% for the first nine months of 1995, compared to 1.26% and 1.24%, respectively, for 1994. Return on average equity was 15.66% for the third quarter of 1995, compared to 15.70% for the third quarter of 1994. For the first nine months of 1995, return on average equity was 15.65%, compared to 15.44% for the first nine months of the previous year. Average equity to assets of 8.80% for the third quarter of 1995 increased 78 basis points from 8.02% in the third quarter of 1994, reflecting higher retained earnings and the impact of common stock issued for first quarter 1995 acquisitions. Average equity to assets for the first nine months of 1995 was 8.62%, compared to 8.04% for the same period of 1994. Period-end equity to assets of 8.53% at September 30, 1995 was 80 basis points above the September 30, 1994 ratio of 7.73%, also reflecting higher earnings and stock issued for acquisitions. Risk-based capital ratios are another measure of capital adequacy. At September 30, 1995, Crestar's consolidated risk-adjusted capital ratios were 9.2% for Tier 1 and 12.9% for total capital, well above the required minimums of 4.0% and 8.0%, respectively. The Tier 1 leverage ratio of 8.0% at September 30, 1995 also was significantly above the regulatory minimum of 3.0%. Crestar's tangible leverage ratio, defined as total equity less intangible assets divided by total assets less intangible assets, was 7.5% at September 30, 1995. Under Federal Deposit Insurance Corporation (FDIC) rules, each of Crestar's three subsidiary banks was considered "well-capitalized" as of September 30, 1995, the highest category of capitalization defined by regulatory authorities, allowing for the lowest level of FDIC insurance premium payments. Fourth quarter earnings may be impacted by a legislatively proposed one-time assessment of approximately 75 basis points (0.75%) on deposits insured by the Savings Association Insurance Fund (SAIF) of the FDIC. Any one-time assessment on SAIF-insured deposits will impact Crestar's three bank subsidiaries and Loyola F.S.B. Approximately 40% of Crestar's current deposit base, and virtually all of Loyola's current deposit base, are SAIF-insured. A 75 basis point assessment, on an after-tax basis, would result in a one-time charge to Crestar of approximately $15 million, and to Loyola of approximately $7 million. As a consequence of the one-time SAIF assessment, future earnings are expected to be augmented by a reduction in ongoing SAIF assessment rates. The estimated $15 million charge for Crestar reflects a proposed 20% reduction in the assessments on SAIF-insured deposits acquired by banks in thrift purchase transactions (Oakar deposits). Net Interest Margin And Net Interest Income (Tables 3 and 15) Crestar's net interest margin for the third quarter of 1995 was 4.89%, an improvement of 7 basis points from the margin recorded in the third quarter of 1994. The improvement was due to favorable changes in the composition and yield of balance sheet earning assets, which offset higher rates paid on deposits and declines in interest income arising from off-balance sheet hedge transactions. Positive influences on the third quarter 1995 margin include favorable changes in the composition of balance sheet earning assets and their respective interest rate yields. Changes in the earning asset mix increased the third quarter 1995 net interest margin by approximately 29 basis points when compared to the third quarter of 1994. Reflecting the impact of strong marketing efforts, increased demand and completed bank and thrift acquisitions, loans as a percentage of total earning assets increased from an average of 68% during the third quarter of 1994 to 76% for the same period of 1995. Average total loans were $9.5 billion during the third quarter of 1995, compared to $8.5 billion during the third quarter of 1994. Average bank card loans experienced significant growth, with third quarter 1995 average balances up $411 million, or 35%, versus the same period of 1994. The growth in bank card balances reflects Crestar's strong marketing emphasis, including promotional efforts outside of Virginia, Maryland and Washington, D.C. Average instalment loan balances were up $306 million or 18% from third quarter 1994, with average consumer real estate loans increasing 17% during this period. Average business loans for the third quarter were flat compared with the third quarter of 1994, as reductions in real estate- construction loans were offset by modest increases in commercial and real estate-income property loans. Funding for loan growth came in part from reductions in money market investments, which averaged $235 million in the third quarter of 1995 versus $781 million in the third quarter of 1994. Securities available for sale were also utilized to fund loan growth, with the average balance declining $387 million when compared to the 1994 third quarter average balance. With regards to funding sources, interest-bearing deposits represented 62% of total funding sources in the third quarter of 1995, versus 65% of funding sources in the same period of 1994. A higher rate environment, with increased competitive pricing for deposits among financial institutions, resulted in decreases in average balances for regular savings, interest checking and domestic time deposits, with average total deposits experiencing a decrease of $174 million, or 2%, from the third quarter of 1994. Average balances of short-term borrowings and long-term debt increased by $64 million and $159 million, respectively, during this same time period. These changes in funding sources had a negative impact of 9 basis points on the third quarter 1995 net interest margin, when compared to the same quarter of 1994. When coupled with the impact of changes to Crestar's earning asset mix, this resulted in a net 20 basis point improvement in the third quarter 1995 net interest margin arising from changes in Crestar's total balance sheet mix. The yield on average loans increased 41 basis points from the third quarter of 1994, to 8.92%. Higher yields were experienced on all categories of loans, with the exception of a decline on the average yield earned on Crestar's expanding credit card loan portfolio, which reflects the effects of promotional credit card rates. Yields on securities available for sale were 6.56% in third quarter 1995 versus 6.38% in the same period of 1994. Yields on securities held to maturity were 6.75% during the third quarter of 1995 versus 5.66% in the same period of 1994. Yields on money market investments were 5.93% for the third quarter of 1995 versus 4.60% for the third quarter of 1994. Reflecting a higher interest rate environment, the yield on total average earning assets was 8.38% for the third quarter of 1995, versus 7.69% for the same period of 1994. Also reflecting the higher rate environment, the average rate paid on deposits increased in many categories of interest-bearing core deposits. The average rate paid on total interest bearing deposits increased 64 basis points, from 3.19% in the third quarter of 1994 to 3.83% in 1995. Increases in rates paid on deposits, however, have lagged the increases in yields on variable rate assets, such as prime-rate based loans and money market investments. This has presented a favorable interest rate environment for many financial institutions. In total, interest rate spreads had a positive impact of 9 basis points on Crestar's third quarter 1995 net interest margin, when compared to the third quarter of 1994. Off-balance sheet hedge transactions, which had a favorable impact on the net interest margin in 1994, experienced net negative interest rate spreads between rates paid and rates received during the third quarter of 1995. In comparison to third quarter 1994, such off-balance sheet transactions had a negative impact of 19 basis points on third quarter 1995's net interest margin, partially offsetting the combined favorable impact on Crestar's net interest margin of 20 basis points from changes in balance sheet mix and 9 basis points from favorable changes in interest rates. The impact of nonperforming assets on third quarter 1995's net interest margin, in comparison to the same period of 1994, was not significant. As a result of the 7 basis point increase in the net interest margin and a 1% increase in average earning assets, tax-equivalent net interest income for the third quarter of 1995 increased 2% over the third quarter of 1994. For the first nine months, tax equivalent net interest income increased 5% over 1994 as a result of a 13 basis point increase in the net interest margin and a 2% increase in average earning assets. Factors contributing to the increased year-to-date margin mirror those previously discussed. Positive changes to the earning assets mix for the year-to-date period had a favorable impact of 31 basis points, while changes to the funding mix resulted in an 8 basis point negative impact to the year-to-date margin. Favorable interest rate spreads for the comparable nine month period increased the net interest margin by 17 basis points. Off-balance sheet hedge