-----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, CGZyCCqjy8wCc/U+ZSwGKT0JCVExWceKSe3QN3ZwfLSahyHtRsXIqLW0VvDO8W5p NhBAPWxpNzVMytNEjpgW6g== 0000916641-98-000358.txt : 19980331 0000916641-98-000358.hdr.sgml : 19980331 ACCESSION NUMBER: 0000916641-98-000358 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRESTAR FINANCIAL CORP CENTRAL INDEX KEY: 0000101880 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 540722175 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07083 FILM NUMBER: 98579720 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-K 1 CRESTAR FINANCIAL CORP. 10-K Form 10-K Crestar Financial Corporation And Subsidiaries FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 - -------------------------------------------------------------------------- or [ ] 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) State of Virginia 54-0722175 - --------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 919 East Main Street, Post Office Box 26665, Richmond, VA 23261-6665 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (804)782-5000 - --------------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock $5 Par Value New York Stock Exchange - --------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: None - --------------------------------------------------------------------------- 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. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value (average of the high and low prices) of Crestar Financial Corporation voting stock held by non-affiliates as of January 31, 1998 was approximately $5.96 billion. As of January 31, 1998, Crestar Financial Corporation had 111,622,058 shares of Common Stock $5 Par Value outstanding. The Proxy Statement of the annual meeting of shareholders to be held April 24, 1998 is incorporated by reference in Part III of this Form 10-K. Management's Discussion And Analysis Of Operations And Financial Condition Crestar Financial Corporation And Subsidiaries This commentary provides an overview of Crestar Financial Corporation's (Crestar or the Corporation) financial condition, changes in financial condition and results of operations for the years 1995 through 1997. The following discussion should assist readers in their analysis of the accompanying consolidated financial statements and supplemental financial information. Crestar conducts its banking operations through Crestar Bank, the Corporation's sole banking subsidiary. Crestar Bank's 566 banking offices provide services throughout Crestar's primary market area of Virginia, Maryland and Washington, D.C. This market is characterized as economically diverse. Crestar's market area is also characterized by active competition Table 1 Selected Financial Information(1) Dollars in thousands, except per share data
Results Of Operations (for the year): 1997 1996 1995 1994 1993 Income from earning assets $ 1,575,584 $ 1,563,379 $ 1,491,903 $ 1,300,794 $ 1,175,881 Net interest income 876,298 866,310 814,855 777,851 707,284 Provision for loan losses 108,097 95,890 66,265 36,509 63,325 Net Income 309,808 218,271(2) 215,887(3) 215,158 179,586 Income applicable to common shares 309,808 218,271 215,887 215,158 177,365 Earnings Per Share Basic: Net Income $ 2.80 $ 1.97 $ 1.95 $ 1.95 $ 1.62 Average shares outstanding (000s) 110,618 110,560 110,986 110,216 109,365 Diluted: Net Income $ 2.77 $ 1.95 $ 1.92 $ 1.93 $ 1.60 Average shares outstanding (000s) 111,929 112,037 112,432 111,643 110,836 Dividends paid per common share $ 1.14 $ 1.005 $ .875 $ .765 $ .57 ============================================================================================================ Financial Condition (at December 31): Total assets $24,928,516 $22,861,941 $22,332,611 $20,167,656 $18,924,076 Long-term debt 831,383 859,336 671,295 715,132 604,026 Total equity 2,059,763 1,779,510 1,785,588 1,601,538 1,510,109 ============================================================================================================ Selected Ratios (for the year): Return on average assets 1.42% 1.01% 1.06% 1.11% 1.01% Equity leverage 11.59x 12.15x 11.90x 12.41x 12.08x Return on average common equity 16.46 12.28 12.58 13.78 12.39 Net interest margin 4.47 4.44 4.44 4.47 4.47 Dividend payout ratio: On common stock 31.09(4) 60.93(4) 40.31 35.68 33.90 Equity formation rate 11.34(4) 4.80(4) 7.51 8.86 7.95 Based on averages: Total equity to total assets 8.63 8.23 8.40 8.06 8.28 Total loans to total equity 7.65x 7.67x 7.97x 7.56x 6.75x ============================================================================================================ Other Data (at December 31): Number of banking locations 566 508 480 483 446 Full-time equivalent employees 8,215 8,720 8,487 9,212 8,803 ============================================================================================================
(1) For all periods presented, shares outstanding and per share data have been restated to reflect Crestar's two-for-one stock-split in the form of a stock dividend. The stock split was approved on December 20, 1996 and distributed on January 24, 1997 to shareholders of record on January 3, 1997. (2) Net income in 1996 reflects $32.5 million of merger costs associated with Crestar's merger with Citizens Bancorp on December 31, 1996. (3) Net income in 1995 reflects $29.3 million of merger costs associated with Crestar's merger with Loyola Capital Corporation on December 31, 1995. (4) Based on dividends paid (versus dividends declared), Crestar's 1997 and 1996 dividend payout ratios were 42.18% and 45.20%, respectively, and the equity formation rates were 9.52% and 6.73%, respectively. Management's Discussion Crestar Financial Corporation And Subsidiaries [GRAPH] Return on Average Common Equity (percent) 1993 12.39 1994 13.78 1995 12.58 1996 12.28 1997 16.46 [GRAPH] Common Stock Price & Book Value* ($ per share) 1993 1994 1995 1996 1997 Book Value $ 13.72 $14.57 $ 16.12 $ 16.20 $ 18.49 High 23 1/4 24 7/8 30 1/2 37 3/4 57 1/4 Low 17 9/16 18 1/16 18 1/2 26 3/16 33 5/8 - -------------------- * Price range for the year and book value at year end [GRAPH] Market* Capitalization ($ in billions) 1993 1.571 1994 1.405 1995 2.531 1996 4.086 1997 6.351 * Year-end common stock price multiplied by number of shares outstanding, excluding impact of pooling of interest mergers 13 - ---------------------- 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, securities brokerage firms, credit unions, leasing companies and mortgage banking companies. On December 31, 1996, Crestar completed its merger with Citizens Bancorp (Citizens), a $4.1 billion asset bank holding company based in Laurel, Maryland. The merger was accounted for as a pooling of interests business combination. Accordingly, the accompanying consolidated financial information reflects the results of operations of both Crestar and Citizens, on a combined basis, for all periods presented. Also in December 1996, Crestar's Board of Directors declared a two-for-one split, in the form of a stock dividend, of the Corporation's common stock. The two-for-one stock split was distributed on January 24, 1997. For all periods presented in these financial statements, average shares outstanding and per common share data have been adjusted to reflect the common stock split. Certain reclassifications have been made to prior years' consolidated financial statements and related financial information to conform to the 1997 presentation. Earnings Overview Crestar Financial Corporation earned net income of $309.8 million in 1997, representing $2.77 in diluted earnings per share. Net income in 1996 was $218.3 million or $1.95 per diluted common share. Net income for 1996 was affected by several non-recurring items, including $32.5 million in one-time after-tax charges associated with the December 31, 1996 merger with Citizens. In addition to the Citizens merger costs, other non-recurring items affecting net income for 1996 included a $21.5 million after-tax charge to recapitalize the Savings Association Insurance Fund (SAIF), incurred in the third quarter of 1996, as well as a $10.6 million benefit related to the repeal of thrift bad debt tax legislation, also recorded in the third quarter of 1996. Excluding these three non-recurring items, net income for 1996 totaled $261.7 million, or $2.34 per diluted common share. Excluding all non-recurring charges, net income for 1997 represented an increase over comparable 1996 results of $48.1 million, or 18%, primarily attributable to growth in noninterest income, an increase in Crestar's net interest margin, and management of controllable expenses. The key profitability measures of return on average assets (ROA) and return on average total shareholders' equity (ROE) for 1997 in comparison to 1996 reflect the non-recurring items impacting 1996's results. Return on average assets was 1.42% for 1997, compared to 1.01% in 1996. Reported net income reflects a ROE of 16.46% in 1997 versus 12.28% in 1996. These ratios, along with other selected earnings and balance sheet information for each of the years in the five-year period ended December 31, 1997, are shown in Table 1. Excluding one-time costs incurred during 1996, Crestar's ROA was 1.21%, and ROE was 14.73%, for 1996. Results for 1995, also included in Table 1, reflect the impact of one-time costs associated with the December 31, 1995 pooling of interests merger with Loyola Capital Corporation. These 14 Table 2 Selected Financial Information - Excluding Merger Costs And Other Non-recurring Items (1), (2) Dollars in thousands, except per share data
1997 1996(1) 1995(2) 1994 1993 Net income $309,808 $261,696 $245,167 $215,158 $179,586 Earnings Per Share: Basic $ 2.80 $ 2.37 $ 2.21 $ 1.95 $ 1.62 Diluted 2.77 2.34 2.18 1.93 1.60 Return on average assets 1.42% 1.21% 1.20% 1.11% 1.01% Return on average equity 16.46 14.73 14.28 13.78 12.39 Overhead ratio 54.57 58.20 60.75 64.86 65.48 ============================================================================================================
(1) Selected Financial Information for 1996 excludes $32.5 million in after-tax merger costs related to the pooling-of-interests merger with Citizens Bancorp on December 31, 1996. Other non-recurring items excluded from 1996 results include a $21.5 million after-tax charge to recapitalize the Savings Association Insurance Fund, and a $10.6 million after-tax benefit related to repeal of thrift bad debt tax legislation. (2) Selected Financial Information for 1995 excludes $29.3 million in after-tax merger costs related to the pooling-of-interests merger with Loyola Capital Corporation on December 31, 1995. merger related expenses totaled $29.3 million on an after-tax basis for 1995. Table 2 displays key financial information, including net income, earnings per share and Crestar's overhead ratio (noninterest expense as a percentage of tax-equivalent net interest income and noninterest income) for 1993 through 1997, excluding the impact of merger costs and other nonrecurring items incurred by Crestar in 1995 and 1996. Significant items affecting the change in reported earnings per share for 1997, 1996 and 1995 are summarized in Table 3. Each applicable item is net of federal income taxes computed using a 35% rate. Mergers And Acquisitions On November 13, 1997, Crestar acquired American National Bancorp, Inc. (American National) for common stock and cash, in a transaction accounted for as a purchase. Based in Baltimore, American National operated ten banking locations and had approximately $500 million in total assets, $340 million in loans and $310 million in deposits at date of purchase. In consideration for the outstanding stock of American National, Crestar paid $14 million in cash and issued 1.236 million shares of common stock, for a combined value of $77 million. The acquisition of American National has been accounted for under the purchase method of accounting, whereby the purchase price has been allocated to the underlying assets acquired and liabilities assumed based on their respective fair values at the date of acquisition. Crestar's 1997 results include the results of operations of the assets purchased and liabilities assumed from American National from the date of purchase. Financial statement note 2 contains additional information concerning mergers and acquisitions. Under interstate banking and branching legislation enacted by Congress in 1995, previously existing restrictions on interstate bank acquisitions were abolished. Bank holding companies from any state are now able to acquire banks and bank holding companies located in any other state, subject to certain conditions. Effective in 1997, the law allows 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. The laws of Virginia, Maryland and the District of Columbia allow interstate bank mergers, and also permit interstate branch acquisitions and new branching by out-of-state banks if reciprocal treatment is accorded in the state of the acquiring bank or bank holding company. There has been significant acquisition activity in the region in which Crestar operates, centered on the acquisition of Virginia-based financial institutions by large, strongly capitalized out-of-state bank holding companies. Management expects the level of competition to remain high in the Corporation's marketing area in the future. Common Stock And Dividends On December 31, 1997, Crestar's common stock price was $57, an increase of 53% from the December 31, 1996 split-adjusted closing price of $37 3/16. Significant increases were noted in many financial institution stocks during 1997, and the S&P 500 stock index posted an increase of 31%. Crestar's stock appreciation during 1996 was 26%, excluding dividends. Based on the common stock price and number of common shares outstanding at year-end, Crestar's market capitalization exceeded $6.4 billion at December 31, 1997. 15 Management's Discussion Crestar Financial Corporation And Subsidiaries Table 3 Analysis Of Diluted Earnings Per Share 1997 1996 vs. vs. 1996 1995 Diluted Earnings Per Share - prior period $1.95 $1.92 - -------------------------------------------------------------- Interest income .07 .41 Interest expense (.01) (.12) Provision for loan losses (.07) (.20) Securities gains or losses .01 .03 Other noninterest income .39 .12 Foreclosed properties expense - (.02) One-time merger costs: Citizens Bancorp .29 (.29) Loyola Capital Corporation - .26 SAIF assessment expense .20 (.20) Repeal of thrift bad debt tax legislation (.10) .10 Other noninterest expense - (.06) Change in effective income tax rate .04 (.01) Decrease in shares outstanding - .01 - --------------------------------------------------------------- Net increase .82 .03 - --------------------------------------------------------------- Diluted Earnings Per Share - current period $2.77 $1.95 =============================================================== Book value per common share was $18.49 at December 31, 1997, compared to a December 31, 1996 book value per share of $16.20. The ratio of market value to book value was 3.1x at December 31, 1997. On the basis of 1997 earnings per diluted common share of $2.77 and the year-end market price of $57, the December 31, 1997 price to earnings ratio was 20.6x. The S&P 500 stock index had a price to earnings composite ratio of approximately 24.0x at year-end 1997. In December 1996, simultaneous with the announcement of the two-for-one common stock split, Crestar's Board of Directors announced a $.27 dividend per common share, effective with the February 1997 dividend payment date. The December 1996 dividend declaration meant that the Corporation paid four quarterly dividends during 1997, but declared three cash dividends during calendar 1997. Reflecting improved operating results, the common dividend was increased during the second quarter of 1997, from $0.27 to $0.29 per share. Dividends paid during 1997 totaled $1.14 per common share, compared to $1.005 per share in 1996, representing an increase of 13%. Crestar's current quarterly dividend of $0.29 per share represents an annualized dividend of $1.16 per share, equating to a yield of 2.0% based on the year-end market price. The Corporation's objective is to pay dividends of at least 30% to 40% of earnings to common shareholders, with a current bias towards the higher end of this range, given the Corporation's strong capital position. Cash dividends on Crestar's common stock are customarily paid on the 21st day of February, May, August and November. Capital Resources And Adequacy Crestar ended 1997 with strong capital ratios, reflecting improved operating results for 1997. Average shareholders' equity was $1.9 billion during 1997, representing a 6% increase over 1996 levels. Equity growth in 1997 is primarily attributable to the earnings of the Corporation, along with shares issued for the American National acquisition and for employee benefit and dividend reinvestment plans. These factors were partially offset by Crestar's cash dividends declared and by purchases of common stock during the year. During 1997, Crestar purchased and retired 1.95 million shares of common stock at an average price of approximately $43.43 per share. Crestar purchased 1.13 million shares of common stock to retire shares issued for the American National acquisition. Also during 1997, 824 thousand shares were purchased to meet the needs of the dividend reinvestment plan, employee stock options and Crestar's thrift and profit sharing plan. The Corporation purchased and retired approximately 3.4 million shares of common stock, on a post-split basis, during 1996 at an average price of $29.03 per share. The Consolidated Statements of Changes in Shareholders' Equity provide details of these and other equity transactions. The Corporation expects to make repurchases of common stock in 1998 only to the extent that such purchases relate to shares issued or to be issued for acquisitions accounted for under the purchase method of accounting for business combinations, including the November 1997 acquisition of American National. Crestar's equity to assets ratio at December 31, 1997 was 8.26%, compared to a ratio of 7.78% at December 31, 1996. The average equity to assets ratio was 8.63% for 1997, compared to 8.23% for 1996. The equity leverage ratio (defined as average total assets divided by average total shareholders' equity) decreased from 12.15x in 1996 to 11.59x in 1997. Other capital ratios for 1997 and 1996 are shown in Table 4. A key measure of equity's ability to absorb losses is the ratio of average equity to average loans. This measure continued to reflect Crestar's capital strength, and increased slightly from 13.04% for 1996 to 13.08% for 1997. The equity formation rate (calculated as net income less dividends declared divided by average total equity) was 11.34% for 1997; the comparable rate for 1996 was 4.80%. 16 Table 4 Capital Adequacy Dollars in thousands Risk-Adjusted Capital at December 31 1997 1996 Tier 1 Capital: Shareholders' equity $ 2,059,763 $ 1,779,510 Crestar Capital Trust I preferred stock 200,000 200,000 Goodwill and other adjustments (191,448) (152,632) - -------------------------------------------------------------------------------- Total Tier 1 capital 2,068,315 1,826,878 - -------------------------------------------------------------------------------- Tier 2 Capital: Allowable long-term debt 249,732 284,690 Allowable allowance for loan losses net of other adjustments 255,510 214,642 - -------------------------------------------------------------------------------- Total Tier 2 capital 505,242 499,332 - -------------------------------------------------------------------------------- Total risk-adjusted capital 2,573,557 2,326,210 - -------------------------------------------------------------------------------- Risk-adjusted assets, net of allowance 20,581,043 17,361,823 Fourth quarter average assets, net of adjustments 22,478,203 21,693,213 Risk-adjusted capital ratios: Tier 1 10.1% 10.5% Total 12.5 13.4 Tier 1 leverage ratio 9.2 8.4 - -------------------------------------------------------------------------------- Other Capital Ratios Average equity to: Average total assets 8.63 8.23 Average total loans 13.08 13.04 Equity leverage 11.59x 12.15x Equity formation rate 11.34% 4.80% Period-end equity to assets 8.26 7.78 ================================================================================ Risk-based capital ratios are another measure of capital adequacy. At December 31, 1997, Crestar's consolidated risk-adjusted capital ratios were 10.1% for Tier 1 and 12.5% for total capital, well above the required minimums of 4.0% and 8.0%, respectively. These ratios are calculated using regulatory capital (either Tier 1 or total capital) as the numerator and both on- and off-balance sheet risk-weighted assets as the denominator. Tier 1 capital consists primarily of common equity less goodwill and certain other intangible assets. Total capital adds certain qualifying debt instruments and a portion of the allowance for loan losses to Tier 1 capital. One of four risk weights, primarily based on credit risk, is applied to both on- and off-balance sheet assets to determine the asset denominator. Under Federal Deposit Insurance Corporation (FDIC) rules, Crestar Bank was considered "well-capitalized", the highest category of capitalization defined by the regulators allowing for the lowest level of FDIC insurance premium payments, as of December 31, 1997. Note 13 to the consolidated financial statements includes additional data on the regulatory capital ratios for Crestar Bank as of December 31, 1997. Additional measures of capital strength include the regulatory Tier 1 leverage ratio and the tangible leverage ratio. The Tier 1 leverage ratio is defined as Tier 1 capital divided by average total assets less goodwill and certain other intangibles. The Tier 1 leverage ratio has a regulatory minimum of 3.0%, although most institutions are required to maintain a ratio of at least 4.0% to 5.0%, depending primarily upon risk profiles. At December 31, 1997, Crestar's Tier 1 leverage ratio was 9.2%. The tangible leverage ratio is calculated by excluding intangibles from both assets and regulatory capital, and is utilized by the Federal Reserve Board in evaluating proposals for expansion or acquisitions. At December 31, 1997, Crestar's tangible leverage ratio was 7.5%, well within accepted Federal Reserve Board ranges. A double leverage ratio of over 100% measures the extent to which the equity capital of subsidiaries is supported by Parent Company debt rather than equity. Calculated as the investment in its subsidiaries divided by its own equity accounts, Crestar Financial Corporation's double leverage was 94.2% at December 31, 1997, compared to 94.7% at December 31, 1996. Financial statement note 19 contains Parent Company financial statements. In January 1998, Crestar issued $150 million in subordinated notes, having a stated interest rate of 6.50% and due January 15, 2018, with putable/callable provisions effective January 15, 2008. Proceeds from this long-term debt issuance will be used for general corporate purposes. Crestar has filed shelf registration statements with the Securities and Exchange Commission pertaining to the possible future issuance of other securities. Under the currently effective registration statements, the Corporation may issue in the future up to approximately $175 million in subordinated debt securities, preferred stock or common stock, or any combination thereof. 17 Management's Discussion Crestar Financial Corporation And Subsidiaries Table 5 Average Balances, Net Interest Income And Rate/Volume Analysis(1) Dollars in millions
Average Balance Yield/Rate ------------------------- ------------------------ 1997 1996 1995 1997 1996 1995 ---- ---- ---- ---- ---- ---- $ $ $ % % % 3,957 3,717 3,616 8.05 8.11 8.45 Commercial 1,263 1,259 1,260 8.87 8.76 8.63 Real estate - income property 337 354 401 8.97 9.46 10.00 Real estate - construction 4,353 3,698 3,243 8.11 8.40 8.51 Instalment 1,217 1,529 1,582 13.99 12.49 11.31 Bank card 3,264 3,072 3,573 7.74 7.76 7.83 Real estate - mortgage - ------------------------------------------------------------------------------------------------------------- 14,391 13,629 13,675 8.59 8.70 8.70 Total loans(2) 751 1,060 2,174 6.11 6.12 6.09 Securities held to maturity 3,648 3,862 2,043 6.32 6.28 6.53 Securities available for sale 389 332 337 5.59 5.39 5.99 Money market investments 684 836 374 7.61 7.54 7.52 Mortgage loans held for sale - ------------------------------------------------------------------------------------------------------------- 19,863 19,719 18,603 7.99 7.98 8.08 Total earning assets ============================================================================================================= 5,857 5,814 5,690 3.01 2.94 3.17 Interest-bearing demand deposits 1,538 1,690 1,864 2.47 2.59 2.76 Regular savings deposits 4,286 4,996 4,949 4.96 5.20 5.20 Domestic time deposits - ------------------------------------------------------------------------------------------------------------- 11,681 12,500 12,503 3.66 3.80 3.91 Total interest-bearing core deposits 912 510 73 5.65 5.45 5.39 Certificates of deposit $100,000 and over 2,997 2,785 2,327 5.30 5.20 5.75 Short-term borrowings - ------------------------------------------------------------------------------------------------------------- 3,909 3,295 2,400 5.38 5.24 5.73 Purchased liabilities 825 689 696 7.50 7.19 7.19 Long-term debt - ------------------------------------------------------------------------------------------------------------- 16,415 16,484 15,599 4.26 4.23 4.34 Total interest-bearing liabilities 3,448 3,235 3,004 Other sources - net - ------------------------------------------------------------------------------------------------------------- 19,863 19,719 18,603 3.52 3.54 3.64 Total sources of funds 4.47 4.44 4.44 Net Interest Margin/Income =============================================================================================================
(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, and the tax-equivalent adjustment to interest income was $11.2 million, $9.9 million and $11.3 million in 1997, 1996 and 1995, respectively. (2) Nonaccrual loans are included in the average loan balances and income on such loans is recognized on a cash basis.
In thousands 1997 vs. 1996 1996 vs. 1995 Income/Expense(3) -------------------------- -------------------------- ----------------- Change due to(4) Change due to(4) ---------------- ---------------- Increase Increase 1997 1996 1995 (Decrease) Rate(5) Volume (Decrease) Rate(5) Volume -------- ------ -------- ---------- ------- ------ ---------- ------- ------- $ $ $ $ $ $ $ $ $ 318,382 301,360 305,467 17,022 (2,333) 19,355 (4,107) (12,656) 8,549 112,051 110,281 108,807 1,770 1,386 384 1,474 1,615 (141) 30,287 33,486 40,089 (3,199) (1,671) (1,528) (6,603) (1,920) (4,683) 352,887 310,486 276,058 42,401 (12,723) 55,124 34,428 (4,048) 38,476 170,160 190,954 178,840 (20,794) 19,003 (39,797) 12,114 18,036 (5,922) 252,620 238,564 279,914 14,056 (795) 14,851 (41,350) (2,209) (39,141) -------------------------------------------------------------------------------------- 1,236,387 1,185,131 1,189,175 51,256 (15,086) 66,342 (4,044) (90) (3,954) 45,891 64,794 132,352 (18,903) (66) (18,837) (67,558) 282 (67,840) 230,628 242,486 133,290 (11,858) 1,618 (13,476) 109,196 (9,101) 118,297 21,754 17,901 20,204 3,853 780 3,073 (2,303) (2,004) (299) 52,078 63,012 28,145 (10,934) 557 (11,491) 34,867 66 34,801 -------------------------------------------------------------------------------------- 1,586,738 1,573,324 1,503,166 13,414 1,921 11,493 70,158 (19,837) 89,995 ====================================================================================== 176,488 171,109 180,600 5,379 3,018 2,361 (9,490) (14,414) 4,924 37,997 43,850 51,368 (5,853) (1,901) (3,952) (7,518) (2,731) (4,787) 212,480 259,971 257,418 (47,491) (10,372) (37,119) 2,553 183 2,370 -------------------------------------------------------------------------------------- 426,965 474,930 489,386 (47,965) (16,688) (31,277) (14,455) (14,315) (140) 51,501 27,843 3,915 23,658 1,724 21,934 23,927 317 23,610 158,819 144,797 133,709 14,022 3,071 10,951 11,088 (15,182) 26,270 -------------------------------------------------------------------------------------- 210,320 172,640 137,624 37,680 5,629 32,051 35,015 (16,261) 51,276 62,001 49,499 50,038 12,502 2,681 9,821 (539) (65) (474) -------------------------------------------------------------------------------------- 699,286 697,069 677,048 2,217 5,192 (2,975) 20,021 (18,514) 38,535 699,286 697,069 677,048 2,217 (2,875) 5,092 20,021 (20,702) 40,723 -------------------------------------------------------------------------------------- 887,452 876,255 826,118 11,197 4,796 6,401 50,137 865 49,272 ======================================================================================
(3) Includes tax-equivalent net loan fees of $195,000, $978,000 and $1.3 million for 1997, 1996 and 1995, respectively. (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. Net Interest Income And Net Interest Margin A fundamental source of Crestar's earnings, net interest income, is defined as the difference between income on earning assets and the cost of funds supporting those assets. Significant categories of earning assets are loans and securities, while deposits and short-term borrowings represent the major portion of interest-bearing liabilities. The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates when compared to previous periods of operations. Net interest income in Table 5 is presented on a tax-equivalent basis to enhance the comparability of assets with different tax attributes. This comparability is achieved through increasing interest income on tax-exempt assets by an amount equal to the federal income taxes which would have been paid had the income been fully taxable. This tax-equivalent adjustment is based on the applicable statutory federal corporate income tax rate and resulted in an increase to pre-tax income from earning assets in 1997, 1996 and 1995 of $11.2 million, $9.9 million and $11.3 million, respectively. On a tax-equivalent basis, net interest income increased $11.2 million or 1% in 1997 following a $50.1 million or 6% rise in 1996. These increases reflect an increase in average earning assets of 1% in 1997 and 6% in 1996. 18 The net interest margin is calculated as tax-equivalent net interest income divided by average earning assets, and represents the Corporation's net yield on its earning assets. In 1997 the net interest margin of 4.47% represented an improvement of 3 basis points over the net interest margin of 4.44% recorded in 1996. Significant items affecting net interest margin from 1996 to 1997 are summarized in Table 6. Favorable changes in interest rates paid on funding sources were a significant influence on the net interest margin for 1997. The positive impact of such changes was partially offset by the impact of unfavorable changes in the composition of earning assets and funding sources, and the impact of off-balance sheet hedging transactions in comparison to the results for 1996. Changes in balance sheet mix decreased the 1997 net interest margin by approximately 9 basis points. Loans as a percentage of total earning assets increased from an average of 69% in 1996 to 72% in 1997, as both the overall consumer and business loan portfolios exhibited growth. Despite this increase in total loan balances, Crestar's net interest margin was detrimentally impacted by declines in the average balances of bank card loans, which have historically been Crestar's highest yielding loan type. The growth in Crestar's loan portfolio during 1997 was most apparent in instalment, real estate - mortgage and commercial loans. Combined securities holdings, composed of the securities available for sale and 19 Management's Discussion Crestar Financial Corporation And Subsidiaries Table 6 Analysis Of Net Interest Margin Margin Change 1996 Net Interest Margin 4.44% - ----------------------------------------------------------- Change in net interest margin from: Earning asset mix (8) bp Funding mix (1) Off-balance sheet hedges (3) Interest rate changes 15 - ----------------------------------------------------------- Net change in net interest margin 3 bp 1997 Net Interest Margin 4.47% =========================================================== securities held to maturity portfolios, averaged $4.4 billion during 1997 versus $4.9 billion in 1996. Securities represented 22% of the Corporation's average earning assets during 1997, compared to 25% during 1996. The composition of Crestar's sources of funds shifted slightly to higher cost sources during the year, negatively impacting the 1997 net interest margin by 1 basis point. Average interest-bearing core deposits totaled $11.7 billion for 1997, versus $12.5 billion for 1996. With average earning asset levels relatively stable during this time period, these deposits as a percent of average earning assets declined from 63% in 1996 to 59% in 1997. Average balances of purchased liabilities, which are composed of short-term borrowings and non-retail certificates of deposit of $100,000 and over, totaled $3.9 billion during 1997, versus $3.3 billion in 1996, and represented 20% of average earning assets during 1997. Significant sources of short-term borrowings during 1997 included federal funds purchased, Federal Home Loan Bank borrowings, and securities sold under repurchase agreements. Long-term debt and other sources of funds represented 4% and 17%, respectively, of total average earning assets during 1997. Demand deposits, an important component of other sources of funds, averaged $3.1 billion in 1997, an increase of 4% from the average balances of 1996. Changes in average interest rate yields on earning assets did not significantly impact the net interest margin for 1997, in comparison to 1996. Yields on average earning assets increased by 1 basis point from the prior year, averaging 7.99% in 1997 versus 7.98% in 1996. Excluding the impact of off-balance sheet hedging transactions, the yield on average earning assets was 8.00% for 1997 and 7.97% for 1996. The average yield on Crestar's loan portfolio decreased to 8.59% in 1997 versus 8.70% in 1996. Higher yields on the bank card loan portfolio were offset by declines in most other loan categories. Commercial, real estate - construction, instalment and real estate-mortgage loans, which on a combined basis represented 83% of Crestar's average loan portfolio during 1997, had average yield decreases of 6, 49, 29 and 2 basis points, respectively. During the same time period, the average yield on bank card loans increased from 12.49% in 1996 to 13.99% in 1997. The higher yield for 1997 primarily reflects the impact of expiring promotional interest rates on specific bank card programs. Securities available for sale yielded a return of 6.32% in 1997, compared to a return of 6.28% in 1996. The yield on the Corporation's securities held to maturity investment portfolio was relatively unchanged from the prior year. The yield on average balances of mortgage loans held for sale was up 7 basis points in 1997, in comparison to the prior year, and yields on money market investments increased from 5.39% to 5.59% during the same time period. Lower cost funding sources were a significant benefit to the Corporation's net interest margin during 1997. Average rates paid on domestic time deposits declined 24 basis points, with yields on regular savings deposits decreasing 12 basis points. The average rate paid on total interest-bearing core deposits during 1997 was 3.66%, in comparison to 3.80% in 1996. The impact of falling rates on deposits was partially offset by higher average rates on short-term borrowings, certificates of deposit of $100,000 and over, and long-term debt. Rates paid on short-term borrowings increased 10 basis points in 1997, averaging 5.30% in 1997 compared to 5.20% in 1996. Average rates paid on long-term debt, reflecting the year-end 1996 issuance of $200 million in trust preferred securities, increased from 7.19% in 1996 to 7.50% in 1997. The total impact of interest rate changes, on both funding sources and earning assets, was to increase the net interest margin by 15 basis points in 1997 in comparison to the prior year. Off-balance sheet derivative transactions (interest rate swaps, caps and floors) had a negative impact on Crestar's 1997 net interest margin when compared to 1996. The majority of the negative impact for 1997 arose from the amortization of the cost basis of interest rate caps and floors purchased to hedge market value changes of selected assets and liabilities. Total off-balance sheet interest rate conversions and hedges negatively impacted net interest income by $4.0 million in 1997, which was composed of a $2.9 million decrease in interest income and a $1.1 million increase in interest expense, based on the underlying asset or liability associated with the transaction. In 1996, the comparable impact of hedging activity was an increase of $1.1 million to net interest income, which was composed of a $1.2 million increase in interest income and a $0.1 million increase in interest expense. This difference equated to a 3 basis point negative impact on the 1997 net interest margin, as compared to 1996 results. 20 Table 7 Noninterest Income
In thousands 1997 1996 1995 1994 1993 Service charges on deposit accounts $126,105 $114,249 $109,264 $103,692 $100,978 Trust and investment advisory 74,421 65,939 59,841 54,963 56,797 Bank card-related 41,972 52,088 49,935 41,161 28,841 Automated teller machine fees 25,945 18,684 17,856 13,828 11,959 Mortgage origination - net 19,632 12,212 2,753 389 9,580 Mortgage servicing - net 15,404 17,085 16,087 17,082 7,691 Annuities 10,979 9,637 9,394 8,751 6,554 Mutual funds 7,287 5,877 3,170 2,673 3,379 Trading account activities 5,058 3,833 3,515 1,874 5,227 Commissions on letters of credit 4,954 4,980 4,805 5,575 7,712 Insurance 3,883 3,958 3,727 3,062 2,997 Gain on sale of mortgage servicing rights 10,450 8,268 11,000 18,732 3,600 Gain (loss) on sale and disposal of branches and other properties - net 6,884 (22,380) (2,317) - - Gain on securitization of student loans 9,305 - - - - Gain on sale of merchant card processing 17,325 - - - - Miscellaneous 36,507 35,362 33,105 25,068 23,794 Securities gains (losses) 5,328 3,393 (2,067) (10,766) 2,094 - ------------------------------------------------------------------------------------------------------------ Total noninterest income $421,439 $333,185 $320,068 $286,084 $271,203 ============================================================================================================
Nonperforming asset levels had no material impact on the Corporation's net interest margin in 1997, when compared to 1996. Additional interest income of approximately $11.6 million for 1997 and $12.3 million for 1996 would have been realized had all nonperforming assets performed as originally expected. Nonperforming assets exclude loans that are both past due 90 days or more and not deemed nonaccrual, due to an assessment of collectibility (see "Nonperforming Assets and Other Risk Elements"). 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. Competitive pressures, especially with regard to deposit rates, may lead to decreases in net interest margins in future periods. From 1995 to 1996, the net interest margin was unchanged, equaling 4.44% for both years. Positive influences on the 1996 margin included favorable changes in rates paid on funding sources, and in changes arising from off-balance sheet hedging transactions. These factors were offset by the impact of unfavorable changes in the composition of both earning assets and funding sources. Table 5 presents a comparison of the earning assets and sources of funds for these two years. Noninterest Income Noninterest income increased 26% in 1997, following a 4% increase in 1996. Excluding securities gains and losses, noninterest income in 1997 increased $86.3 million or 26% over 1996, compared with a 1996 increase of $7.9 million or 2% over 1995. Many categories of noninterest income exhibited strong growth in 1997, with significant increases recorded in service charges on deposit accounts, trust and investment advisory fees and mortgage origination income. Reflecting growth in non-interest bearing deposit accounts and selected fee increases, service charges on deposit accounts increased 10% over the prior year and totaled $126.1 million for 1997. Trust and investment advisory income increased $8.5 million or 13% from 1996. This increase reflects new account growth coupled with the beneficial effects on fee income of rising bond and equity markets. At year-end 1997, trust assets held by Crestar's Trust and Investment Management Group exceeded $38 billion, and assets under management totaled $15 billion. Reflecting significantly greater origination volume, and favorable market conditions for the sale of mortgage loans to investors, mortgage origination income totaled $19.6 million in 1997, compared to $12.2 million in 1996. Mortgage origination income is reported net of direct costs associated with the mortgage underwriting process. Mortgage servicing income exhibited an decrease of $1.7 million, and 21 Management's Discussion Crestar Financial Corporation And Subsidiaries totaled $15.4 million in 1997 compared to $17.1 million in 1996. The decrease reflects higher amortization charges associated with capitalized servicing rights. Gains on sales of mortgage servicing rights totaled $10.5 million in 1997, versus gains of $8.3 million recorded in the previous year. Crestar's loan servicing portfolio was $12.5 billion at December 31, 1997, compared to $11.4 billion at year-end 1996. Other sources of growth in noninterest income were fees from sales of mutual funds, annuities and brokerage services, as Crestar continued to expand its marketing of these financial products. Automated teller machine (ATM) income continues to be a growing source of noninterest income, due to an increase in usage by banking customers, expansion of Crestar's ATM network and selected fee increases. Such income recorded an increase of $7.2 million in 1997, totaling $25.9 million in 1997 compared to $18.7 million in 1996. Crestar's network of ATM machines totaled 613 at year-end 1997, compared to 496 at year-end 1996. In the fourth quarter of 1997, Crestar recorded a gain of $9.3 million arising from the securitization of student loans. In the future, Crestar anticipates periodically utilizing the securitization of loan products to capture the value of the Corporation's loan origination functions while freeing corporate funds for other investment purposes. Also in 1997, Crestar recorded a gain of $17.3 million from the sale of merchant bankcard processing operations. Due primarily to the second quarter sale, bank card-related noninterest income decreased by $10.1 million, or 19%, during 1997 and totaled $42.0 million for the year. The comparability of results for 1996 and 1995 are impacted by non-recurring branch and equipment charges recorded as reductions of noninterest income. In 1996, as part of the costs incurred in the merger with Citizens, Crestar recorded an $18.2 million charge for branch closing costs. These costs are classified as a loss on sale and disposal of branches, and reduced noninterest income in 1996. Noninterest income for 1996 also includes non-merger related net losses on the sale and disposal of branches, totaling $4.1 million, representing the cost of closing selected banking locations as part of Crestar's strategy of refining its service delivery systems. In 1995, as part of the merger with Loyola, $3.7 million in branch closing costs were recorded. Offsetting this charge were net gains of $3.5 million on branch closings and sales (including sale of related branch deposit accounts) from 1995 activity. These results are included in the totals for gain (loss) on sale and disposal of branches in Table 7, for the applicable year of occurrence. During 1997 Crestar recorded net gains on sale of branches and other property of $6.9 million, with $5.8 million arising from the sale of two properties acquired as part of the 1996 Citizens merger. Noninterest Expense Noninterest expense decreased $66.1 million or 8% in 1997, totaling $714.3 million for 1997 versus $780.3 million in 1996. Noninterest expense in 1996 was impacted by non-recurring costs, including $31.8 million in acquisition-related costs related to the merger with Citizens. In addition, Crestar incurred a one-time assessment on SAIF insured deposits during the third quarter of 1996, impacting noninterest expense by $34.1 million. Excluding the impact of the 1996 non-recurring merger costs and SAIF assessment, noninterest expense for 1997 exhibited a slight decrease of less than 1% in comparison to the prior year. Such results reflect the operating efficiencies derived from the December 31, 1996 merger with Citizens, especially in the noninterest expense categories of personnel, occupancy and equipment expenses. Approximately $3.5 million in non-recurring expenses associated with the Citizens merger were incurred in 1997. Part of Crestar's non-recurring expenses in 1996 was an expense totaling $34.1 million associated with congressional legislation regarding the recapitalization of the Savings Association Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation (FDIC). The legislation, which resulted in an after-tax charge of $21.5 million during the third quarter of 1996, addressed the disparity between deposit insurance premiums for SAIF-insured deposits and deposits insured under the Bank Insurance Fund. The assessment is reflected in 1996's noninterest expense as part of FDIC premiums - net. Decreases in FDIC insurance premiums, effective in the fourth quarter of 1996, led to lower FDIC premium expense for 1997 in comparison to prior years, excluding the impact of the 1996 SAIF assessment. Excluding the assessment, FDIC premium expenses were $7.1 million for 1996, and declined to $2.7 million for 1997. With the consummation of the merger with Citizens, Crestar incurred $31.8 million in non-recurring merger-related noninterest expenses for 1996 (this balance excludes branch closure and fixed asset disposal costs recorded as a reduction of noninterest income, and also excludes the merger's impact on income tax expense). These merger-related expenses included severance and other personnel costs of $11.3 million, professional fees of $5.4 million, and outside data services expense of $4.8 million. Noninterest 22
Table 8 Noninterest Expense In thousands 1997 1996 1995 1994 1993 Salaries $307,623 $320,890 $311,286 $307,478 $273,376 Benefits 83,023 76,558 77,256 65,112 51,247 - ------------------------------------------------------------------------------------------------------------- Total personnel 390,646 397,448 388,542 372,590 324,623 Occupancy - net 60,016 64,450 62,851 63,290 56,374 Equipment 41,400 38,479 37,916 35,063 32,999 Communications 37,182 38,572 34,446 30,840 26,519 Outside data services 26,717 28,883 26,112 23,527 19,189 Professional fees and services 26,061 30,692 22,620 17,996 18,413 Advertising and marketing 21,732 26,165 20,400 26,171 18,734 Amortization of intangibles 17,147 16,673 15,416 7,740 12,337 Loan expense 12,217 12,731 9,407 10,842 9,736 Stationery, printing and supplies 10,436 12,669 12,709 11,781 10,786 Transportation 7,101 7,056 7,281 7,140 6,641 Bank franchise tax 5,506 6,140 3,789 3,199 2,810 FDIC premiums - net 2,684 41,174 24,812 34,855 31,859 Foreclosed properties (net recoveries) 3,097 6,872 (3,616) 5,725 37,436 Miscellaneous 52,315 52,342 55,514 47,219 41,955 - ------------------------------------------------------------------------------------------------------------- Total noninterest expense $714,257 $780,346 $718,199 $697,978 $650,411 =============================================================================================================
expenses recorded as part of the Loyola merger in 1995 totaled $18.4 million, and included $11.3 million in severance and other personnel expense, professional fees of $3.6 million and outside data services of $1.2 million. Foreclosed properties expense decreased from $6.9 million in 1996 to $3.1 million in 1997. Of the 1996 expense, $4.0 million was recorded in connection with the year-end 1996 merger with Citizens Bancorp, reflecting Crestar's accelerated marketing and disposal plans for specific foreclosed properties. Noninterest expense for 1997 includes $5.3 million of costs incurred in preparing the Corporation's data processing systems to be "Year 2000" compliant. Crestar is implementing changes to its information systems so that they will be fully operable for date recognition and data processing when the year 2000 begins. A further discussion of these changes is included under "Other Risk Elements". Total capital expenditures for 1997, 1996 and 1995 were approximately $115 million, $73 million and $58 million, respectively. The 1997 figure included expenditures for branch and office refurbishments, and new branch computer technology. In addition, construction outlays for a new six-story office building located adjacent to the Crestar Mortgage Corporation (CMC) headquarters in Richmond totaled approximately $44 million. Total capital expenditures in 1998 are anticipated to be approximately $72 million. Income Taxes In 1997, Crestar's income tax expense was $165.6 million, compared to $105.0 million in 1996 and $134.6 million in 1995. The effective tax rates for 1997, 1996 and 1995 were 34.8%, 32.5% and 38.4%, respectively. The relatively low 1996 effective tax rate was primarily attributable to a non-recurring $10.6 million reduction of income tax expense in the third quarter of 1996. This reduction of expense arose from the repeal of the tax law that previously required, under certain circumstances, thrift institutions to recapture into taxable income the pre-1988 loan loss allowance. Crestar had recorded the charge at the time of the merger with Loyola Capital Corporation on December 31, 1995, and later benefited when the law was repealed. The effective tax rates for 1996 and 1995, normalized to exclude the adjustment, were 35.7% and 35.4% respectively. Other fluctuations in Crestar's effective tax rates for 1997 compared to 1996 were primarily caused by lower state income tax expense and by the recognition of tax benefits, during 1997, relating to prior years. Deferred tax assets and liabilities are based on the differences between financial statement and tax bases of assets and liabilities. The tax effects of these differences are measured using enacted tax rates that will be effective for the period during which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets if, and to the extent, it is more likely than not that the 23 Management's Discussion Crestar Financial Corporation And Subsidiaries EARNING ASSET MIX ($ in millions) [GRAPH] DECEMBER 31, 1997 ----------------- Mortgage Loans Held For Sale $ 964.7 4% Money Market Investments $ 1,431.8 6% Securities Held to Maturity & $ 4,465.7 20% Securities Available For Sale Loans $15,677.0 70% -------------- Total $22,539.2 FUNDING MIX ($ in millions) [GRAPH] DECEMBER 31, 1997 ----------------- Long-Term Debt $ 831.4 4% Other Sources-Net $ 4,089.8 18% Purchased Funds $ 5,721.1 25% Interest-Bearing Core Depostits $11,896.9 53% ------------ Total $22,539.2 deferred tax assets will not be fully realized. In management's judgment, no valuation allowance was necessary at December 31, 1997 and 1996. Deferred tax expense is measured by the change in the net deferred tax assets or liabilities for the period. Liquidity, Market Risk And Interest Sensitivity 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 investments, 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 after giving consideration to capital adequacy, liquidity needs, interest rate risk, the economic outlook, market opportunities, and customer needs. General strategies to accomplish this objective include maintaining a strong balance sheet, maintaining adequate core deposit levels, taking an acceptable level of 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 53% of total funding sources at December 31, 1997 compared with 59% at December 31, 1996. As an additional indication of adequate liquidity, securities available for sale represented 17%, and money market investments represented 6%, of Crestar's total earning assets at December 31, 1997. Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates or equity prices. Like many financial institutions, Crestar's principal market risk is interest rate risk. Interest rate risk can be measured by looking at the volatility of projected net income as a result of possible changes in interest rates over a given period of time. Crestar's goal is to limit interest rate exposure to prudent levels as determined by the Corporation's ALCO committee. The committee establishes limits on the earnings at risk for a current planning period, usually defined as either the current calendar year or the remainder of the current year plus the next calendar year. Established limits are subject to change, but have typically been 10% or less of projected net income for the planning period. Actions that can be taken to manage interest rate risk include changing the mix of floating rate versus fixed rate earning assets and funding sources, changes in average maturities within the securities available for sale portfolio through sales and purchases, the use of derivative instruments for interest rate conversions or to hedge interest risk, and marketing and product development efforts to attract new loans and deposits. The level of interest rate risk taken is based on management's assessment of the market environment, and will vary from period to period. A significant tool used by Crestar in assessing interest rate exposure is net interest income simulations. A net income forecast is prepared regularly 24 Table 9 Off-Balance Sheet Derivatives Activity - Notional Balances(1) In thousands
Interest Rate Conversions Market Value Hedges ------------------------- --------------------- Hedges of Interest Interest Interest Interest Lending Rate Rate Rate Rate Commit- Swaps Caps Caps Floors ments(2) Total Balance, January 1, 1996 $1,200,000 $ 40,000 $ - $ - $ 547,790 $1,787,790 Additions 300,000 - 1,750,000 1,000,000 3,535,603 6,585,603 Terminations (500,000) - - - - (500,000) Maturities (100,000) (5,000) - - (3,376,662) $(3,481,662) - ------------------------------------------------------------------------------------------------------------ Balance, December 31, 1996 $ 900,000 $ 35,000 $1,750,000 $1,000,000 $ 706,731 $4,391,731 Additions 775,000 450,000 400,000 250,000 5,300,010 7,175,010 Terminations - - (200,000) (1,250,000) - (1,450,000) Maturities - (25,000) - - (4,546,853) (4,571,853) - ------------------------------------------------------------------------------------------------------------ Balance, December 31, 1997 $1,675,000 $460,000 $1,950,000 $ - $1,459,888 $5,544,888 ============================================================================================================
(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. based on a current interest rate forecast, in addition to numerous high and low interest rate scenarios involving changes in interest rates of up to and including 300 basis points from current interest rates. The various interest rate scenarios represent a reasonable range of interest rates. By its nature, the simulation process includes numerous assumptions, including assumptions on changes in average balances and yields, changes in deposit and loan mix, and forecasts of interest rate movements and prepayments. Prepayment assumptions are based on the expertise of management along with input from external financial market sources. The expected dynamics of the balance sheet, including shifts in loans and deposits, are included in the simulations. Also taken into account are the assumed effects of interest rate caps and floors. While the simulation process is a powerful tool in analyzing interest sensitivity, 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 interest rate and low interest rate estimates generated by this simulation process are compared to an estimate generated under a current interest rate scenario. Based on the most recent simulations at December 31, 1997, Crestar's projected 12-month after-tax net income under the current interest rate scenario at year-end 1997 would decrease by approximately $12.2 million in a high interest rate scenario, and would decrease by approximately $1.4 million in a low interest rate scenario, if nothing else changed and no management actions were taken. These projections were based on interest rate increases of 100 basis points under a 12-month high interest rate scenario, and interest rate decreases of 100 basis points under a low interest rate scenario, from market interest rates in effect at December 31, 1997. Changes in interest rates under these simulations were projected at 25 basis points per month. The results of these projections were within Crestar's tolerance for interest rate risk, and indicate a sufficient liquidity position and acceptable operating environment under the high, low and current interest rate scenarios. Another management tool for assessing interest rate risk is the quantification of the economic fair value of shareholders' equity. Economic value of equity consists of the present value of all future cash flows from assets, liabilities and off-balance sheet items. Potential changes in the economic value of equity are calculated by projecting cash flows and then computing present values under a series of different interest rate scenarios. The economic value calculations include the valuation of instruments with option characteristics, using numerous interest rate path valuations and mathematical rate simulation techniques. Crestar has incorporated this tool as a significant component of the Corporation's management of interest rate risk. Economic value measurement results at year-end 1997 were within Crestar's internal guidelines. Each of the 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. Assumptions can be inherently uncertain; 25 Management's Discussion Crestar Financial Corporation And Subsidiaries Table 10 Off-Balance Sheet Derivative Financial Instruments(1) December 31, 1997
Average Weighted Fixed Estimated Dollars in thousands Notional Average Receive Fair Balance Maturity Rate Value Comments Interest Rate Conversions Generic interest rate swaps $1,675,000 3.0 yrs. 6.12% Notional amounts of $1.43 Carrying amount(2) $ 835 billion and $250 million Commercial loan program convert floating rate Unrealized gains 12,721 commercial and instalment Unrealized losses (1,862) loans, respectively, to fixed Instalment loan program rate. Floating rates paid Unrealized gains 256 tied to LIBOR. Unrealized losses (57) ------- Estimated fair value 11,893 ------- Interest rate caps 460,000 3.1 yrs. 6.93%(3) Notional amount of $460 Carrying amount(2) 6,294 million hedges the interest Money market deposit rate risk associated with rising program interest rates on floating rate Unrealized gains 7 money market deposits Unrealized losses (3,321) (strike rate tied to LIBOR). ------- Estimated fair value 2,980 ------- Market Value Hedges Interest rate caps 1,950,000 2.2 yrs. 7.56%(3) Notional amount of $1.75 billion Carrying amount(2) 13,124 hedges the market value of fixed Securities available for rate securities available for sale sale program(4) in a rising rate environment Unrealized losses (10,765) (strike rate for $800 million Real estate income property tied to 5 year CMT; strike rate loan program for $950 million tied to LIBOR). Unrealized losses (748) Notional amount of $200 million hedges the market value of fixed rate real estate income property property loans (strike rate tied to LIBOR). ------- Estimated fair value 1,611 ------- Hedges of Lending Commitments Forward contracts 1,459,888 .2 yrs. n/a Hedges of residential Unrealized gains 904 mortgage lending Unrealized losses (5,588) commitments. ------- Estimated fair value (4,684) ---------- ------- Total derivatives $5,544,888 $11,800 ======================================================================================================================
(1) Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. (2) Includes any accrued interest receivable and or payable balances, and unamortized premiums paid for interest rate caps. (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) The fair value of derivative interest rate caps hedging securities classified as available for sale is included in the total fair value of the securities available for sale portfolio. The unamortized premiums paid for such interest rate caps are included in the amortized cost basis of securities available for sale, with any unrealized gain or loss (net of tax) pertaining to these interest rate caps included in shareholders' equity as "Net unrealized gain (loss) on securities available for sale." n/a - Not applicable LIBOR - London Interbank Offered Rates 5 year CMT - Yield on 5 year constant maturity U.S. Treasury securities 26 Table 11 Off-Balance Sheet Derivatives--Expected Maturities(1) December 31, 1997
Dollars in thousands Within One to Three to Over One Year Three Years Five Years Five Years Total Interest Rate Conversions Generic interest rate swaps: Notional amount $ 300,000 $ 600,000 $625,000 $150,000 $1,675,000 Average fixed receive rate 5.72% 5.93% 6.26% 7.16% 6.12% Carrying amount $ (90) $ 5 $ 590 $ 330 $ 835 Net unrealized gain (loss) (353) (447) 3,868 7,990 11,058 Interest rate caps Notional amount $ 5,000 $ 255,000 $200,000 $ - $ 460,000 Average strike rate 6.50% 7.47% 6.25% - 6.93% Carrying amount $ - $ 1,221 $ 5,073 $ - $ 6,294 Net unrealized loss - (1,035) (2,279) - (3,314) Market Value Hedges Interest rate caps Notional amount $ - $1,950,000 $ - $ - $1,950,000 Average strike rate - 7.56% - - 7.56% Carrying amount $ - $ 13,124 $ - $ - $ 13,124 Unrealized loss - (11,513) - - (11,513) Hedges of Lending Commitments Forward contracts:(2) Notional amount $1,459,888 $ - $ - $ - $1,459,888 Net unrealized loss (4,684) - - - (4,684) Total derivatives: Notional amount $1,764,888 $2,805,000 $825,000 $150,000 $5,544,888 Carrying amount $ (90) $ 14,350 $ 5,663 $ 330 $ 20,253 Net unrealized gain (loss) (5,037) (12,995) 1,589 7,990 (8,453) ---------- ----------- --------- -------- ---------- Estimated fair value $ (5,127) $ 1,355 $ 7,252 $ 8,320 $ 11,800 ===========================================================================================================
(1) Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. (2) Hedges of residential mortgage lending commitments. actual results will differ from projected results due to changes in market conditions, management strategies and the timing and magnitude of interest rate changes. As noted, one tool available to assist in the management of interest rate risk is the utilization of derivative interest rate contracts, such as interest rate swaps, caps and floors. Crestar's outstanding interest rate swap instruments at December 31, 1997 are utilized to convert certain variable rate assets to fixed rates as part of the Corporation's interest risk management strategy. Interest rate caps are utilized to minimize interest rate risk associated with rising rates on floating rate money market deposits, fixed rate securities and fixed rate real estate loans. 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 prospective 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 December 31, 1997, nor has Crestar ever experienced any charge-offs related to the credit risk of derivative transactions. Interest rate simulation techniques are used by Crestar to assess and monitor market risk in the Corporation's derivative portfolio. Tables 9, 10 and 11 present information regarding the fair values, maturity, average rates, and activity for 1997 for these off-balance sheet derivative instruments. The notional amount of Crestar's interest rate swaps, caps and floors (excluding customer positions where Crestar simply acts as an intermediary) was $4.085 billion at December 31, 1997. Forward 27 Management's Discussion Crestar Financial Corporation and Subsidiaries contracts with a notional balance of $1.460 billion, utilized to hedge lending commitments of Crestar's mortgage banking subsidiary, were also outstanding at December 31, 1997, bringing the total notional value of derivative financial instruments related to interest rate risk management activities to $5.545 billion at year-end 1997. Maturities on such instruments ranged from less than one month to 6.3 years. The net unrealized losses on these instruments totaled $8.5 million as of December 31, 1997, which was composed of gross unrealized gains of $13.9 million and gross unrealized losses of approximately $22.4 million. At December 31, 1996, derivatives used as hedges of interest rate risk had gross unrealized gains of $2.6 million and gross unrealized losses of $14.0 million, and at December 31, 1995, such derivatives had gross unrealized gains of $13.6 million and gross unrealized losses of $6.1 million. Financial statement note 21 also contains additional information pertaining to these types of agreements. During the course of 1997 and 1996, Crestar terminated prior to maturity certain interest rate swaps, caps and floors being utilized as interest rate conversions or hedges against interest rate movements. At December 31, 1997 Crestar had a deferred gain of $4.2 million included in other assets, arising from the termination of interest rate floors during 1997. The deferred gain is being amortized over a weighted-average remaining maturity of 3.4 years. The Corporation had no unamortized deferred gain or loss balances from terminated instruments at December 31, 1996. Terminations of derivative instruments prior to maturity may occur in the future in response to modifications of interest rate risk management strategies. Estimated fair values of financial instruments held at December 31, 1997 and 1996 are presented in financial statement note 21. Management is concerned about the comparability of fair value estimates between financial institutions due to the wide range of valuation techniques utilized and the numerous estimates and assumptions that must be made, given the absence of active secondary markets for many financial instruments. This is particularly true for estimated fair values computed for loan portfolios and deposit liabilities. Lack of uniform valuation methodologies introduces a great degree of subjectivity to such fair value estimates. A brief description of the methodologies used in computing fair value estimates, and the resulting estimated fair values, are provided in financial statement note 21. Crestar's loan portfolio, which constitutes the Corporation's largest financial instrument asset category, had an estimated fair value of approximately 2% in excess of recorded book value at December 31, 1997. Credit quality trends and the year-end interest rate environment were major factors in the determination of the estimated fair value for net loans. Deposit liabilities payable on short notice or demand, which constituted 69% of Crestar's total deposits at December 31, 1997, were assigned an estimated fair value equal to the balance payable on demand, in accordance with mandatory accounting standards. However, purchase transactions of such deposits usually reflect premiums to recorded book value, due to the relationship value of such deposits over their projected life and their value as a low cost source of funds. Securities held to maturity are carried at amortized cost on the Corporation's Consolidated Balance Sheets, as Crestar has the ability and positive intent to hold these securities to maturity. Trading account securities (classified as money market investments) are carried at fair value as they are intended to be sold in the near term. Securities available for sale are carried at fair value and represent securities not classified as held to maturity or trading account securities. Unrealized holding gains or losses on securities available for sale are excluded from the Consolidated Statement of Income and reported, net of tax, as a separate component of shareholder's equity. At December 31, 1997, the fair market value of securities classified as available for sale was $3.839 billion. The amortized cost of these securities was $3.841 billion. The net unrealized loss on securities available for sale, net of tax, at December 31, 1997 was approximately $0.7 million. At December 31, 1996 the net unrealized gain on securities available for sale, net of tax, was $21.3 million. The net unrealized gain or loss on securities available for sale, recorded as a component of shareholders' equity, will continue to be subject to change in future periods due to fluctuations in market values, acquisition activities, and sales, purchases, maturities and calls of securities classified as available for sale. Table 12 Debt And Other Security Ratings (as of January 30, 1998) Standard Thomson Security Moody's & Poor's BankWatch 83/4% Subordinated Notes due 2004 Baa1 BBB+ A- 81/4% Subordinated Notes due 2002 Baa1 BBB+ A- 85/8% Subordinated Notes due 1998 Baa1 BBB+ A- Commercial Paper P-2 Not rated TBW-1 Crestar Bank Deposits: Long-Term A2 A Not rated Short-Term P-1 A-1 TBW-1 Crestar Capital Trust I Preferred Stock Baa1 BBB Not rated ===================================================== 28 [GRAPH] Sources of Funds- Averages ($ in millions) 1993 1994 1995 1996 1997 ----- ------ ------ ------- ------- [S] [C] Long-Term Debt $ 464 $ 588 $ 696 $ 689 $ 826 Other Sources-Net 2,610 2,853 3,004 3,234 3,448 Purchased Liabilities 1,717 1,901 2,400 3,296 3,909 Interest-Bearing Core Deposits 11,362 12,333 12,503 12,500 $11,680 Average Core Deposit Mix (percent) [GRAPH] 1993 1994 1995 1996 1997 ----- ------ ------ ------- ------- Demand Deposits 18 18 19 20 21 Interest-Bearing Demand Deposits 38 38 37 37 40 Regular Savings Deposits 13 14 12 11 10 Domestic Time Deposits 31 30 32 32 29 ------ ------- ------- -------- -------- 100 100 100 100 100 USES OF FUNDS Averages ($ in millions) [GRAPH] 1993 1994 1995 1996 1997 ----- ------ ------ ------- ------- Mortgage Loans Held For Sale $ 430 $ 408 $ 374 $ 836 684 Money Market Investments 878 650 337 332 389 Securities Held To Maturity & Securities Available For Sale 4,895 4,805 4,216 4,922 4,399 Loans 9,950 11,812 13,676 13,629 14,391 Securities held to maturity at December 31, 1997 had an amortized cost of $627 million and a market value of $631 million. Unrealized pre-tax gains on such securities at year-end 1997 were $6.8 million, with unrealized pre-tax losses of $2.0 million. No sales of investments classified as securities held to maturity occurred during 1997, 1996 or 1995. 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 usually accelerates. During such 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. The Corporation had no security holdings at December 31, 1997 that met the definition of a high-risk mortgage derivative product, as defined by the Federal Financial Institutions Examination Council (FFIEC) regulations. All investment securities, including mortgage backed pass-through securities, CMO securities and other collateralized receivables, are also managed with respect to their credit risk. Credit risk arises because payments of interest and principal can be dependent on the payment of the underlying security, in addition to the contractual obligation of the issuer to collect and remit such payments to individual security owners. In some respects, such credit risk is similar to the risks incurred by purchasers of corporate bond securities. The Corporation monitors credit risk by assessing, and monitoring on an ongoing basis, the financial strength and performance of the issuers of such securities. See "Uses of Funds" for a further description of the Corporation's security holdings. The Corporation's debt ratings are presented in Table 12. During January 1998, $150 million in subordinated debt securities were issued by Crestar. The subordinated note issuance received a rating of Baa1, and a rating of BBB+, from the Moody's and Standard & Poor's rating agencies, respectively. Sources Of Funds Crestar's largest and most important funding source is core deposits, which Crestar defines as total deposits less certificates of deposit of $100,000 and over. Core deposits totaled $15.4 billion at December 31, 1997, representing 68% of total funding sources at year-end 1997. Core deposits totaled $15.5 billion at December 31, 1996, or 75% of total funding sources at year-end 1996. Reflecting a competitive environment for consumer deposits, average core deposits decreased 5% from 1996 to 1997, totaling $14.8 billion for 1997 versus $15.5 billion for the previous year. Demand deposits increased $187 million, or 6%, from year-end 1996 to year-end 1997. Interest bearing demand deposits, which encompass interest checking and money market deposit accounts, increased $344 million or 6% during this period. Declines were noted in regular savings accounts and, to a greater degree, 29 Management's Discussion Crestar Financial Corporation And Subsidiaries domestic time deposits. Competitive pricing for deposits among financial institutions, in addition to the consolidation or sale of selected branch locations during 1996 and 1997, contributed to the decline in consumer certificates of deposit accounts. Growth in sales of mutual fund and insurance annuity products within Crestar's branch system was also a factor in declines in year-end balances of domestic time deposits, from year-end 1996 levels. Purchased liabilities are composed of certificates of deposit of $100,000 and over (large CDs) and short-term borrowings. Total purchased liabilities increased $1.5 billion from December 31, 1996, reflecting their desirability as a cost-effective alternative funding source during periods of slow deposit growth. Purchased liabilities represented 25% of Crestar's total funding sources at December 31, 1997. At that date, approximately 32% of Crestar's purchased funds consisted of funds invested by local customers and, as such, are less volatile than other categories of purchased funds. Long-term debt decreased $28 million during 1997, or 3%, primarily reflecting scheduled reductions of collateralized mortgage obligation bonds, mortgage indebtedness and capital lease obligations. Uses Of Funds Total earning assets at December 31, 1997 were $22.5 billion, an increase of $1.8 billion or 9% from year-end 1996, compared with a 3% increase in the prior year. Period-end balances for 1997 reflect the impact of Crestar's November 1997 purchase of American National, with approximately $500 million of total assets. Average earning assets for 1997 were more stable, with average balances totaling $19.9 billion for 1997, an increase of $144 million or 1% over the average earning asset balances of 1996. Crestar's earning assets are comprised of loans, securities, money market investments and mortgage loans held for sale. Average balances of loans for 1997 increased $761 million, or 6%, in comparison to 1996 levels, and comprised 72% of average earning assets for 1997. Loans represented 69% of Crestar's average earning assets in 1996. At December 31, 1997, loans net of unearned income were $15.7 billion, representing an increase of $1.6 billion or 12% over the balance at December 31, 1996. During 1997, the composition of the loan portfolio changed as strong growth was experienced in commercial, instalment and real estate mortgage loans. Declining balances were experienced in Crestar's bank card portfolio for the second year. At December 31, 1997, consumer loans represented 60%, and business loans represented 40%, of Crestar's total loan portfolio. Crestar's business loan portfolio consists of commercial, real estate - income property and real estate - construction loans. Commercial loan volume experienced significant growth in the latter part of 1997. Coupled with Crestar's acquisition of American National, the new loan volume contributed to an increase of $664 million or 17% in commercial loan balances as of December 31, 1997, versus year-end 1996. Business related real estate loans exhibited total growth of $79 million during the same time period, with real estate - construction loans increasing 21%, to $381 million. Consumer instalment loans exhibited the strongest growth of all loan categories during 1997, increasing by $787 million or 19% over year-end 1996 levels. During the third quarter of 1997, Crestar completed the purchase of approximately $600 million of home equity loans and outstanding balances under home equity lines of credit. In December 1997, Crestar securitized $212 million in student loans. Excluding the impact of these two transactions, instalment loan balances exhibited an increase of approximately 10% over year-end 1996 levels. Bank card loans decreased $269 million or 19% in 1997, following a reduction of $276 million or 16% from 1995 to 1996. Marketing efforts directed to new accounts have been curtailed from prior levels. Account balances have also declined as a result of the expiration of introductory low interest rates on some bank card products. Bank card balances represented 7% of the total loan portfolio at December 31, 1997, versus 10% at year-end 1996. Real estate - mortgage loans increased $366 million or 12% during 1997, and totaled $3.4 billion at December 31, 1997. Approximately $220 of real estate - mortgage loans were acquired in the November 1997 acquisition of American National. Consumer real estate-mortgage loans represented 22% of the Corporation's total loan portfolio at December 31, 1997, compared to 21% at year-end 1996. Total securities (classified as either held to maturity or available for sale) as of December 31, 1997 decreased $820 million or 16% from December 31, 1996. Average balances for 1997 also decreased, as proceeds from the sales and maturities of securities were used to fund higher loan balances. The composition of Crestar's securities portfolio along with related yield and maturity information as of December 31, 1997 are presented in Table 13 (Analysis of Securities Held to Maturity) and Table 14 (Analysis of Securities Available For Sale). Both average expected maturity and actual stated maturity are shown in these tables. The average expected maturity considers prepayments and amortization, resulting in a more realistic measure of maturities than actual stated maturity. The Corporation's securities portfolio includes investments in both mortgage-backed pass-through securities and collateralized mortgage obligations (CMO). A mortgage-backed pass-through obligation depends on the underlying pool of mortgage loans to 30 Table 13 Analysis Of Securities Held To Maturity(1)
Average Average Expected Stated December 31, 1997 Par Amortized Market Average Maturity Maturity Dollars in thousands Value Cost Value Yield(2) (Yrs/Mos) (Yrs/Mos) U.S. Treasury and Federal agencies: Within one year $ 98,500 $ 99,327 $ 98,962 4.9% One to five years 97,000 97,679 98,362 5.9 - ---------------------------------------------------------------------------------------------------------------- Total U.S. Treasury and Federal agencies 195,500 197,006 197,324 5.4 01/05 01/05 - ---------------------------------------------------------------------------------------------------------------- Mortgage-backed obligations of Federal agencies: Within one year 1,102 1,104 1,106 4.3 One to five years 8,822 8,848 8,999 7.5 Five to ten years 147,500 146,196 148,130 6.6 After ten years 227,782 224,059 225,254 6.3 - ---------------------------------------------------------------------------------------------------------------- Total mortgage-backed obligations of Federal agencies 385,206 380,207 383,489 6.4 14/07 14/09 - ---------------------------------------------------------------------------------------------------------------- States and political subdivisions: Within one year 2,348 2,339 2,410 8.5 One to five years 15,755 15,879 16,279 7.7 Five to ten years 9,345 9,302 9,532 8.0 After ten years 19,170 19,045 19,522 8.2 - ---------------------------------------------------------------------------------------------------------------- Total states and political subdivisions 46,618 46,565 47,743 8.0 07/10 07/10 - ---------------------------------------------------------------------------------------------------------------- Other taxable securities: Within one year 2,300 2,300 2,301 11.5 One to five years 100 100 93 4.3 After ten years 530 538 541 7.7 - ---------------------------------------------------------------------------------------------------------------- Total other taxable securities 2,930 2,938 2,935 10.5 02/05 02/10 - ---------------------------------------------------------------------------------------------------------------- Total securities held to maturity $630,254 $626,716 $631,491 6.2% 09/11 10/00 ================================================================================================================
(1) Maturity line classifications are based on stated maturity (2) Tax-equivalent basis, based on amortized cost provide a stream of cash flows to the investor consisting of both principal and interest payments from the underlying mortgages. A CMO is a mortgage-backed security that is comprised of classes of bonds created by prioritizing the cash flows from underlying mortgage pools in order to meet different objectives of investors. Approximately 67% (market value) of Crestar's securities available for sale portfolio, and approximately 61% (amortized cost) of Crestar's securities held to maturity portfolio, was composed of mortgage-backed obligations of Federal agencies as of December 31, 1997. This category includes mortgage-backed securities of Federal agencies, as well as CMO securities guaranteed by Federal agencies such as the Federal Home Loan Mortgage Corporation. Securities classified as "Other taxable securities" can include non-government CMO securities, corporate debt obligations, and corporate obligations securitized by credit card and instalment loan balances. Other taxable securities classified as available for sale at December 31, 1997 included approximately $782 million (market value) of non-government CMO obligations. None of Crestar's securities holdings as classified by individual issuer (excluding U.S. Treasury and Federal agencies) exceeded 10% of total shareholders' equity at December 31, 1997. Money market investments increased by $686 million or 92% from December 31, 1996 to $1.4 billion at December 31, 1997, in part reflecting the investment of funds from increased short-term borrowings at year-end. Average balances of money market investments in 1997 were $389 million, versus $332 million in 1996, and reflect an appropriate level of investment given liquidity needs and balance sheet management strategies. Average mortgage loans held for sale totaled $684 million for 1997, representing 3% of average earning assets. While mortgage loan origination activity for 1997 exceeded prior year levels, shorter average holding periods for loans held 31 Management's Discussion Crestar Financial Corporation And Subsidiaries Table 14 Analysis Of Securities Available For Sale(1)