transactions had a negative impact on the margin, in comparison to year-to-date 1994 results, of approximately 28 basis points. For the first nine months of 1995, off-balance sheet hedge transactions resulted in a 0.7% decrease in the Corporation's total income from earning assets, and a 0.1% increase in total interest expense. Acquisitions completed during the first quarter of 1995 (Jefferson Savings and Loan Association, Independent Bank, and TideMark Bancorp, Inc.) contributed approximately 2% of Crestar's net interest income for the quarter ended September 30, 1995. The impact on Crestar's net interest margin for the third quarter and the first nine months of 1995 from the three acquisitions was not significant. The extent to which Crestar will be able to maintain its current net interest margin is significantly influenced by the economic environment in our markets and the economic policy of the Federal Reserve Board, in addition to competitive market conditions for both loans and deposits. Crestar's net interest margin of 4.89% for the third quarter of 1995, while up 7 basis points from the third quarter of 1994, was down slightly from the 4.93% recorded in the second quarter of 1995. A reduction in the prime commercial loan rate and fed funds interest rates contributed to this decline. Competitive pressures, in addition to acquisition strategies, may lead to further pressures on the Corporation's net interest margin in future periods. Risk Exposures And Credit Quality (Tables 4-7) Crestar's financial condition as of the end of the third quarter of 1995 exhibited strong overall credit quality. The allowance for loan losses was $223 million at September 30, 1995, representing 2.31% of period-end loans, 296% of period-end nonperforming assets, and a 367% coverage of nonperforming loans. Based on current expectations relative to portfolio characteristics and performance measures, including loss projections, management considers the level of the allowance adequate. Under the Corporation's criteria for classification of nonperforming loans, loans that are both (a) past due 90 days or more and (b) not deemed nonaccrual due to an assessment of collectibility are specifically excluded from the definition of nonperforming assets. Accruing loans past due 90 days or more, and excluded from classification as nonperforming assets, totaled $41.7 million at September 30, 1995, with consumer loans representing 93% of this balance. At September 30, 1995, nonperforming assets of $75.5 million were down $11.0 million or 13% from September 30, 1994, and down $19.4 million from December 31, 1994. These reductions were recorded despite $15.4 million in acquisition-related balances acquired during the first quarter of 1995. The ratio of nonperforming assets to loans and foreclosed properties at September 30, 1995 was 0.78%, down from 1.02% at December 31, 1994 and 1.00% at September 30, 1994. Based on current portfolio trends, and barring an unexpected deterioration in the economy, management does not expect the ratio of nonperforming assets to loans and foreclosed properties to change significantly during the remainder of 1995. Crestar's provision for loan losses was $14.0 million for the third quarter of 1995, compared to $8.1 million in provision expense recorded in the third quarter of 1994. Net charge-offs totaled $13.4 million in the third quarter of 1995, compared to $8.9 million in the comparable period of 1994. Net charge-offs as a percentage of average loans were 0.56% for the third quarter of 1995, compared to 0.54% for the second quarter of 1995 and 0.42% for the third quarter of 1994. The largest proportion of net loan charge-offs during the third quarter of 1995 occurred in the bank card loan portfolio. Net charge-offs for bank card loans were $14.1 million for the three months ended September 30, 1995, compared to $6.0 million in 1994's third quarter. This increase in bank card net charge-offs, while partially attributable to the significant growth of Crestar's bank card loan portfolio, also reflects current industry-wide trends of higher delinquency rates for consumer debt. Net bankcard loan charge-offs as a percentage of bankcard loans were 3.53% for the third quarter of 1995, compared to 3.11% for the second quarter of 1995 and 2.03% in the third quarter of 1994. Crestar's expectations are that the ratio of total net charge-offs to average total loans for the full year 1995 will increase from the level experienced in 1994, but remain below 1993's results. This expectation is based upon assumptions regarding the general economic climate in Crestar's principal markets and the performance characteristics of the loan portfolio, including Crestar's continued success in resolving remaining nonperforming loans. Changes in these conditions may produce different results. Net charge-offs to average total loans were 0.45% in 1994 and 0.95% in 1993. In addition to other loan categories, Crestar closely manages its portfolio of loans to real estate developers and investors (REDI). As shown in Table 4, REDI outstanding balances remained fairly constant and totaled $1.0 billion at September 30, 1995. This balance represented 11% of the total loan portfolio at that date. At September 30, 1994, REDI loans represented 13% of the total loan portfolio. Table 5 provides the property type and geographic diversification of the current REDI portfolio. REDI nonperforming assets were $48.9 million at September 30, 1995, compared to $56.4 at September 30, 1994. Potential problem loans consist of loans that are currently performing in accordance with contractual terms but for which potential operating or financial concerns of the obligors have caused management to have serious doubts regarding the ability of such obligors to continue to comply with present repayment terms. At September 30, 1995, potential problem loans, not included in Table 7, amounted to approximately $184 million. Potential problem loans were $210 million at December 31, 1994 and $144 million at September 30, 1994. In many lending transactions, collateral is taken to reduce the credit risk exposure and provide an additional measure of security. Generally, the cash flow or earning power of the borrower represents the primary source of repayment and collateral liquidation a secondary source of repayment. Crestar determines the need for collateral on a case-by-case or product-by-product basis. Factors considered include the current and prospective creditworthiness of the customer, terms of the instrument and economic conditions. It is the policy of the Corporation to review each prospective credit in order to determine an adequate level of security or collateral to obtain prior to making the loan. The type of collateral will vary and ranges from liquid assets to real estate. The Corporation's access to collateral, in the event of borrower default, is assured through adherence to state and local lending laws and the Corporation's lending standards and credit monitoring procedures. The amount of collateral, if any, is based on industry practice as well as an assessment of the creditworthiness of the customer. The primary risk associated with bankcard loans is that they are unsecured and are solely dependent upon the creditworthiness of the borrower. The Corporation monitors this risk using both internal and external statistical models, as well as monitoring economic trends, such as employment and wage levels, within targeted lending areas. Underwriting standards are continually evaluated and modified based upon these factors. Noninterest Income And Expense (Table 8) Noninterest income totaled $71.8 million in the third quarter of 1995, a $8.0 million or 13% increase over the third quarter of 1994. Excluding securities losses, noninterest income increased $8.1 million over third quarter 1994 results. This increase reflects growth in most noninterest income categories, partially offset by a decline in mortgage income. Reflecting promotional activities and increased merchant fee volume, bank card-related fee income increased by $1.8 million, or 17%, in comparison to the third quarter of 1994. Trust and investment advisory income increased 18% from third quarter 1994 levels, while service charges on deposit accounts increased 11% in comparison to the third quarter of 1994. Mortgage income for the third quarter of 1995 totaled $5.6 million, or $3.5 million less than the results reported in the third quarter of 1994. Gains on sales of mortgage servicing rights totaled $4.8 million in the third quarter of 1994, while there were no such sales in the third quarter of 1995. Other noninterest income for the third quarter of 1995 includes a net gain of $4.7 million arising from the sale or closure of 15 branches. In an effort to rationalize operating and marketing efficiencies within its branch operations, Crestar from time-to-time will sell or close selected branches. For the nine months ended September 30, 1995, net gains from such activities totaled $3.2 million. At September 30, 1995, Crestar operated 332 banking offices. Noninterest expense was down 3% in the third quarter of 1995 when compared to the same period of 1994, totaling $134.5 million for the three month period ended September 30, 1995 versus $138.5 million for the same period of 1994. Management continues to emphasize prudent control of noninterest expenses and assimilation of recent acquisitions in a cost-effective manner. Personnel expense decreased 2%, and occupancy expense was down 5%, compared to the third quarter of 1994. Other noninterest expense, reflecting the rebate of FDIC deposit insurance fees during the quarter, fell $2.2 million or 5% compared to the third quarter of 1994. During the third quarter, Crestar's deposit insurance assessments on deposits insured by the FDIC's Bank Insurance Fund (BIF) decreased from 0.31% to 0.04%, on an annualized basis. Because the decrease was retroactive to June 1995, a rebate of $4.2 million was recorded in the third quarter of 1995 as a reduction of FDIC premium expense. The assessments for deposits insured under the Savings Association Insurance Fund (SAIF) of the FDIC remained unchanged. The third quarter 1995 foreclosed properties expense of $0.8 million was flat compared to third quarter 1994. For the nine month period ended September 30, 1995, foreclosed properties expense resulted in a small net credit balance arising from net gains recorded on the sale of foreclosed properties during 1995. Foreclosed properties expense for the nine months ended September 30, 1994 was $1.8 million. The effective tax rate for third quarter 1995 and the first nine months of 1995 was 35.3% and 34.2%, respectively, compared to 34.4% and 33.3% for the same periods in 1994. Increased provisions for state income taxes and higher amortization of goodwill, which is non-deductible for tax purposes, contributed to the higher effective tax rates for 1995. Financial statement note 10 contains additional information concerning income taxes. Financial Condition (Table 9) Crestar's assets totaled $14.8 billion at September 30, 1995, compared to $14.0 billion at December 31, 1994, and $14.5 billion at September 30, 1994. The increase from year-end 1994 is primarily due to acquisitions completed during the first quarter of 1995. Loans net of unearned income increased $384 million, or 4%, from year-end 1994 levels, reflecting growth from a combination of acquisitions and internally generated lending, offset by declines in real estate - - construction loan balances. Total deposits of $10.9 billion at September 30, 1995 were minimally changed from December 31, 1994 balances. Despite the impact of acquisitions completed during the first quarter, a higher interest rate environment and increased competition for deposits resulted in declines in demand, interest checking and regular saving deposits. With respect to the securities held to maturity portfolio, carrying value exceeded the market value at September 30, 1995 by $2.9 million, consisting of $4.2 million in unrealized gains and $7.1 million in unrealized losses. At September 30, 1995, the amortized cost of securities available for sale exceeded the fair value of such securities by $4.1 million, consisting of $6.5 million in unrealized gains and $10.6 million in unrealized losses. Shareholders' equity at September 30, 1995 reflects a $2.6 million reduction for the excess, net of tax, of the amortized cost of securities available for sale over the fair value at quarter-end, compared to reductions of $36.6 million and $30.8 million at December 31, 1994 and September 30, 1994, respectively. The net unrealized gain or loss on securities available for sale, which is recorded as a component of shareholders' equity, will continue to be subject to change in future periods due to fluctuations in market value, acquisition activities, and purchases, sales, maturities and calls of securities classified as available for sale. Unrealized losses at September 30 are not expected to have a material impact on the future operating results or liquidity of the Corporation. All mortgage-backed securities in the securities available for sale and the securities held to maturity portfolios are subject to prepayment risk, since the mortgage loans underlying these securities can prepay at any time without penalty. This risk becomes apparent during periods of declining interest rates, when refinancing of existing mortgage loans can accelerate. During these periods, the expected maturity of mortgage-backed securities shortens due to prepayments, reducing the expected stream of future interest payments to be received. The interest rate and prepayment risk associated with mortgage-backed securities is considered by management in assessing the overall asset/liability structure of the Corporation. During the third quarter of 1995, Crestar sold approximately $378 million of securities classified as available for sale, generating securities losses of $69 thousand. Such sales were consummated in conjunction with the overall management of interest rate risk for the Corporation. Crestar purchased and retired 135,000 shares of common stock during the third quarter of 1995, and has purchased and retired 1.5 million shares of common stock during the first nine months of 1995. Such purchases were primarily made to offset the issuances of common stock relating to the three acquisitions completed during the first quarter of 1995. Purchases during the third quarter of 1995 were made at an average price of $52.61 per common share. As of September 30, 1995, Crestar had a remaining authorization to purchase and retire up to 1.2 million shares of common stock in order to meet the needs of the dividend reinvestment plan, thrift and profit sharing plan and the first quarter 1995 issuances related to acquisitions. Liquidity and Interest Sensitivity (Tables 10-13) Bank liquidity is a measure of the ability to generate and maintain sufficient cash flows to fund operations and to meet financial obligations to depositors and borrowers promptly and in a cost-effective manner. Liquidity is provided through securities available for sale, money market investments, maturing loans and securities, and the ability to generate new deposits or borrowings as needed. Crestar's liquidity position is actively managed on a daily basis, and monitored regularly by the Asset/Liability Management Committee (ALCO). ALCO's overall objective is to optimize net interest income within the constraints of prudent capital adequacy, liquidity needs, the interest rate and economic outlook, market opportunities and customer requirements. General strategies to accomplish this objective include maintaining a strong balance sheet, maintaining strong core deposit levels, accepting manageable interest rate risk, adhering to conservative financial management principles and practicing prudent dividend policies. Core deposits provide a typically stable source of liquidity. Crestar's interest-bearing core deposits represented 65% of total funding sources at September 30, 1995, compared to 67% of total funding sources at September 30, 1994. As an additional indication of adequate liquidity, securities available for sale represented 14%, and money market investments represented 5%, of Crestar's total earning assets at September 30, 1995. Interest sensitivity refers to the volatility of net interest income as a result of changes in interest rates. Crestar's goal is to limit interest rate exposure to prudent levels as determined by the Corporation's ALCO committee. ALCO establishes limits on the earnings at risk for a twenty-four month period. The level of exposure taken is based on an assessment of the market environment, and will vary from period to period. The primary tool used by ALCO in assessing interest rate exposure is net interest income simulations. The committee establishes limits on net interest income at risk for a twenty-four month period. A two year net interest income forecast is prepared regularly based on a consensus interest rate forecast, in addition to high and low interest rate scenarios. The high and low interest rate scenarios are based upon an assessment of the historic volatility of interest rates. The expected dynamics of the balance sheet under each scenario, including shifts in loans and deposits, are included in the simulations. By its nature, this simulation process includes numerous assumptions, for both long-term and short-term timeframes, including assumptions on average balances and yields, and forecasts of interest rate movements. Other assumptions made in the Corporation's simulation process relate to early loan repayments and investment security repayments. Prepayment assumptions are based on the expertise of management along with input from external financial market sources. Many of the assumptions used in the simulation process are both highly qualitative and subjective, and subject to the risk that past historical activity may not generate accurate predictions of future results. The high rate and low rate estimates generated by this simulation process are compared to the estimate generated under the consensus interest rate scenario. Crestar's most recent