Average Average Expected Stated December 31, 1997 Par Amortized Market Average Maturity Maturity Dollars in thousands Value Cost Value Yield(2) (Yrs/Mos) (Yrs/Mos) U.S. Treasury and Federal agencies: Within one year $ 25,240 $ 25,237 $ 25,236 6.3% One to five years 175,485 175,324 174,582 5.6 Five to ten years 9,500 9,408 9,649 6.3 After ten years 7,300 7,272 7,649 6.9 - --------------------------------------------------------------------------------------------------------------- Total U.S. Treasury and Federal agencies 217,525 217,241 217,116 5.7 02/11 03/02 - --------------------------------------------------------------------------------------------------------------- Mortgage-backed obligations of Federal agencies: Within one year 103,081 101,989 102,930 6.4 One to five years 224,538 224,156 223,596 6.4 Five to ten years 1,000,736 995,082 999,434 7.6 After ten years 1,265,538 1,273,684 1,263,230 6.5 - --------------------------------------------------------------------------------------------------------------- Total mortgage-backed obligations of Federal agencies 2,593,893 2,594,911 2,589,190 6.5 09/00 10/10 - --------------------------------------------------------------------------------------------------------------- Other taxable securities: Within one year 158,555 158,337 158,313 9.8 One to five years 73,714 73,677 73,102 5.8 Five to ten years 47,967 47,953 47,990 6.3 After ten years 506,687 505,905 509,429 6.7 - --------------------------------------------------------------------------------------------------------------- Total other taxable securities: 786,923 785,872 788,834 7.2 14/08 14/10 - --------------------------------------------------------------------------------------------------------------- Total interest-earning investments 3,598,341 3,598,024 3,595,140 6.6 09/10 11/03 Common and preferred stocks 242,566 242,566 243,866 6.4 - --------------------------------------------------------------------------------------------------------------- Total securities available for sale$3,840,907 $3,840,590 $3,839,006 6.6% ===============================================================================================================
(1) Maturity line classifications are based on stated maturity (2) Tax-equivalent basis, based on amortized cost for sale resulted in lower average levels of mortgage loans held for sale during 1997, in comparison to 1996. The significant refinancing activity experienced in December 1997 by Crestar's mortgage banking subsidiary resulted in much higher balances of mortgage loans held for sale at December 31, 1997 when compared to the prior year-end level, and in comparison to average balances during the year. Types Of Lending Crestar's loan portfolio is broadly segmented into commercial and consumer loans. The commercial loans are more specifically segmented into loans to corporations, partnerships and sole proprietorships. These loans can have various purposes to include financing working capital, equipment, real estate and, to a lesser degree, acquisitions and recapitalizations. Loan types can be either short-term lines of credit, term loans or mortgage financing. Loan maturities are managed such that they are compatible with the maturity structure of the Corporation's sources of funding. Commercial real estate loans are further segmented into owner-occupied property, income property and construction loans. Owner-occupied property is considered to be similar to traditional commercial loans since repayment is primarily from the cash flow of the owner, with the real estate serving as collateral being a secondary repayment source. Income property loans are made to entities or individuals engaged in real estate investment; the primary source of repayment arises from the rental or sale of the property. Construction loan funds are used by the borrower to build or develop real estate properties. Construction loans are expected to either be refinanced at completion, convert to income property or to be owner-occupied. Table 15 shows the various loan categories and balances outstanding for a five year period. Consumer loans are comprised of residential real estate mortgage, bank card and instalment loans. Instalment loans represent a broad loan category where loan receipts may be for several different purposes, including car or boat purchases, home im- 32 Table 15 Loan Portfolio Analysis December 31,
Dollars in millions 1997 1996 1995 1994 1993 ------------- ------------ ------------- -------------- --------------- $ % $ % $ % $ % $ % Business Loans: Commercial 4,667 30 4,003 29 3,773 27 3,868 30 3,520 33 Real estate - income property 1,254 8 1,242 9 1,225 9 1,098 8 1,029 10 Real estate - construction 381 2 314 2 407 3 391 3 437 4 Consumer Loans: Instalment 4,847 31 4,060 29 3,653 26 2,942 22 2,501 23 Bank card 1,154 7 1,423 10 1,699 12 1,488 11 988 9 Real estate - mortgage 3,374 22 3,008 21 3,276 23 3,408 26 2,191 21 - --------------------------------------------------------------------------------------------------------------- Total loans - net of unearned income 15,677 100 14,050 100 14,033 100 13,195 100 10,666 100 ===============================================================================================================
provement and college tuition. Bank card loans are unsecured lines of credit, while most other consumer loans are secured. Instalment loans have various maturity structures, with most maturing within five years. Real estate-mortgage loan maturities may extend to 30 years. Most residential real estate loans are underwritten to national market standards and therefore can be securitized and sold into the secondary market. Credit Underwriting And Risk Management Crestar has comprehensive policies and procedures which cover both commercial and consumer loan origination and management of risk. All loans are underwritten in a manner that emphasizes the borrower's capacity to pay. The measurement of a borrower's capacity to pay serves to define the potential risk of nonpayment or default. A higher potential for default is a factor in determining the need for and amount of collateral required. Crestar makes unsecured loans when the capacity to pay is considered substantial. Generally, as capacity lessens, collateral is required to provide a secondary source of repayment and to reduce the risk of loss. Various policies and procedures provide guidance on such factors as amount, terms, price, maturity and appropriate collateral levels. Each risk factor is considered critical to assuring that Crestar receives an adequate return for the risk undertaken, and that the risk of loss is minimized. Crestar effectively manages the risk associated with commercial loans, which generally have balances larger than individual consumer loans, by having lending professionals work in tandem with credit underwriting personnel to determine a loan's risk. To further assess loan portfolio quality, there is a Credit Review team that independently reviews various individual loans and loan segments, and supports the credit management process of the Corporation. Crestar's commercial loans are not considered to be concentrated, except those loans to real estate developers and investors (REDI). Diversification is achieved through lending to various industries located within Crestar's market area. This diversification is believed to reduce investment risk associated with changes in economic conditions. Due to its concentration and specialized nature, real estate investment lending is governed by its own distinct policies and procedures. This loan class is also primarily underwritten and managed by a specialized division of lending professionals. Underwriting policies delineate such factors as concentrations by property type, amount, terms, price and collateral. Real estate investment lending is generally collateralized and, as such, market conditions are monitored closely. Key market measurements include vacancy rates, rental rates, absorption rates for new properties and loan-to-value ratios. The Federal Deposit Insurance Corporation Improvement Act (FDICIA) establishes guidelines, by loan type, for real estate lending. Maximum real estate loan-to-value ratios under these guidelines include 65% for undeveloped land, 75% for land development loans, 80% for commercial, multi-family and other nonresidential construction loans, and 85% for residential (1 to 4 family) construction loans. Crestar's policies for loan-to-value are within the parameters established by the FDICIA. Based upon Standard Industrial Classification codes used for bank regulatory reporting purposes, the Corporation had no aggregate loan classifications of 10% or more of total loans in any particular industry at year-end 1997. Under a broader view of the portfolio, Crestar had $1.79 billion in loans outstanding at December 31, 1997 to real estate developers and investors (REDI), comprising 11% of the loan portfolio at year-end 1997. The REDI designation is based on borrower type and encom- 33 Management's Discussion Crestar Financial Corporation And Subsidiaries passes non-owner occupied real estate and construction loans as well as other forms of credit extended to real estate developers or investors. Crestar monitors the REDI portfolio with respect to diversification on a basis of both geographic location and loan type. REDI loans as of December 31, 1997 are classified on the consolidated balance sheet as real estate-income property ($1.254 billion), and within the real estate-construction ($279 million) and commercial loan ($256 million) categories. Consumer loans, by their nature and size, are generally not subject to risks associated with concentration. However, a portfolio of a specific consumer loan type may create concentration risk, and therefore consumer loan portfolios are monitored closely. The underwriting of consumer loans at Crestar is done primarily by two lending groups. The Consumer Finance Group concentrates on instalment and bank card lending, with Crestar's mortgage banking subsidiary, Crestar Mortgage Corporation, handling real estate-mortgage loans. This structure is considered to be an effective approach to cost management and reduction of credit risk. Consumer loan underwriting across product types utilizes both the skills of lending professionals as well as the use of statistically-based credit-scoring models. This underwriting process considers both economic factors, such as interest rates, employment, consumer income, consumer debt and delinquency levels, in addition to individual loan factors, such as an individual's employment history, payment history, current debt levels and, if applicable, collateral values. Underwriting guidelines are continually evaluated and subject to modification based upon these factors. Future loss expectations consider prevailing economic and consumer trends in conjunction with current loan underwriting guidelines. Provision And Allowance For Loan Losses Both the amount of the provision and the level of the allowance for loan losses are impacted by many factors, including general economic conditions, actual and expected credit losses, loan performance measures, historical trends and other circumstances, both internal and external. The amount of the provision for loan losses is established based on evaluation of the current level of the allowance. Individual loan-by-loan reviews are performed quarterly on large commercial and real estate exposures in the lower quality risk ratings categories. For the remainder of the portfolio, a formula-based approach is utilized. The formula is designed to cover inherent loss in that portion of the portfolio not subject to specific review. The formula may be adjusted for changes in the factors listed above. Loan loss allowances for the consumer loan portfolio are also based on historical and anticipated losses and the current and projected characteristics of the different types of consumer loans. Management's evaluation and resulting provision and allowance decisions are reviewed by the Board of Directors on a quarterly basis. Total credit costs, which equals the sum of the provision for loan losses and foreclosed properties expense, were $111.2 million in 1997, an increase of $8.4 million or 8% from the $102.8 million in credit costs recorded 1996. Crestar made provisions for loan losses of $108.1 million in 1997, an increase of 13% compared to provision expense of $95.9 million in 1996. The increase in provision expense primarily reflects the performance of Crestar's bank card loan portfolio during the year, which like 1996 was evidenced by historically high levels of loan charge-offs compared to years prior to 1996. The increase also reflects the growth in Crestar's loan portfolio during 1997. Mitigating the increase in total credit costs was a decrease in foreclosed properties expense, which totaled $3.1 million for 1997, compared to $6.9 million in 1996. A provision expense for foreclosed properties of $4.0 million was recorded in 1996 as part of the Citizens merger costs, to recognize Crestar's accelerated disposition strategy with respect to specific foreclosed properties held by Citizens. Net loan charge-offs in 1997 totaled $99.7 million, down slightly from a total of $100.6 million in net loan charge-offs in 1996. Net charge-offs as a percentage of average loans were 0.69% in 1997, compared to 0.74% in 1996 and 0.48% in 1995. The largest proportion of net loan charge-offs during 1997 and 1996 occurred in the bank card loan portfolio. Net charge-offs for bank card loans were $82.7 million for 1997, compared to $82.2 million in 1996. Net bank card loan charge-offs as a percentage of bank card loans for 1997 was 6.79%, compared to 5.37% in 1996 and 3.33% in 1995. Bank card charge-off results for 1997 were favorably impacted by two non-recurring items. During 1997, Crestar sold a portfolio of fully charged-off loans to another corporation, and recorded the proceeds of $1.5 million as a recovery. The growth of bank card net charge-offs is a result of the significant growth in Crestar's bank card loan portfolio during 1993 through 1995. Crestar's experience has shown that the delinquency and loss performance of newly underwritten bank card loans typically do not reach their highest levels until after 24 months from origination. Crestar's bank card loss rates have been higher than originally expected due to an unanticipated decline in consumer payment performance, influenced by a substantive increase in consumer bankruptcy filings. Crestar's experience is similar to many others in the credit card business. The increase in the net charge-off ratio is a result of a more 34 Table 16 Allowance For Loan Losses
Dollars in thousands 1997 1996 1995 1994 1993 Beginning balance $ 268,868 $ 274,430 $ 265,171 $ 254,682 $ 244,226 - ------------------------------------------------------------------------------------------------------------ Allowance from acquisitions and other activity - net 4,108 (888) 8,353 15,687 22,000 - ------------------------------------------------------------------------------------------------------------ Provision for loan losses 108,097 95,890 66,265 36,509 63,325 - ------------------------------------------------------------------------------------------------------------ Loans charged off: Commercial 4,726 7,696 11,295 16,662 33,075 Real estate - income property 218 2,250 3,819 13,036 26,473 Real estate - construction 1,756 2,668 1,043 817 5,307 Instalment 27,862 28,757 21,746 14,571 16,848 Bank card 92,576 88,811 57,595 28,573 21,064 Real estate - mortgage 2,635 1,903 1,303 1,815 2,807 - ------------------------------------------------------------------------------------------------------------ Total loans charged off 129,773 132,085 96,801 75,474 105,574 - ------------------------------------------------------------------------------------------------------------ Recoveries: Commercial 6,220 8,646 8,747 9,480 11,630 Real estate - income property 2,382 4,662 5,211 6,513 920 Real estate - construction 767 1,920 3,461 4,389 5,077 Instalment 10,676 9,641 8,718 8,352 8,017 Bank card 9,924 6,617 4,924 4,676 4,882 Real estate - mortgage 125 35 381 357 179 - ------------------------------------------------------------------------------------------------------------ Total recoveries 30,094 31,521 31,442 33,767 30,705 - ------------------------------------------------------------------------------------------------------------ Net charge-offs 99,679 100,564 65,359 41,707 74,869 - ------------------------------------------------------------------------------------------------------------ Allowance, December 31: Commercial 62,063 53,321 64,836 78,028 78,708 Real estate - income property 25,014 27,211 41,003 39,810 50,731 Real estate - construction 10,160 10,622 18,771 17,475 18,015 Instalment 28,708 27,914 24,337 23,251 24,546 Bank card 59,813 67,303 56,898 27,442 20,399 Real estate - mortgage 11,510 13,333 13,482 12,266 8,726 Unallocated 84,126 69,164 55,103 66,899 53,557 - ------------------------------------------------------------------------------------------------------------ Balance, December 31 $ 281,394 $ 268,868 $ 274,430 $ 265,171 $ 254,682 ============================================================================================================ Loans: Total at year end $15,676,990 $14,049,705 $14,032,820 $13,194,738 $10,666,472 Average during year 14,390,637 13,629,552 13,675,135 11,811,269 9,950,341 Net charge-offs to: Average total loans .69% .74% .48% .35% .75% Provision for loan losses 92.21 104.87 98.63 114.24 118.23 Allowance for loan losses to: Year-end loans 1.79 1.91 1.96 2.01 2.39 Net charge-offs 2.82x 2.67x 4.20x 6.36x 3.40x Net charge-offs earnings coverage 5.85 4.17 6.38 8.77 4.38 ============================================================================================================
seasoned portfolio, higher than expected bankruptcies and the moderation of new bank card marketing programs. Moderating new marketing programs has contributed to a decline in outstanding loan balances during 1996 and 1997. Average outstanding balances of bank card loans have declined from $1.58 billion in 1995 and $1.53 billion in 1996 to $1.22 billion in 1997. At December 31, 1997, bank card loans totaled $1.15 billion and represented 7% of Crestar's total loan portfolio. Excluding the impact of bank card loans, net loan charge-offs were $17.0 million in 1997, versus $18.4 million in 1996. Net recoveries were recorded in 1997 and 1996 in the commercial and real estate-income property loan categories. Instalment loan net charge-offs totaled $17.2 million for 1997, down from $19.1 million in 1996. Net charge-offs in Crestar's real estate-mortgage portfolio were $2.5 million in 1997, compared to $1.9 million in 1996. For the year ended December 31, 1997, instalment loan charge-offs as a percentage of instalment loans outstanding were 0.39%. Real estate - mortgage loan charge-offs as a percentage of such loans outstanding during 1997 were 0.08%. 35 Management's Discussion Crestar Financial Corporation And Subsidiaries Total credit costs in 1996 of $102.8 represented an increase of $40.1 million from total credit costs recorded in 1995. Crestar experienced an increase in provision for loan losses of $29.6 million from 1995 to 1996. The increase reflected the performance of Crestar's bank card loan portfolio during the year, which was evidenced by high levels of loan charge-offs compared to prior years. Net loan charge-offs of $100.6 million in 1996 represented an increase of $35.2 million or 54% from 1995 levels. A sizable percentage of Crestar's bank card loan accounts began to reach a maturity level during 1995 and 1996, with net charge-off levels climbing from the levels experienced when the accounts were less than two years old from time of underwriting. Net charge-offs for bank card loans were $82.2 million for 1996, compared to $52.7 million in 1995. The allowance for loan losses at December 31, 1997 was $281 million, representing 1.79% of year-end loans, 326% of total nonperforming assets and 465% of total nonperforming loans. At December 31, 1996, the allowance for loan losses was $269 million, representing 1.91% of loans, 247% coverage of total nonperforming assets and 330% coverage of total nonperforming loans at that date. Improvement in the two coverage ratios was due to reductions in both nonperforming loans and nonperforming assets from 1996 levels, accompaned by an increased allowance for loan losses. Details of the activity in the allowance for loan losses for the past five years is shown in Table 16. Based on current expectations relative to portfolio characteristics and performance measures including loss projections, management considers the level of the allowance adequate. Although the allowance for loan losses is a general allowance applicable to all loan categories, the allocation provided in Table 16 is made to provide a general indication of the relative risk assessment of the components of the loan portfolio. Nonperforming Assets And Other Risk Elements Nonperforming assets consist of nonaccrual loans, formally restructured loans and foreclosed properties. Generally, commercial and consumer real estate-mortgage loans are placed in nonaccrual status when principal or interest is 90 days or more past due, or earlier if it is known or expected that interest will not be paid or full collection of all principal and interest is unlikely. Bank card loans are not placed in nonaccrual status, but are generally charged off when past due 180 days. If notification of bankruptcy has been received during the 180 day period, Crestar will seek repayment (reaffirmation) of the bank card loan through applicable bankruptcy laws. Any loan balance not specifically reaffirmed within 60 days of notification of bankruptcy is charged off. Instalment loans are generally placed in nonaccrual status when past due 120 days, with balances not supported by an assessment of collateral charged-off at that time. If well-secured, loans may be restructured as to rate, maturity or other terms as determined on an individual credit basis. Using the Corporation's criteria for classification of nonperforming loans, loans that are both past due 90 days or more, but are deemed to be adequately secured and are in the near-term process of collection are not usually placed in nonaccrual status and, if not, are therefore excluded from the definition of nonperforming assets. As noted, the consumer loan charge-off policy does not require certain loans to be placed in nonaccrual status since active collection efforts are underway. Accruing loans past due 90 days or more, excluded from classification as nonperforming assets, totaled $68 million at December 31, 1997, with consumer loan balances representing over 90% of this balance (see Table 17). These loans are in the process of collection, with the intention of collecting all principal and interest due. Foreclosed properties represent properties acquired through legal foreclosure or similar proceedings. At December 31, 1997, nonperforming assets of $86.2 million were down $22.7 million or 21% from December 31, 1996. REDI nonperforming assets totaled $40.3 million and comprised 47% of total nonperforming assets at December 31, 1997. The REDI nonperforming asset balance reflects a decrease of $21.5 million, or 35%, from December 31, 1996. In addition, commercial loan nonperforming balances declined during the year, in part reflecting a strong economic environment in Crestar's market area during 1997. Instalment and real estate - mortgage loan categories of nonperforming assets were up slightly in comparison to balances at December 31, 1996, but as a percentage of outstanding loans show improvement over year-end 1996 levels. Foreclosed properties decreased $1.8 million or 6% from December 31, 1996 to December 31, 1997. The December 31, 1997 foreclosed properties balance of $25.7 million is net of a $13.2 million valuation allowance to address exposure to prevailing market and economic conditions on the marketability of the portfolio. The ratio of nonperforming assets to loans and foreclosed properties at December 31, 1997 was 0.55%, compared to 0.77% at December 31, 1996 and 0.92% at December 31, 1995. 36 Table 17 Nonperforming Assets(1) And Past Due Loans
December 31, Dollars in thousands Nonaccrual loans: 1997 1996 1995 1994 1993 ------- -------- -------- -------- -------- Commercial $11,247 $ 20,348 $ 29,714 $ 39,943 $ 46,185 Real estate - income property 6,412 22,624 28,366 28,193 31,256 Real estate - construction 14,239 10,368 6,096 8,624 12,782 Instalment 3,292 2,895 5,883 5,878 6,810 Real estate - mortgage 25,310 25,208 19,925 13,532 14,326 - ----------------------------------------------------------------------------------------------------------- Total nonaccrual loans 60,500 81,443 89,984 96,170 111,359 Restructured loans - - - 8,339 3,208 - ----------------------------------------------------------------------------------------------------------- Total nonperforming loans(1) 60,500 81,443 89,984 104,509 114,567 Foreclosed properties - net 25,731 27,515 39,054 48,224 63,219 - ----------------------------------------------------------------------------------------------------------- Total nonperforming assets(1) $86,231 $108,958 $129,038 $152,733 $177,786 =========================================================================================================== Nonperforming assets1 to: Loans and foreclosed properties - net .55% .77% .92% 1.15% 1.66% Total assets .35 .48 .58 .76 .94 Allowance for loan losses to: Nonperforming assets(1) 326 247 213 174 143 Nonperforming loans(1) 465 330 305 254 222 Allowance for loan losses plus shareholders' equity to nonperforming assets(1) 27.15x 18.80x 15.96x 12.22x 9.93x =========================================================================================================== Accruing loans past due 90 days: Commercial $ 3,524 $ 9,480 $ 6,111 $ 1,626 $ 2,185 Real estate - income property 1,750 503 3,712 1,618 7,931 Real estate - construction 216 - 926 198 197 Instalment: Student 25,742 21,614 9,101 14,705 7,879 Other 6,886 7,587 4,689 1,552 2,051 Bank card 24,126 25,573 20,680 10,868 6,418 Real estate - mortgage 6,023 7,117 10,304 5,920 2,809 - ----------------------------------------------------------------------------------------------------------- Total accruing loans past due 90 days: $68,267 $ 71,874 $ 55,523 $ 36,487 $ 29,470 ===========================================================================================================
(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 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 December 31, 1997, potential problem loans that are not included in Table 17 as nonperforming or past due loans amounted to $77 million. Of this balance, over 90% percent represent commercial or commercial real estate-income property related credits. In addition, $7 million of standby letters of credits in various industries were being monitored at December 31, 1997. Depending on changes in the economy and other future events, these loans and others not presently identified could be classified as nonperforming assets in the future. Potential problem loans were $153 million at December 31, 1996. There are no loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have not been disclosed above, that either (i) represent or result from trends or uncertainties that management reasonably expects will materially impact future operating results, liquidity or capital resources or (ii) represent material credits about which management is aware of any information that causes management to have serious doubts as to the ability of such borrowers to comply with loan repayment terms. 37 Management's Discussion Crestar Financial Corporation And Subsidiaries Table 18 Nonaccrual Loans As A Percent Of Loan Category(1)
December 31, 1997 1996 1995 1994 1993 Commercial .2% .5% .8% 1.0% 1.3% Real estate - income property .5 1.8 2.3 2.6 3.0 Real estate - construction 3.7 3.3 1.5 2.2 2.9 Instalment .1 .1 .2 .2 .3 Real estate - mortgage .8 .8 .6 .4 .7 - ----------------------------------------------------------------------------------------------------------- Total .4% .6% .6% .7% 1.0% ===========================================================================================================
(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 Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114), as amended, requires that impaired loans within the scope of the accounting pronouncement 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. Under SFAS 114, a creditor may 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 December 31, 1997, impaired loans of $14 million were included in the nonaccrual loan balances of Crestar. The balance of impaired loans at December 31, 1996 totaled $29.8 million. Because the majority of loans deemed impaired during 1997 and 1996 were collateral dependent, valuations of impaired loans did not vary materially from the values previously assigned to this population of loans. The market area for the Corporation, which operates primarily in Virginia, Maryland and the District of Columbia, has historically had a higher per capita income level than the national level, and generally exhibited stable employment during the past year. As a provider of credit to both commercial and consumer customers, Crestar's future financial results can be impacted by significant changes in the regional and national economy. Crestar is implementing changes to its information systems so that they will be fully operable for date recognition and information processing when the year 2000 begins. An assessment of needed changes was completed by a corporate-wide task force, led by Crestar's Technology and Operations Group, with representation from all major business segments. The task force continues to monitor Crestar's progress, in addition to communicating with external service providers and selected customers to ensure they are taking appropriate actions to address date recognition issues. A combination of internal and external resources are being used to implement the needed changes to the Corporation's many different information systems. Some of the necessary changes in Crestar's computer code have been made during the course of normal maintenance. Other changes will necessitate re-writing of computer code, which will be completed in 1998. The total cost for this conversion and testing process is estimated to be between $22 and $27 million. This estimate includes some costs, such as the purchase of computer hardware, that will qualify as depreciable assets for accounting purposes, with the related depreciation expense recognized over the estimated lives of the applicable assets. However, the majority of costs will be expensed as incurred, in compliance with generally accepted accounting principles. Expenses of between $12 million and $15 million are expected to be incurred in 1998. During 1997, Crestar incurred $5.3 million in noninterest expenses related to the year 2000 project. New Accounting Standards The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income," which will be effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and presentation of comprehensive income and its components (revenues, expenses, gains and losses) within the Corporation's consolidated financial statements. Generally, comprehensive income includes net income along with other transactions not typically recorded as a component of net income, including changes in unrealized gains and losses on securities available for sale. SFAS 130 requires the disclosure of an amount that represents total comprehensive income and the components of comprehensive income in a consolidated financial statement. The provisions of this statement are effective with 1998 interim reporting. The disclosure requirements will have no impact on financial position or results of operations. 38 The FASB has also issued Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for determining a company's operating segments and the type and level of financial information to be disclosed in both annual and interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS 131 will be effective for financial statements for fiscal years beginning after December 15, 1997. However, SFAS 131 is not required to be applied for interim reporting in the initial year of application. Crestar expects to comply fully with the requirements by year-end 1998. Inflation The effect of changing prices on financial institutions is typically different than on non-banking companies since virtually all of a bank's assets and liabilities are monetary in nature. In particular, interest rates are significantly affected by inflation, but neither the timing nor magnitude of the changes are directly related to price level indices; therefore, the Corporation can best counter inflation over the long term by managing net interest income and controlling net increases in noninterest income and expenses. Information contained in "Management's Discussion and Analysis of Operations and Financial Condition" may contain forward-looking statements with respect to Crestar Financial Corporation's financial condition and results of operations. These forward looking statements may involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to, an increase in competitive pressures in the banking industry, economic conditions on both a regional and national basis, adverse technological change, changes in the interest rate environment or the Corporation's interest rate risk position, and the impact of future legal and regulatory actions, including the establishment of federal deposit insurance rates. It is important to note that the actual results may differ materially from those projected in forward-looking statements. 39 Consolidated Balance Sheets Crestar Financial Corporation And Subsidiaries
Dollars in thousands, except share data December 31, ----------------------------- 1997 1996 Assets Cash and due from banks $ 1,175,314 $ 1,105,036 Securities held to maturity (note 3) 626,716 967,510 Securities available for sale (note 4) 3,839,006 4,318,349 Money market investments (note 5) 1,431,790 745,672 Mortgage loans held for sale 964,697 658,838 Loans (notes 6, 11, 13, 20): Business Loans: Commercial 4,666,505 4,002,574 Real estate - income property 1,254,079 1,242,097 Real estate - construction 381,413 314,016 Consumer Loans: Instalment 4,846,857 4,060,174 Bank card 1,153,937 1,422,934 Real estate - mortgage 3,374,199 3,007,910 ------------------------------------------------------------------------------------------ Total Loans 15,676,990 14,049,705 Less: Allowance for loan losses (note 7) (281,394) (268,868) ------------------------------------------------------------------------------------------ Loans - net 15,395,596 13,780,837 ------------------------------------------------------------------------------------------ Premises and equipment - net (notes 8 and 12) 486,111 435,316 Intangible assets - net 197,420 180,420 Foreclosed properties - net (notes 6 and 9) 25,731 27,515 Other assets 786,135 642,448 ------------------------------------------------------------------------------------------ Total Assets (note 21) $24,928,516 $22,861,941 ========================================================================================================== Liabilities Demand deposits $ 3,540,340 $ 3,352,921 Interest-bearing demand deposits 6,257,114 5,913,373 Regular savings deposits 1,448,589 1,620,925 Domestic time deposits 4,191,151 4,643,409 Certificates of deposit $100,000 and over 932,058 140,582 ------------------------------------------------------------------------------------------ Total deposits 16,369,252 15,671,210 Short-term borrowings (note 11) 4,789,045 4,116,051 Other liabilities 879,073 435,834 Long-term debt (note 12) 831,383 859,336 ------------------------------------------------------------------------------------------ Total Liabilities (note 21) 22,868,753 21,082,431 - ---------------------------------------------------------------------------------------------------------- Shareholders' Preferred stock. Authorized 2,000,000 shares; none issued - - Equity Common stock, $5 par value. Authorized 200,000,000 shares; outstanding 111,420,187 in 1997; 109,869,886 in 1996 557,101 549,350 Capital surplus 340,623 227,079 Retained earnings 1,162,767 1,024,365 Net unrealized loss on securities available for sale (notes 4 and 10) (728) (21,284) ------------------------------------------------------------------------------------------ Total Shareholders' Equity (notes 12, 13, and 15) 2,059,763 1,779,510 Commitments and contingencies (notes 8 and 20) ------------------------------------------------------------------------------------------ Total Liabilities And Shareholders' Equity $24,928,516 $22,861,941 ============================================================================================================= See accompanying notes to consolidated financial statements. 40 Consolidated Statements Of Income Crestar Financial Corporation And Subsidiaries
In thousands, except per share data Years Ended December 31, --------------------------------------------- 1997 1996 1995 Income Interest and fees on loans $1,228,108 $1,178,236 $1,181,048 From Interest on securities held to maturity 43,088 61,770 129,242 Earning Interest and dividends on securities available Assets for sale 230,628 242,486 133,290 Income on money market investments 21,682 17,875 20,178 Interest on mortgage loans held for sale 52,078 63,012 28,145 ------------------------------------------------------------------------------------------ Total income from earning assets 1,575,584 1,563,379 1,491,903 ------------------------------------------------------------------------------------------ Interest Interest-bearing demand deposits 176,488 171,109 180,600 Expense Regular savings deposits 37,997 43,850 51,368 Domestic time deposits 212,480 259,971 257,418 Certificates of deposit $100,000 and over 51,501 27,843 3,915 ------------------------------------------------------------------------------------------ Total interest on deposits 478,466 502,773 493,301 Short-term borrowings 158,819 144,797 133,709 Long-term debt 62,001 49,499 50,038 ------------------------------------------------------------------------------------------ Total interest expense 699,286 697,069 677,048 - ---------------------------------------------------------------------------------------------------------- Net Credit Net Interest Income 876,298 866,310 814,855 Income Provision for loan losses (note 7) 108,097 95,890 66,265 ------------------------------------------------------------------------------------------ Net Credit Income 768,201 770,420 748,590 - ---------------------------------------------------------------------------------------------------------- Noninterest Service charges on deposit accounts 126,105 114,249 109,264 Income Trust and investment advisory income 74,421 65,939 59,841 Bank card-related income 41,972 52,088 49,935 Other income (note 17) 173,613 97,516 103,095 Securities gains (losses) (note 4) 5,328 3,393 (2,067) ------------------------------------------------------------------------------------------ Total noninterest income 421,439 333,185 320,068 - ---------------------------------------------------------------------------------------------------------- Net Credit And Noninterest Income 1,189,640 1,103,605 1,068,658 - ---------------------------------------------------------------------------------------------------------- Noninterest Personnel expense (notes 14, 15 and 16) 390,646 397,448 388,542 Expense Occupancy expense - net 60,016 64,450 62,851 Equipment expense 41,400 38,479 37,916 Other expense (note 18) 222,195 279,969 228,890 ------------------------------------------------------------------------------------------ Total noninterest expense 714,257 780,346 718,199 - ---------------------------------------------------------------------------------------------------------- Net Income Income before income taxes 475,383 323,259 350,459 Income tax expense (note 10) 165,575 104,988 134,572 ------------------------------------------------------------------------------------------ Net income $ 309,808 $ 218,271 $ 215,887 ============================================================================================================= Earnings Per Share Basic $ 2.80 $ 1.97 $ 1.95 Diluted 2.77 1.95 1.92 ============================================================================================================= See accompanying notes to consolidated financial statements.