projection of pre-tax earnings at risk, as a percentage of the next twenty-four month's projected net interest income under a consensus interest rate scenario, is approximately 3% for a high interest rate scenario, and 4% for a falling interest rate scenario. The net interest income at risk percentage does not consider all possible future discretionary actions, including possible hedging activity, that may be entered into to manage future earnings volatility. The most recent projections indicate a sufficient liquidity position, and acceptable operating environment, under the high, low and consensus interest rate scenarios. A second interest sensitivity tool is the quantification of market value changes for all assets and liabilities given an increase or decrease in interest rates. This approach provides a longer term view of interest rate risk, capturing predominantly all expected future cash flows. Assets and liabilities with option characteristics are valued based on numerous interest rate path valuations using Monte Carlo rate simulation techniques. The banking industry and its regulatory authorities are moving toward a market value method of interest sensitivity assessment. Crestar has been developing this tool and is incorporating it as another component of interest rate risk management to supplement the results achieved through net interest income simulations. Another interest rate risk tool used by Crestar is the interest rate "gap", or mismatch in repricing between interest-sensitive assets and liabilities, which provides a general indication of interest sensitivity at a specific point in time. A gap schedule is shown in Table 10, and reflects the earlier of the maturity or repricing dates for various assets and liabilities at September 30, 1995. At that point in time, Crestar had a cumulative negative twelve-month gap with $1.5 billion excess of interest-sensitive sources of funds over uses of funds. This generally indicates that earnings should improve in a declining interest rate environment as liabilities reprice more quickly than assets. The opposite would be true of a positive, or asset-sensitive, gap. While most assets and liabilities reprice either at maturity or in accordance with their contractual terms, some demonstrate characteristics that require adjustments to more accurately reflect their repricing behavior. Table 10 presents interest sensitivity on an adjusted basis to reflect these characteristics. The first of these adjustments is made through the use of beta factors, which are based on a ratio of actual changes in interest rates on consumer deposits with no stated maturity (interest checking, money market and regular savings deposits) to changes in the prime rate during interest rate cycles for the last several years. Essentially, the beta factors recognize that certain consumer deposits are less interest-sensitive than other funding sources, such as short-term borrowings, to movements in market interest rates. For example, the beta adjustment for interest checking in Table 10 demonstrates that for any given increase or decrease in the prime commercial loan rate, Crestar expects the interest rates paid on interest checking deposits will reprice much slower, in both a rising and falling rate environment, than the commercial prime rate. This is an industry-wide characteristic of interest checking deposits that Crestar must address for a more accurate gap analysis. The beta adjustments, therefore, are used to quantify these deposits as sources of funds that are less sensitive to prime interest rate changes than indicated by their variable rate characteristics. In addition to beta adjustments, the table also incorporates an adjustment to reflect the sensitivity of much of the Corporation's demand deposit balances to the level of interest rates. In periods of rising interest rates, average balances of non-interest bearing demand deposits will decrease (all other factors being constant) as customers become more sensitive to reducing debt or converting demand deposit funds to interest bearing accounts. On a cumulative twelve-month basis, Crestar had an asset sensitive "adjusted gap" at September 30, 1995, with $1.3 billion excess of interest-sensitive uses of funds over sources of funds. This generally indicates that earnings should improve in a rising interest rate environment as assets reprice more quickly than liabilities. While Crestar does not have a targeted gap range, management considers the adjusted gap at September 30, 1995 to be at a prudent level in the current interest rate and economic environment. This is supported by Corporation's net interest income simulations (see above), which remain the primary asset/liability management tool. The static gap and adjusted gap do not include $230 million (notional amount) of interest rate caps which Crestar has added to potentially offset the effect of rising interest rates on variable rate deposits. These interest rate caps did not have an impact on Crestar's static gap and adjusted gap at September 30, 1995, as the fixed strike rates on the caps were above their specified market index rates. Each of the above three tools used to assess interest rate risk have strengths and weaknesses. While Crestar believes that the above methodologies provide a meaningful representation of the Corporation's interest rate sensitivity, the methodologies do not necessarily take into account all business developments which can have an impact on net interest income, such as changes in credit quality or changes in the amount and composition of earning assets and sources of funds. As noted, Crestar incurs a degree of interest rate risk as a provider of banking services to its customers. This risk can be reduced through derivative interest rate contracts, such as interest rate swaps, caps and floors. The majority of Crestar's outstanding derivative instruments at September 30, 1995 are utilized to convert certain variable rate assets to fixed rates in order to lock in a profitable interest spread based on the underlying fixed rate funding sources. Because financial derivatives typically do not have actual principal dollars transferred between parties, notional principal amounts are used to express the volume of such transactions. However, the notional amount of derivative contracts does not represent direct credit exposure, which the Corporation believes is a combination of current replacement cost of those instruments with a positive market value plus an amount for additional market movement. Crestar has established policies governing derivative activities, and the counterparties used by Crestar are considered high quality credits. In addition, Crestar may demand collateral from a counterparty to further minimize credit risk. There were no past due amounts or reserves for possible derivative credit losses at September 30, 1995, nor has Crestar ever experienced any charge-offs related to the credit risk of derivative transactions. The notional amount of Crestar's interest rate swaps, caps and floors (excluding customer positions where Crestar acts as an intermediary) was $1.6 billion at September 30, 1995. Forward contracts with a notional amount of $564 million, utilized to hedge lending commitments of Crestar's mortgage banking subsidiary, were also outstanding at September 30, 1995, bringing the total notional value of derivative financial instruments related to interest rate risk management activities to $2.2 billion at September 30, 1995. Tables 11, 12, and 13 present information regarding fair values, maturity, average rates, and activity as of and for the nine month period ending September 30, 1995 for these off-balance sheet derivative instruments. Net unrealized losses on these instruments totaled $5.3 million as of September 30, 1995. Financial statement note 11 contains additional information pertaining to these types of agreements. Index amortizing interest rate swaps represent $594 million of the $2.2 billion in notional value of derivative instruments, as of September 30, 1995, utilized in Crestar's risk management activities. A key characteristic of index amortizing swaps is that their notional value may amortize more slowly in a rising interest rate environment than in a stable or falling interest rate environment. This characteristic can lead to increased volatility of fair values during periods of changing interest rates. The economic purpose of using these swaps is to convert floating rate loans to fixed rates, as an interest rate risk management strategy, where fixed rate deposits have provided the source of funds for underwriting the applicable loans. Crestar utilizes its interest rate simulation and market valuation methods, in addition to its monitoring of financial market activity, to control risks related to index amortizing swaps and other derivative instruments. The weighted average expected maturity of Crestar's index amortizing swaps at September 30, 1995 was less than eight months. During the second and third quarters of 1995, the Corporation terminated prior to maturity certain interest rate swaps being utilized as hedges against interest rate risk. The losses upon termination have been deferred and are being amortized as a yield adjustment over the remaining term of each terminated swap contract. At September 30, 1995, the unamortized balance of the deferred losses was $3.7 million. The terminations reflect decisions by ALCO to refine balance sheet management strategies; additional terminations of interest rate swaps prior to maturity may occur in the future in response to modifications of interest rate risk management strategies. New Accounting Standards The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122) in May 1995. SFAS 122 requires that the cost of mortgage loans originated or purchased with a definitive plan to sell the loans and retain the servicing rights be allocated between the loans and servicing rights based on their estimated fair values at the purchase or originating date. In compliance with the guidelines of SFAS 122, Crestar elected to adopt the new accounting standard effective January 1, 1995. The provisions of SFAS 122 have been applied prospectively to transactions occurring after January 1, 1995. The effects of adopting SFAS 122 on Crestar's consolidated financial statements for the three and nine month periods ended September 30, 1995 were increases in mortgage origination income of $985,000 and $2,660,000, respectively, with corresponding increases in mortgage servicing rights (classified as Other assets in the Consolidated Balance Sheets). Such additional income resulted from a lower adjusted cost basis on mortgage loans sold by the Company's mortgage banking subsidiary during the first nine months of 1995. See Financial Statement note 1 for further information on SFAS 122. The FASB issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114) in 1993. SFAS 114 was further amended by the FASB in 1994 through the issuance of Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures" (SFAS 118). Effective January 1, 1995, SFAS 114, as amended by SFAS 118, requires that an impaired loan be measured and reported on the basis of the present value of expected cash flows discounted at the loan's effective interest rate, or at the fair value of the loan's collateral if the loan is deemed collateral dependent. Impaired loans are specifically reviewed loans for which it is probable that the creditor will be unable to collect all amounts due according to the terms of the loan agreement. SFAS 118 allows a creditor to use existing methods for recognizing interest income on an impaired loan. For Crestar's nonaccrual loans, including impaired loans, interest receipts are recognized as interest revenue or are applied to principal when management believes the ultimate collectibility of principal is in doubt. At September 30, 1995, impaired loans of $28 million were included in the nonaccrual loan balances of Crestar. The balance of impaired loans at January 1, 1995 totaled $40 million. Because the majority of loans deemed impaired during the first nine months of 1995 were collateral dependent, valuations of impaired loans did not vary materially from the values previously assigned to this population of loans. The initial adoption of the new accounting standard did not require an increase to Crestar's allowance for loan losses. The impact of adopting SFAS 114, as amended by SFAS 118, was therefore immaterial to the financial condition and operations of Crestar as of and for the nine month period ended September 30, 1995, and had no material impact on the comparability of the credit risk information included in Tables 4 through 7. Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was issued in March 1995. The Statement requires that long-lived assets and certain identifiable intangibles to be held and used by a company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the company should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss would be recognized if the sum of the expected future cash flows, undiscounted, is less than the carrying amount of the asset. The Statement also establishes standards for recording an impairment loss for certain assets that are subject to disposal. The Statement excludes financial instruments, long-term customer relationships of financial institutions, mortgage servicing rights, and deferred income tax assets. Adoption of the new accounting standard is expected to occur on January 1, 1996. At this time, Crestar does not expect any impact to the Corporation's net income upon implementation of SFAS 121. Table 1 Financial Highlights
Dollars in millions, except per share data Three Months Nine Months % % For the Period Ended September 30 1995 1994 Change 1995 1994 Change Net Income $48.4 $43.6 11 $141.4 $126.7 12 Dividends Declared on Common Stock 17.0 15.1 12 49.4 42.5 16 Per Common Share: Net Income $1.27 $1.15 10 $ 3.71 $ 3.34 11 Dividends Declared .45 .40 13 1.30 1.13 15 Average Shares Outstanding (000s) 38,053 38,063 - 38,107 37,933 - ====== ====== == ====== ====== == Key Ratios Return on Average Assets 1.38% 1.26% 1.35% 1.24% Return on Average Equity 15.66 15.70 15.65 15.44 Average Equity to Average Assets 8.80 8.02 8.62 8.04 Net Interest Margin 4.89 4.82 4.94 4.81 At September 30 Book Value Per Share $33.38 $29.70 12 Equity to Assets 8.53% 7.73% Risk Adjusted Capital Ratios: Tier 1 9.2 9.6 Total 12.9 12.2 Common Shares Outstanding (000s) 37,709 37,598 ====== ======
Table 2 Analysis Of Earnings Per Common Share
3rd Qtr. 1995 3rd Qtr. 1995 vs. vs. 3rd Qtr. 1994 2nd Qtr. 1995 Earnings Per Common Share - prior period $1.15 $1.24 ----- ----- Interest income .37 - Interest expense (.34) (.03) Provision for loan losses (.10) (.01) Securities gains or losses - .03 Other noninterest income .14 .01 Noninterest expense .07 .08 Income taxes (.02) (.05) ---- ---- Net increase .12 .03 --- --- Earnings Per Common Share - current period $1.27 $1.27 ===== =====
Table 3 Average Balances, Net Interest Income And Rate/Volume Analysis(1) Dollars in thousands
3rd Qtr. ---------------------------------------- 2nd Qtr. Average Balance Average ------------------------- Increase Balance 1995 1994 (Decrease) 1995 --------- ---------- ---------- --------- $ $ % $ 2,888,705 2,840,046 2 3,017,662 Commercial 786,408 776,197 1 802,250 Real estate - income property 173,824 225,788 (23) 182,905 Real estate - construction 2,036,619 1,730,946 18 1,967,956 Instalment 1,590,871 1,179,880 35 1,573,073 Bank card 2,070,274 1,769,755 17 2,174,101 Real estate - mortgage --------- --------- -- --------- 9,546,701 8,522,612 12 9,717,947 Total loans - net of unearned income(2) 819,922 961,378 (15) 852,398 Securities held to maturity 1,562,548 1,949,879 (20) 1,411,687 Securities available for sale 234,606 780,606 (70) 289,402 Money market investments 411,719 268,309 53 254,491 Mortgage loans held for sale ------- ------- --- ------- 12,575,496 12,482,784 1 12,525,925 Total earning assets ========== ========== == ========== 1,817,501 1,876,726 (3) 1,868,312 Interest checking deposits 2,513,028 2,410,600 4 2,482,634 Money market deposit accounts 1,242,381 1,486,232 (16) 1,310,929 Regular savings deposits 3,160,571 3,204,215 (1) 3,187,239 Domestic time deposits --------- --------- -- --------- 8,733,481 8,977,773 (3) 8,849,114 Total interest-bearing core deposits 1,317,800 1,252,181 5 1,227,230 Purchased liabilities 379,155 220,584 72 384,971 Long-term debt 10,430,436 10,450,538 - 10,461,315 Total interest-bearing liabilities ---------- ---------- ---------- 2,145,060 2,032,246 6 2,064,610 Other sources - net --------- --------- - --------- 12,575,496 12,482,784 1 12,525,925 Total sources of funds ========== ========== = ========== Net Interest Income
3rd Qtr. -------------------------------------------- 1995 vs. 1994 3rd Qtr. 1995 vs. 2nd Qtr. 1995 ----------------------------- ------------------------------- Income/Expense(3) Change due to(4) 2nd Qtr. Change due to(4) --------------- ------------------ Income/ ----------------- Increase Expense(3) Increase 1995 1994 (Decrease) Rate(5) Volume 1995 (Decrease) Rate(5) Volume ------ ------ -------- ------ ------ ---------- --------- ------- ------ $ $ $ $ $ $ $ $ $ Commercial 59,693 57,493 2,200 1,230 970 63,828 (4,135) (1,411) (2,724) Real estate - income property 17,084 16,353 731 517 214 17,132 (48) 289 (337) Real estate - construction 4,290 4,907 (617) 510 (1,127) 4,420 (130) 89 (219) Instalment 48,179 37,145 11,034 4,493 6,541 46,104 2,075 490 1,585 Bank card 44,811 35,034 9,777 (2,338) 12,115 45,169 (358) (862) 504 Real estate - mortgage 39,845 32,074 7,771 2,360 5,411 41,303 (1,458) 513 (1,971) ------- ------- ------- ------- ------- ------- ------ ------ ------ Total loans - net of unearned income(2) 213,902 183,006 30,896 9,083 21,813 217,956 (4,054) (240) (3,814) Securities held to maturity 13,842 13,609 233 2,707 (2,474) 14,036 (194) 341 (535) Securities available for sale 26,043 31,352 (5,309) 282 (5,591) 22,942 3,101 649 2,452 Money market investments 3,507 9,058 (5,551) 785 (6,336) 4,363 (856) (30) (826) Mortgage loans held for sale 7,539 5,197 2,342 (436) 2,778 5,127 2,412 (756) 3,168 ------- ------- ------- ------- ------- ------- ------ ------ ------ Total earning assets 264,833 242,222 22,611 20,823 1,788 264,424 409 (632) 1,041 ======= ======= ======= ======= ======= ======= ====== ====== ====== Interest checking deposits 9,968 10,544 (576) (243) (333) 10,489 (521) (236) (285) Money market deposit accounts 24,549 17,966 6,583 5,820 763 24,183 366 70 296 Regular savings deposits 8,404 10,177 (1,773) (103) (1,670) 9,165 (761) (282) (479) Domestic time deposits 40,925 33,101 7,824 8,335 (511) 39,019 1,906 2,241 (335) ------- ------- ------- ------- ------- ------- ------ ------ ------ Total interest-bearing core deposits 83,846 71,788 12,058 14,019 (1,961) 82,856 990 2,078 (1,088) Purchased liabilities 18,264 13,930 4,334 3,608 726 17,574 690 (603) 1,293 Long-term debt 8,041 4,484 3,557 333 3,224 8,173 (132) (9) (123) Total interest-bearing liabilities 110,151 90,202 19,949 20,123 (174) 108,603 1,548 1,870 (322) ------- ------- ------- ------- ------- ------- ------ ------ ------ Other sources - net Total sources of funds 110,151 90,202 19,949 19,277 672 108,603 1,548 1,117 431 Net Interest Income 154,682 152,020 2,662 1,546 1,116 155,821 (1,139) (1,749) 610 ======= ======= ======= ======= ======= ======= ====== ====== ======