41 Consolidated Statements Of Cash Flows Crestar Financial Corporation And Subsidiaries
In thousands Years Ended December 31, --------------------------------------------- 1997 1996 1995 Operating Net Income $ 309,808 $ 218,271 $ 215,887 Activities Adjustments to reconcile net income to net cash provided (used) by operating activities: Provisions for loan losses, foreclosed properties and other losses 108,097 100,540 65,068 Depreciation and amortization of premises and equipment 48,472 46,719 46,948 Amortization of intangible assets 17,147 16,673 15,416 Deferred income tax expense (benefit) 13,705 (4,826) 8,363 Gain on sale of merchant card processing (17,325) - - Net gain on sales of loans and other assets (42,189) (18,739) (11,561) Origination and purchase of loans held for sale (4,019,616) (4,204,696) (2,854,956) Proceeds from sales of loans held for sale 3,714,462 4,234,076 2,392,666 Net increase in accrued interest receivable, prepaid expenses and other assets (71,906) (56,105) (13,998) Net increase in accrued interest payable, accrued expenses and other liabilities 50,175 77,350 18,190 Other, net 16,915 8,434 1,884 ------------------------------------------------------------------------------------------ Net cash provided (used) by operating activities 127,745 417,697 (116,093) - ---------------------------------------------------------------------------------------------------------- Investing Proceeds from maturities and calls of securities Activities held to maturity 354,860 413,760 443,674 Proceeds from maturities and calls of securities available for sale 463,671 2,110,023 550,384 Proceeds from sales of securities available for sale 3,735,373 4,349,327 1,937,661 Purchases of securities held to maturity (12,587) (276,492) (70,242) Purchases of securities available for sale (3,101,100) (7,207,722) (2,709,418) Net increase in money market investments (686,583) (228,980) (60,053) Principal collected on non-bank subsidiary loans 42,373 71,013 21,636 Loans originated by non-bank subsidiaries (88,417) (286,615) (164,147) Proceeds from sales of loans 805,662 199,038 73,306 Net increase in other loans (614,871) (307,758) (157,961) Purchases of premises and equipment (98,695) (72,861) (57,617) Proceeds from sales of foreclosed properties, mortgage servicing rights and merchant card processing 67,141 37,325 64,620 Purchases of net assets of financial institutions (11,598) 138,628 144,875 Purchases of loans and loan portfolios (1,611,867) - - Proceeds from sales of branch deposits and premises - (7,837) (91,861) Other, net (35,536) (28,747) (16,864) ------------------------------------------------------------------------------------------ Net cash used by investing activities (792,174) (1,097,898) (92,007) - ---------------------------------------------------------------------------------------------------------- Financing Net increase (decrease) in demand, interest-bearing Activities demand and regular savings deposits 261,902 (140,758) (214,450) Net increase (decrease) in certificates of deposit 126,326 (626,637) 427,435 Net increase in short-term borrowings 570,894 1,297,730 345,552 Proceeds from issuance of long-term debt 3,389 63 8,626 Proceeds from issuance of preferred stock by subsidiary - 200,000 - Principal payments on long-term debt (69,817) (65,374) (82,447) Cash dividends paid (130,671) (98,660) (87,031) Common stock purchased and retired (84,845) (98,823) (82,144) Proceeds from the issuance of common stock 57,693 34,537 30,428 Other, net (164) (2,086) - ------------------------------------------------------------------------------------------ Net cash provided by financing activities 734,707 499,992 345,969 - ---------------------------------------------------------------------------------------------------------- Cash And Increase (decrease) in cash and cash equivalents 70,278 (180,209) 137,869 Cash Cash and cash equivalents at beginning of year 1,105,036 1,285,245 1,147,376 - ------------------------------------------------------------------------------------------------------------- Equivalents Cash and cash equivalents at end of year $ 1,175,314 $ 1,105,036 $ 1,285,245 =============================================================================================================
Cash and cash equivalents consist of cash and due from banks; see accompanying notes to consolidated financial statements. 42 Consolidated Statements Of Changes In Shareholders' Equity Crestar Financial Corporation And Subsidiaries
Net Unrealized Common Stock Gain (Loss) On ------------------ Securities Capital Retained Available In thousands, except per share data Shares Amount Surplus Earnings For Sale Total Balance, December 31, 1994 54,978 $274,890 $392,169 $ 973,872 $(39,393) $1,601,538 Net Income - - - 215,887 - 215,887 Cash dividends declared on common stock ($.875 per share) - - - (87,031) - (87,031) Change in net unrealized loss on securities available for sale (notes 4, 10) - - - - 52,621 52,621 Common stock purchased and retired (1,765) (8,825) - (73,319) - (82,144) Common stock issued: For acquisition of financial institutions 1,318 6,589 45,973 - - 52,562 For dividend reinvestment plan 376 1,881 14,792 - - 16,673 For thrift and profit sharing plan 231 1,156 7,967 - - 9,123 For other stock compensation plans 10 50 387 - - 437 Upon exercise of stock options (including tax benefit of $1,290) 234 1,171 4,751 - - 5,922 - ------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 55,382 $276,912 $466,039 $1,029,409 $13,228 $1,785,588 Net Income - - - 218,271 - 218,271 Cash dividends declared on common stock ($1.275 per share) - - - (133,002) - (133,002) Change in net unrealized gain on securities available for sale (notes 4, 10)- - - - (34,512) (34,512) Common stock purchased and retired (1,702) (8,510) - (90,313) - (98,823) Cash paid in lieu of fractional shares (1) (8) (78) - - (86) Common stock issued: For dividend reinvestment plan 357 1,783 17,799 - - 19,582 For thrift and profit sharing plan 119 593 6,010 - - 6,603 For other stock compensation plans 19 97 868 - - 965 For two-for-one split in the form of a stock dividend 54,935 274,675 (274,675) - - - Upon exercise of stock options (including tax benefit of $6,572) 761 3,808 11,116 - - 14,924 - ------------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 109,870 $549,350 $227,079 $1,024,365 $(21,284) $1,779,510 Net Income - - - 309,808 - 309,808 Cash dividends declared on common stock ($.87 per share) - - - (96,329) - (96,329) Change in net unrealized loss on securities available for sale (notes 4, 10)- - - - 20,556 20,556 Common stock purchased and retired (1,954) (9,768) - (75,077) - (84,845) Cash paid in lieu of fractional shares (5) (24) (140) - - (164) Common stock issued: For acquisition of financial institution 1,236 6,179 56,453 - - 62,632 For dividend reinvestment plan 733 3,665 25,820 - - 29,485 For thrift and profit sharing plan 295 1,474 10,573 - - 12,047 For other stock compensation plans 73 364 1,907 - - 2,271 Upon exercise of stock options (including tax benefit of $8,631) 1,172 5,861 18,931 - - 24,792 - ------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 111,420 $557,101 $340,623 $1,162,767 $ (728) $2,059,763 ============================================================================================================= See accompanying notes to consolidated financial statements.
43 Notes To Consolidated Financial Statements Crestar Financial Corporation and Subsidiaries (1) Nature Of Operations, Use Of Estimates And Accounting Policies Crestar Financial Corporation and Subsidiaries (Crestar or the Corporation) provide banking and non-banking financial services throughout Virginia, Maryland and Washington, DC, which compose Crestar's primary market area. Through a network of 566 banking locations and 613 automated teller machines, Crestar provides a broad range of banking services, including various types of deposit accounts and instruments, commercial and consumer loans, trust and investment management services, bank credit cards and international banking services. These services are offered through a single bank subsidiary. Other financial services are provided through non-bank subsidiaries. Mortgage loan origination, servicing and wholesale mortgage lending are offered by Crestar Mortgage Corporation, and Crestar Asset Management Company provides asset management investment advisory services. Crestar Insurance Agency, Inc. offers a variety of personal and business insurance products. Crestar Leasing Corporation provides equipment leasing services. Securities brokerage and investment banking services are offered by Crestar Securities Corporation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying footnotes. Actual results could differ from those estimates. The accounting and reporting policies of Crestar conform to generally accepted accounting principles and to general practice within the banking and financial institutions industry. Certain reclassifications have been made to prior years' consolidated financial statements to conform to the 1997 presentation. The following is a summary of significant policies: (a) Principles Of Consolidation The consolidated financial statements of Crestar include the accounts of all wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In the condensed financial statements of Crestar Financial Corporation (Parent), the investments in subsidiaries are stated at equity in the net assets of such subsidiaries (note 19). On December 31, 1996 Crestar merged with Citizens Bancorp (Citizens), a multi-bank holding company, in a transaction accounted for as a pooling of interests. Accordingly, historical financial data for periods before the merger have been restated to include the combined results of both Crestar and Citizens. Business combinations accounted for as purchases are included only from their respective dates of acquisition. The excess of cost over the estimated fair value of the tangible assets and liabilities acquired is recorded as intangible assets and amortized over the periods estimated to be benefited (generally 15 years). Assets held in an agency or fiduciary capacity are not assets of Crestar and are not included in the accompanying consolidated balance sheets. (b) Stock Split On December 20, 1996, the Corporation's Board of Directors declared a two-for-one split of its common stock in the form of a 100% stock dividend, effective January 24, 1997. Average common shares outstanding and per common share data in the consolidated financial statements have been retroactively adjusted to reflect the common stock split. (c) Securities Securities are classified as either securities held to maturity, securities available for sale or trading securities. Securities held to maturity are carried at amortized cost, as the Corporation has the positive intent and ability to hold these securities to maturity. Trading securities are carried at estimated fair value as they are intended to be sold in the near term; trading securities are classified as money market investments on the accompanying consolidated balance sheets. Securities not classified as held to maturity or trading are classified as available for sale. Available for sale securities are stated at estimated fair value, with the unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity. Quoted market prices are used to determine estimated fair value. The amortized cost of securities classified as held to maturity or available for sale is adjusted for amortization of premiums and accretion of discounts to maturity, or earlier call date if appropriate, using the level yield method. Such amortization is included in interest income from securities. Realized gains and losses, and declines in value judged to be other than temporary are included in securities gains (losses) in the accompanying consolidated statements of income. Realized gains and losses are computed using the specific identification method. (d) Money Market Investments Money market investments are stated at cost, which approximates market value, except for trading securities, which are carried at market value. Trading securities primarily include U.S. Treasury and municipal debt obligations. Trading securities may include positions in derivative financial instruments such as futures contracts and purchased options. Adjustments to market and trading account gains and losses are classified as other income in the accompanying consolidated statements of income. Trading account interest and dividend income are included in income on money market investments. 44 (e) Mortgage Loans Held For Sale Mortgage loans held for sale are carried at the lower of aggregate cost or market value. Adjustments to market and realized gains and losses are classified as other income in the accompanying consolidated statements of income. (f) Loans Loans are stated at the principal amounts outstanding net of unearned income. Interest on loans is accrued by multiplying the applicable rates by the principal amounts outstanding. Interest receipts on nonaccrual loans are recognized as interest revenue or are applied to principal when management believes the ultimate collectibility of principal is in doubt. Generally, business and consumer real estate-mortgage loans are placed in nonaccrual status when principal or interest is 90 days or more past due, or earlier if it is known or expected that interest will not be paid, or full collection of all principal and interest is unlikely, based upon an evaluation of the financial strength of the borrower and the net realizable value of the collateral. Bank card loans are not placed in nonaccrual status, but are generally charged off when past due 180 days. If notification of bankruptcy has been received during the 180 day period, Crestar will seek repayment (reaffirmation) of the bank card loan through applicable bankruptcy laws. Any loan balance not specifically reaffirmed within 60 days of notification of bankruptcy is charged off. Instalment loans are generally placed in nonaccrual status when past due 120 days, with balances not supported by an assessment of collateral charged-off at that time. If well secured, loans may be restructured as to rate, maturity or other terms as determined on an individual credit basis. Past due loans are loans which are delinquent 90 days or more but which are currently not in nonaccrual status based on accounting and collectibility criteria. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount is amortized as an adjustment of the related loan's yield. Crestar amortizes these amounts over the contractual life of the related loans or over the commitment period. Foreign activities represent less than 1 percent of total assets, revenues, income before income taxes and net income for all years presented. (g) Impaired Loans 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 fair 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 nonaccrual loans, as generally loans are placed in nonaccrual status on the earlier of the date that principal or interest amounts are past due 90 days or more, or the date that collection of such amounts is judged uncertain based on evaluation of the financial strength of the borrower and the fair value of the collateral. Restructured loans are impaired loans in the year of restructuring; thereafter, such loans are subject to management's evaluation of impairment based on the restructured terms. 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. 45 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries SFAS 118 allows a creditor to use existing methods for recognizing interest income on an impaired loan. Consistent with Crestar's method for nonaccrual 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. (h) Allowance For Loan Losses Both the amount of the provision and the level of the allowance for loan losses are effected by many factors, including general economic conditions, actual and expected credit losses, loan performance measures, historical trends and other circumstances, both internal and external. The amount of the provision for loan losses is established based on evaluation of the current level of the allowance. Individual loan-by-loan reviews are performed quarterly on large commercial and real estate exposures in the lower quality risk ratings categories. For the remainder of the portfolio, a formula-based approach is utilized. The formula is designed to cover inherent loss in that portion of the loan portfolio not subject to specific review. The formula may be adjusted for changes in the subjective factors listed above. Loan loss allowances for the consumer loan portfolio are also based on historical and anticipated losses and the current and projected characteristics of the different types of consumer loans. Management's evaluation and resulting provision and allowance decisions are reviewed by the Board of Directors on a quarterly basis. Loan charge-offs to the allowance are made when a loan, or a portion thereof, is considered uncollectible or is transferred to foreclosed properties. (i) Premises And Equipment Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization charges are computed using the straight-line method. Premises and equipment are depreciated over the estimated useful lives of the assets, except for leasehold improvements which are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Certain noncancelable leases have been capitalized and are classified as premises and equipment in the accompanying consolidated balance sheets. Related amounts representing capital lease obligations are classified as long-term debt in the accompanying consolidated balance sheets and are amortized using the interest method to allocate payments between principal and interest. The initial carrying amounts represent the present value of the future rental payments, discounted at the incremental borrowing rate of the lessee. Capital lease assets are amortized over the lease term. Estimated lives of the principal items of premises and equipment are: 3 to 50 years for buildings and improvements, and 3 to 12 years for furniture, fixtures and equipment. The costs of major renovations are capitalized, while the costs of ordinary maintenance and repairs are expensed as incurred. Interest costs are capitalized based on a rate representative of the Corporation's long term cost of funds and the average balance of construction in progress during the period. (j) Intangible Assets Intangible assets consisted of goodwill and deposit based intangibles, having a combined balance of $197,049,000 and $179,993,000 at December 31, 1997 and 1996, respectively, and favorable lease rights of $371,000 and $427,000, respectively. Accumulated amortization of goodwill was $81,302,000 and $67,174,000 at December 31, 1997 and 1996, respectively. Goodwill is amortized on a straight-line basis over 15 years. Deposit base intangibles are amortized over the estimated lives of the related deposit relationships, ranging from 8 to 15 years. (k) Capitalized Mortgage Servicing Rights Mortgage servicing rights are accounted for under the provisions of Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125), which became effective January 1, 1997. SFAS 125, which is applied prospectively from its effective date, does not significantly change Crestar's accounting for mortgage loan servicing rights. The cost of mortgage loans sold, with servicing rights retained, is allocated between the loans and the servicing rights based on their estimated fair values at time of loan sale. The estimated fair value of mortgage servicing rights is determined by reference to recent trades of comparable servicing rights, or is determined based on expected future cash flows discounted at an interest rate commensurate with the servicing risks involved. For the purpose of evaluating and measuring impairment, capitalized mortgage servicing rights are stratified according to the predominant risk characteristics of the underlying loans. Impairment is recognized through a valuation allowance for each stratum based on any excess of the amount capitalized, net of amortization, over fair value. Fair value in excess of the amount capitalized, net of amortization, is not recognized. Crestar performs an impairment analysis based on whether the mortgage servicing rights relate to conventional or government guaranteed residential mortgage loans, fixed or floating rate residential mortgage loans, and loans stratified between below market rates and all other interest rates. 46 Capitalized mortgage servicing rights of $63,864,000 and $53,392,000 at December 31, 1997 and 1996, respectively, were included in other assets in the accompanying consolidated balance sheets. Mortgage servicing rights of $50 million and $38 million were purchased or originated during 1997 and 1996, respectively. At December 31, 1997, capitalized mortgage servicing rights were net of a related valuation allowance of $538,000. The activity in such valuation allowance, which was unchanged from December 31, 1996 had a balance of $456,000 at December 31, 1995, was not material to the consolidated financial statements for 1997, 1996 and 1995. The fair value of capitalized mortgage servicing rights was approximately $89 million at December 31, 1997. 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 serving and credit costs. Amortization expense for capitalized mortgage servicing rights totaled $13.1 million, $10.2 million and $6.7 million in 1997, 1996 and 1995, respectively. (l) Foreclosed Properties Property acquired through legal foreclosure proceedings, abandonment of the property, acceptance of deed in lieu of foreclosure or transfer in exchange for an outstanding loan is initially recorded at estimated fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. At the time of foreclosure, any excess of cost over the estimated fair value is charged to the allowance for loan losses, and estimated selling costs are expensed as foreclosed properties expense. After foreclosure, valuations are routinely performed by management and the property is carried at the lower of cost or fair value less estimated selling costs. Write-downs are charged against any applicable foreclosed property valuation allowance or current earnings. (m) Income Taxes The Parent and its subsidiaries file a consolidated federal income tax return. The provision for income taxes for each company is recorded on the basis of filing separate income tax returns, after adjustments relating to consolidated income tax regulations and signed tax sharing agreements. Income taxes currently payable or receivable by each subsidiary are paid to or received from the Parent. The Corporation records a provision for income taxes based on the amounts of current and deferred taxes payable (or refundable) for the year. The deferred tax expense or benefit represents the change in the net deferred tax asset or liability during the period. Deferred tax assets and liabilities are recognized for the tax effects of differing carrying values of assets and liabilities for tax and financial statement reporting purposes that will reverse in future periods. (n) Shareholders' Equity During December 1996, the Corporation's Board of Directors increased the common stock authorization from 100,000,000 to 200,000,000 shares. During 1997, 1996 and 1995 the Corporation purchased and retired 1,954,000, 3,404,000 and 3,530,200 shares of common stock at an average cost of $43.43, $29.03 and $23.27 per share, respectively. No shares were beneficially owned by a subsidiary. (o) Earnings Per Share Effective December 31, 1997 Crestar adopted Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." This Statement supersedes APB Opinion No. 15 (Opinion 15), "Earnings Per Share," and replaces the presentation of primary earnings per share (EPS) with a presentation of basic EPS. SFAS 128 requires dual presentation of basic and diluted EPS on the face of the income statement. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Contingently issuable shares are included in the computation of basic EPS as of the date that all necessary conditions have been satisfied. Diluted EPS reflects the potential dilution that could occur if options to issue common stock were exercised. Contingently issuable shares are included in the computation of diluted EPS based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period. Diluted EPS is computed similarly to fully diluted EPS pursuant to Opinion 15. All prior-period EPS data has been restated to reflect the provisions of SFAS 128. Average common and common equivalent shares used in the determination of earnings per share were: ================================================== In thousands 1997 1996 1995 - -------------------------------------------------- Weighted average common shares 110,591 110,537 110,986 Basic shares contingently issuable 27 23 - - -------------------------------------------------- Basic common shares 110,618 110,560 110,986 Dilutive shares contingently issuable 35 71 - Dilutive stock options 1,276 1,406 1,446 - -------------------------------------------------- Diluted common shares 111,929 112,037 112,432 47 (p) Fee Revenue Crestar generally records mortgage loan servicing income as payments are collected, based on a percentage of the principal balance of loans serviced. Loan servicing expenses are charged to operations when incurred. Trust and investment advisory revenues are recorded on an accrual basis, with income recognized when earned. Fee income from matched swap, cap and floor arrangements for which Crestar serves as a financial intermediary is recognized over the lives of the related agreements and is classified as other income in the consolidated statements of income. (q) Risk Management Instruments Interest rate swaps, caps and floors used to achieve interest rate risk management objectives are accounted for in a manner consistent with the accounting basis of the related asset or liability. An instrument designated to hedge an asset or liability carried at historical cost is accounted for on an accrual basis, whereby the interest income or expense of the related asset or liability is adjusted for the net amount of any interest receivable or payable generated by the hedging instrument during the reporting period. For such instruments, no amounts other than any accrued interest receivable or payable, or any deferred premiums paid, are included in the accompanying consolidated balance sheets. Interest rate swaps involve the exchange of payments between counterparties based on the interest differential between a fixed and a floating interest rate applied to a notional balance. Under accrual accounting, this interest differential is recognized as an adjustment to the interest income or expense of the related asset or liability in the accompanying statements of income. In exchange for a premium paid, purchased interest rate caps and floors provide for a payment to Crestar based on the difference between an index interest rate and the contractual cap or floor rate. Under accrual accounting, this payment is recognized as an increase to the interest income or as a decrease to the interest expense of the related asset or liability, respectively. The premium paid for interest rate caps or floors is amortized over the life of the instrument as a decrease to the interest income or as an increase to the interest expense of the related asset or liability, respectively. To qualify for accrual accounting, these derivative instruments are required to meet an identified risk management objective, to be designated to specific pools of assets or liabilities in the consolidated balance sheets, and to have underlying indices that highly correlate (i.e., move concurrently and are of the same relative duration) with the indices of the designated assets or liabilities. In addition to establishing expected index and balance correlation at inception, management performs a periodic assessment to demonstrate ongoing correlation. Should these derivative instruments fail to meet the accrual criteria at inception or over the life of the instruments, the instruments would be marked to market as trading securities (note 1(c)). Crestar has had no derivative instruments used for risk management purposes which have failed to meet accrual criteria over the life of the instruments. Upon early termination of derivative instruments which otherwise meet accrual criteria, the net proceeds received or paid are deferred, if material, and amortized to the interest income or expense of the related asset or liability over the lesser of the remaining contractual life of the instrument or the maturity of the related asset or liability. At December 31, 1997 Crestar had a deferred gain of $4.2 million included in other assets in the accompanying consolidated balance sheets arising from the early termination of interest rate floors in the fourth quarter of 1997. At termination, such floors qualified for accrual accounting and had a weighted-average remaining maturity of approximately 3.4 years, which represents the amortization period of the resulting deferred gain. Approximately 47% of this deferred gain is being amortized as an increase to interest income on real estate mortgage loans: approximately 53% is being amortized as a reduction of interest expense on domestic time deposits. At December 31, 1996 there were no deferred gains or losses in the accompanying consolidated balance sheets arising from the early termination of instruments otherwise qualifying for accrual accounting. Forward contracts are used to hedge interest rate exposure on mortgage loan commitments and mortgage loans held for sale. Unrealized gains and losses on the contracts are included in the cost basis used in adjusting the carrying value of mortgage loans held for sale to the lower of cost or market value. Realized gains and losses and adjustments to the lower of cost or market value are included in mortgage loan origination income in the accompanying consolidated statements of income. (r) Retirement, Postretirement And Postemployment Benefits Substantially all employees are covered by a pension plan. The net periodic pension expense includes a service cost component, a component reflecting the actual return on plan assets, an interest cost component, and the effect of deferring and amortizing certain actuarial gains and losses and the unrecognized net transition asset over 15 years. Costs of retiree benefits other than pensions are accrued in a manner similar to pension costs. 48 (2) Mergers And Acquisitions On November 13, 1997, Crestar acquired American National Bancorp, Inc. (American National) for a purchase price of $14 million in cash and 1.236 million shares of common stock having a combined value of $77 million. American National, which operated American National Savings Bank with headquarters in Baltimore, Maryland, had approximately $500 million in assets, $340 million in loans and $310 million in deposits at date of acquisition. The excess of cost over the estimated fair value of the tangible net assets acquired was approximately $33 million. The acquisition of American National was accounted for as a purchase and, accordingly, the results of operations since the date of acquisition are included in the accompanying consolidated financial statements. The results of operations of American National for the periods prior to the purchase were not material to the results of Crestar. On December 31, 1996 Crestar merged with Citizens Bancorp (Citizens), a bank holding company based in Laurel, Maryland, in a transaction accounted for as a pooling of interests business combination. Accordingly, historical financial data for periods before the merger have been restated to include the combined results of both Crestar and Citizens. Approximately 25.3 million shares of common stock were issued by Crestar to the former shareholders of Citizens. Citizens had total assets of approximately $4.1 billion at the date of acquisition. Excluding the impact of $32.5 million (after-tax) in merger related expenses, Citizens had net income of $43.4 million, and Crestar had net income of $207.4 million, on a pre-merger basis for the year ended December 31, 1996. Net interest income for the year ended December 31, 1996, on a pre-merger basis, was $142.3 million for Citizens and $724.0 million for Crestar. Net interest income, net income and net income per share amounts for Crestar and Citizens for the year ended December 31, 1995, prior to restatement for the pooling of interests merger, are presented below: ==================================================== In millions, except per share amounts Year ended December 31,1995 Crestar Financial Corporation Net interest income $679.4 Net income 179.8 Net income per common share 2.06 Citizens Bancorp 135.5 Net income 36.1 Net income per Citizens common share 2.40 Combined Crestar Financial Corporation Net interest income 814.9 Net income 215.9 Net income per diluted common share 1.92 ===================================================== On December 31, 1995 Crestar merged with Loyola Capital Corporation (Loyola), a savings bank holding company based in Baltimore, Maryland. The merger with Loyola was also accounted for as pooling of interests business combination, and historical financial data for periods before the merger were restated at that time to include the combined results of Crestar and Loyola. Approximately 10.4 million shares of common stock were issued by Crestar to the former shareholders of Loyola. Loyola had total assets of approximately $2.5 billion at the date of merger. Excluding the impact of $29.3 million (after-tax) in merger related expenses, and the subsequent restatement of results for the Citizens pooling of interests merger, Loyola had net income of approximately $19.1 million and Crestar had net income of approximately $189.9 million, on a pre-merger basis, for the year ended December 31, 1995. Net interest income for the year ended December 31, 1995, on a pre-merger basis, was $71.3 million for Loyola and $608.1 million for Crestar. 49 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (3) Securities Held To Maturity The amortized cost (carrying values) and estimated fair values of securities held to maturity at December 31 follow:
============================================================================================================= Amortized Unrealized Unrealized Market In thousands Cost Gains Losses Value 1997 U.S. Treasury and Federal agencies $197,006 $1,045 $ 727 $197,324 Mortgage-backed obligations of Federal agencies 380,207 4,523 1,241 383,489 Other taxable securities 2,938 4 7 2,935 States and political subdivisions 46,565 1,206 28 47,743 - ---------------------------------------------------------------------------------------------------------- Total $626,716 $6,778 $2,003 $631,491 - ---------------------------------------------------------------------------------------------------------- 1996 U.S. Treasury and Federal agencies $237,942 $733 $2,300 $236,375 Mortgage-backed obligations of Federal agencies 638,843 3,529 3,602 638,770 Other taxable securities 13,119 37 11 13,145 States and political subdivisions 77,606 1,018 164 78,460 - ---------------------------------------------------------------------------------------------------------- Total $967,510 $5,317 $6,077 $966,750 ========================================================================================================== The stated maturities of securities held to maturity at December 31, 1997 follow: ========================================================================================================== Amortized Market In thousands Cost Value Due in one year or less $105,070 $104,779 Due after one year through five years 122,506 123,733 Due after five years through ten years 155,498 157,662 Due after ten years 243,642 245,317 - ---------------------------------------------------------------------------------------------------------- Total $626,716 $631,491 ==========================================================================================================
At December 31, 1997 and 1996 securities held to maturity with an aggregate carrying value of $572.7 million and $418.5 million, respectively, were pledged to secure deposits and for other purposes. (4) Securities Available For Sale The amortized cost and estimated fair values (carrying values) of securities available for sale at December 31 follow:
=========================================================================================================== Amortized Unrealized Unrealized Market In thousands Cost Gains Losses Value 1997 U.S. Treasury and Federal agencies $ 217,241 $ 938 $ 1,063 $ 217,116 Mortgage-backed obligations of Federal agencies 2,594,911 11,946 17,667 2,589,190 Other taxable securities 785,872 3,962 1,000 788,834 Common and preferred stocks 242,566 1,300 - 243,866 - ----------------------------------------------------------------------------------------------------------- Total $3,840,590 $18,146 $19,730 $3,839,006 - ----------------------------------------------------------------------------------------------------------- 1996 U.S. Treasury and Federal agencies $ 823,118 $ 203 $ 5,141 $ 818,180 Mortgage-backed obligations of Federal agencies 2,849,724 12,310 39,808 2,822,226 Other taxable securities 468,094 1,953 2,347 467,700 Common and preferred stocks 210,203 40 - 210,243 - ----------------------------------------------------------------------------------------------------------- Total $4,351,139 $14,506 $47,296 $4,318,349 ===========================================================================================================
50 The stated maturities of securities available for sale at December 31, 1997 follow:
=========================================================================================================== Amortized Market In thousands Cost Value Due in one year or less $ 285,563 $ 286,479 Due after one year through five years 473,157 471,280 Due after five years through ten years 1,052,443 1,057,073 Due after ten years 1,786,861 1,780,308 - ----------------------------------------------------------------------------------------------------------- 3,598,024 3,595,140 Common and preferred stocks 242,566 243,866 - ----------------------------------------------------------------------------------------------------------- Total $3,840,590 $3,839,006 ===========================================================================================================
At December 31, 1997 and 1996, securities available for sale with an aggregate carrying value of $1.8 billion and $1.9 billion, respectively, were pledged to secure deposits and for other purposes. Proceeds from sales of securities available for sale were $3.7 billion in 1997, $4.3 billion in 1996 and $1.9 billion in 1995. Gross gains of approximately $9.9 million, $12.7 and $5.3 million and gross losses of approximately $4.6 million, $9.3 million and $7.4 million were realized on such sales during 1997, 1996 and 1995, respectively. (5) Money Market Investments Money market investments at December 31 included:
========================================================================================================== In thousands 1997 1996 Federal funds sold $ 257,440 $178,120 Securities purchased under agreements to resell 990,000 417,000 Time deposits 150,042 125,041 U.S. Treasury 8,363 5,802 Trading account securities 6,839 7,563 Other 19,106 12,146 - ---------------------------------------------------------------------------------------------------------- Total money market investments $1,431,790 $745,672 ==========================================================================================================
(6) Nonperforming Assets And Impaired Loans Nonperforming assets at December 31 are shown below. Nonperforming assets include nonaccrual loans, loans which meet the accounting definition of a troubled debt restructuring (restructured loans) and foreclosed properties. 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. Such accruing loans past due 90 days or more, excluded from the amounts shown below, totaled $68.3 million and $71.9 million at December 31, 1997 and 1996, respectively. ======================================================================== In thousands 1997 1996 Nonaccrual loans $60,500 $ 81,443 Foreclosed properties - net 25,731 27,515 - ------------------------------------------------------------------------ Total nonperforming assets $86,231 $108,958 ======================================================================== Average nonperforming loans for the year $66,400 $ 82,700 ======================================================================== Average nonperforming assets for the year $95,200 $117,700 ======================================================================== 51 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries Transfers from nonaccrual loans to foreclosed properties (non-cash additions) were $8.4 million, $7.9 million and $14.6 million in 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996 loans accounted for as restructured loans, included in nonaccrual loans, totaled $1.2 million and $17.4 million, respectively. Nonaccrual loans are classified as loans in the accompanying consolidated balance sheets. The aggregate recorded investment in nonperforming loans outstanding at December 31, 1997, 1996 and 1995, the pro forma interest income that would have been earned in 1997, 1996 and 1995 if such loans had not been classified as nonperforming, and the amount of interest income actually included in net interest income for such years follows:
============================================================================================================= In thousands Nonperforming Loan Category ------------------------------------------------------------------------------- Real Estate- Real Estate- 1997 Commercial Income Property Construction All Other Total Recorded investment $11,247 $6,412 $14,239 $28,602 $60,500 Pro forma interest 5,510 3,331 1,350 286 10,477 Interest earned 166 - - 87 253 - ------------------------------------------------------------------------------------------------------------- 1996 Recorded investment $20,348 $22,624 $10,368 $28,103 $81,443 Pro forma interest 4,460 3,621 1,412 258 9,751 Interest earned 279 583 - 38 900 - ------------------------------------------------------------------------------------------------------------- 1995 Recorded investment $29,714 $28,366 $ 6,096 $25,808 $89,984 Pro forma interest 6,411 6,059 1,206 1,255 14,931 Interest earned 58 240 7 221 526 =============================================================================================================
Included in Crestar's nonperforming loans above are certain impaired loans. Impaired loans and the allocated valuation allowance at December 31, 1997 and 1996 were $14.2 million with an allowance of $3.0 million and $29.8 million with an allowance of $5.4 million, respectively. All impaired loans had an allocated valuation allowance at December 31, 1997 and 1996. The allocated valuation allowance for impaired loans, and activity related thereto, is included in the allowance for loan losses (note 7). Collateral dependent loans, which were measured at the fair value of the collateral, constituted 100% of impaired loans at December 31, 1997 and 1996. The average recorded investment in impaired loans for the years ended December 31, 1997, 1996 and 1995 was $16.3 million, $34.4 million and $37.6 million, respectively. There was no material interest income recognized on impaired loans in 1997, 1996 and 1995. 52 (7) Allowance For Loan Losses Transactions in the allowance for loan losses for the years ended December 31 were:
============================================================================================================ In thousands 1997 1996 1995 Beginning balance $268,868 $274,430 $265,171 - ------------------------------------------------------------------------------------------------------------ Charge-offs (129,773) (132,085) (96,801) Recoveries 30,094 31,521 31,442 - ------------------------------------------------------------------------------------------------------------ Net charge-offs (99,679) (100,564) (65,359) Provision for loan losses 108,097 95,890 66,265 Allowance from acquisitions and other activity - net 4,108 (888) 8,353 - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) 12,526 (5,562) 9,259 - ------------------------------------------------------------------------------------------------------------ Ending balance $281,394 $268,868 $274,430 ============================================================================================================
(8) Premises And Equipment Premises and equipment at December 31 included: ===================================================== In thousands 1997 1996 Land $ 64,646 $ 67,136 Buildings and improvements 372,305 386,215 Furniture, fixtures and equipment 286,541 331,655 Capitalized leases Land and buildings 2,869 1,942 Equipment - - Less: Accumulated deprecia- tion and amortization (346,468) (399,311) - ----------------------------------------------------- 379,893 387,637 Construction in progress 106,218 47,679 - ----------------------------------------------------- Total premises and equipment - net $486,111 $435,316 ===================================================== At December 31, 1997, future minimum lease payments under noncancelable capital and operating leases that have an initial term in excess of one year follow: =================================================== Operating Capital In thousands Leases Leases 1998 $ 25,722 $ 885 1999 22,071 350 2000 17,708 337 2001 13,934 321 2002 9,684 249 Later years 43,096 616 - --------------------------------------------------- Total minimum lease payments $132,215 $2,758 Imputed interest (rates of 8 1/8 - 14 3/8%) (1,010) - --------------------------------------------------- Present value of net minimum lease payments (included in long-term debt) $1,748 =================================================== Total minimum lease payments included in the preceding table have not been reduced by future minimum sublease rentals of $705,000. Crestar owns and, along with its subsidiaries, is the principal tenant of the corporate headquarters building in Richmond, Virginia, the Crestar Mortgage Corporation headquarters building in Richmond, an operations center in Richmond, and regional office buildings in Roanoke and Norfolk, Virginia, Washington, DC, and Baltimore, Maryland. At December 31, 1997, Crestar had 566 banking locations, of which approximately 55% were owned facilities with the remainder as leased properties. Management considers these properties suitable and adequate for current operations. During 1997, 1996 and 1995, Crestar capitalized interest of $3.1 million, $485,000, and $1.4 million, respectively, associated with construction in progress. Such capitalized interest is included as a reduction of interest expense on short-term borrowings in the consolidated statements of income. Lease expense relating to both cancelable and noncancelable operating lease agreements (including month-to-month rental agreements) is shown below. Customarily, these leases provide that the lessee pay taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. =================================================== In thousands 1997 1996 1995 Buildings $26,815 $25,867 $26,414 Equipment 2,394 4,699 4,172 Total lease expense $29,209 $30,566 $30,586 =================================================== 53 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (9) Allowance For Foreclosed Properties Transactions in the allowance for losses on foreclosed properties for the years ended December 31 were:
========================================================================================================== In thousands 1997 1996 1995 Beginning balance $18,449 $13,574 $22,463 - ---------------------------------------------------------------------------------------------------------- Provision for foreclosed properties - 6,550 (2,119) Write-downs (5,359) (1,204) (9,464) Allowance from acquisitions - net 101 (471) 2,694 - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) (5,258) 4,875 (8,889) - ---------------------------------------------------------------------------------------------------------- Ending balance $13,191 $18,449 $13,574 ==========================================================================================================
(10) Income Taxes The current and deferred components of income tax expense allocated to continuing operations for the years ended December 31 in the accompanying consolidated statements of income were:
========================================================================================================== In thousands 1997 1996 1995 Current: Federal $145,790 $107,402 $118,226 State and local 6,080 2,412 7,983 - ---------------------------------------------------------------------------------------------------------- Total current tax expense 151,870 109,814 126,209 - ---------------------------------------------------------------------------------------------------------- Deferred: Federal 10,832 (6,290) 6,391 State and local 2,873 1,464 1,972 - ---------------------------------------------------------------------------------------------------------- Total deferred tax expense (benefit) 13,705 (4,826) 8,363 - ---------------------------------------------------------------------------------------------------------- Total income tax expense $165,575 $104,988 $134,572 ==========================================================================================================
In addition to the state and local income tax expense above, Crestar incurred Virginia bank franchise tax expense of $5.5 million, $6.1 million and $3.9 million in 1997, 1996 and 1995, respectively. This tax is imposed on banks in Virginia in lieu of income and personal property taxes. Crestar remits 80% of this tax to the Virginia municipalities in which it does business and the remaining 20% to the Commonwealth of Virginia. 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 years ended December 31 were:
========================================================================================================== In thousands 1997 1996 1995 ----------------- ------------------ --------------- Amount % Amount % Amount % Income before income taxes $475,383 $323,259 $350,459 - ---------------------------------------------------------------------------------------------------------- Tax expense at statutory rate 166,384 35.0 113,141 35.0 122,661 35.0 - ---------------------------------------------------------------------------------------------------------- Increase (decrease) in taxes resulting from: Allowance for loan loss recapture - .- (8,694) (2.6) 8,694 2.6 Tax-exempt interest and dividends (8,016) (1.7) (7,314) (2.3) (8,047) (2.3) Nondeductible interest expense 1,841 .4 1,079 .3 807 .2 Amortization of goodwill 4,214 .9 4,146 1.3 3,928 1.1 State income taxes 5,820 1.2 1,866 .6 7,138 2.0 Other - net (4,668) (1.0) 764 .2 (609) (.2) - ---------------------------------------------------------------------------------------------------------- Total increase (decrease) in taxes (809) (.2) (8,153) (2.5) 11,911 3.4 - ---------------------------------------------------------------------------------------------------------- Total income tax expense $165,575 34.8 $104,988 32.5 $134,572 38.4 ==========================================================================================================
54 The Corporation made income tax payments of $151.5, $114.1 million and $105.3 million during 1997, 1996 and 1995, respectively. The sources and tax effects of temporary differences that gave rise to significant portions of deferred income tax assets (liabilities) at December 31 were:
========================================================================================================== In thousands 1997 1996 Deferred income tax assets: Allowance for loan losses $ 95,979 $ 85,797 Intangible assets 19,670 16,211 Compensation and employee benefits 33,492 28,568 Unrealized loss on securities available for sale 236 11,484 Other 12,304 9,692 - -------------------------------------------------------------------------------------------------------------- Total deferred income tax assets 161,681 151,752 - -------------------------------------------------------------------------------------------------------------- Deferred income tax liabilities: Premises and equipment (13,856) (15,543) Loans (12,324) (5,091) Mortgage servicing (11,953) (9,462) Other (4,142) (4,697) - -------------------------------------------------------------------------------------------------------------- Total deferred income tax liabilities (42,275) (34,793) - -------------------------------------------------------------------------------------------------------------- Net deferred income tax asset $119,406 $116,959 ==============================================================================================================
The net deferred income tax asset is included in other assets in the accompanying consolidated balance sheets. There was no valuation allowance relating to the net deferred tax asset at December 31, 1997 and 1996. Crestar has sufficient taxable income in the available carryback periods to realize all of its deferred income tax assets. (11) Short-Term Borrowings Short-term borrowings outstanding as of December 31 and their weighted average interest rates were:
=============================================================================================================== In thousands 1997 1996 1995 -------------------- ------------------- ------------------------ Amount Rate Amount Rate Amount Rate Federal funds purchased $1,709,698 6.12% $2,277,338 6.29% $1,486,553 5.46% Securities sold under repurchase agreements 868,233 5.59 888,281 5.58 725,104 5.19 Federal Home Loan Bank borrowings 938,500 5.88 525,000 5.50 427,200 5.83 Term Federal funds purchased 675,000 5.75 175,000 5.41 50,000 5.41 U.S. Treasury demand notes 335,164 5.59 - - - - Notes payable 260,225 5.30 248,194 5.26 181,125 4.92 Other 2,225 5.14 2,238 6.23 1,539 2.91 - --------------------------------------------------------------------------------------------------------------- Total short-term borrowings $4,789,045 $4,116,051 $2,871,521 ===============================================================================================================
Federal funds purchased mature daily. Securities sold under repurchase agreements are due upon demand. Short-term Federal Home Loan Bank borrowings all mature within 365 days, with the majority maturing within one month. Term Federal funds purchased mature within 180 days. U.S. Treasury demand notes mature daily. Notes payable are due upon demand. The Corporation is required to maintain as collateral for its Federal Home Loan Bank borrowings, including those classified as long-term obligations in note 12, real estate mortgage loans in an amount approximating 133% of the outstanding principal balance of the borrowings. Crestar Bank, a wholly owned subsidiary of Crestar, had a $6.5 million unused committed Federal Home Loan Bank letter of credit outstanding at December 31, 1997. The Parent's unused committed lines of credit totaled $30 million at December 31, 1997. Crestar paid $604.9 million, $647.8 million and $621.7 million in interest on deposits and short-term borrowings in 1997, 1996 and 1995, respectively. 55 Notes to Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (12) Long-Term Debt Long-term debt at December 31 included:
============================================================================================================ In thousands 1997 1996 Parent: 8 3/4% Subordinated notes due 2004 $149,732 $149,693 8 1/4% Subordinated notes due 2002 125,000 125,000 8 5/8% Subordinated notes due 1998 49,997 49,987 - ------------------------------------------------------------------------------------------------------------ Total Parent 324,729 324,680 4 - 8% Federal Home Loan Bank obligations payable through 2017 284,270 310,225 7 7/8 - 111/4% Collateralized mortgage obligation bonds maturing through 2019 12,761 14,864 8 1/4% Mortgage indebtedness maturing through 2009 7,875 8,579 8 1/8 - 143/8% Capital lease obligations maturing through 2006 1,748 988 Crestar Capital Trust I preferred stock 200,000 200,000 - ------------------------------------------------------------------------------------------------------------ Total consolidated long-term debt $831,383 $859,336 ============================================================================================================
Crestar Capital Trust I (the Trust) is a wholly-owned special purpose finance subsidiary of the Parent, operating in the form of a grantor trust. The Trust was created in 1996 solely to issue capital securities and remit the proceeds to Crestar. Crestar is the sole owner of the common stock securities of the Trust. On December 31, 1996, the Trust issued 200,000 shares of Preferred Stock capital securities (Trust Preferred Stock) with a stated value of $1,000 per share, and a fixed dividend yield of 8.16% of the stated value. The stated value of the Trust Preferred Stock is unconditionally guaranteed on a subordinated basis by the Parent. The securities have a mandatory redemption date of December 15, 2026, and are subject to varying call provisions at the option of Crestar beginning December 15, 2006. Through an inter-company lending transaction, proceeds received by the Trust from the sale of the securities were lent to the Parent for general corporate purposes. The Trust Preferred Stock is senior to Crestar's common stock in event of claims against Crestar, but is subordinate to all senior and subordinated debt securities. Crestar has the right to terminate the Trust upon the occurrence of certain events, including (a) dividend payments on the preferred stock securities are no longer deemed tax-deductible, or the Trust is taxed on the income received from the underlying inter-company debt agreement with the Parent, (b) the capital securities are no longer considered Tier 1 capital under Federal Reserve Bank guidelines, or (c) the Trust, through a change of law, is deemed to be an investment company under the Investment Company Act of 1940 and subject to that act's reporting requirements. Shares of the Trust Preferred Stock are capital securities which are distinct from the common stock or preferred stock of Crestar, and the dividends thereon are tax-deductible. Dividends accrued for payment by the Trust are classified as interest expense on long-term debt in the consolidated income statement of Crestar. Neither the 8 3/4% nor the 8 1/4% subordinated notes are redeemable prior to maturity. The 8 5/8% subordinated notes may not be exchanged or redeemed prior to maturity, except upon the occurrence of certain events relating to the federal income tax treatment of the notes to the Corporation. The 8 3/4%, 8 1/4% and 8 5/8% subordinated notes all qualify as Tier 2 capital for Federal bank regulatory purposes subject to applicable discounts for remaining time to maturity. Expenses relating to the issuance of the 8 3/4%, 8 1/4% and 8 5/8% notes are being amortized to maturity on a straight-line basis. Outstanding debt agreements at December 31, 1997 place restrictions upon the disposal of subsidiary common stock. Mortgage indebtedness consists of the debt relating to one pledged facility owned by Crestar Bank which had an aggregate carrying value of $9.7 million at December 31, 1997. Mortgage payments in 1997, including interest, were $1.4 million; payments in 1998 are expected to approximate the 1997 amount. The Corporation made payments of $62.1 million, $49.8 million and $48.2 million in interest on long-term debt in 1997, 1996 and 1995, respectively. The combined maturities of all long-term debt for the years 1998 through 2002 follow: =========================================================================== In thousands 1998 1999 2000 2001 2002 Parent $ 49,997 $ - $ - $ - $125,000 Consolidated 137,935 67,196 62,422 19,019 153,314 =========================================================================== 56 (13) Regulatory Requirements And Restrictions The Corporation's bank affiliate is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank affiliate must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The bank affiliate's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the bank affiliate to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 1997, that the bank affiliate meets all capital adequacy requirements to which it is subject. As of December 31, 1997, the most recent notification from the Federal Reserve Bank categorized the bank affiliate as "well capitalized". There are no conditions or events since that notification that management believes have changed the institution's category. The bank affiliate's actual regulatory capital amounts and ratios are set forth below:
============================================================================================================ In millions Minimum To Be Well Requirements Capitalized Under For Capital Regulatory Actual Adequacy Purposes Provisions ----------------- ------------------- -------------------- Amount Ratio Amount Ratio Amount Ratio As of December 31, 1997: $ % $ % $ % Total Capital (to Risk Weighted Assets): Consolidated 2,574 12.5 1,646 8.0 2,058 10.0 Crestar Bank 2,028 10.0 1,615 8.0 2,019 10.0 Tier 1 Capital (to Risk Weighted Assets): Consolidated 2,068 10.1 823 4.0 1,235 6.0 Crestar Bank 1,523 7.5 808 4.0 1,211 6.0 Tier 1 Capital (to Average Assets): Consolidated 2,068 9.2 899 4.0 1,124 5.0 Crestar Bank 1,523 7.0 873 4.0 1,092 5.0 As of December 31, 1996: Total Capital (to Risk Weighted Assets): Consolidated 2,326 13.4 1,389 8.0 1,736 10.0 Crestar Bank(1) 1,965 11.3 1,391 8.0 1,739 10.0 Tier 1 Capital (to Risk Weighted Assets): Consolidated 1,827 10.5 694 4.0 1,042 6.0 Crestar Bank(1) 1,464 8.4 696 4.0 1,043 6.0 Tier 1 Capital (to Average Assets): Consolidated 1,827 8.4 868 4.0 1,085 5.0 Crestar Bank(1) 1,464 6.8 855 4.0 1,069 5.0 ============================================================================================================
(1) During 1997, two bank affiliates of Crestar, Citizens Bank of Maryland and Citizens Bank of Washington, N.A., which were acquired by Crestar in its December 31, 1996 merger with Citizens Bancorp, were merged into Crestar Bank. All data as of December 31, 1996 for Crestar Bank reflects the pro forma balances of the two banking affiliates (Citizens Bank of Maryland and Citizens Bank of Washington, N.A.) as if the mergers into Crestar Bank had taken place on December 31, 1996. Each individual affiliate was "well capitalized" as of year-end 1996 under the applicable regulatory guidelines. 57 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries Under the current supervisory practices of the Bank subsidiary's regulatory agencies, prior approval from those agencies is required if cash dividends declared in any given year exceed net income for that year plus retained earnings of the two preceding years. The amount of dividends available to the Parent from the Bank subsidiary at January 1, 1998, without prior approval, was approximately $279.1 million. Cash dividends paid by the Bank subsidiary to the Parent in 1997, 1996 and 1995 were $105.6 million, $144.7 million and $89.1 million, respectively. Section 23A of the Federal Reserve Act imposes limitations on the amount of credit that may be extended to the Parent by the Bank subsidiary. Generally, up to 10% of the Bank subsidiary's total risk-based capital and excess allowance for loan losses may be loaned by the bank subsidiary to the Parent. As of December 31, 1997, $206 million of credit was available to the Parent under this limitation, although no Section 23A extensions of credit were outstanding. For the reserve maintenance period in effect at December 31, 1997 and 1996, the Bank subsidiary was required to maintain an average daily balance totaling approximately $219.7 million and $289.5 million, respectively, with the Federal Reserve Bank. The average amount of reserve balances for the year ended December 31, 1997 totaled approximately $335.4 million. As of January 1, 1997, aggregate loans to directors and executive officers and their associates were $37.3 million. Additions and repayments totaled $16.7 million and $519,000, respectively, during 1997 and the balance was $20.7 million at year end. A net reduction of $32.8 million in 1997 resulted from changes in executive officer and director status. These loans were made in the ordinary course of business and were arms-length in terms of credit risk, interest rates and collateral requirements prevailing at the time for comparable transactions. These loans do not represent more than a normal credit risk. None of these loans were nonaccrual, past due or restructured at December 31, 1997. 58 (14) Pension Plans Substantially all employees are participants in the Corporation's noncontributory defined benefit pension plans. Benefits under the plans are based on length of service and a percentage of qualifying compensation during the final years of employment. The Corporation's funding policy is to contribute annually the maximum amount that can be contributed for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. A summary of the plans' funded status and amounts recognized in the Corporation's consolidated balance sheets at December 31, 1997 and 1996 based on a measurement date of September 30 for each year, follows.
============================================================================================================ In thousands 1997 1996 Accumulated benefit obligations: Vested $171,870 $125,637 Nonvested 7,904 3,330 - ------------------------------------------------------------------------------------------------------------ Total accumulated benefit obligations 179,774 128,967 ============================================================================================================ Projected benefit obligations for service rendered to date (237,957) (177,634) Plan assets at fair value, primarily listed stocks and U.S. Treasury and agency obligations 207,012 169,862 - ------------------------------------------------------------------------------------------------------------ Plan assets less than projected benefit obligations (30,945) (7,772) Unrecognized net gain from past experience different from that assumed and effects of changes in assumptions (3,548) (4,407) Unrecognized prior service costs 24,570 9,734 Unrecognized net obligations being amortized over approximately 15 years (1,872) (1,965) - ------------------------------------------------------------------------------------------------------------ Accrued pension expense $ (11,795) $ (4,410) ============================================================================================================
Net periodic pension expense included the following components in 1997, 1996 and 1995:
============================================================================================================ In thousands 1997 1996 1995 Service cost - benefits earned during the year $ 9,609 $ 8,601 $ 7,258 Interest expense on projected benefit obligations 14,094 11,507 11,727 Effect of actual return on plan assets (40,982) (24,289) (3,137) Net amortization and deferral 27,155 12,985 (10,508) - ------------------------------------------------------------------------------------------------------------ Net periodic pension expense $ 9,876 $ 8,804 $ 5,340 ============================================================================================================
During 1995, Crestar purchased annuities to settle pension obligations for selected retirees of the Corporation. As a result, the projected benefit obligation was reduced by $18.9 million in 1995, and a pre-tax gain of $4.3 million was recognized as noninterest income. Assumptions used in the valuation of the defined benefit pension plans and the determination of the actuarial present value of the project benefit obligation for 1997 were a weighted average discount rate of 7.5%, an expected long-term rate of return of 9.25%, and an assumed 4.75% rate of increase in future compensation. The Citizens and Loyola plans were each valued separately for periods prior to their merger with Crestar, and each plan independently determined its assumptions. The aggregate disclosures for 1996 and 1995, therefore, reflect the following weighted average assumptions used in determining the actuarial present value of the projected benefit obligations:
============================================================================================================ Crestar Citizens Loyola ------------- ------------- ------- 1996 1995 1996 1995 1995 Weighted average discount rate 7.75% 7.75% 7.75% 7.00% 7.75% Expected long-term rate of return 9.25 9.25 8.00 8.00 9.25 Rate of increase in future compensation 4.75 4.75 4.75 5.00 4.75 ============================================================================================================ 59 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (15) Stock Compensation Plans The Corporation applies Accounting Principles Board (APB) Opinion 25 and related interpretations in accounting for stock-based compensation plans. Accordingly, no compensation cost has been recognized for its fixed stock options. Had compensation cost for the Corporation's fixed stock options been determined based on the fair value at the grant dates, consistent with the alternative method of Financial Accounting Standards No. 123 (SFAS 123), the Corporation's net income and diluted earnings per common share would have been reduced to the pro forma amounts indicated below. In accordance with the transition provisions of SFAS 123, the pro forma amounts reflect fixed stock options with grant dates subsequent to January 1, 1995.
============================================================================================================ In thousands except per share data 1997 1996 1995 Net income As reported $309,808 $218,271 $215,887 Pro forma 305,767 215,219 213,601 Earnings per common share-diluted As reported 2.77 1.95 1.92 Pro forma 2.73 1.92 1.90 ============================================================================================================
Under the 1993 Stock Incentive Plan, the Corporation may grant incentive and non-qualified stock options, stock appreciation rights (SARs), financial performance-related stock awards and outright awards of stock to any employee. The Corporation may grant a maximum of 4.0 million shares under the 1993 Stock Incentive Plan; stock awards, including the settlement of performance awards, are limited to a maximum of 1.4 million shares. Under the 1981 Stock Option Plan, 727,259 previously granted incentive and non-qualified stock options were outstanding at December 31, 1997. No future options are available for grant under this plan. Under both plans, the exercise price of each fixed stock option equals the market price of the Corporation's stock on the date of grant. An option's maximum term is 10 years. Options vest one year from date of grant. For the purpose of computing the pro forma amounts indicated above, the fair value of each option on the date of grant is estimated using the Black-Scholes option-pricing model with the following assumptions used for Crestar's grants in 1997, 1996 and 1995: dividend yields of 2.9% to 4.2%; expected volatility of 29%, 30% and 27%, respectively; risk-free interest rates of 5.3% to 7.7%; and an expected option life of 3.8 years. Citizens used the following assumptions for grants in 1996 and 1995: dividend yields of 3.8% to 4.2%; expected volatility of 25% and 26%, respectively; a risk-free interest rate of 6.6%; and an expected option life of 4.8 years. The weighted-average fair value of each option granted by Crestar during 1997, 1996 and 1995 was $9.00, $5.95 and $4.18, respectively. The weighted-average fair value of each option granted by Citizens during 1996 and 1995 was $4.54 and $4.09, respectively. A summary of the status of the Corporation's fixed stock option plans as of December 31 and changes during the years ending on those dates is presented below:
============================================================================================================= 1997 1996 1995 -------------------- ---------------------- --------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price Outstanding, Jan. 1 3,594,558 $17 4,672,427 $12 4,365,879 $11 Granted 752,956 34 706,630 26 811,014 18 Exercised (1,210,580) 15 (1,779,490) 9 (495,222) 10 Forfeited (16,460) 25 (5,009) 18 (9,244) 13 ----------- ----------- --------- Outstanding, Dec. 31 3,120,474 22 3,594,558 17 4,672,427 12 =========== =========== ========= Options exercisable at year-end 2,519,198 2,814,769 3,805,648 ===============================================================================================================
60 The following table summarizes information about fixed stock options outstanding:
================================================================================================================ As of December 31, 1997 Options Outstanding ---------------------------------------- Options Exercisable Weighted- ------------------------------- Average Weighted- Weighted- Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price $3.33 to 14.60 712,609 3.5 years $11 712,609 $11 15.87 to 19.78 715,504 7.1 18 715,504 18 20.19 to 27.00 587,491 6.1 22 587,491 22 27.06 to 35.78 504,294 8.1 27 503,594 27 35.78 to 52.91 600,576 9.1 37 - - ----------- --------- $3.33 to 52.91 3,120,474 6.6 22 2,519,198 19 ================================================================================================================
The Value Share Program was established under the 1993 Stock Incentive Plan to provide senior managers with an opportunity for reward based on the Corporation's long-term performance. During 1997, the Corporation granted 214,300 value shares when Crestar's stock price was $37 per share, and 121,650 value shares when Crestar's stock price was $56 per share. The grant of 214,300 value shares is payable in fifty percent stock and fifty percent cash; the grant of 121,650 value shares is payable entirely in stock. The percentage of value share awards earned is based on Crestar's attainment of certain strategic goals over a performance cycle. The performance cycle is two to three years; value shares may be earned earlier if certain strategic goals are met. There were no new value share awards granted in 1996 and 1995. During 1997, 96,450 value shares granted prior to 1995 were paid in an award of $1.7 million cash and 48,154 common shares when Crestar's stock price was $35 per share. In conjunction with this award, 75,476 non-qualified stock options were granted. During 1997, 1996 and1995, common shares of 25,748, 51,602 and 20,852, respectively, related to performance awards granted prior to 1995 were issued when Crestar's stock price was $37, $29 and $22 per share, respectively. Other outright awards of stock were not material in the years presented. During 1995, the Corporation granted 30,000 performance shares, subject only to a three year vesting requirement, to the Chairman and Chief Executive Officer when the stock price was $28 per share. These performance shares are not issued and have no voting rights, but do receive dividend equivalents which are converted to additional shares. The Corporation recognized compensation expense for performance and value shares, including awards granted in years prior to 1995, of $1.4, $3.3 and $1.3 million in 1997, 1996 and 1995, respectively. Under the Directors' Equity Program, each non-employee director is eligible to receive equity awards covering a five-year cycle. Equity awards are not issued and have no voting rights; equity awards do receive dividend equivalents which are converted to additional shares. Equity awards vest over the five-year cycle in 20 percent increments based on the participant's total years of board service, including years prior to 1996. Equity awards granted in 1996 totaled 20,400 shares, each granted when the stock price was $30 per share. There were no material directors' equity awards or distributions in 1997. Compensation expense recognized in 1996 related to directors' equity awards totaled $600,000. Directors' may also defer annual retainers which may be payable in stock at the election of the director; such amounts were not material in the years presented. 61 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (16) Other Employee Benefit Plans The Corporation provides postretirement life and contributory health insurance benefit plans for eligible retirees. The cost of such benefits are accrued in a manner similar to pension costs. The projected status of Crestar's postretirement life and contributory health insurance benefit plans for eligible retirees as of December 31 follow:
=========================================================================================================== In thousands 1997 1996 Accumulated postretirement benefit obligations (other than pensions): Retirees $48,236 $47,104 Eligible active plan participants 7,094 6,320 Ineligible active participants 10,820 11,613 - ----------------------------------------------------------------------------------------------------------- Total 66,150 65,037 Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions (26,417) (19,333) Unrecognized transition obligation to be recognized over 20 years (22,099) (29,773) - ----------------------------------------------------------------------------------------------------------- Accrued postretirement benefit expense $17,634 $15,931 =========================================================================================================== Postretirement benefit expense for the years ended December 31 included: =========================================================================================================== In thousands 1997 1996 1995 Service cost $1,057 $1,039 $ 870 Interest cost 4,538 3,847 4,026 Net amortization and deferral 2,668 2,343 2,132 - ----------------------------------------------------------------------------------------------------------- Net postretirement benefit expense $8,263 $7,229 $7,028 ===========================================================================================================
The weighted average annual assumed rate of increase in the per capita cost of covered benefits for health insurance is 7% for 1998 and is assumed to decrease to 6% in 1999 and remain at that level thereafter. Increasing the assumed health care trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation for the medical plan by approximately $5.3 million, and would increase the aggregate of the service and interest components of net postretirement benefit expense by approximately $403 thousand for 1997. The weighted average discount rate used in projecting the accumulated plan benefit obligation was 7.50% for 1997 and 7.75% for 1996; the average rate of annual compensation increase was 4.75% for both years. The Corporation maintains a grantor trust to pay certain employee benefits as they become due. Assets of the trust are restricted to use for applicable employee benefit plans, including deferred compensation and medical benefit plans. Such trust assets of $100 million and $91 million at December 31, 1997 and 1996, respectively, are included in the Corporation's total assets. The Corporation has thrift and profit-sharing plans covering substantially all full-time employees beginning January 1 after date of hire. During 1997, 1996 and 1995 the Corporation made matching contributions of 50 cents for every $1 of employee contributions to the thrift plan, up to 6 percent of base pay. Employer profit-sharing contributions are determined by applying a formula based on return on equity to covered compensation. Thrift and profit-sharing plan expenses totaled $17.6 million, $16.8 million and $16.0 million in 1997, 1996 and 1995, respectively. 62 (17) Other Income Other income in the consolidated statements of income includes:
============================================================================================================= In thousands 1997 1996 1995 Automated teller machine fees $ 25,945 $18,684 $17,856 Mortgage origination - net 19,632 12,212 2,753 Mortgage servicing - net 15,404 17,085 16,087 Trading account activities 5,058 3,833 3,515 Commissions on letters of credit 4,954 4,980 4,805 Gain on sale of mortgage servicing rights 10,450 8,268 11,000 Gain (loss) on sale and disposal of branches and other properties - net 6,884 (22,380) (2,317) Gain on securitization of student loans 9,305 - - Gain on sale of merchant card processing 17,325 - - Miscellaneous 58,656 54,834- 49,396 - ------------------------------------------------------------------------------------------------------------- Total other income $173,613 $97,516 $103,095 =============================================================================================================
(18) Other Expense Other expense in the consolidated statements of income includes:
============================================================================================================ In thousands 1997 1996 1995 Communications $ 37,182 $ 38,572 $ 34,446 Outside data services 26,717 28,883 26,112 Professional fees and services 26,061 30,692 22,620 Advertising and marketing 21,732 26,165 20,400 Amortization of purchased intangibles 17,147 16,673 15,416 Loan expense 12,217 12,731 9,407 Stationery, printing and supplies 10,436 12,669 12,709 Transportation 7,101 7,056 7,281 FDIC premiums - net 2,684 41,174 24,812 Foreclosed properties (net recoveries) 3,097 6,872 (3,616) Miscellaneous 57,821 58,482 59,303 - ------------------------------------------------------------------------------------------------------------ Total other expense $222,195 $279,969 $228,890 ============================================================================================================
63 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (19) Condensed Parent Information The Parent's Condensed Balance Sheets at December 31 were:
============================================================================================================ In thousands 1997 1996 Cash in banks $ 48,831 $ 76,611 Securities available for sale 125,505 123,747 Money market investments 601,553 380,499 Notes receivable from subsidiaries 185,000 336,369 Investments in wholly-owned subsidiaries: Bank subsidiaries 1,761,401 1,662,418 Non-bank subsidiaries 173,609 15,974 Investment in Crestar Capital Trust I 6,003 6,200 Other assets 33,309 61,380 - ------------------------------------------------------------------------------------------------------------ Total Assets $2,935,211 $2,663,198 ============================================================================================================ Short-term borrowings from subsidiaries $ 8,657 $ 50,051 Other short-term borrowings 260,225 202,962 Other liabilities 75,637 99,795 Long-term note payable to subsidiary 206,200 206,200 Other long-term debt 324,729 324,680 Total shareholders' equity 2,059,763 1,779,510 - ------------------------------------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $2,935,211 $2,663,198 ============================================================================================================
The Parent's retained earnings were $1.2 billion and $1.0 billion at December 31, 1997 and 1996, respectively, and were primarily comprised of the undistributed earnings of its subsidiaries. The Parent's Condensed Statements of Income for each of the last three years ended December 31 were:
============================================================================================================ In thousands 1997 1996 1995 Cash dividends from bank subsidiaries $110,635 $144,721 $ 89,072 Interest from subsidiaries 28,094 21,261 21,011 Interest on securities available for sale 5,051 4,346 2,896 Income on money market investments 15,553 6,472 8,631 Other income 760 1,347 1,437 - ---------------------------------------------------------------------------------------------------------- Total income 160,093 178,147 123,047 - ---------------------------------------------------------------------------------------------------------- Interest on short-term borrowings 12,282 9,654 8,820 Interest on long-term note payable to subsidiary 16,826 - - Interest on other long-term debt 27,800 27,800 27,800 Other expense 1,487 2,341 6,521 - ---------------------------------------------------------------------------------------------------------- Total expense 58,395 39,795 43,141 - ---------------------------------------------------------------------------------------------------------- Income before income taxes and equity in undistributed net income of subsidiaries 101,698 138,352 79,906 Income tax benefit (4,961) (3,697) (4,068) - ----------------------------------------------------------------------------------------------------------- Income before equity in undistributed net income of subsidiaries 106,659 142,049 83,974 Equity in undistributed net income of subsidiaries 203,149 76,222 131,913 - ----------------------------------------------------------------------------------------------------------- Net Income $309,808 $218,271 $215,887 ============================================================================================================
64 The Parent's Condensed Statements of Cash Flows for each of the last three years ended December 31 were:
============================================================================================================ In thousands 1997 1996 1995 Operating Activities Net income $309,808 $218,271 $215,887 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of subsidiaries (203,149) (76,222) (131,913) Amortization and accretion, net 480 430 407 Net decrease (increase) in accrued interest receivable, prepaid expenses and other assets 24,590 (38,154) (1,010) Net increase in accrued interest payable, accrued expenses and other liabilities 9,982 5,306 2,334 Other, net 2,255 918 531 - ------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 143,966 110,549 86,236 - ------------------------------------------------------------------------------------------------------------ Investing Activities Proceeds from maturities of securities held to maturity 3,367 6,402 1,347 Proceeds from maturities of securities available for sale 758,088 724,989 487,734 Purchases of securities available for sale (759,800) (733,381) (518,995) Net decrease (increase) money market investments (221,054) (307,097) 105,126 Net decrease (increase) in notes receivable from subsidiaries 342 (63,163) (37,999) Net decrease in investment in subsidiaries 199,999 172,800 27,537 Net cash paid for acquisitions (11,598) - (22,643) Other, net 1,028 363 988 - ------------------------------------------------------------------------------------------------------------ Net cash provided (used) by investing activities (29,628) (199,087) 43,095 - ------------------------------------------------------------------------------------------------------------ Financing Activities Net increase in short-term borrowings 15,869 63,912 20,864 Proceeds from advance from subsidiary - 206,200 - Cash dividends paid (130,671) (98,660) (87,031) Common stock purchased and retired (84,845) (98,823) (82,144) Proceeds from the issuance of common stock 57,693 34,537 30,428 Other, net (164) (2,086) - - ------------------------------------------------------------------------------------------------------------ Net cash provided (used) by financing activities (142,118) 105,080 (117,883) - ------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (27,780) 16,542 11,448 Cash and cash equivalents at beginning of year 76,611 60,069 48,621 - ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 48,831 $ 76,611 $ 60,069 ============================================================================================================ Cash and cash equivalents consists of cash in banks.
(20) Commitments, Contingencies And Other Financial Instruments 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, which are some of the instruments used by Crestar to meet the financing needs of its customers and to manage its own interest rate risk. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. Any losses which may result from these transactions are not expected to have a material effect on the accompanying consolidated financial statements. Notional principal amounts often are used to express the volume of the transaction, but the amounts potentially subject to credit risk are much smaller. The contract or notional amount, the estimated fair value and the credit risk amount of each class of such instruments at December 31 was: 65
============================================================================================================ In thousands 1997 1996 ------------------------------------ ------------------------------------- Estimated Estimated Fair Value Contract/ Fair Value Contract/ Asset Notional Credit risk Asset Notional Credit risk (Liability) Amount Amount (Liability) Amount Amount Financial instruments whose notional or contract amounts equaled maximum credit risk: Legally binding unfunded com- mitments to extend credit $(2,817) $10,071,337 $10,071,337 $(9,396) $ 8,148,955 $ 8,148,955 Standby letters of credit - 472,959 472,959 - 387,672 387,672 Commercial and similar letters of credit - 54,559 54,559 - 97,510 97,510 Recourse obligations - 1,677,298 1,677,298 - 1,633,445 1,633,445 - ------------------------------------------------------------------------------------------------------------ Total $(2,817) $12,276,153 $12,276,153 $(9,396) $10,267,582 $10,267,582 ============================================================================================================ Financial instruments whose notional or contract amounts exceeded maximum credit risk: For interest rate risk management Interest rate swaps $11,893 $1,675,000 $ 32,260 $(6,434) $ 900,000 $ 20,597 Interest rate caps 4,591 2,410,000 20,634 12,198 1,785,000 26,637 Interest rate floors - - - 6,133 1,000,000 16,605 Forward contracts (4,684) 1,459,888 - 733 706,731 - As a financial intermediary Interest rate swaps 251 79,722 4,865 312 98,372 5,813 Interest rate caps - 23,920 3 - 33,920 15 Interest rate collars - 10,000 9 - 26,000 395 - ------------------------------------------------------------------------------------------------------------ Total $12,051 $5,658,530 $ 57,771 $12,942 $4,550,023 $ 70,062 ============================================================================================================
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. Standby letters of credit are conditional commitments issued by Crestar to guarantee the performance of customers to a third party. Crestar receives a commitment fee for entering into such agreements. The credit risk associated with commitments to extend credit and standby letters of credit is similar to direct lending; therefore, all of these items are subject to the Corporation's loan approval and review procedures and policies. Based upon management's credit evaluation of the customer, 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. The maximum credit risk associated with commitments to extend credit and standby letters of credit assumes that the counterparty defaults and the collateral proves to be worthless. The total contract amounts do not necessarily represent future cash requirements, since many of these items are expected to expire without being drawn upon. A geographic concentration exists within Crestar's loan portfolio since most of Crestar's business activity is with customers located in Virginia, Maryland or Washington, DC. Based upon Standard Industrial Classification codes used for regulatory purposes, the Corporation had no aggregate loan concentration of 10% or more of total loans in any particular industry at December 31, 1997. However, under a broader view of the portfolio, Crestar had $1.8 billion in loans outstanding to real estate developers and investors at year-end 1997. These loans are diversified by geographic region within Crestar's market and by project type and are made in accordance with the Corporation's normal credit and underwriting guidelines and risk management policies. 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 at December 31, 1997 included $112 million of contractual recourse liability accepted by 66 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 $309,000 at December 31, 1997, based on estimates of future losses on this contractual recourse liability. Recourse obligations also included $119 million of contractual recourse liability accepted by Crestar on certain mortgage loan sales to private investors. For the period extending up to one year from origination, investors have the right to sell loans that meet certain delinquency criteria back to Crestar. The remaining notional balance of recourse obligations of $1.5 billion at December 31, 1997 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 $1.0 billion of this notional balance was insured by agencies of the Federal government or private insurance companies at December 31, 1997. As a financial institution, Crestar entails 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 fair value of the underlying hedged asset or liability. For interest rate risk management purposes, Crestar was using interest rate (fixed receive) swaps with notional balances of $1.4 billion and $250 million at December 31, 1997 to convert floating rate commercial and instalment loans, respectively, to fixed rates. Crestar was using purchased interest rate caps with notional balances of $1.75 billion and $200 million to hedge the market value of fixed rate securities available for sale and real estate income property loans, respectively, and $460 million to minimize interest rate risk associated with rising rates on floating rate money market deposits. Crestar also serves as a financial intermediary in interest rate swap, cap and collar agreements, providing interest rate risk management services to customers. As an intermediary, Crestar becomes a principal in the exchange of interest payments between parties and is exposed to loss should one party default. The Corporation performs normal credit review on each counterparty and minimizes its exposure by entering into offsetting positions or by using hedging techniques. 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 $19.6 million, less collateral held of approximately $11.1 million, plus an amount for prospective market movement. Four counterparties constituted 17%, 16%, 11% and 10% of the estimated credit and market exposure of $57.8 million at December 31, 1997. Crestar also had forward agreements outstanding at December 31, 1997, 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. Crestar may, from time to time, enter into certain derivative contracts, such as purchased futures or options contracts, for trading purposes. Such contract amounts were not material in 1997 and 1996. The fair values of commitments to extend credit, standby letters of credit and commercial and similar letters of credit were estimated based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and creditworthiness of counterparties. Unfunded loan commitments are generally priced at market at the time of funding and are subject to certain credit standards. The fair values of forward agreements are estimated based on current settlement values. The fair values of interest rate swaps, caps and floors are estimated based on the amount the Corporation would receive or pay to terminate the contracts or agreements. Such amounts are determined using a valuation model which considers current market yields, counterparty credit risk and other relevant variables. The carrying value of interest rate swaps, caps, floors and forward contracts related to interest rate risk management activities was $20.3 million and $24.0 million at December 31, 1997 and 1996, respectively. The carrying value of such instruments includes any accrued interest receivable and/or payable balances, and unamortized premiums paid for interest rate caps and floors. The carrying value of other off-balance sheet financial instruments was not material at December 31, 1997 and 1996. Certain litigation is pending or threatened against Crestar. Management, in consultation with legal counsel, is of the opinion that there is no pending or threatened litigation that could, individually or in the aggregate, have a material impact on the Corporation's financial condition or financial statements beyond liabilities established for this purpose. 67 Notes To Consolidated Financial Statements Crestar Financial Corporation And Subsidiaries (21) Fair Value Of Financial Instruments Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures about Fair Value of Financial Instruments," defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. As the majority of Crestar's financial instruments lack an available trading market, significant estimates, assumptions and present value calculations are required to determine estimated fair value. Comparability among financial institutions is difficult due to the wide range of acceptable valuation techniques and the subjectivity of required assumptions. Crestar's remaining assets and liabilities, not considered financial instruments, have not been valued differently than customary, historical cost accounting, nor have lines of business been separately valued. Information regarding the estimated fair values of Crestar's financial instruments at December 31 follows:
=============================================================================================================== In thousands Estimated Fair Value Carrying Value Assets (Liabilities) Assets (Liabilities) -------------------- ---------------------- 1997 1996 1997 1996 Cash and due from banks $ 1,175,314 $ 1,105,036 $ 1,175,314 $ 1,105,036 Securities held to maturity 631,491 966,750 626,716 967,510 Securities available for sale 3,839,006 4,318,349 3,839,006 4,318,349 Money market investments 1,431,790 745,672 1,431,790 745,672 Net loans, including loans held for sale 16,655,000 14,628,000 16,360,293 14,439,675 Other financial instrument assets 404,756 321,744 404,756 321,744 Deposits with no stated maturities (11,246,043) (10,887,219) (11,246,043) (10,887,219) Deposits with stated maturities (5,121,000) (4,765,000) (5,123,209) (4,783,991) Short-term borrowings (4,789,045) (4,116,051) (4,789,045) (4,116,051) Long-term debt (877,078) (880,067) (831,383) (859,336) Other financial instrument liabilities (783,480) (425,188) (783,480) (425,188) Off-balance sheet financial instruments - net 9,234 3,546 - - ===============================================================================================================
The carrying amounts in the table are included in the consolidated balance sheets under the indicated captions, except for off-balance sheet financial instruments which are discussed in note 20. The carrying value of cash and due from bank balances and money market investments approximates fair value. Financial instruments actively traded in a secondary market, such as securities, were valued using available quoted market prices. The Corporation's loan portfolio was valued based on estimated future cash flows, discounted at various rates. The discount rates used were commensurate with rates paid on U.S. Treasury securities with various maturity dates, adjusted for noninterest operating costs, anticipated credit losses and prepayment risk. The estimated fair value of the loan portfolio excludes the intangible value attributable to account relationships, including bank card, home equity line or similar revolving line of credit arrangements. Other financial instrument assets consist primarily of customers' liability on acceptances and accrued interest receivable, for which carrying amount approximates fair value. The carrying value of demand deposits, interest checking deposits, money market deposit accounts and regular savings deposits is defined by SFAS 107 to approximate fair value. Deposits with stated maturities were valued based on estimated future cash flows, discounted at various rates. The discount rates used were commensurate with rates paid on U.S. Treasury securities, adjusted for factors such as operating expenses and prepayment risk. The estimated fair value of deposits excludes the intangible value attributable to long-term relationships with depositors. The carrying value of short-term borrowings approximates fair value. Long-term debt was valued based on interest rates currently available to Crestar for debt with similar terms and remaining maturities. Other financial instrument liabilities consist primarily of liability on acceptances, interest payable on deposits and balances due upon settlement of securities purchases, for which carrying value approximates fair value. 68 (22) Quarterly Financial Results (Unaudited) Consolidated quarterly results of operations for the years ended December 31 were:
============================================================================================================= Dollars in thousands, except per share data First Second Third Fourth 1997 Quarter Quarter Quarter(1) Quarter(2) Income from earning assets $388,791 $385,614 $391,737 $409,442 Net interest income 219,660 218,309 217,138 221,191 Provision for loan losses 29,698 36,000 19,099 23,300 Securities gains (losses) 4,064 (91) 124 1,231 Other noninterest income 99,403 111,107 95,985 109,616 Net credit and noninterest income 293,429 293,325 294,148 308,738 Noninterest expense 180,005 179,010 173,231 182,011 Income before income taxes 113,424 114,315 120,917 126,727 Net Income 71,780 75,790 79,543 82,695 - ------------------------------------------------------------------------------------------------------------- Basic: Earnings per share $ .65 $ .69 $ .71 $ .75 Average shares outstanding (000s) 110,290 110,496 110,760 110,916 Diluted: Earnings per share $ .64 $ .68 $ .71 $ .74 Average shares outstanding (000s) 111,579 111,602 112,069 112,423 Dividends paid per common share $ .27 $ .29 $ .29 $ .29 - ------------------------------------------------------------------------------------------------------------- 1996 Income from earning assets $385,826 $392,900 $388,868 $395,785 Net interest income 211,653 218,623 215,566 220,468 Provision for loan losses 22,230 24,430 25,100 24,130 Securities gains 2,373 270 96 654 Other noninterest income 85,178 91,320 80,221 73,073 Net credit and noninterest income 276,974 285,783 270,783 270,065 Noninterest expense 175,118 180,729 212,039 212,460 Income before income taxes 101,856 105,054 58,744 57,605 Net Income 65,111 66,876 48,118 38,166 - ------------------------------------------------------------------------------------------------------------- Basic: Earnings per share $ .59 $ .60 $ .44 $ .34 Average shares outstanding (000s) 111,116 111,002 110,150 109,981 Diluted: Earnings per share $ .58 $ .60 $ .43 $ .34 Average shares outstanding (000s) 112,405 111,923 111,101 111,447 Dividends paid per common share $ .225 $ .26 $ .26 $ .26 ==============================================================================================================
(1) During the third quarter of 1996 Crestar recorded a one-time after-tax charge of $21.5 million, or $.19 per share, associated with congressional legislation regarding the recapitalization of the Savings Association Insurance Fund. Also in the third quarter of 1996, a nonrecurring tax benefit of $10.6 million, or $.09 per share, was recorded in connection with the repeal of thrift bad debt tax legislation. (2) During the fourth quarter of 1996, nonrecurring after-tax merger costs totaling $32.5 million, or $.29 per share, were recorded as part of the pooling-of-interests merger with Citizens Bancorp. 69 Crestar Financial Corporation The Board Of Directors And Shareholders We have audited the accompanying consolidated balance sheets of Crestar Financial Corporation and subsidiaries (the Corporation) as of December 31, 1997 and 1996 and the related consolidated statements of income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the consolidated financial statements of Citizens Bancorp (Citizens), which was acquired during 1996 in a transaction accounted for as a pooling of interests, as discussed in note 2. Such statements are included in the consolidated financial statements of the Corporation and reflect total assets constituting 18% at December 31, 1996, and total income from earning assets constituting 18% in 1996 and 1995 of the related consolidated totals. Those statements were audited by other auditors whose report, dated January 16, 1997 expressed an unqualified opinion thereon. The other auditors' report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Citizens, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Crestar Financial Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP Richmond, Virginia January 14, 1998 70 Crestar Financial Corporation Statement On Corporate Responsibility The financial statements on pages 40 to 69 have been prepared by management in accordance with generally accepted accounting principles and include some amounts that are necessarily based on our best estimates and judgments. We are responsible for the accuracy, integrity, objectivity, consistency and fair presentation of the financial statements and all other financial information contained in this Annual Report. We fulfill these responsibilities by relying on a system of internal controls, which has been designed to ensure that transactions are properly authorized and recorded in our financial records. Our internal auditing function independently assesses the effectiveness of internal controls and recommends possible improvements thereto. Because of inherent limitations in any system of controls, there can be no absolute assurance that errors or irregularities will not occur. Nevertheless, we believe that our system of internal controls provides reasonable assurance as to the integrity and reliability of our financial records. Some of the financial information in this Annual Report is presented on a tax-equivalent basis to improve comparative analysis. In addition, some of the business segment information incorporates allocation methods for which there are no generally accepted accounting principles. However, in all other respects, it is consistent with the audited financial statements. Through its Audit Committee, which is composed of directors who are not officers or employees of the Corporation, the Board of Directors fulfills its oversight responsibility for determining that the accounting policies employed by management in preparing the Corporation's financial statements are appropriate and that our system of internal controls is adequately reviewed and maintained. The Committee periodically reviews, with management and the internal auditors, accounting policies, control processes and procedures, and audit and regulatory examination reports of the Corporation and its subsidiaries. In addition, our external auditors meet regularly with and have full and free access to the Committee, privately and with management present, to discuss the results of their audits and other auditing, accounting and financial reporting matters. The Committee reports to the full Board after each of its meetings. KPMG Peat Marwick LLP has audited the accompanying consolidated financial statements. Their report represents their judgment as to whether our consolidated financial statements present fairly our financial position and results of operations and cash flows in conformity with generally accepted accounting principles. We are committed to ensuring that corporate affairs are conducted in accordance with consistently applied standards of conduct applicable to all officers and associates. In essence, everyone is expected to manage their responsibilities with integrity. Our standards provide guidance on general business conduct, political activities, community involvement, outside employment and business activities, conflict of interests, personal finances, and the use and safeguard of confidential information. Crestar Financial Corporation 71 Board Of Directors Of Crestar Financial Corporation J. Carter Fox Chairman Chesapeake Corporation Richmond, Virginia Packaging and Paper Products Manufacturer Executive and Nominating & Governance Committee Bonnie Guiton Hill President & Chief Executive Officer Times Mirror Foundation Los Angeles, California Charitable Foundation Nominating & Governance Committee (Chairman) Charles R. Longsworth Chairman Emeritus The Colonial Williamsburg Foundation Williamsburg, Virginia Educational Museum, Hotels and Restaurants Executive Committee and Human Resources & Compensation Committee (Chairman) Patrick J. Maher Chairman Washington Gas Light Company Washington, DC Natural Gas Utility Executive Committee and Audit Committee (Chairman) Frank E. McCarthy President National Automobile Dealers Association McLean, Virginia Human Resources & Compensation Committee Paul D. Miller President Litton/Sperry Marine, Charlottesville, Virginia Marine Navigation and Control Systems Human Resources & Compensation Committee G. Gilmer Minor, III Chairman, President & Chief Executive Officer Owens & Minor, Inc. Richmond, Virginia Hospital/Medical Supply Distributor Human Resources & Compensation and Nominating & Governance Committee Gordon F. Rainey, Jr. Partner, Chairman of the Executive Committee Hunton & Williams Richmond, Virginia Attorneys Executive Committee Frank S. Royal Member & President Frank S. Royal, M.D., P.C. Richmond, Virginia Family Medicine Executive Committee Alfred H. Smith, Jr. Partner A. H. Smith Associates Limited Partnership Branchville, Maryland Concrete, Sand & Gravel Distributor Jeffrey R. Springer President Midlantic Investments, LLC Glen Arm, Maryland Real Estate and Venture Capital Investments Richard G. Tilghman Chairman & Chief Executive Officer Crestar Financial Corporation and Crestar Bank Executive Committee (Chairman) Eugene P. Trani President Virginia Commonwealth University Richmond, Virginia Audit Committee L. Dudley Walker Chairman Bassett-Walker, Inc. Martinsville, Virginia Textile and Apparel Manufacturer Audit Committee James M. Wells III President & Chief Operating Officer Crestar Financial Corporation and Crestar Bank Executive Committee Robert C. Wilburn President & Chief Executive Officer The Colonial Williamsburg Foundation Williamsburg, Virginia Educational Museum, Hotels and Restaurants Audit Committee Karen Hastie Williams Partner Crowell & Moring Washington, DC Attorneys Audit Committee 72 Principal Officers Of Crestar Financial Corporation Richard G. Tilghman*, 57 Chairman & Chief Executive Officer 31 years of service. Elected President and Chief Executive Officer in 1985 and Chairman in 1986. James M. Wells III*, 51 President & Chief Operating Officer 29 years of service. Elected President in 1988 and to current position in 1997. James D. Barr*, 54 Group Executive Vice President-Controller & Treasurer 24 years of service. Elected Senior Vice President-Finance in 1987 and to current position in 1988. William V. Bunting, 57 Group Executive Vice President-Consumer Finance Group 31 years of service. Elected Executive Vice President-Consumer Lending in 1992 and to current position in 1997. William K. Butler II, 51 President-Eastern Region 25 years of service. Elected President-Norfolk in 1984 and to current position in 1985. A. Dale Cannady, 50 President-Capital Region 26 year of service. Elected Senior Vice President-Commercial Division in 1985, Executive Vice President-Capital Region Commercial Division in 1996 and to current position in 1997. Thomas M. Eckis*, 49 Corporate Executive Vice President-Corporate Banking 23 years of service. Elected Group Executive Vice President-Real Estate Finance in 1990 and of Corporate Banking in 1994, Senior Credit Officer in 1995 and to current position in 1997. William M. Ginther*, 51 Corporate Executive Vice President-Technology & Operations/Regional Banking 27 years of service. Elected Executive Vice President in 1987, Group Executive Vice President-Technology & Operations in 1994 and to current position in 1997. C. Garland Hagen*, 52 Corporate Executive Vice President-Corporate Development & Funds Management Group 25 years of service. Elected Executive Vice President in 1985 and to current position in 1987. F. Edward Harris, 56 President-Western Region 33 years of service. Elected Executive Vice President-Western Region in 1982 and to current position in 1985. C.T. Hill*, 47 Corporate Executive Vice President-Senior Credit Officer 27 years of service. Elected Executive Vice President-Capital Region Commercial Division in 1990, President-Capital Region in 1994 and to current position in 1997. Thomas D. Hogan, 51 Group Executive Vice President-Crestar Investment Group 9 years of service. Elected Executive Vice President-Trust & Investment Management Group in 1988 and to current position in 1996. Richard F. Katchuk*, 51 Corporate Executive Vice President & Chief Financial Officer 2 years of service. Elected to current position in 1995. James J. Kelley*, 53 Group Executive Vice President-Management Resources Group 24 years of service. Elected Senior Vice President in 1986 and to current position in 1995. Craig J. Kelly*, 52 Group Executive Vice President-Strategic Marketing 1 year of service. Elected to current position in 1997. Peter F. Nostrand, 50 President-Greater Washington Region 24 years of service. Elected Senior Executive Vice President of Greater Washington Region in 1988 and to current position in 1995. O.H. Parrish, Jr.*, 55 President-Regional & Corporate Banking 32 years of service. Elected Executive Vice President & Senior Credit Officer in 1985, President-Virginia Banking in 1994 and to current position in 1997. Marc C. Smith, 50 President-Crestar Mortgage Corporation 23 years of service. Elected Executive Vice President & Chief Operating Officer-Crestar Mortgage Corporation in 1989 and to current position in 1990. J. Scott Wilfong, 47 President-Maryland Region 1 year of service. Elected to current position in 1997. *Executive Officer of Crestar Financial Corporation for purposes of the Securities Exchange Act of 1934. 73 Statement Of Business Crestar Financial Corporation And Subsidiaries Crestar Financial Corporation (Crestar) is the holding company for Crestar Bank, which engages in a banking business in Virginia, Maryland and the District of Columbia, and four subsidiaries that provide insurance, leasing, mortgage banking and full-service securities and investment banking services. At December 31, 1997, Crestar had $24.9 billion in total assets, $16.4 billion in total deposits and $2.1 billion in total shareholders' equity. In 1963, six Virginia banks combined to form United Virginia Bankshares Incorporated (UVB), a Virginia stock corporation and registered bank holding company. During the 1960s and 1970s, UVB acquired 18 other Virginia banks and formed one newly chartered bank. On December 31, 1979, all of the UVB banks were merged into United Virginia Bank. During the 1980s, nine more banks were acquired, including NS&T Bank, N.A. in the District of Columbia in 1985 and Bank of Bethesda in Maryland in 1986. In September, 1987 UVB changed its name to Crestar Financial Corporation. Since 1990, Crestar Financial Corporation has acquired 23 banks and thrifts in Virginia, Maryland and Washington, DC. The single transaction in 1997 was the purchase of American National Bancorp, Inc., which added approximately $500 million in assets and $310 million in deposits to the Crestar banking system. Crestar is supervised and examined by the Board of Governors of the Federal Reserve system under the Bank Holding Company Act of 1956 (BHCA). The BHCA requires Federal Reserve approval for bank acquisitions and regulates non-banking activities of bank holding companies. Deposits of Crestar Bank are insured by the Federal Deposit Insurance Corporation (FDIC). As a Virginia-chartered bank, Crestar Bank is regulated by the State Corporation Commission of Virginia. Since September 1995, the BHCA has permitted bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions, including nationwide and state imposed concentration limits. Banks have been able to branch across state lines by acquisition, merger or new bank charter, since June 1, 1997, if state law expressly permits interstate branching. The laws of Virginia, the District of Columbia and Maryland expressly permit interstate branching. A fundamental principle underlying the Federal Reserve's supervision and regulation of bank holding companies is that bank holding companies should be a source of managerial and financial strength to their subsidiary banks. Subsidiary banks in turn are to be operated in a manner that protects the overall soundness of the institution and the safety of deposits. Bank regulators can take various remedial measures to deal with banks and bank holding companies that fail to meet legal and regulatory standards. The 1989 Financial Reform, Recovery and Enforcement Act (FIRREA) expanded federal regulatory enforcement powers. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) created five capital-based supervisory levels for banks and requires bank holding companies to guarantee compliance with capital restoration plans of undercapitalized insured depository affiliates. Crestar Bank was considered "well-capitalized" under regulatory definitions in effect at December 31, 1997. This is the highest rating presently available. Crestar serves customers through a network of 566 banking locations and 613 automated teller machines as of December 31, 1997. Crestar Bank offers a broad range of banking services, including various types of deposit accounts and instruments, commercial and consumer loans, trust and investment management services, bank credit cards and international banking services. Other services are provided through non-bank subsidiaries. Crestar Insurance Agency, Inc. offers a variety of personal and business insurance products. Securities brokerage and investment banking services are offered by Crestar Securities Corporation. Crestar Leasing Corporation provides equipment leasing services. Mortgage loan origination, servicing and wholesale lending are offered by Crestar Mortgage Corporation. Crestar Asset Management Company provides asset management investment advisory services. Crestar Mortgage Corporation and Crestar Asset Management Company are subsidiaries of Crestar Bank. The mission of Crestar Financial Corporation is to provide a broad array of financial products and services at a price that represents the best value for our customers' money and, by doing so, to provide a superior return for our shareholders. Crestar's executive offices are located at Crestar Center, 919 East Main Street, Richmond, Virginia. Regional headquarters are located in Norfolk and Roanoke, Virginia, Washington, DC and Baltimore, Maryland. Crestar's operations centers are located in Richmond and Glen Burnie, Maryland. 74 Form 10-K Cross-Reference Index Crestar Financial Corporation And Subsidiaries Part I Item I Business...............................................................................74 Guide 3 Disclosures............................18-19, 31-32, 32-38, 45-46, 50-53, 53, 76, 78-80 Item 2 Properties.........................................................................53, 74 Item 3 Legal Proceedings......................................................................67 Item 4 Submission of Matters to a Vote of Security Holders..................................None Part II Item 5 Market for the Registrant's Common Equity and Related Shareholder Matters..................................................57, 80, Back Cover Item 6 Selected Financial Data................................................................13 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations13-39 Item 8 Financial Statements and Supplementary Data Consolidated Financial Statements: Crestar Financial Corporation and Subsidiaries Consolidated Balance Sheets................................................................40 Consolidated Statements of Income..........................................................41 Consolidated Statements of Cash Flows......................................................42 Consolidated Statements of Changes in Shareholders' Equity.................................43 Notes to Consolidated Financial Statements................................................44-69 Independent Auditors' Report.................................................................70 Condensed Financial Information of Registrant.....................................56, 57, 64-65 Selected Quarterly Financial Data............................................................69 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None Part III Item 10 Directors(1) and Executive Officers of the Registrant...............................72, 73 Item 11 Executive Compensation1 Item 12 Security Ownership of Certain Beneficial Owners and Management1 Item 13 Certain Relationships and Related Transactions1 Part IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K: See Item 8 for a listing of all Financial Statements and Supplementary Data Reports on Form 8-K........................................................................None Exhibits(2) Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on February 27, 1998 by the undersigned, thereunto duly authorized. Crestar Financial Corporation, Registrant Linda F. Rigsby, Senior Vice President, Deputy General Counsel and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on February 27, 1998 by the following persons in the capacities indicated. Richard G. Tilghman, Chairman and Chief Executive Officer James M. Wells III, President and Chief Operating Officer Richard F. Katchuk, Corporate Executive Vice President and Chief Financial Officer James D. Barr, Group Executive Vice President, Controller and Treasurer A Majority Of The Directors Of The Registrant whose names appear on page 72. - -------------------------------------------------------------------------------- (1) This information is omitted pursuant to Instruction G of Form 10-K since the Registrant intends to file with the Commission a definitive Proxy Statement, pursuant to Regulation 14A, not later than 120 days after December 31, 1997. (2) A list of Exhibits was filed separately. Copies of any Exhibits not contained herein may be obtained by writing to Linda F. Rigsby, Secretary, Crestar Financial Corporation, 919 East Main Street, Richmond, VA 23261-6665. Note: Any information not included herein has been omitted because it is not applicable. 75 Supplemental Financial Information Crestar Financial Corporation And Subsidiaries Maturity And Rate Sensitivity Of Selected Loans December 31, 1997
In millions Maturity ------------------------------------------- within 1 year 1-5 years over 5 years Total Commercial $2,636.8 $1,269.2 $ 760.5 $4,666.5 Real estate - income property 246.6 717.7 289.8 1,254.1 Real estate - construction 259.8 93.1 28.5 381.4 - ----------------------------------------------------------------------------------------------------------- Total business loans 3,143.2 2,080.0 1,078.8 6,302.0 Less: Business loans with predetermined rates 406.7 1,344.9 697.5 2,449.1 - ----------------------------------------------------------------------------------------------------------- Business loans with adjustable rates $2,736.5 $ 735.1 $ 381.3 $3,852.9 ===========================================================================================================
Time Deposits $100,000 And Over December 31, 1997 In millions Maturity ------------------------------------------- 0-3 mos. 3-6 mos. 6-12 mos. over 1 yr. Total Certificates of deposit $100,000 and over $568.3 $176.1 $184.3 $ 3.4 $ 932.1 Domestic time deposits 64.3 60.7 65.8 81.4 272.2 - -------------------------------------------------------------------------------------------------------------- Total $632.6 $236.8 $250.1 $84.8 $1,204.3 ==============================================================================================================
Maximum Short-Term Borrowings
In thousands Maximum Outstanding At Any Month End ---------------------------------------------------------- 1997 1996 1995 Federal funds and term Federal funds purchased $2,384,698 $2,524,420 $1,723,928 Securities sold under repurchase agreements 1,053,634 1,008,946 1,140,666 Federal Home Loan Bank borrowings 938,500 640,000 484,200 Notes payable 294,537 218,212 177,300 U.S. Treasury demand notes and other 501,535 3,035 5,200 =============================================================================================================
Short-Term Borrowings--Average Balances And Rates ============================================================================================================= 1997 1996 1995 ----------------------- ----------------- ----------------- Dollars in thousands Amount Rate Amount Rate Amount Rate Federal funds and term Federal funds purchased $1,417,874 5.41% $1,474,463 5.38% $1,037,663 5.91% Securities sold under repurchase agreements 739,454 5.04 670,549 4.87 760,351 5.52 Federal Home Loan Bank borrowings 420,715 5.67 428,825 5.52 368,879 6.08 Notes payable 250,724 4.80 208,437 4.55 158,249 4.95 U.S. Treasury demand notes and other 167,899 5.34 3,201 6.56 2,206 3.26 - ------------------------------------------------------------------------------------------------------------- Total $2,996,666 5.30 $2,785,475 5.20 $2,327,348 5.75 =============================================================================================================
76 Consolidated Statements Of Income (Five Years) And Supplementary Data Crestar Financial Corporation And Subsidiaries
In thousands, except per share data Years Ended December 31, ----------------------------------------------------------------------- Income From Earning Assets 1997 1996 1995 1994 1993 Interest and fees on loans $1,228,108 $1,178,236 $1,181,048 $ 964,453 $ 827,512 Interest on securities held to maturity 43,088 61,770 129,242 136,747 201,578 Interest and dividends on securities available for sale 230,628 242,486 133,290 142,357 86,590 Income on money market investments 21,682 17,875 20,178 28,383 30,670 Interest on mortgage loans held for sale 52,078 63,012 28,145 28,854 29,531 - ----------------------------------------------------------------------------------------------------------- Total income from earning assets 1,575,584 1,563,379 1,491,903 1,300,794 1,175,881 - ----------------------------------------------------------------------------------------------------------- Interest Expense Interest-bearing demand deposits 176,488 171,109 180,600 152,539 136,840 Regular savings deposits 37,997 43,850 51,368 56,602 51,920 Domestic time deposits 212,480 259,971 257,418 193,254 192,845 Certificates of deposit $100,000 and over 51,501 27,843 3,915 2,600 2,043 - ----------------------------------------------------------------------------------------------------------- Total interest on deposits 478,466 502,773 493,301 404,995 383,648 Short-term borrowings 158,819 144,797 133,709 79,192 51,893 Long-term debt 62,001 49,499 50,038 38,756 33,056 - ----------------------------------------------------------------------------------------------------------- Total interest expense 699,286 697,069 677,048 522,943 468,597 - ----------------------------------------------------------------------------------------------------------- Net Interest Income 876,298 866,310 814,855 777,851 707,284 Provision for loan losses 108,097 95,890 66,265 36,509 63,325 - ----------------------------------------------------------------------------------------------------------- Net Credit Income 768,201 770,420 748,590 741,342 643,959 - ----------------------------------------------------------------------------------------------------------- Noninterest Income Service charges on deposit accounts 126,105 114,249 109,264 103,692 100,978 Trust and investment advisory income 74,421 65,939 59,841 54,963 56,797 Bank card-related income 41,972 52,088 49,935 41,161 28,841 Other income 173,613 97,516 103,095 97,034 82,493 Securities gains (losses) 5,328 3,393 (2,067) (10,766) 2,094 - ----------------------------------------------------------------------------------------------------------- Total noninterest income 421,439 333,185 320,068 286,084 271,203 - ---------------------------------------------------------------------------------------------------------------- Net Credit And Noninterest Income 1,189,640 1,103,605 1,068,658 1,027,426 915,162 - ----------------------------------------------------------------------------------------------------------- Noninterest Expense Personnel expense 390,646 397,448 388,542 372,590 324,623 Occupancy expense - net 60,016 64,450 62,851 63,290 56,374 Equipment expense 41,400 38,479 37,916 35,063 32,999 Other expense 222,195 279,969 228,890 227,035 236,415 - ----------------------------------------------------------------------------------------------------------- Total noninterest expense 714,257 780,346 718,199 697,978 650,411 - ----------------------------------------------------------------------------------------------------------- Income Before Income Taxes 475,383 323,259 350,459 329,448 264,751 Income tax expense 165,575 104,988 134,572 114,290 85,165 - ----------------------------------------------------------------------------------------------------------- Net Income $ 309,808 $ 218,271 $ 215,887 $ 215,158 $ 179,586 =========================================================================================================== Earnings Per Share Basic $ 2.80 $ 1.97 $ 1.95 $ 1.95 $ 1.62 Diluted 2.77 1.95 1.92 1.93 1.60 =========================================================================================================== Supplementary Data Average shares outstanding (000s): Basic 110,618 110,560 110,986 110,216 109,365 Diluted 111,929 112,037 112,432 111,643 110,836 ===========================================================================================================
77 Crestar Financial Corporation And Subsidiaries