(1) Tax-equivalent basis. (2) Nonaccrual loans are included in the average loan balances and income on such loans is recognized on a cash basis. (3) Includes tax-equivalent net loan fees of $72,000 and $814,000 for the third quarter of 1995 and 1994, respectively, and $382,000 for the second quarter of 1995. (4) Variances are computed on a line-by-line basis and are non-additive. (5) Variances caused by the change in rate times the change in balances are allocated to rate. Table 4 Loans To Real Estate Developers And Investors (REDI)
In millions September 30, June 30, December 31, 1995 1994 1995 1994 Commercial - developer lines $ 70.6 $ 98.5 $ 78.6 $ 98.7 Commercial - other 55.4 77.3 63.2 67.7 Real estate - income property 780.7 761.4 794.3 744.9 Real estate - construction 122.5 190.6 134.4 152.0 ----- ----- ----- ----- Total REDI loans $1,029.2 $1,127.8 $1,070.5 $1,063.3 ======== ======== ======== ========
Table 5 Loans To Real Estate Developers And Investors-- Geographic Distribution And Property Type September 30, 1995 In millions
Region Total Greater Corporation Washington Eastern Western Capital Land acquisition and development $ 78.1 $ 44.4 $ 25.9 $ 3.5 $ 4.3 Residential developments 238.4 126.2 66.8 38.0 7.4 Commercial projects: Office buildings 141.8 91.5 29.6 9.4 11.3 Retail stores and malls 207.2 147.7 42.0 8.1 9.4 Hotels and motels 110.2 38.5 41.7 22.4 7.6 Industrial buildings 124.6 90.8 13.5 4.8 15.5 ----- ---- ---- --- ---- Total commercial projects 583.8 368.5 126.8 44.7 43.8 ----- ----- ----- ---- ---- Special use 56.9 26.2 15.9 12.9 1.9 Other 72.0 52.7 13.1 2.3 3.9 ---- ---- ---- --- --- Total REDI loans $1,029.2 $618.0 $248.5 $101.4 $61.3 ======== ====== ====== ====== =====
Table 6 Allowance For Loan Losses Dollars in thousands
Third Quarter Nine Months Ended Sept. 30, 1995 1994 1995 1994 Beginning balance $ 222,882 $ 226,666 $ 219,189 $ 210,958 --------- --------- --------- --------- Allowance from acquisitions - net (100) (21) 5,356 15,687 --------- --------- --------- --------- Provision for loan losses 14,000 8,100 37,600 26,982 --------- --------- --------- --------- Net charge-offs (recoveries): Commercial (180) 767 239 3,963 Real estate - income property (1,511) 2,211 (1,225) 6,125 Real estate - construction (990) (1,529) (1,956) (2,297) Instalment 1,978 1,138 5,007 2,774 Bank card 14,052 5,990 36,212 16,272 Real estate - mortgage 3 278 438 900 --------- --------- --------- --------- Total net charge-offs 13,352 8,855 38,715 27,737 --------- --------- --------- --------- Balance, September 30 $ 223,430 $ 225,890 $ 223,430 $ 225,890 ========= ========= ========= ========= Allowance for loan losses to period-end loans 2.31% 2.61% 2.31% 2.61% Annualized net charge-offs to average loans .56 .42 .54 .46 ========= ========= ========= =========
Table 7 Nonperforming Assets And Past Due Loans
Dollars in thousands September 30, December 31, Nonaccrual loans: 1995 1994 1994 Commercial $22,540 $26,224 $28,708 Real estate - income property 21,034 23,468 21,872 Real estate - construction 5,963 3,668 7,279 Instalment 4,308 2,787 3,408 Real estate - mortgage 7,090 6,787 8,139 ----- ----- ----- Total nonaccrual loans 60,935 62,934 69,406 Restructured loans - - 6,878 ----- ------ ------ Total nonperforming loans(1) 60,935 62,934 76,284 Foreclosed properties - net 14,614 23,644 18,629 ------ ------ ------ Total nonperforming assets(1) $75,549 $86,578 $94,913 ======= ======= ======= Nonperforming assets(1) to: Loans and foreclosed properties - net .78% 1.00% 1.02% Total assets .51 .60 .68 Allowance for loan losses to: Nonperforming assets(1) 296 261 231 Nonperforming loans(1) 367 359 287 Allowance for loan losses plus shareholders' equity to nonperforming assets(1) 19.62x 15.51x 14.17x ===== ===== ===== Accruing loans past due 90 days: Commercial $ 1,460 $ 2,204 $ 1,608 Real estate - income property 991 424 1,071 Real estate - construction 306 133 198 Instalment: Student 8,812 11,092 14,705 Other 2,962 1,160 1,368 Bank card 16,654 8,486 10,831 Real estate - mortgage 10,530 9,014 5,920 ------ ----- ----- Total accruing loans past due 90 days: $41,715 $32,513 $35,701 ======= ======= =======
(1) Loans which are both past due 90 days or more and not deemed nonaccrual due to an assessment of collectibility are specifically excluded from the definition of nonperforming. Table 8 Summary Of Noninterest Income And Expense
In thousands Second Nine Months Ended Third Quarter Quarter September 30, Noninterest Income 1995 1994 1995 1995 1994 Service charges on deposit accounts $ 22,833 $ 20,640 $ 21,765 $ 66,189 $ 62,535 Trust and investment advisory 15,581 13,244 15,151 44,270 42,688 Bank card-related 12,101 10,321 11,919 35,078 27,296 Mortgage servicing - net 2,663 3,195 2,722 8,465 9,614 Mortgage origination - net 2,924 1,140 2,151 5,858 7,108 Trading account activities 416 49 657 1,697 444 Commissions on letters of credit 1,167 874 1,059 3,500 3,624 Gain on sale of mortgage servicing rights - 4,800 - 5,900 14,132 Gain on sale and disposal of branches - net 4,655 - - 3,169 - Gain on pension settlement - - 4,340 4,340 - Miscellaneous 9,487 9,463 11,378 31,043 26,167 Securities gains (losses) (69) 12 (1,050) (3,529) (1,755) --- -- ------ ------ ------ Total noninterest income $ 71,758 $ 63,738 $ 70,092 $205,980 $191,853 ======== ======== ======== ======== ======== Noninterest Expense Salaries $ 60,962 $ 62,655 $ 60,876 $183,034 $182,580 Benefits 14,854 14,976 15,432 45,406 45,840 ------ ------ ------ ------ ------ Total personnel 75,816 77,631 76,308 228,440 228,420 Occupancy - net 10,586 11,098 10,616 32,162 31,953 Equipment 6,919 6,370 6,904 20,835 18,367 Communications 7,012 6,670 7,074 21,300 18,767 Stationery, printing and supplies 1,691 2,023 1,956 5,753 6,118 Professional fees and services 3,219 2,743 2,522 9,116 8,550 Loan expense 2,087 1,943 1,933 5,863 7,567 FDIC premiums - net 2,024 6,429 6,644 15,037 18,716 Advertising and marketing 3,309 6,199 3,811 11,480 14,680 Transportation 1,455 1,489 1,505 4,451 4,368 Outside data services 4,852 4,670 4,879 14,739 13,859 Amortization of purchased intangibles 3,426 (252) 3,429 9,655 6,186 Miscellaneous 11,228 10,582 10,728 31,121 30,411 ------ ------ ------ ------ ------ Subtotal 133,624 137,595 138,309 409,952 407,962 Foreclosed properties 846 858 694 (9) 1,751 --- --- --- -- ----- Total noninterest expense $134,470 $138,453 $139,003 $409,943 $409,713 ======== ======== ======== ======== ========
Table 9 Debt Ratings (as of October 30, 1995)
Standard Thomson Security Moody's & Poor's BankWatch 8 3/4% Subordinated Notes due 2004 Baa1 BBB+ A- 8 1/4% Subordinated Notes due 2002 Baa1 BBB+ A- 8 5/8% Subordinated Notes due 1998 Baa1 BBB+ A- Commercial Paper P-2 Not rated TBW-1 Crestar Bank Deposit Notes: Long-Term A2 A Not rated Short-Term P-1 A-1 TBW-1
Table 10 Interest Sensitivity Analysis September 30, 1995