1997 1996 ------------------------------- ----------------------------- Income(4)/ Yield/ Income(4)/ Yield/ Dollars in thousands Balance Expense Rate Balance Expense Rate ------------------------------- ----------------------------- Assets $ $ % $ $ % Securities held to maturity(2) 751,461 45,891 6.11 1,059,470 64,794 6.12 Securities available for sale(2) 3,647,675 230,628 6.32 3,862,323 242,486 6.28 Money market investments(2) 389,204 21,754 5.59 332,182 17,901 5.39 Mortgage loans held for sale(2) 684,078 52,078 7.61 835,770 63,012 7.54 - ----------------------------------------------------------------------------------------------------------- Commercial 3,956,699 318,382 8.05 3,717,001 301,360 8.11 Real estate - income property 1,263,125 112,051 8.87 1,258,762 110,281 8.76 Real estate - construction 337,562 30,287 8.97 353,868 33,486 9.46 Instalment 4,352,768 352,887 8.11 3,698,106 310,486 8.40 Bank card 1,216,651 170,160 13.99 1,529,341 190,954 12.49 Real estate - mortgage 3,263,832 252,620 7.74 3,072,474 238,564 7.76 - ----------------------------------------------------------------------------------------------------------- Total loans(2,3) 14,390,637 1,236,387 8.59 13,629,552 1,185,131 8.70 Allowance for loan losses (275,841) (274,460) - ----------------------------------------------------------------------------------------------------------- Loans - net 14,114,796 13,355,092 Cash and due from banks 872,711 922,638 Premises and equipment - net 460,414 418,394 Intangible assets - net 176,550 184,427 Foreclosed properties - net 29,111 36,735 Other assets 683,717 580,940 - ----------------------------------------------------------------------------------------------------------- Total Assets 21,809,717 21,587,971 ========== ========== Total Earning Assets 19,863,055 1,586,738 7.99 19,719,297 1,573,324 7.98 ========== ========= ==== ========== ========= ==== Liabilities And Shareholders' Equity Interest-bearing demand deposits 5,857,355 176,488 3.01 5,814,157 171,109 2.94 Regular savings deposits 1,537,660 37,997 2.47 1,689,981 43,850 2.59 Domestic time deposits 4,284,623 212,480 4.96 4,995,653 259,971 5.20 Certificates of deposit $100,000 and over 912,283 51,501 5.65 510,341 27,843 5.45 - ----------------------------------------------------------------------------------------------------------- Total savings and time deposits(2) 12,591,921 478,466 3.80 13,010,132 502,773 3.86 Demand deposits 3,147,020 3,038,032 - ----------------------------------------------------------------------------------------------------------- Total deposits 15,738,941 16,048,164 Short-term borrowings(2) 2,996,666 158,819 5.30 2,785,475 144,797 5.20 Long-term debt(2) 826,307 62,001 7.50 688,953 49,499 7.19 Other liabilities 365,907 288,636 - ----------------------------------------------------------------------------------------------------------- Total liabilities 19,927,821 19,811,228 - ----------------------------------------------------------------------------------------------------------- Preferred stock - - Common shareholders' equity 1,881,896 1,776,743 - ----------------------------------------------------------------------------------------------------------- Total shareholders' equity 1,881,896 1,776,743 - ----------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity 21,809,717 21,587,971 ========== ========== Total interest-bearing liabilities 16,414,894 699,286 4.26 16,484,560 697,069 4.23 Other sources-net 3,448,161 3,234,737 - ----------------------------------------------------------------------------------------------------------- Total Sources of Funds 19,863,055 699,286 3.52 19,719,297 697,069 3.54 ========== ======= ==== ========== ======= ==== Net Interest Spread 3.73 3.75 Net Interest Income/Margin 887,452 4.47 876,255 4.44 ===========================================================================================================
(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. 78
1995 1994 1993 - ------------------------------------- --------------------------------- ----------------------------------- Income(4)/ Yield/ Income(4)/ Yield/ Income(4)/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate - ---------------------------------- ----------------------------- -------------------------------- $ $ % $ $ % $ $ % 2,173,601 132,352 6.09 2,357,296 140,533 5.96 3,280,276 207,423 6.32 2,042,723 133,290 6.53 2,448,915 142,357 5.81 1,615,535 86,590 5.36 337,167 20,204 5.99 649,669 28,383 4.37 877,688 30,724 3.50 374,482 28,145 7.52 407,796 28,854 7.08 429,638 29,531 6.87 - --------------------------------------------------------------------------------------------------------------- 3,615,826 305,467 8.45 3,511,264 275,442 7.84 3,367,982 259,270 7.70 1,260,403 108,807 8.63 1,105,522 90,667 8.20 1,008,293 80,124 7.95 400,718 40,089 10.00 405,849 35,399 8.72 392,963 29,755 7.57 3,243,571 276,058 8.51 2,762,983 219,146 7.93 2,408,510 203,845 8.46 1,581,916 178,840 11.31 1,154,573 137,989 11.95 712,928 97,447 13.67 3,572,701 279,914 7.83 2,871,078 214,265 7.46 2,059,665 165,959 8.06 - --------------------------------------------------------------------------------------------------------------- 13,675,135 1,189,175 8.70 11,811,269 972,908 8.24 9,950,341 836,400 8.41 (271,024) (271,298) (256,999) - --------------------------------------------------------------------------------------------------------------- 13,404,111 11,539,971 9,693,342 944,423 897,363 864,769 413,353 400,504 373,835 161,123 110,815 75,416 40,464 62,524 104,244 544,309 505,255 509,481 - --------------------------------------------------------------------------------------------------------------- 20,435,756 19,380,108 17,824,224 ========== ========== ========== 18,603,108 1,503,166 8.08 17,674,945 1,313,035 7.43 16,153,478 1,190,668 7.37 ========== ========= ==== ========== ========= ==== ========== ========= ==== 5,690,529 180,600 3.17 5,720,111 152,539 2.67 5,313,313 136,840 2.58 1,863,640 51,368 2.76 2,101,876 56,602 2.69 1,794,233 51,920 2.89 4,949,176 257,418 5.20 4,510,528 193,254 4.28 4,254,935 192,845 4.53 72,665 3,915 5.39 58,671 2,600 4.43 46,650 2,043 4.38 - --------------------------------------------------------------------------------------------------------------- 12,576,010 493,301 3.92 12,391,186 404,995 3.27 11,409,131 383,648 3.36 2,855,475 2,754,656 2,574,752 - --------------------------------------------------------------------------------------------------------------- 15,431,485 15,145,842 13,983,883 2,327,348 133,709 5.75 1,841,998 79,192 4.30 1,670,436 51,893 3.11 695,537 50,038 7.19 588,269 38,756 6.59 463,691 33,056 7.13 264,728 242,678 231,257 - --------------------------------------------------------------------------------------------------------------- 18,719,098 17,818,787 16,349,267 - --------------------------------------------------------------------------------------------------------------- - - 43,890 1,716,658 1,561,321 1,431,067 - --------------------------------------------------------------------------------------------------------------- 1,716,658 1,561,321 1,474,957 - --------------------------------------------------------------------------------------------------------------- 20,435,756 19,380,108 17,824,224 ========== ========== ========== 15,598,895 677,048 4.34 14,821,453 522,943 3.53 13,543,258 468,597 3.46 3,004,213 2,853,492 2,610,220 - --------------------------------------------------------------------------------------------------------------- 18,603,108 677,048 3.64 17,674,945 522,943 2.96 16,153,478 468,597 2.90 ========== ======= ==== ========== ======= ==== ========== ======= ==== 3.74 3.90 3.91 826,118 4.44 790,092 4.47 722,071 4.47 ===============================================================================================================
(3) Nonaccrual loans are included in the average loan balances and income on such loans is recognized on a cash basis. (4) The tax-equivalent adjustment to net interest income was $11.2 million in 1997, $9.9 million in 1996, $11.3 million in 1995, $12.2 million in 1994 and $14.8 million in 1993. 79 Selected Ratios and Other Data Crestar Financial Corporation And Subsidiaries
Ratios 1997 1996 1995 1994 1993 Net interest margin(1) 4.47% 4.44% 4.44% 4.47% 4.47% Noninterest expense to: Net interest income(1) and noninterest income 54.57 64.52 62.66 64.86 65.48 Average assets 3.27 3.61 3.51 3.60 3.65 Average earning assets to average total assets 91.07 91.34 91.03 91.20 90.63 Net Income to: Average earning assets 1.56 1.11 1.16 1.22 1.11 Average assets 1.42 1.01 1.06 1.11 1.01 Average total equity 16.46 12.28 12.58 13.78 12.18 Average total equity to: Average loans 13.08 13.04 12.55 13.22 14.82 Average assets 8.63 8.23 8.40 8.06 8.28 Dividend payout ratio on common stock 31.09 60.93 40.31 35.68 33.90 Equity formation rate 11.34 4.80 7.51 8.86 7.95 Long-term debt at year end to: Total equity at year end 40.36 37.05 37.60 44.65 40.00 Total equity and long-term debt at year end 28.76 27.03 27.32 30.87 28.57 Net charge-offs to: Average total loans .69 .74 .48 .35 .75 Provision for loan losses 92.21 104.87 98.63 114.24 118.23 Allowance for loan losses to year-end loans 1.79 1.91 1.96 2.01 2.39 Nonperforming assets to year-end loans and foreclosed properties - net(2) .55 .77 .92 1.15 1.66 Net charge-offs earnings coverage 5.85x 4.17x 6.38x 8.77x 4.38x Average asset to equity leverage 11.59 12.15 11.90 12.41 12.08 ============================================================================================================== Other data Cash dividends paid per common share(3) $1.14 $1.005 $.875 $.765 $ .57 Number of average diluted shares (000s) 111,929 112,037 112,432 111,643 110,836 Market price of common stock: High $57 1/4 $37 3/4 $30 1/2 $24 7/8 $23 1/4 Low 33 5/8 26 3/16 18 1/2 18 1/16 17 9/16 Last 57 37 3/16 29 9/16 18 13/16 20 15/16 At year end: Book value per common share 18.49 16.20 16.12 14.57 13.72 Price/diluted earnings multiple 20.58x 19.07x 15.40x 9.75x 13.09x Dividend yield on common stock(3) 2.00% 2.70% 2.96% 4.07% 2.72% Number of common shareholders of record 21,954 21,771 21,047 20,004 20,091 Number of banking locations 566 508 480 483 446 Number of employees 8,712 9,199 8,944 9,657 9,126 Full-time equivalent employees 8,215 8,720 8,487 9,212 8,803 ==============================================================================================================
(1) Tax-equivalent basis (2) 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 (3) Dividends paid per common share represent historical dividends per common share paid by Crestar Financial Corporation; dividend yield on common stock is based on cash dividends paid during year 80 General Information Crestar Financial Corporation And Subsidiaries Corporate Headquarters Crestar Center 919 East Main Street, P.O. Box 26665 Richmond, Virginia 23261-6665 (804)782-5000 TELEX: 827420 Annual Meeting The 1998 Annual Meeting of Shareholders will be held at 10:00 a.m. on Friday, April 24, 1998 on the third floor of the new Crestar Riverview Center at 1001 Semmes Avenue in downtown Richmond, south of the James River. Common Stock Crestar's common stock is traded on the New York Stock Exchange where our symbol is CF. Dividends are customarily paid on the 21st of February, May, August and November. Quarterly Common Stock Prices And Dividends The high, low and last price of Crestar's common stock for each quarter of 1997 and 1996 and the dividends paid per share are shown below. Quarter Market Price Dividends --------------------- --------- Ended High Low Last Paid 1997 March 31 $38 3/4 $34 3/8 $34 5/8 $ .27 June 30 42 5/8 33 5/8 38 7/8 .29 September 30 49 3/16 39 1/4 46 7/8 .29 December 31 57 1/4 43 57 .29 - ------------------------------------------------------ 1996 March 31 $291 3/16 $26 1/2 $28 3/4 $.225 June 30 29 3/16 26 5/8 26 5/8 .26 September 30 30 11/16 26 3/16 29 1/2 .26 December 31 37 3/4 29 37 3/16 .26 ====================================================== On January 23, 1998, a quarterly dividend on common stock of $.29 per share was declared. Financial Information To obtain financial information on Crestar, contact Eugene S. Putnam, Jr., Senior Vice President-Investor Relations and Corporate Finance, at the Corporate Headquarters, (804)782-5619. For electronic access, see the "Investor's Information" section on Crestar's Internet home page at http://www.crestar.com. Corporate Publications Crestar's Annual Report and Form 10-K, Form 10-Qs and other corporate publications are available on request by writing or calling our Investor Relations Department at the Corporate Headquarters, (804)782-7152. The Securities and Exchange Commission (SEC) maintains a web site which contains reports, proxy and information statements pertaining to registrants which file electronically with the SEC, including Crestar. The SEC's web site address is http://www.sec.gov. This information is also available through Crestar's home page at http://www.crestar.com. Shareholder Information If you have questions about a specific stock ownership account, write or call our Investor Relations Department at the Corporate Headquarters, (804)782-7933. For electronic access, see the "Investor's Information" section on Crestar's Internet home page at http://www.crestar.com. Dividend Reinvestment And Stock Purchase Plan Shareholders of common stock receive a 5% discount from market price when they reinvest their Crestar dividends in additional shares. Shareholders participating in the Plan can also make optional cash purchases of common stock at market price and pay no brokerage commissions. To obtain our Plan prospectus and enrollment card, write or call our Investor Relations Department at the Corporate Headquarters, (804)782-7933. Cash Dividend Direct Deposit Shareholders may elect to have their Crestar dividends directly deposited to a checking, savings or money market account. This service provides a convenient and safe method of receiving dividends and is offered at no cost to shareholders. To obtain additional information and an enrollment form, write or call our Investor Relations Department at the Corporate Headquarters, (804)782-7933. (logo) This annual report is printed on recycled paper. Exhibits The following exhibits are filed with this form or are incorporated by reference in response to Item 14(c). Those exhibits not included herein are not applicable or the required information is shown in the Consolidated Financial Statements or the notes thereto. 3(a) Restated Articles of Incorporation (filed as Exhibit 3(a) to Registrant's 1996 Form 10-K and incorporated by reference herein). 3(b) Bylaws as amended through December 19, 1997 (filed herewith). 4(a) Indenture dated as of September 1, 1993 for subordinated debt securities (filed as Exhibit 4.1 to Registration Statement No. 33-50387 and incorporated by reference herein). Pursuant to this indenture, a series of $150,000,000 of 8 3/4% subordinated Notes due 2004 have been issued, the terms of which are described in 4(g) below. 4(b) Indenture dated as of February 1, 1985 for subordinated debt securities (filed as Exhibit 4(c) to Registrant's 1985 Form 10-K and incorporated by reference herein). Pursuant to this Indenture, a series of $50,000,000 of 8 5/8% Subordinated Notes Due 1998 and a series of $125,000,000 of 8 1/4% Subordinated Notes Due 2002 have been issued, the terms of which are described in 4(c) and 4(e) below. 4(c) First Supplemental Indenture dated as of March 1, 1986 covering $50,000,000 of 8 5/8% Subordinated Notes due 1998 (filed as Exhibit 4(b) to Registration Statement No. 33-4332 and incorporated by reference herein). 4(d) Second Supplemental Indenture dated as of September 1, 1986 (filed as Exhibit 4.1 to Registrant's Form 8-K current report dated July 16, 1992 and incorporated by reference herein). 4(e) Third Supplemental Indenture dated as of July 1, 1992 covering $125,000,000 of 8 1/4% Subordinated Notes Due 2002 (filed as Exhibit 4(c) to Registrant's 1992 Form 10-K and incorporated by reference herein). 4(f) Rights Agreement dated June 23, 1989, between the Registrant and Mellon Bank, NA, as Rights Agent (filed as Exhibit 4.1 to the Registrant's Form 8-K current report dated June 23, 1989, and incorporated by reference herein). 4(g) Board of Directors Resolutions approving issuance of $150,000,000 of 8 3/4% Subordinated Notes due 2004 (filed as Exhibit 4(g) to Registrant's 1994 Form 10-K and incorporated by reference herein). 4(h) First Supplemental Indenture dated as of January 1, 1998, to Indenture dated as of September 1, 1993, referred to in 4(a) above, pursuant to which Registrant issued $150,000,000 principal amount of 6 1/2% Putable/Callable Subordinated Notes due January 15, 2018 (filed as an exhibit to Registrant's report on Form 8-K dated January 30, 1998 and incorporated by reference herein). 4(i) Indenture of Crestar Financial Corporation, with the Chase Manhattan Bank as Trustee, relating to Registrant's 8.16% Junior Subordinated Deferrable Interest Debentures due December 15, 2026, issued to Crestar Capital Trust I in exchange for the proceeds from Crestar Capital Trust I's issuance of its 8.16% Capital Securities (filed as Exhibit 4.1, to Registration Statement on Form S-4, No. 323-27333 and incorporated herein by reference). 4(j) First Supplemental Indenture of Crestar Financial Corporation, with the Chase Manhattan Bank as Trustee, relating to the Junior Subordinated Debentures referred to in Exhibit 4(i) above (filed as Exhibit 4.2 to Registration Statement on Form S-4, No. 333-27333 and incorporated herein by reference). 10(a) Management Incentive Compensation Plan of Crestar Financial Corporation (filed as Exhibit 10(b) to Registrant's 1989 Form 10-K and incorporated by reference herein). 10(b) Crestar Financial Corporation Executive Life Insurance Plan as amended and restated effective January 1, 1991 (filed as Exhibit 10(d) to Registrant's 1993 Form 10-K and incorporated by reference herein). 10(c) Crestar Financial Corporation Executive Welfare Plan (filed as Exhibit 10(d) to Registrant's 1990 Form 10-K and incorporated by reference herein). 10(d) Amendments (effective December 18, 1992) to Crestar Financial Corporation Executive Welfare Plan (filed as Exhibit 10(e) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(e) 1981 Stock Option Plan of Crestar Financial Corporation and Affiliated Corporations as amended through January 25, 1991 (filed as Exhibit 10(e) to Registrant's 1991 Form 10-K and incorporated by reference herein). 10(f) Severance Agreement between the Corporation and Richard G. Tilghman dated February 23, 1996 (filed as Exhibit 10(g) to Registrant's 1995 Form 10-K and incorporated by reference herein). Changes approved by Board of Directors on December 19, 1997: amended Agreement will be filed after it has been executed. 10(g) Severance Agreement between the Corporation and James M. Wells III dated February 23, 1996 (filed as Exhibit 10(h) to Registrant's 1995 Form 10-K and incorporated by reference herein). Changes approved by Board of Directors on December 19, 1997: amended Agreement will be filed after it has been executed. 10(h) Severance Agreement between the Corporation and O. H. Parrish, Jr. dated February 23, 1996 (filed as Exhibit 10(i) to Registrant's 1995 Form 10-K and incorporated by reference herein). Changes approved by Board of Directors on December 19, 1997: amended Agreement will be filed after it has been executed. 10(i) Severance Agreement between the Corporation and C. Garland Hagen dated February 23, 1996 (filed as Exhibit 10(k) to Registrant's 1995 Form 10-K and incorporated by reference herein). Changes approved by Board of Directors on December 19, 1997: amended Agreement will be filed after it has been executed. 10(j) Severance Agreement between the Corporation and Richard C. Katchuk dated February 23, 1996 (filed as exhibit 10(l) to Registrant's 1996 Form 10-K and incorporated by reference herein). Changes approved by Board of Directors on December 19, 1997: amended Agreement will be filed after it has been executed. 10(k) Crestar Financial Corporation Executive Severance Plan, as amended and restated effective February 23, 1996 (filed as Exhibit 10(l) to Registrant's 1995 Form 10-K and incorporated by reference herein). Changes approved by Board of Directors on December 19, 1997: amendments will be filed after they are prepared. 10(l) Crestar Financial Corporation Excess Benefit Plan (filed as Exhibit 10(k) to Registrant's 1990 Form 10-K and incorporated by reference herein). 10(m) Amendments (effective December 18, 1992) to Crestar Financial Corporation Excess Benefit Plan (filed as Exhibit 10(m) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(n) United Virginia Bankshares Incorporated Deferred Compensation Program under Incentive Compensation Plan of United Virginia Bankshares Incorporated and Affiliated Corporations (filed as Exhibit 10(m) to Registrant's 1988 Form 10-K and incorporated by reference herein). 10(o) Amendment (effective 1/1/87) to United Virginia Bankshares Incorporated Deferred Compensation Program Under Incentive Compensation Plan of United Virginia Bankshares Incorporated and Affiliated Corporations (filed as Exhibit 10(p) to Registrant's 1995 Form 10-K and incorporated by reference herein). 10(p) Amendments (effective 1/1/87 and 1/1/88) to United Virginia Bankshares Incorporated Deferred Compensation Program Under Incentive Compensation Plan of United Virginia Bankshares Incorporated and Affiliated Corporations (filed as Exhibit 10(q) to Registrant's 1995 Form 10-K and incorporated by reference herein). 10(q) Amendment (effective 1/1/94) to Crestar Financial Corporation Deferred Compensation Program Under Incentive Compensation Plan of Crestar Financial Corporation and Affiliated Corporations (filed as Exhibit 10(r) to Registrant's 1995 Form 10-K and incorporated by reference herein). 10(r) Crestar Financial Corporation Deferred Compensation Plan for Outside Directors of Crestar Financial Corporation and Crestar Bank (filed as Exhibit 10(n) to Registrant's 1988 10-K and incorporated by reference herein). 10(s) Amendments (effective April 24, 1991) to Crestar Financial Corporation Deferred Compensation Plan for Outside Directors of Crestar Financial Corporation and Crestar Bank (filed as Exhibit 10(p) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(t) Crestar Financial Corporation Additional Nonqualified Executive Plan (filed as Exhibit 10(n) to Registrant's 1990 Form 10-K and incorporated by reference herein). 10(u) Amendments (effective December 18, 1992) to Crestar Financial Corporation Additional Nonqualified Executive Plan (filed as Exhibit 10(r) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(v) Crestar Financial Corporation Benefit Assurance Plan (filed as Exhibit 10(p) to Registrant's 1990 Form 10-K and incorporated by reference herein). 10(w) Amendments (effective December 18, 1992) to Crestar Financial Corporation Benefit Assurance Plan (filed as Exhibit 10(v) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(x) Crestar Financial Corporation Supplemental Benefit Plan (filed as Exhibit 10(q) to Registrant's 1990 Form 10-K and incorporated by reference herein). 10(y) Amendments (effective December 18, 1992) to Crestar Financial Corporation Supplemental Benefit Plan (filed as Exhibit 10(x) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(z) Deferred Compensation Plan for Selected Employees of United Virginia Bankshares Incorporated and Affiliated Corporations (filed as Exhibit 10(r) to Registrant's 1990 Form 10-K and incorporated by reference herein). 10(aa) Amendment (effective January 1, 1987) to Deferred Compensation Plan for Selected Employees of United Virginia Bankshares Incorporated and Affiliated Corporations (filed as Exhibit 10(z) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(ab) Amendments (effective 1/1/87 and 1/1/88) to Deferred Compensation Plan for Selected Employees of United Virginia Bankshares Incorporated and Affiliated Corporations (filed as Exhibit 10(ac) to Registrant's 1995 Form 10-K and incorporated by reference herein). 10(ac) Amendment (effective 1/1/94) to Deferred Compensation Plan for Selected Employees of Crestar Financial Corporation and Affiliated Corporations (filed as Exhibit 10(ac) to Registrant's 1995 Form 10-K and incorporated by reference herein). 10(ad) Crestar Financial Corporation Premium Assurance Plan (filed as Exhibit 10(s) to Registrant's 1991 Form 10-K and incorporated by reference herein). 10(ae) Amendments (effective December 18, 1992) to Crestar Financial Corporation Premium Assurance Plan (filed as Exhibit 10(ab) to Registrant's 1992 Form 10-K and incorporated by reference herein). 10(af) Crestar Financial Corporation 1993 Stock Incentive Plan as amended and restated effective February 28, 1997 (filed herewith). This supersedes the prior version of this plan filed as Exhibit 10(ad) to Registrant's 1993 Form 10-K. 10(ag) Amendments (effective December 20, 1996) to the Crestar Financial Corporation Supplemental Executive Retirement Plan (filed as Exhibit 10(aj) to Registrant's 1996 Form 10-K and incorporated by reference herein). 10(ah) Crestar Financial Corporation Directors' Stock Compensation Plan (filed as Exhibit 10(ae) to Registrant's 1993 Form 10-K and incorporated by reference herein). 10(ai) Crestar Financial Corporation Temporary Executive Benefit Plan as amended through December 18, 1992 (filed as Exhibit 10(af) to Registrant's 1993 Form 10-K and incorporated by reference herein). 10(aj) Crestar Financial Corporation Permanent Executive Benefit Plan as amended through December 18, 1992 (filed as Exhibit 10(ag) to Registrant's 1993 Form 10-K and incorporated by reference herein). 10(ak) Crestar Financial Corporation Supplemental Executive Retirement Plan, effective January 1, 1995 (filed as Exhibit 10(al) to Registrant's 1995 Form 10-K and incorporated by reference herein). 10(al) Amendments (effective December 19, 1997) to Crestar Financial Corporation Supplemental Executive Retirement Plan (filed herewith). 10(am) Crestar Financial Corporation Directors' Equity Program, effective January 1, 1996 (filed as Exhibit 10(ao) to Registrant's 1996 Form 10-K and incorporated by reference herein). 10(an) Amendment (effective December 20, 1996) to Crestar Financial Corporation Directors' Equity Program (filed as Exhibit 10(ap) to Registrant's 1996 Form 10-K and incorporated by reference herein). 10(ao) Amendment (effective September 26, 1997) to Crestar Financial Corporation Directors' Equity Program (filed herewith). 10(ap) Crestar Financial Corporation Crestar/Citizens Stock Option Plan (filed as Exhibit 10(aq) to Registrant's 1996 Form 10-K and incorporated by reference herein). 10(aq) Citizens Bank of Maryland Unfunded Compensation Master Plan (filed as Exhibit 10(ar) to Registrant's 1996 Form 10-K and incorporated by reference herein). 10(ar) Employment and Severance Agreement between the Corporation (as successor to Citizens Bancorp) and Jeffrey R. Springer dated September 23, 1987 with Amendment No. 1 dated October 18, 1989, Amendment No. 2 dated December 15, 1993 and Correction to Amendment No. 2 dated June 19, 1996 (filed as Exhibit 10(as) to Registrant's 1996 Form 10-K and incorporated by reference herein). 21 Subsidiaries (filed herewith). 23(a) Consent of KPMG Peat Marwick LLP (filed herewith). 23(b) Consent of Deloitte & Touche LLP (filed herewith). 27 Financial Data Schedule (filed herewith). 99(a) Independent Auditor's Report for Consolidated Financial Statements of Citizens Bancorp and Subsidiaries, dated January 16, 1997 (filed as Exhibit 99(a) to Registrant's 1996 Form 10-K and incorporated by reference herein). 99(b) Crestar Bank, Consolidated Reports of Condition and Income for A Bank With Domestic and Foreign Offices, Federal Financial Institutions Examination Council Report 031 (FFEIC 031), as of December 31, 1997 (filed herewith). Note: All Item 10 documents represent Executive Compensation Plans or Arrangements, or Amendments thereto. EX-3 2 EXHIBIT 3(B) BYLAWS OF CRESTAR FINANCIAL CORPORATION Incorporated Under The Laws Of The Commonwealth Of Virginia Adopted December 20, 1979 (And Including Amendments Adopted Thereto Through December 19, 1997) INDEX TO BYLAWS OF CRESTAR FINANCIAL CORPORATION Article I - Meetings Of Stockholders 1.1 - Place of Meetings......................................1 1.2 - Annual Meetings........................................1 1.3 - Special Meetings.......................................1 1.4 - Notice of Meetings.....................................1 1.5 - Quorum.................................................1 1.6 - Voting.................................................1 1.7 - Conduct of Meetings....................................2 1.8 - Inspectors.............................................3 Article II - Board Of Directors 2.1 - General Powers.........................................3 2.2 - Number of Directors....................................3 2.3 - Quorum.................................................3 2.4. - Vacancy................................................3 2.5 - Term of Office.........................................3 2.6 - Meetings of the Board..................................3 2.7 - Compensation...........................................4 2.8 - Eligibility............................................4 Article III - Committees 3.1 - Standing Committees....................................5 3.2 - Executive Committee....................................6 3.3 - Audit Committee........................................6 3.4 - Human Resources and Compensation Committee.............7 3.5 - Nominating & Governance Committee......................7 3.6 - Other Committees.......................................7 Article IV - Officers 4.1 - Number and Manner of Election or Appointment...........8 4.2 - Term of Office.........................................8 4.3 - Removal................................................8 4.4 - Resignations...........................................8 4.5 - Vacancies, New Offices and Promotions..................8 4.6 - Chairman of the Board..................................9 4.7 - President..............................................9 Article IV - Officers (Continued) 4.8 - Corporate Secretary....................................9 4.9 - Treasurer..............................................9 4.10 - Auditor................................................9 4.11 - Powers and Duties of Other Officers...................10 4.12 - Deposit Accounts......................................10 4.13 - Securities Accounts...................................10 Article V - Capital Stock 5.1 - Certificates..........................................10 5.2 - Lost, Destroyed and Mutilated Certificates............11 5.3 - Transfer of Stock.....................................11 5.4 - Closing of Transfer Books and Fixing Record Date......11 Article VI - Emergency Bylaws 6.1 - Effect................................................11 6.2 - Meetings During Emergency.............................12 6.3 - Officer Successorship.................................12 6.4 - Principal Office......................................12 6.5 - Liability.............................................12 6.6 - Amendments............................................12 Article VII - Indemnification Of Directors And Officers 7.1 - Extent of Indemnification.............................13 7.2 - Insurance.............................................13 7.3 - Change in Board Composition...........................13 7.4 - Miscellaneous.........................................14 Article VIII - Miscellaneous Provisions 8.1 - Seal..................................................14 8.2 - Voting of Stock Held..................................14 8.3 - Fiscal Year...........................................14 8.4 - Checks, Notes and Drafts..............................14 8.5 - Control Share Acquisitions............................15 8.6 - Amendments............................................15 CRESTAR FINANCIAL CORPORATION BYLAWS Article I Meeting Of Stockholders 1.1 Place of Meetings. All meetings of the stockholders shall be held at such place, either within or without the State of Virginia, as may be designated by the Board of Directors. 1.2 Annual Meetings. The annual meeting of stockholders, for the election of Directors and transaction of such other business as may come before the meeting, shall be held at such time and date as designated by the Board of Directors. 1.3 Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, by the President, or by a majority of the Board of Directors. No business shall be transacted and no corporate action shall be taken at a special meeting other than that stated in the notice of the meeting. 1.4 Notice of Meetings. Unless waived in the manner prescribed by law, notice of each meeting of stockholders shall be given in writing, not less than ten nor more than sixty days before the day of the meeting, or such other notice as is required by law, to each stockholder entitled to vote at such meeting and shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. If mailed, such notice shall be deemed to have been given when deposited in the United States mail, with postage thereon prepaid, directed to the stockholder at his address as it appears on the stock transfer books of the Corporation. 1.5 Quorum. Any number of stockholders together holding a majority of outstanding shares of capital stock entitled to vote with respect to the business to be transacted, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If less than a quorum shall be in attendance at the time for which a meeting shall have been called, the meeting may be adjourned from time to time by a majority of the stockholders present or represented by proxy without notice other than by announcement at the meeting until a quorum shall attend. 1.6 Voting. At any meeting of the stockholders, each stockholder of a class entitled to vote on any matter coming before the meeting shall, as to such matter, have one vote, in person or by proxy, for each share of capital stock of such class standing in his or her name on the stock transfer books of the Corporation on that date, not more than seventy days prior to such meeting, as designated by the Board of Directors, for the purpose of determining stockholders entitled to vote, as the date on which the stock transfer books of the Corporation are to be closed or as the record date. Every proxy shall be in writing and signed by the stockholder entitled to vote or signed by his or her duly authorized attorney in fact. At a meeting where a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote shall be the act of the stockholders. -1- 1.7 Conduct of Meetings. At each meeting of the stockholders, the Chairman of the Board or the President shall act as chairman and preside. In their absence, the Chairman of the Board may designate another officer of the Corporation who need not be a Director to preside. The Corporate Secretary of the Corporation or an Assistant Corporate Secretary, or in their absence, a person whom the chairman of such meeting shall appoint, shall act as corporate secretary of such meeting. At any meeting of stockholders of the Corporation, only that business that is properly brought before the meeting may be presented to and acted upon by stockholders. To be properly brought before the meeting, business must be brought (a) by or at the direction of the Board of Directors or (b) by a stockholder who has given written notice of business he or she expects to bring before the meeting to the Corporate Secretary of the Corporation not less than sixty nor more than ninety days prior to the anniversary date of the immediately preceding Annual Meeting. If mailed, such notice shall be sent by certified mail, return receipt requested, and shall be deemed to have been given when received by the Corporate Secretary of the Corporation. A stockholder's notice to the Corporate Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation's stock beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. No business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in this Section 1.7. The chairman of a meeting of stockholders shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.7. Any such business not properly brought before the meeting shall not be transacted. Any nomination for Director made by a stockholder must be made in writing to the Corporate Secretary of the Corporation not less than sixty nor more than ninety days prior to the anniversary date of the immediately preceding Annual Meeting. If mailed, such notice shall be sent by certified mail, return receipt requested, and shall be deemed to have been given when received by the Corporate Secretary of the Corporation. A stockholder's nomination for Director shall set forth (a) the name and business address of the stockholder's nominee, (b) the fact that the nominee has consented to his or her name being placed in nomination, (c) the name and address, as they appear on the Corporation's books, of the stockholder making the nomination, (d) the class and number of shares of the Corporation's stock beneficially owned by the stockholder, and (e) any material interest of the stockholder in the proposed nomination. The chairman of a meeting of stockholders shall, if the facts warrant, determine and declare to the meeting that a director nomination was not properly brought before the meeting in accordance with the provisions of this Section 1.7. Any such nomination not properly brought before the meeting shall not be considered. -2- Notwithstanding compliance with this Section 1.7, the chairman of a meeting of stockholders may rule out of order any business brought before the meeting that is not a proper matter for stockholder consideration. This Section 1.7 shall not limit the right of stockholders to speak at meetings of stockholders on matters germane to the Corporation's business, subject to any rules for the orderly conduct of the meeting imposed by the Chairman of the meeting. The Corporation shall not have any obligation to communicate with stockholders regarding any business or Director nomination submitted by a stockholder in accordance with this Section 1.7 unless otherwise required by law. 1.8 Inspectors. An appropriate number of inspectors for any meeting of stockholders may be appointed by the chairman of such meeting. Inspectors so appointed will open and close the polls, will receive and take charge of proxies and ballots, and will decide all questions as to the qualifications of voters, validity of proxies and ballots, and the number of votes properly cast. Article II Board Of Directors 2.1 General Powers. The business and affairs of the Corporation shall be managed by the Board of Directors and, except as otherwise expressly provided by law, in accordance with the Articles of Incorporation or these Bylaws. 2.2 Number of Directors. The Board of Directors shall consist of not less than five nor more than twenty-six Directors, the exact number to be designated by the Board. 2.3 Quorum. A majority of the number of Directors pursuant to these Bylaws at the time of the meeting shall constitute a quorum for the transaction of business. The act of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Less than a quorum may adjourn any meeting. 2.4 Vacancy. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of the majority of the remaining Directors, though less than a quorum of the Board, unless the vacancy is sooner filled by the stockholders. 2.5 Term of Office. Each Director, unless he or she dies, resigns or is removed from office, shall hold office until his or her term expires. 2.6 Meetings of the Board. (a) Place of Meetings. Meetings of the Board of Directors shall be held at such place and at such time, either within or without the State of Virginia, as may be designated by the Board, or upon call of the Chairman of the Board or the President. (b) Organizational Meeting. An organizational meeting shall be held as soon as practicable after the adjournment of the annual meeting of stockholders at which the Board of Directors is elected, for the purpose of electing officers, appointing committees for the ensuing year, and for transacting such other business as may properly come before the meeting. -3- (c) Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place as the Board may designate, and no notice thereof need be given. (d) Special Meetings. Special meetings of the Board of Directors may be held at any time or place upon the call of the Chairman of the Board or the President, or any three members of the Board. Notice of each such meeting shall be given to each Director by mail at his business or residence address at least forty-eight hours before the meeting, or by telephone or facsimile notice to him or her at least twenty-fours hours before the meeting. Meetings may be held at any time without notice if all of the Directors are present, or if those not present waive notice in writing either before or after the meeting. The notice of meetings of the Board need not state the purpose of the meeting. (e) Conduct of Meetings. At each meeting of the Board of Directors, the Chairman of the Board or the President shall act as chairman and preside. In their absence, the Chairman of the Board may designate another officer of the Corporation, who need not be a Director, to preside. The Corporate Secretary of the Corporation or an Assistant Corporate Secretary, or in their absence, a person whom the chairman of such meeting shall appoint, shall act as corporate secretary of such meeting. Any action required or permitted to be taken by the Board may be taken without a meeting if all Directors consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents of the Directors shall be filed with the minutes of the proceedings of the Board meeting. 2.7 Compensation. Directors, and members of any committee of the Board who are not officers of the Corporation or subsidiaries thereof, shall be paid such compensation as the Board of Directors from time to time may determine for his or her services as Director, or as chairman or a member of any committee of the Board, and shall, in addition, be reimbursed for such expenses as shall be incurred by the Director in the performance of his or her duties. Nothing herein shall preclude Directors and members of any committee of the Board from serving the Corporation in other capacities and receiving compensation therefor. 2.8 Eligibility. No Director shall be eligible for election after he or she attains the age of sixty-five. Upon reaching the age of sixty-five or when a Director's responsibilities in his or her business or profession terminate or are reduced, the Director shall submit to the Nominating & Governance Committee a letter offering to resign from the Board, and the Committee will recommend to the Board the action to be taken on the letter, based upon the Board's Guiding Principles of Corporate Governance. Any Director age sixty-three or over at the time of the adoption of this provision may serve until his or her present term of office expires. Except for the Chief Executive Officer, no Director who is an officer of the Corporation or any subsidiary shall be eligible for reelection after he or she has retired. -4- Article III Committees 3.1 Standing Committees. (a) Number. There shall be four standing committees of the Board of Directors which shall be comprised only of Directors. The standing committees are as follows: Executive, Audit, Human Resources & Compensation, and Nominating & Governance Committee. In order to broaden the experience of Directors, it shall be the policy of the Corporation to seek rotation among Directors as members of various committees. At the first meeting of the Board of Directors after the annual meeting of the stockholders, the Chairman of the Board shall recommend the membership of each committee and the Board shall elect the membership of each committee, who shall serve at the pleasure of the Board. (b) Quorum. A majority of the number of members of any standing committee shall constitute a quorum for the transaction of business. The action of a majority of members present at a committee meeting at which a quorum is present shall constitute the act of the committee. (c) Conduct of Meetings. Any action required or permitted to be taken by the committee may be taken without a meeting if all members of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and written consents of the members shall be filed with the minutes of the proceedings of the committee. (d) Meetings and Minutes. Subject to the foregoing, and unless the Board shall otherwise decide, each committee shall fix its rules of procedure, determine its action and fix the time and place of its meetings. Special meetings of a committee may be held at anytime upon the call of the Chairman of the Board, the chairman of the committee, or any two members of the committee. Each committee shall keep minutes of all meetings which shall be at all times available to Directors. Action taken by a committee shall be reported promptly to the Board but not less frequently than quarterly. (e) Term of Office. A member of any standing committee shall hold office until the next organizational meeting of the Board of Directors or until he or she is removed or ceases to be a Director. (f) Vacancies. Should a vacancy occur on any standing committee resulting from any cause whatsoever, the Board, by resolution, may fill such vacancy at any time. (g) Resignation and Removal. A member of a standing committee may resign at any time by giving written notice of his or her intention to do so to the Chairman of the Board or the Corporate Secretary of the Corporation, and may be removed at any time by the Board of Directors. -5- 3.2 Executive Committee. (a) How Constituted. The Executive Committee shall consist of not less than five nor more than nine Directors, including the Chairman of the Board, who shall be Chairman of the Committee, and the President. If the Chairman of the Board will not be present at a meeting, the President shall preside, and if the President will not be present, the Chairman may designate another officer of the Corporation, who need not be a member of the Committee or a Director, to preside at the meeting. (b) Primary Responsibilities. The primary responsibilities of the Executive Committee shall consist of: exercise of all powers of the Board of Directors between meetings of the Board except as to matters exclusively reserved to the Board under law; annual review of management's financial goals and business plan; service as the Board's steering committee on capital, liquidity and asset/liability, as well as the Board's advisor on mergers and acquisitions and corporate structure matters; review and recommendation to the Board of the annual capital budget and authorization of capital expenditures within a level established by the Board; supervision over the exercise of fiduciary powers; oversight over the Corporation's contributions policy, approval of the annual contributions budget and authorization or recommendation to the Board of larger individual contributions as specified by the Board. 