In millions Maturity/Rate Sensitivity 0-3 3-6 6-12 One to Over Uses Of Funds months months months five years five years Total Loans: Commercial $ 2,347.8 $ 51.8 $ 69.4 $ 76.7 $ 502.9 $ 3,048.6 Real estate - income property 389.5 6.8 10.3 21.3 352.0 779.9 Real estate - construction 149.5 1.6 .9 1.2 18.0 171.2 Instalment 916.7 102.4 148.4 226.3 683.3 2,077.1 Bank card 231.2 135.0 748.5 364.1 97.5 1,576.3 Real estate - mortgage 16.1 319.7 294.1 579.3 807.2 2,016.4 Securities held to maturity 32.6 57.3 74.8 115.9 545.6 826.2 Securities available for sale 330.3 125.6 146.2 147.0 1,058.6 1,807.7 Money market investments 613.1 5.0 .1 - - 618.2 Mortgage loans held for sale 446.8 - - - - 446.8 ------- ----- ------- ------- ------- -------- Total earning assets 5,473.6 805.2 1,492.7 1,531.8 4,065.1 13,368.4 Interest sensitivity hedges on assets (350.0) (449.6) 195.4 160.6 443.6 - Total uses $ 5,123.6 $ 355.6 $ 1,688.1 $1,692.4 $4,508.7 $13,368.4 ========= ======= ======= ======= ======== ========= Sources of Funds Interest checking deposits $ 1,800.3 $ - $ - $ - $ - $ 1,800.3 Money market deposit accounts 2,486.4 - - - - 2,486.4 Regular savings deposits 1,209.0 - - - - 1,209.0 Domestic time deposits 297.9 318.3 682.1 868.3 960.3 3,126.9 Certificates of deposit $100,000 and over 26.1 14.5 12.3 4.7 5.4 63.0 Short-term borrowings 1,873.1 - - - - 1,873.1 Long-term debt - .2 3.7 17.2 359.1 380.2 ------- ----- ------- ------- ------- -------- Total interest-bearing liabilities 7,692.8 333.0 698.1 890.2 1,324.8 10,938.9 Other sources - net - - - - 2,429.5 2,429.5 Interest sensitivity hedges on liabilities - (15.0) - - 15.0 - ------- ----- ------- ------- ------- -------- Total sources $ 7,692.8 $ 318.0 $ 698.1 $ 890.2 $3,769.3 $13,368.4 ========= ======= ======= ======= ======== ========= Cumulative maturity/rate sensitivity gap $(2,569.2) $(2,531.6) $(1,541.6) $ (739.4) $ - $ - ========= ======= ======= ======= ======== ========= Adjustments Beta adjustments: Interest checking (beta factor .18) $ 1,476.2 Money market accounts (beta factor .55) 1,118.9 Regular savings (beta factor .12) 1,063.9 Demand deposit sensitivity (822.2) ------- ----- ------- ------- ------- -------- Cumulative adjusted maturity/rate sensitivity gap $ 267.6 $ 305.2 $ 1,295.2 $2,097.4 $ - $ - ========= ======= ======= ======= ======== =========
Table 11 Off-Balance Sheet Derivative Financial Instruments(1)
September 30, 1995 Weighted Average Average Fixed Estimated Dollars in thousands Notional Expected Receive Fair Balance Maturity Rate Value Comments Interest Rate Conversions Generic interest rate swaps $ 550,000 3.0 yrs. 5.98% Notional amounts of Carrying amount(2) $ (91) $350 million and $200 Unrealized gross gains 275 million, respectively, con- Unrealized gross losses (3,118) vert floating rate com- ----- mercial and real estate Estimated fair value (2,934) income property loans to fixed rate. Floating rate paid tied to LIBOR. Amortizing interest rate swaps 593,666 .6 yrs. 5.12% Convert floating rate Carrying amount(2) (1,084) commercial loans to Unrealized gross gains 48 fixed rate. Floating rate Unrealized gross losses (5,194) paid tied to LIBOR. ------ Notional amounts may Estimated fair value (6,230) amortize more slowly ------ as rates rise. Interest rate caps 245,000 1.6 yrs. 7.49%(3) Minimize interest rate Carrying amount(2) 1,951 risk associated with Unrealized gross gains 298 rising rates on floating Unrealized gross losses (1,262) rate money market Estimated fair value ----- deposits. Tied to LIBOR. 987 Interest rate floors 250,000 2.5 yrs. 6.80%(4) Minimize interest rate Carrying amount(2) 2,871 risk associated with Unrealized gross gains 4,024 falling rates on floating Unrealized gross losses - rate commercial loans. ----- Tied to LIBOR. Estimated fair value 6,895 ----- Hedges of Lending Commitments Forward contracts 564,014 .1 yrs. n/a Hedges of residential Unrealized gross gains 1,030 mortgage lending Unrealized gross losses (1,361) commitments. ------ Estimated fair value (331) ------ Total hedges against interest rate risk $2,202,680 $(1,613)
(1) Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. (2) Includes any accrued interest receivable or payable balances, and unamortized premiums paid for interest rate caps and floors. (3) Represents average strike rate. For interest rate caps purchased, Crestar will receive interest if a specified market index rate rises above a fixed strike rate during the term of the contract. Any interest received is based on the difference between a higher index interest rate and the contractual cap rate, applied to the underlying notional balance. No interest payments are received if the index rate remains below the cap rate. (4) Represents average strike rate. For interest rate floors purchased, Crestar will receive interest if a specified market index rate falls below a fixed strike rate during the term of the contract. Any interest received is based on the difference between a lower index interest rate and the contractual floor rate, applied to the underlying notional balance. No interest payments are received if the index rate remains above the floor rate. n/a - Not applicable LIBOR - London Interbank Offered Rates Table 12 Off-Balance Sheet Derivatives--Expected Maturities(1)
September 30, 1995 Dollars in thousands Within One to Three to One Year Three Years Five Years Total Interest Rate Conversions Generic interest rate swaps: Notional amount $ 100,000 $100,000 $350,000 $ 550,000 Average fixed receive rate 6.32% 5.67% 5.97% 5.98% Estimated fair value $ 171 $ (1,174) $ (1,931) $ (2,934) Amortizing interest rate swaps:(3) Notional amount $ 591,156 $ 2,510 $ - $ 593,666 Average fixed receive rate 5.10% 8.40% - 5.12% Estimated fair value $ (6,287) $ 57 $ - $ (6,230) Interest rate caps Notional amount $ 5,000 $235,000 $ 5,000 $ 245,000 Average strike rate 5.00% 7.57% 6.00% 7.49% Estimated fair value $ 13 $ 587 $ 387 $ 987 Interest rate floors Notional amount $ - $250,000 $ - $ 250,000 Average strike rate - 6.80% - 6.80% Estimated fair value $ - $ 6,895 $ - $ 6,895 Hedges of Lending Commitments Forward contracts:(2) Notional amount $ 564,014 $ - $ - $ 564,014 Estimated fair value (331) - - (331) Total hedges against interest rate risk: Notional amount $1,260,170 $587,510 $355,000 $2,202,680 Estimated fair value (6,434) 6,365 (1,544) (1,613)
(1) Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. (2) Hedges of residential mortgage lending commitments. (3) Based on expected weighted average life. Table 13 Off-Balance Sheet Derivatives Activity(1)
In thousands Asset Rate Conversions Liability Rate Interest Rate Swaps Conversions Hedges of Generic Amortizing Interest Interest Lending Receive Receive Rate Rate Commit- Fixed Fixed Floors Caps ments(2) Total Balance, July 1, 1995 $ 300,000 $ 753,270 $ 250,000 $ 245,000 $ 520,418 $ 2,068,688 Additions 250,000 -- -- -- 588,730 838,730 Termination -- (100,000) -- -- -- (100,000) Maturities/Amortizations -- (59,604) -- -- (545,134) (604,738) ------- -------- -------- Balance, September 30, 1995 $ 550,000 $ 593,666 $ 250,000 $ 245,000 $ 564,014 $ 2,202,680 =========== =========== =========== =========== =========== =========== Balance, January 1, 1995 $ 600,000 $ 860,166 $ 200,000 $ -- $ 266,439 $ 1,926,605 Additions from acquisitions -- -- -- 45,000 -- 45,000 Other additions 250,000 -- 250,000 200,000 1,509,003 2,209,003 Terminations -- (196,400) -- -- -- (196,400) Maturities/Amortizations (300,000) (70,100) (200,000) -- (1,211,428) (1,781,528) ----------- Balance, September 30, 1995 $ 550,000 $ 593,666 $ 250,000 $ 245,000 $ 564,014 $ 2,202,680
(1) Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. (2) Forward contracts hedging residential mortgage lending commitments; maturities represent contracts delivered. Table 14 Selected Quarterly Financial Information
Dollars in thousands, except per share data 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. Results of operations: 1995 1995 1995 1994 1994 Net interest income(1) $154,682 $155,821 $154,460 $149,689 $152,020 Provision for loan losses 14,000 13,500 10,100 2,700 8,100 ------ ------ ------ ----- ----- Net credit income 140,682 142,321 144,360 146,989 143,920 Securities gains (losses) (69) (1,050) (2,410) (9,021) 12 Other noninterest income 71,827 71,142 66,540 65,037 63,726 ------ ------ ------ ------ ------ Net credit and noninterest income 212,440 212,413 208,490 203,005 207,658 Noninterest expense 134,470 139,003 136,470 135,594 138,453 ------- ------- ------- ------- ------- Income before taxes 77,970 73,410 72,020 67,411 69,205 ------ ------ ------ ------ ------ Tax-equivalent adjustment 3,198 2,719 2,776 2,746 2,742 Book tax expense 26,366 23,307 23,653 22,280 22,859 ------ ------ ------ ------ ------ Income tax expense 29,564 26,026 26,429 25,026 25,601 ------ ------ ------ ------ ------ Net Income $ 48,406 $ 47,384 $ 45,591 $ 42,385 $ 43,604 ======== ======== ======== ======== ======== Per common share: Net income $ 1.27 $ 1.24 $ 1.20 $ 1.13 $ 1.15 Dividends declared .45 .45 .40 .40 .40 Average shares outstanding (000s) 38,053 38,173 38,097 37,637 38,063 ====== ====== ====== ====== ====== Selected ratios and other data: Return on average assets 1.38% 1.35% 1.32% 1.24% 1.26% Return on average equity 15.66 15.69 15.60 15.22 15.70 Net interest margin(1) 4.89 4.93 4.92 4.81 4.82 Net charge-offs as % of average loans .56 .54 .52 .42 .42 Allowance as % of period-end loans 2.31 2.28 2.28 2.36 2.61 Overhead ratio 59.38 61.53 62.43 65.92 64.17 Average equity to average assets 8.80 8.61 8.44 8.14 8.02 Equity leverage 11.37x 11.61x 11.84x 12.29x 12.47x Full-time equivalent employees (period end) 6,325 6,434 6,623 6,747 6,817
(1) Tax-equivalent basis. Table 15 Consolidated Average Balances/Net Interest Income/Rates1
Three Months Ended September 30, 1995 1994 Dollars in thousands Income/ Yield/ Income/ Yield/ Balance Expense Rate Balance Expense Rate Assets $ $ % $ $ % Securities held to maturity(2) 819,922 13,842 6.75 961,378 13,609 5.66 Securities available for sale(2) 1,562,548 26,043 6.56 1,949,879 31,352 6.38 Money market investments(2) 234,606 3,507 5.93 780,606 9,058 4.60 Mortgage loans held for sale(2) 411,719 7,539 7.39 268,309 5,197 7.75 ------- ----- ---- ------- ----- ---- Commercial 2,888,705 59,693 8.24 2,840,046 57,493 7.95 Real estate - income property 786,408 17,084 8.60 776,197 16,353 8.33 Real estate - construction 173,824 4,290 9.77 225,788 4,907 8.61 Instalment 2,036,619 48,179 9.35 1,730,946 37,145 8.55 Bank card 1,590,871 44,811 11.29 1,179,880 35,034 11.81 Real estate - mortgage 2,070,274 39,845 7.68 1,769,755 32,074 7.21 --------- ------ ---- --------- ------ ---- Total loans - net of unearned(2,3) 9,546,701 213,902 8.92 8,522,612 183,006 8.51 Allowance for loan losses (224,666) (228,985) --------- ------ ---- --------- ------ ---- Loans - net 9,322,035 8,293,627 Cash and due from banks 766,013 708,356 Premises and equipment - net 333,641 323,292 Customers' liability on acceptances 8,566 5,132 Intangible assets - net 158,293 114,203 Foreclosed properties - net 14,499 22,311 Other assets 417,186 427,587 --------- ------ ---- --------- ------ ---- Total Assets 14,049,028 13,854,680 --------- ------ ---- --------- ------ ---- Total Earning Assets 12,575,496 264,833 8.38 12,482,784 242,222 7.69 Liabilities And Shareholders' Equity Interest checking deposits 1,817,501 9,968 2.18 1,876,726 10,544 2.23 Money market deposit accounts 2,513,028 24,549 3.88 2,410,600 17,966 2.96 Regular savings deposits 1,242,381 8,404 2.68 1,486,232 10,177 2.72 Domestic time deposits 3,160,571 40,925 5.17 3,204,215 33,101 4.13 Certificates of deposit $100,000 and over 66,433 925 5.52 64,637 733 4.55 --------- ------ ---- --------- ------ ---- Total savings and time deposits(2) 8,799,914 84,771 3.83 9,042,410 72,521 3.19 Demand deposits 2,150,972 2,082,957 --------- ------ ---- --------- ------ ---- Total deposits 10,950,886 11,125,367 Short-term borrowings(2) 1,251,367 17,339 5.49 1,187,544 13,197 4.39 Long-term debt(2) 379,155 8,041 8.48 220,584 4,484 8.13 Liability on acceptances 8,566 5,132 Other liabilities 223,010 204,941 --------- ------ ---- --------- ------ ---- Total liabilities 12,812,984 12,743,568 --------- ------ ---- --------- ------ ---- Total shareholders' equity 1,236,044 1,111,112 Total Liabilities And Shareholders' Equity 14,049,028 13,854,680 Total interest-bearing liabilities 10,430,436 110,151 4.20 10,450,538 90,202 3.43 Other sources - net 2,145,060 2,032,246 --------- ------ ---- --------- ------ ---- Total Sources of Funds 12,575,496 110,151 3.49 12,482,784 90,202 2.87 Net Interest Spread 4.18 4.26 Net Interest Income/Margin 154,682 4.89 152,020 4.82
Three Months Ended June 30, Nine Months Ended September 30, 1995 1995 Dollars in thousands Income/ Yield/ Income/ Yield/ Balance Expense Rate Balance Expense Rate Assets $ $ % $ $ % Securities held to maturity(2) 852,398 14,036 6.59 852,998 42,683 6.67 Securities available for sale(2) 1,411,687 22,942 6.52 1,475,033 72,592 6.57 Money market investments(2) 289,402 4,363 6.05 326,379 14,414 5.90 Mortgage loans held for sale(2) 254,491 5,127 8.06 286,659 16,476 7.67 --------- ------ ---- --------- ------- ---- Commercial 3,017,662 63,828 8.47 2,968,104 185,349 8.34 Real estate - income property 802,250 17,132 8.55 784,330 50,510 8.60 Real estate - construction 182,905 4,420 9.67 181,273 13,207 9.73 Instalment 1,967,956 46,104 9.27 1,965,772 137,034 9.27 Bank card 1,573,073 45,169 11.36 1,552,637 133,057 11.40 Real estate - mortgage 2,174,101 41,303 7.60 2,119,047 120,974 7.61 --------- ------ ---- --------- ------- ---- Total loans - net of unearned(2,3) 9,717,947 217,956 8.94 9,571,163 640,131 8.91 Allowance for loan losses (223,544) (223,694) --------- ------ ---- --------- ------- ---- Loans - net 9,494,403 9,347,469 Cash and due from banks 764,796 756,692 Premises and equipment - net 333,987 331,066 Customers' liability on acceptances 12,555 10,093 Intangible assets - net 162,874 150,541 Foreclosed properties - net 17,274 17,820 Other assets 430,914 419,052 --------- ------ ---- --------- ------- ---- Total Assets 14,024,781 13,973,802 =========== ====== ===== ========== ======= ==== Total Earning Assets 12,525,925 264,424 8.42 12,512,232 786,296 8.38 =========== ====== ===== ========== ======= ==== Liabilities And Shareholders' Equity Interest checking deposits 1,868,312 10,489 2.25 1,853,365 30,910 2.23 Money market deposit accounts 2,482,634 24,183 3.91 2,476,373 71,342 3.85 Regular savings deposits 1,310,929 9,165 2.80 1,307,059 27,031 2.76 Domestic time deposits 3,187,239 39,019 4.95 3,130,625 113,322 4.85 Certificates of deposit $100,000 and over 71,068 954 5.38 68,676 2,736 5.33 --------- ------ ---- --------- ------- ---- Total savings and time deposits(2) 8,920,182 83,810 3.78 8,836,098 245,341 3.72 Demand deposits 2,127,089 2,111,761 --------- ------ ---- --------- ------- ---- Total deposits 11,047,271 10,947,859 Short-term borrowings(2) 1,156,162 16,620 5.75 1,222,911 51,917 5.67 Long-term debt(2) 384,971 8,173 8.49 377,460 24,075 8.50 Liability on acceptances 12,555 10,093 Other liabilities 215,704 210,874 --------- ------ ---- --------- ------- ---- Total liabilities 12,816,663 12,769,197 --------- ------ ---- --------- ------- ---- Total shareholders' equity 1,208,118 1,204,605 --------- ------ ---- --------- ------- ---- Total Liabilities And Shareholders' Equity 14,024,781 13,973,802 =========== ====== ===== ========== ======= ==== Total interest-bearing liabilities 10,461,315 108,603 4.17 10,436,469 321,333 4.12 Other sources - net 2,064,610 2,075,763 --------- ------ ---- --------- ------- ---- Total Sources of Funds 12,525,925 108,603 3.49 12,512,232 321,333 3.44 =========== ====== ===== ========== ======= ==== Net Interest Spread 4.25 4.26 Net Interest Income/Margin 155,821 4.93 464,963 4.94
Nine Months Ended September 30, 1994 Dollars in thousands Income/ Yield/ Balance Expense Rate Assets $ $ % Securities held to maturity(2) 815,964 41,578 6.78 Securities available for sale(2) 2,338,997 102,470 5.86 Money market investments(2) 644,374 19,890 4.13 Mortgage loans held for sale(2) 347,530 18,074 6.93 --------- ------- ---- Commercial 2,775,169 162,556 7.81 Real estate - income property 787,761 47,841 8.10 Real estate - construction 224,055 13,311 7.94 Instalment 1,686,001 105,272 8.34 Bank card 1,074,677 98,150 12.14 Real estate - mortgage 1,567,938 83,921 7.13 --------- ------- ---- Total loans - net of unearned(2,3) 8,115,601 511,051 8.39 Allowance for loan losses (226,123) --------- ------- ---- Loans - net 7,889,478 Cash and due from banks 713,490 Premises and equipment - net 317,034 Customers' liability on acceptances 9,509 Intangible assets - net 106,474 Foreclosed properties - net 23,189 Other assets 405,446 --------- ------- ---- Total Assets 13,611,485 Total Earning Assets 12,262,466 693,063 7.54 Liabilities And Shareholders' Equity Interest checking deposits 1,862,880 30,690 2.20 Money market deposit accounts 2,374,481 47,337 2.67 Regular savings deposits 1,416,851 27,891 2.63 Domestic time deposits 3,119,026 95,711 4.11 Certificates of deposit $100,000 and over 55,262 1,791 4.34 --------- ------- ---- Total savings and time deposits(2) 8,828,500 203,420 3.08 Demand deposits 2,058,101 --------- ------- ---- Total deposits 10,886,601 Short-term borrowings(2) 1,206,399 33,190 3.68 Long-term debt(2) 214,751 13,399 8.32 Liability on acceptances 9,509 Other liabilities 200,160 --------- ------- ---- Total liabilities 12,517,420 --------- ------- ---- Total shareholders' equity 1,094,065 --------- ------- ---- Total Liabilities And Shareholders' Equity 13,611,485 Total interest-bearing liabilities 10,249,650 250,009 3.26 Other sources - net 2,012,816 --------- ------- ---- Total Sources of Funds 12,262,466 250,009 2.73 Net Interest Spread 4.28 Net Interest Income/Margin 443,054 4.81
(1) Income and yields are computed on a tax-equivalent basis using the statutory federal income tax rate exclusive of the alternative minimum tax and nondeductible interest expense. (2) Indicates earning asset or interest-bearing liability. (3) Nonaccrual loans are included in the average loan balances and income on such loans is recognized on a cash basis. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Crestar Financial Corporation ----------------------------- Registrant Date November 14, 1995 /s/ JAMES D. BARR ----------------------------- James D. Barr Executive Vice President, Controller and Treasurer EX-27 2 FDS --
9 9-MOS 9-MOS DEC-31-1995 DEC-31-1994 SEP-30-1995 SEP-30-1994 706,673 690,992 8,685,617 8,869,967 602,800 1,324,580 7,139 257 1,807,656 1,866,204 826,212 944,626 823,334 915,801 9,669,507 8,647,871 223,430 225,890 14,762,143 14,450,357 10,871,466 10,986,121 1,873,127 1,905,049 378,690 223,864 380,237 218,564 188,546 187,989 0 0 0 0 1,070,127 928,770 14,762,193 14,450,357 633,792 504,830 112,938 142,124 30,873 37,928 777,603 684,882 245,341 203,420 321,333 250,009 456,270 434,873 37,600 26,982 (3,529) (1,755) 409,943 409,713 214,707 190,031 141,381 126,694 0 0 0 0 141,381 126,694 3.71 3.34 3.70 3.34 4.94 4.81 60,935 62,934 41,715 32,513 0 0 184,000 144,000 219,189 210,958 59,595 49,127 20,880 21,390 223,430 225,890 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----