3.3 Audit Committee. (a) How Constituted. The Audit Committee shall consist of not less than five nor more than nine Directors, none of whom shall be officers of the Corporation or any subsidiary thereof. The Chairman of the Committee shall be appointed by the Board of Directors upon recommendation of the Chairman of the Board. If the Chairman of the Committee will not be present at a meeting, he or she may designate any member of the Committee to preside at the meeting. (b) Primary Responsibilities. The primary responsibilities of the Audit Committee shall consist of: recommendation of the selection of independent accountants and auditors; review of the scope of the accountant's examination and approval of any non-audit services to be performed by the independent accountants; review of examination reports by the independent accountants and regulatory agencies; approval of, and review of the results of, the internal audit plan; review of credit issues, loan policies and procedures, the quarterly classification of loans and the adequacy of the allowance for loan losses; monitoring of the credit process review function; review of Crestar's Community Reinvestment Act policy, plans and performance; review of internal programs to assure compliance with laws and regulations and the adequacy of internal controls; review of the adequacy of insurance coverage; and approve amendments to, and review employees' and Directors' compliance with the Standards of Conduct. -6- 3.4 Human Resources & Compensation Committee. (a) How Constituted. The Human Resources & Compensation Committee shall consist of not less than four nor more than eight Directors, none of whom shall be officers of the Corporation or any subsidiary thereof. The Chairman of the Committee shall be appointed by the Board of Directors upon recommendation of the Chairman of the Board. If the Chairman of the Committee will not be present at a meeting, he or she may designate any member of the Committee to preside at the meeting. (b) Primary Responsibilities. The primary responsibilities of the Human Resources & Compensation Committee shall consist of: review and approval of major compensation policies; determination of appropriate performance targets under the Corporation's benefit plans; recommendation to the Board of salaries, and approval of other compensation to be paid or awarded to the highest level and most highly paid officers; recommendation of officers requiring Board approval and recommendation of any titling changes and management succession involving the top five officers of the Corporation; review of other matters pertaining to management structure, succession planning and executive development; review and recommendation for Board approval of new and significant changes to qualified and nonqualified benefit plans; and recommendation for Board approval of appropriate changes in Director compensation. 3.5 Nominating & Governance Committee (a) How Constituted. The Nominating & Governance Committee shall consist of not less than three nor more than five Directors, none of whom shall have served as an officer of the Corporation or any subsidiary thereof within the calendar year of appointment or the calendar year immediately preceding the year of appointment. The Chairman of the Committee shall be appointed by the Board of Directors upon recommendation of the Chairman of the Board. If the Chairman of the Committee will not be present at a meeting, he or she may designate any member of the Committee to preside at the meeting. (b) Primary Responsibilities. The primary responsibilities of the Nominating & Governance Committee shall consist of: interpreting the Bylaws whenever a member's change in circumstance, such as illness, retirement or modification of primary employment, may impact eligibility for continued Board service; recommending changes to eligibility requirements as needed to ensure that the Board consists of highly-qualified persons who can provide constructive input into the business of the Corporation and represent a cross section of Crestar constituencies; conducting a comprehensive study of board governance practices of similarly-situated corporations and recommending adoption of Crestar corporate governance guidelines as appropriate; monitoring effectiveness of such guidelines and implementing modification as needed; and establishing and implementing a nomination process to identify and recommend Board nominees as appropriate. 3.6 Other Committees. The Board of Directors may, by resolution, establish such other standing committees of the Board as it may deem advisable. The members, terms and authority of such committees shall be set forth in the resolutions. -7- The Chairman of the Board may establish such other special committees of the Board of Directors as he deems advisable, and may appoint the members of such committees. Any such committees shall have the authority to consider, review, advise and recommend to the Chairman of the Board with respect to such matters as may be referred to it by the Chairman of the Board, but shall have no authority to act for the Corporation except with the prior approval of the Board of Directors. Article IV Officers 4.1 Number and Manner of Election or Appointment. The officers of the Corporation shall be: (a) The Chairman of the Board, the President, a Corporate Secretary, a Treasurer, an Auditor, one or more Regional Presidents, and one or more Corporate Group Executive Vice Presidents, each of whom shall be elected by the Board. (b) Such other officers as the Chairman of the Board or President may deem necessary, each of whom shall be appointed by the Chairman of the Board or President or their designees. One person may hold more than one office except that the offices of the President and Corporate Secretary may not be held by the same person. 4.2 Term of Office. The officers designated in Section 4.1(a) shall be elected annually by the Board at its organizational meeting. Such officers shall each hold office until the next organizational meeting of the Board or until their successors are elected. The officers designated in Section 4.1(b) may be appointed at any time by the Chairman of the Board or the President or their designees. 4.3 Removal. Any officer may be removed from office, with or without cause, at any time, by the Board of Directors. Any officer appointed by the Chairman of the Board or the President, or their designee, may be removed from office by any of such appointing officers with or without cause at any time. 4.4 Resignations. Any officer may resign at any time by giving written notice to the Board, Human Resources and Compensation, Chairman of the Board, President, or the Corporate Secretary. Such resignation shall be effective on the date of receipt of such notice or any later date specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 4.5 Vacancies, New Offices and Promotions. A vacancy from any cause in any office may be filled at any time for the unexpired portion of the term, in the manner prescribed in these Bylaws for regular election to such office. New offices may be created and filled, and the promotions and changes in officers' titles may be made at any time in the manner prescribed in these Bylaws for regular election to such office. -8- 4.6 Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer and shall have general supervision of the policies and operations of the Corporation, subject to the direction and control of the Board. He or she shall preside at all meetings of the stockholders, the Board of Directors and the Executive Committee. The Chairman shall have the power to sign checks, orders, contracts, leases, notes, drafts and other documents and instruments in connection with the business of the Corporation, and have such other powers and perform such other duties as shall be designated by the Board of Directors or as may be incidental to his or her office. 4.7 President. The President shall participate in the supervision of the policies and management of the Corporation, and may, if so designated by the Board of Directors, be the chief operating officer of the Corporation. He or she shall perform all duties incidental to the office of President and shall perform such other duties as may be assigned to him from time to time by the Board of Directors or the Chairman of the Board. In the absence of the Chairman of the Board, he or she shall preside at meetings of stockholders, the Board of Directors and the Executive Committee. The President shall have the same power to sign for the Corporation and to appoint officers as prescribed in these Bylaws for the Chairman of the Board. 4.8 Corporate Secretary. The Corporate Secretary shall: a) keep the minutes of all meetings of the Stockholders, the Board of Directors, the Executive Committee, and such other Committees as the Board may designate; b) see that all notices of such meetings are given in accordance with these Bylaws or as required by law; c) be custodian of the seal to any documents requiring such seal and to attest the same; d) sign, with the Chief Executive Officer, certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and e) in general perform all duties incident to the office of Corporate Secretary and such other duties as from time to time may be assigned to him or her by the Board of Directors or the Chief Executive Officer. In the absence of the Corporate Secretary, an Assistant Corporate Secretary shall act in his or her stead. The Corporate Secretary or Assistant Corporate Secretary may designate one or more officers of the Corporation to act as Attesting Corporate Secretary for the sole purpose of attesting to another officer's signature and affixing the seal of the Corporation. 4.9 Treasurer. The Treasurer shall perform such duties with respect to securities and funds of the Bank as may be prescribed by the Board of Directors or the Chief Executive Officer, and such other duties as may be incidental to the office of Treasurer. 4.10 Auditor. The Auditor shall have general supervision over the internal audit of the Corporation and its subsidiaries. He or she shall be responsible to the Board of Directors, through the Audit Committee, for independently evaluating the adequacy, effectiveness, and efficiency of the Corporation's systems of internal control and of employee compliance therewith. The Auditor shall have the duty of reporting his findings and recommendations to the Audit Committee at least quarterly on any matters concerning the Corporation, except those with respect to credit quality, responsibility for which has been vested in the officer in charge of credit administration. Should the Auditor deem any matter to be of special importance or his or her independence to be in jeopardy, he or she shall report immediately to the Chairman of the Audit Committee or, in his absence, any member of the Committee. The Auditor shall have such other duties and perform such special audits and examinations as -9- may be prescribed from time to time by the Audit Committee or the Board of Directors. For ministerial purposes, the Auditor shall be accountable to the the Chief Financial Officer, and for substantive purposes he shall be accountable to the Chief Executive Officer. 4.11 Powers and Duties of Other Officers. The powers and duties of all other officers of the Corporation shall be those usually pertaining to their respective offices, subject to the direction and control of the Board of Directors and as otherwise provided in these Bylaws, or as prescribed by the Chief Executive Officer. 4.12 Deposit Accounts. The President, the Executive Vice President - Investment Bank, the Executive Vice President, Controller and Treasurer, the Managing Director - Asset/Liability Management Division, and the Managing Director - Funds Management Division are individually authorized and empowered to open and maintain in the name of the Corporation one or more deposit accounts at other financial institutions. The aforementioned officers shall designate the personnel authorized to sign for and transact business in such accounts and may agree to any terms governing such accounts. Any resolutions required of this Corporation in connection with such accounts may be certified by the Corporate Secretary as if specifically adopted by the Board of Directors. 4.13 Securities Accounts. The President, the Executive Vice President - Investment Bank, the Managing Director - Asset/Liability Management Division, and the Managing Director - Funds Management Division are individually authorized and empowered to open and maintain in the name of the Corporation one or more securities accounts for the purpose of purchasing, selling, reselling, borrowing, lending, and otherwise dealing in money market instruments and securities of any and every kind, including agreements or contracts for their repurchase or future delivery, with banks, brokers, dealers, securities firms, or other organizations, and to issue written, telephonic, facsimile, or verbal orders or instructions for transactions to be carried out in such accounts. The aforementioned officers shall designate the personnel authorized to sign for and transact business in such accounts and may agree to any terms governing such accounts. Any resolutions required of this Corporation in connection with such accounts may be certified by the Corporate Secretary as if specifically adopted by the Board of Directors. Article V Capital Stock 5.1 Certificates. The shares of capital stock of the Corporation shall be evidenced by certificates in forms prescribed by the Board of Directors and executed in any manner permitted by law and stating thereon the information required by law. Transfer agents and/or registrars for one or more classes of the stock of the Corporation may be appointed by the Board of Directors and may be required to countersign certificates representing stock of such class or classes. If any officer whose signature or facsimile thereof shall have been used on a stock certificate shall for any reason cease to be an officer of the Corporation and such certificate shall not then have been delivered by the Corporation, the Board of Directors may nevertheless adopt such certificate and it may then be issued and delivered as though such person had not ceased to be an officer of the Corporation. -10- 5.2 Lost, Destroyed and Mutilated Certificates. Holders of the stock of the Corporation shall immediately notify the Corporation of any loss, destruction of mutilation of the certificate therefor, and the Board of Directors or the Executive Committee may cause one or more new certificates for the same number of shares in the aggregate to be issued to such stockholder upon the surrender of the mutilated certificate or upon satisfactory proof of such loss or destruction, and the deposit of a bond in such form and amount and with such surety as the Board of Directors may require. 5.3 Transfer of Stock. The stock of the Corporation shall be transferable or assignable only on the books of the Corporation by the holders in person or by attorney on surrender of the Certificate for such shares duly endorsed and, if sought to be transferred by attorney, accompanied by a written power of attorney to have the same transferred on the books of the Corporation. The Corporation shall recognize, however, the exclusive right of the person registered on its books as the owner of shares to receive dividends and to vote as such owner. To the extent that any provision of the Rights Agreement between the Corporation and Mellon Bank, N.A., as Rights Agent, dated as of June 23, 1989, is deemed to constitute a restriction on the transfer of any securities of the Corporation, including, without limitation, the Rights, as defined therein, such restriction is hereby authorized by the Bylaws of the Corporation. 5.4 Closing of Transfer Books and Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, seventy days. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than seventy days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of, or to vote at, a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notices of the meeting are mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof. Article VI Emergency Bylaws 6.1 Effect. The Emergency Bylaws provided in this Article VII shall be operative during any emergency resulting from an attack of the United States or any nuclear or atomic disaster, notwithstanding any different provision in the preceding articles of the Bylaws or in the Articles of Incorporation of the Corporation or in the Virginia Stock Corporation Act (other than those provisions relating to emergency bylaws). To the extent not inconsistent with these Emergency Bylaws, the Bylaws provided in the preceding articles shall remain in effect during such -11- emergency and upon the termination of such emergency the Emergency Bylaws shall cease to be operative unless and until another such emergency shall occur. 6.2. Meetings During Emergency. (a) Any meeting of the Board of Directors may be called by any officer of the Corporation or by any Director. The notice thereof shall specify the time and place of the meeting. To the extent feasible, notice shall be given only to such of the Directors as it may be feasible to reach at the time, by such means as may be feasible at the time, including publication or radio, and at a time less than twenty-four hours before the meeting if deemed necessary by the person giving notice. Notice shall be similarly given, to the extent feasible, to the other persons referred to in (b) below. (b) At any meeting of the Board of Directors, a quorum shall consist of a majority of the number of Directors fixed at the time in accordance with Article II of the Bylaws. If the Directors present at any particular meeting shall be fewer than the number required for such quorum, other persons present may be included in the number necessary to make up such quorum, and shall be deemed Directors for such particular meeting as determined by the following provisions and in the following order of priority: (i) Officers designated in Section 4.1(a) of the Bylaws, Group Executive Vice Presidents and Executive Vice Presidents, in the order of their seniority of first election to their present office, or if two or more shall have been first elected to such offices on the same day, in the order of their seniority in age; (ii) All other officers of the Corporation in the order of their seniority of first election to such offices, or if two or more shall have been first elected to such offices on the same day, in order of their seniority in age; and (iii) Any other persons that are designated on a list that shall have been approved by the Board of Directors before the emergency, such persons to be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the list. 6.3. Officer Successorship. The Board of Directors, during as well as before any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties. 6.4. Principal Office. The Board of Directors, during as well as before any such emergency, may provide, and from time to time change the principal office, or designate several alternative offices, or authorize the officers to do so. 6.5. Liability. No officer, Director or employee acting in accordance with these Emergency Bylaws shall be liable except for willful misconduct. 6.6. Amendments. These Emergency Bylaws shall be subject to repeal or change by further action of the Board of Directors or by action of the stockholders, except that no such repeal or change shall modify the provisions of the next preceding paragraph with regard to -12- action or inaction prior to the time of such repeal or change. Any such amendment of these Emergency Bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. Article VII Indemnification Of Directors And Officers 7.1. Extent of Indemnification. (a) To the full extent that the Virginia Stock Corporation Act, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors or officers, a Director or officer of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages. (b) To the full extent permitted and in the manner prescribed by the Virginia Stock Bank Act and any other applicable law, the Corporation shall indemnify a Director or officer of the Corporation who is or was a party to any proceeding by reason of the fact that he or she is or was such a Director or officer or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested Directors, to contract in advance to indemnify any Director or officer. (c) The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested Directors, to cause the Corporation to indemnify or contract in advance to indemnify any person not specified in Section B of this Article who was or is a party to any proceeding, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in Section B. 7.2. Insurance. The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by such person in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him or her against such liability under the provisions of this Article. 7.3. Change in Board Composition. In the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to Section 7.1(a) of this Article VII shall be made by special legal counsel agreed upon by the -13- Board of Directors and the proposed indemnitee. If the Board of Directors and the proposed indemnitee are unable to agree upon such special legal counsel, the Board of Directors and the proposed indemnitee each shall select a nominee, and the nominees shall select such special legal counsel. 7.4. Miscellaneous. The provisions of this Article VII shall be applicable to all actions, claims, suits or proceedings commenced after the adoption hereof, whether arising from any action taken or failure to act before or after such adoption. No amendment, modification or repeal of this Article shall diminish the rights provided hereby or diminish the right to indemnification with respect to any claim, issue or matter in any then pending or subsequent proceeding that is based in any material respect on any alleged action or failure to act prior to such amendment, modification or repeal. Reference herein to Directors, officers, employees or agents shall include Area Board Directors, former Directors, officers, employees and agents and their respective heirs, executors and administrators. Article VIII Miscellaneous Provisions 8.1 Seal. The corporate seal of the Corporation shall consist of a flat-faced circular die, on which there shall be engraved the Crestar logogram and the name of the Corporation. Any officer of the Corporation designated in writing by the Chief Executive Officer, the President, the Corporate Secretary or any Attesting Corporate Secretary shall have authority to affix and attest the seal. Failure to use the corporate seal shall not affect the validity of any instrument. 8.2 Voting of Stock Held. Unless otherwise provided by resolution of the Board of Directors or of the Executive Committee, the Chairman of the Board, the President, or any Executive or Senior Vice President may from time to time appoint an attorney or attorneys or agent or agents of this Corporation, in the name and on behalf of this Corporation, to cast the vote which this Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose stock or securities may be held by this Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by any such other corporation. Such officer shall instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of this Corporation such written proxies, consents, waivers or other instruments as may be necessary or proper. In lieu of an appointment of an attorney or agent, the officer may attend any meetings of the holders of stock or other securities of any such other corporation and there vote or exercise any or all power of this Corporation as the holder of such stock or other securities of such other corporation. 8.3 Fiscal Year. The fiscal year of the Corporation shall be the calendar year. 8.4 Checks, Notes and Drafts. Checks, notes, drafts and other orders for the payment of money shall be signed by such persons as the Board of Directors from time to time may authorize. When the Board of Directors so authorizes, however, the signature of any such person may be a facsimile. -14- 8.5 Control Share Acquisitions. Article 14.1 (Control Share Acquisitions) of Chapter 9 of Title 13.1 (Virginia Stock Corporation Act) of the Code of Virginia (1950), as amended from time to time, does not apply to acquisitions of shares of the Corporation. 8.6. Amendments. These Bylaws may be amended, altered, or repealed at any meeting of the Board of Directors by affirmative vote of a majority of the number of Directors fixed at the time in accordance with Article II of these Bylaws. The stockholders entitled to vote in an election of Directors, however, shall have the power to rescind, alter, amend or repeal any Bylaws and to enact Bylaws which, if expressly so provided, may not be amended, altered or repealed by the Board of Directors. -15- EX-10 3 EXHIBIT 10(AF) CRESTAR FINANCIAL CORPORATION 1993 STOCK INCENTIVE PLAN As Amended And Restated Effective February 28, 1997 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS 1.01. Acquiring Person........................... 1 1.02. Administrator.............................. 1 1.03. Agreement.................................. 1 1.04. Associate.................................. 1 1.05. Board...................................... 1 1.06. Change in Control.......................... 2 1.07. Code....................................... 2 1.08. Committee.................................. 2 1.09. Common Stock............................... 2 1.10. Company.................................... 2 1.11. Continuing Director........................ 2 1.12. Control Affiliate.......................... 3 1.13. Control Change Date........................ 3 1.14. Corresponding SAR.......................... 3 1.15. Disability................................. 3 1.16. Efficiency Ratio........................... 3 1.17. Exchange Act............................... 3 1.18. Fair Market Value.......................... 3 1.19. Incentive Award............................ 4 1.20. Initial Value.............................. 4 1.21. NIACC...................................... 4 1.22. Option..................................... 4 1.23. Participant................................ 4 1.24. Performance Shares......................... 4 1.25. Person..................................... 5 1.26. Plan....................................... 5 1.27. Related Entity............................. 5 1.28. Retirement................................. 5 1.29. SAR........................................ 6 1.30. Stock Award................................ 6 1.31. Total Shareholder Return................... 6 ARTICLE II PURPOSES................................... 6 ARTICLE III ADMINISTRATION............................. 7 ARTICLE IV ELIGIBILITY................................ 9 TABLE OF CONTENTS Page ---- ARTICLE V STOCK SUBJECT TO PLAN 5.01. Shares Issued.............................. 9 5.02. Aggregate Limit............................ 9 5.03. Reallocation of Shares..................... 10 ARTICLE VI OPTIONS 6.01. Award...................................... 11 6.02. Option Price............................... 11 6.03. Maximum Option Period...................... 11 6.04. Nontransferability......................... 11 6.05. Transferable Options....................... 12 6.06. Employee Status............................ 12 6.07. Exercise................................... 13 6.08. Payment.................................... 13 6.09. Change in Control.......................... 14 6.10. Shareholder Rights......................... 14 6.11. Disposition of Stock....................... 14 ARTICLE VII SARS 7.01. Award...................................... 15 7.02. Maximum SAR Period......................... 15 7.03. Nontransferability......................... 15 7.04. Transferable SARs.......................... 16 7.05. Exercise................................... 16 7.06. Change in Control.......................... 17 7.07. Employee Status............................ 17 7.08. Settlement................................. 17 7.09. Shareholder Rights......................... 17 ARTICLE VIII STOCK AWARDS 8.01. Award...................................... 18 8.02. Vesting.................................... 18 8.03. Performance Objectives..................... 18 8.04. Employee Status............................ 19 8.05. Change in Control.......................... 19 8.06. Shareholder Rights......................... 19 TABLE OF CONTENTS Page ---- ARTICLE IX PERFORMANCE SHARE AWARDS 9.01. Award...................................... 20 9.02. Earning the Award.......................... 20 9.03. Payment.................................... 21 9.04. Shareholder Rights......................... 21 9.05. Nontransferability......................... 21 9.06. Transferable Performance Shares............ 22 9.07. Employee Status............................ 22 9.08. Change In Control.......................... 22 ARTICLE X INCENTIVE AWARDS 10.01. Award...................................... 23 10.02. Terms and Conditions....................... 23 10.03. Nontransferability......................... 24 10.04. Employee Status............................ 24 10.05. Change in Control.......................... 25 10.06. Shareholder Rights......................... 25 ARTICLE XI ADJUSTMENT UPON CHANGE IN COMMON STOCK..... 26 ARTICLE XII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES.............. 27 ARTICLE XIII GENERAL PROVISIONS 13.01. Effect on Employment and Service........... 28 13.02. Unfunded Plan.............................. 28 13.03. Rules of Construction...................... 29 13.04. Tax Withholding............................ 29 13.05. Limitation on Benefits..................... 29 ARTICLE XIV AMENDMENT.................................. 32 ARTICLE XV DURATION OF PLAN........................... 32 ARTICLE XVII EFFECTIVE DATE OF PLAN..................... 33 CRESTAR FINANCIAL CORPORATION 1993 STOCK INCENTIVE PLAN ARTICLE I DEFINITIONS 1.01. Acquiring Person means that (a) a Person, considered alone or together with all Control Affiliates and Associates of that Person, becomes directly or indirectly the beneficial owner of securities representing at least thirty percent of the Company's then outstanding securities entitled to vote generally in the election of the Board, or (b) a person enters into an agreement that would result in that Person satisfying the conditions in subsection (a) or that would result in a Related Entity's failure to be a Related Entity. 1.02. Administrator means the Committee and any delegate of the Committee that is appointed in accordance with Article III. 1.03. Agreement means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of an award of Performance Shares or a Stock Award, Option, SAR or Incentive Award granted to such Participant. 1.04. Associate, with respect to any Person, is defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as amended as of January 1, 1990. An Associate does not include the Company or a majority-owned subsidiary of the Company. -1- 1.05. Board means the Board of Directors of the Company. 1.06. Change in Control means that (a) the Company enters into any agreement with a Person that involves the transfer of ownership of the Company or of at least fifty percent of the Company's total assets on a consolidated basis, as reported in the Company's consolidated financial statements filed with the Securities and Exchange Commission (including an agreement for the acquisition of the Company by merger, consolidation, or statutory share exchange - regardless of whether the Company is intended to be the surviving or resulting entity after the merger, consolidation, or statutory share exchange - or for the sale of substantially all of the Company's assets to that Person), (b) any Person is or becomes an Acquiring Person, or (c) during any period of two consecutive calendar years, the Continuing Directors cease for any reason to constitute a majority of the Board. 1.07. Code means the Internal Revenue Code of 1986, and any amendments thereto. 1.08. Committee means the Human Resources and Compensation Committee of the Board. 1.09. Common Stock means the common stock of the Company. 1.10. Company means Crestar Financial Corporation. 1.11. Continuing Director means any member of the Board, while a member of the Board and (i) who was a member of the Board prior to the adoption of the Plan or -2- (ii) whose subsequent nomination for election or election to the Board was recommended or approved by a majority of the Continuing Directors. 1.12. Control Affiliate with respect to any Person, means an affiliate as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as amended as of January 1, 1990. 1.13. Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the Control Change Date is the date of the last of such transactions. 1.14. Corresponding SAR means an SAR that is granted in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR relates. 1.15. Disability means that a Participant has satisfied the requirements for a benefit under the Crestar Financial Corporation Long Term Disability Benefits Plan. 1.16. Efficiency Ratio means the percentage determined by dividing (i) noninterest expense less nonrecurring expense by (ii) the sum of net interest income plus noninterest income, all as reported on the Company's financial statements. 1.17. Exchange Act means the Securities Exchange Act of 1934, as amended and as in effect on the date of this Agreement. 1.18. Fair Market Value means, on any given date, the average of the high and low prices of a share of Common Stock as reported on the New York Stock Exchange on such date, or if the Common Stock was not traded on the New York Stock -3- Exchange on such day, then on the next preceding day that the Common Stock was traded on such exchange, all as reported by such source as the Administrator may select. 1.19. Incentive Award means an award under Article X which, subject to such terms and conditions as may be prescribed by the Administrator, entitles the Participant to receive a cash payment from the Company or a Related Entity. 1.20. Initial Value means, with respect to a Corresponding SAR, the option price per share of the related Option and, with respect to an SAR granted independently of an Option, the price per share of Common Stock as determined by the Administrator on the date of the grant; provided, however, that the price per share of Common Stock encompassed by the grant of an SAR shall not be less than the Fair Market Value on the date of grant. 1.21. NIACC means net income after a capital charge. 1.22. Option means a stock option that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement. 1.23. Participant means an employee of the Company or a Related Entity, including an employee who is a member of the Board, who satisfies the requirements of Article IV and is selected by the Administrator to receive an award of Performance Shares, a Stock Award, an Option, an SAR, an Incentive Award or a combination thereof. -4- 1.24. Performance Shares means an award, in the amount determined by the Administrator and specified in an Agreement, stated with reference to a specified number of shares of Common Stock, that entitles the holder to receive a payment for each specified share equal to the Fair Market Value of Common Stock on the date of payment. In the discretion of the Administrator, a Performance Share award may include the right to receive an additional payment for the accumulated dividends that would have been paid on each specified share as if such dividends had been invested in Common Stock on the dividend payment date, from the date of grant to the date of payment. 1.25. Person means any human being, firm, corporation, partnership, or other entity. Person also includes any human being, firm, corporation, partnership, or other entity as defined in sections 13(d)(3) and 14(d)(2) of the Exchange Act, as amended as of January 1, 1990. For purposes of this Plan, the term Person does not include the Company or any Related Entity, and the term Person does not include any employee-benefit plan maintained by the Company or by any Related Entity, and any person or entity organized, appointed, or established by the Company or by any subsidiary for or pursuant to the terms of any such employee-benefit plan, unless the Board determines that such an employee-benefit plan or such person or entity is a Person. 1.26. Plan means the Crestar Financial Corporation 1993 Stock Incentive Plan. -5- 1.27. Related Entity means any entity that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company. 1.28. Retirement means a Participant's separation from service on or after his early, normal or delayed retirement date under the Retirement Plan for Employees of Crestar Financial Corporation and Affiliated Corporations. 1.29. SAR means a stock appreciation right that entitles the holder to receive, with respect to each share of Common Stock encompassed by the exercise of such SAR, the lesser of (a) the excess, if any, of the Fair Market Value at the time of exercise over the Initial Value, or (b) the Initial Value. References to "SARs" include both Corresponding SARs and SARs granted independently of Options, unless the context requires otherwise. 1.30. Stock Award means Common Stock awarded to a Participant under Article VIII. 1.31. Total Shareholder Return means, with respect to any period, the sum of (i) the excess, if any of the Fair Market Value on the first day of the period over the Fair Market Value on the last day of the period and (ii) the value of any dividends on Common Stock payable with respect to such period. -6- ARTICLE II PURPOSES The Plan is intended to assist the Company and Related Entities in recruiting and retaining individuals with ability and initiative by enabling such persons to participate in the future success of the Company and the Related Entities and to associate their interests with those of the Company and its shareholders. The Plan is intended to permit the grant of both Options qualifying under Section 422 of the Code ("incentive stock options") and Options not so qualifying, and the grant of SARs, Stock Awards, Performance Shares and Incentive Awards. No Option that is intended to be an incentive stock option shall be invalid for failure to qualify as an incentive stock option. The proceeds received by the Company from the sale of Common Stock pursuant to this Plan shall be used for general corporate purposes. ARTICLE III ADMINISTRATION The Plan shall be administered by the Administrator. The Administrator shall have authority to grant Stock Awards, Performance Shares, Incentive Awards, Options and SARs upon such terms (not inconsistent with the provisions of this Plan), as the Administrator may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan), on the exercisability of all or any part of an -7- Option or SAR or on the transferability or forfeitability of a Stock Award, an award of Performance Shares or an Incentive Award, including by way of example and not of limitation, conditions on which Participants may defer receipt of benefits under the Plan, requirements that the Participant complete a specified period of employment with the Company or a Related Entity, requirements that the Company achieve a specified level of financial performance or that the Company achieve a specified level of financial return. Notwithstanding any such conditions, the Administrator may, in its discretion, accelerate the time at which any Option or SAR may be exercised, or the time at which a Stock Award may become transferable or nonforfeitable or the time at which an Incentive Award or an award of Performance Shares may be settled. In addition, the Administrator shall have complete authority to interpret all provisions of this Plan; to prescribe the form of Agreements; to adopt, amend, and rescind rules and regulations pertaining to the administration of the Plan; and to make all other determinations necessary or advisable for the administration of this Plan. The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final and conclusive. Neither the Administrator nor any member of the Committee shall be liable for any act done in good faith with respect to this Plan or any Agreement, Option, SAR, Stock Award or Incentive Award or award of Performance -8- Shares. All expenses of administering this Plan shall be borne by the Company, a Related Entity or a combination thereof. The Committee, in its discretion, may delegate to one or more officers of the Company or the Executive Committee of the Board, all or part of the Committee's authority and duties with respect to grants and awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee's delegate or delegates that were consistent with the terms of the Plan. ARTICLE IV ELIGIBILITY Any employee of the Company or a Related Entity (including a corporation that becomes a Related Entity after the adoption of this Plan), is eligible to participate in this Plan if the Administrator, in its sole discretion, determines that such person has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company or a Related Entity. Directors of the Company who are employees of the Company or a Related Entity may be selected to participate in this Plan. -9- ARTICLE V STOCK SUBJECT TO PLAN 5.01. Shares Issued. Upon the award of shares of Common Stock pursuant to a Stock Award or in settlement of an award of Performance Shares, the Company may issue shares of Common Stock from its authorized but unissued Common Stock. Upon the exercise of any Option or SAR the Company may deliver to the Participant (or the Participant's broker if the Participant so directs), shares of Common Stock from its authorized but unissued Common Stock. 5.02. Aggregate Limit. The maximum aggregate number of shares of Common Stock that may be issued under this Plan, pursuant to the exercise of SARs and Options and the grant of Stock Awards and the settlement of Performance Shares awarded on and after February 28, 1997, is 4,000,000 shares. The maximum aggregate number of shares that may be issued under this Plan as Stock Awards and in settlement of Performance Shares awarded on and after February 28, 1997, is 1,200,000 shares. The maximum aggregate number of shares that may be issued under this Plan and the maximum number of shares that may be issued as Stock Awards and in settlement of Performance Shares shall be subject to adjustment as provided in Article XI. 5.03. Reallocation of Shares. If an Option is terminated, in whole or in part, for any reason other than its exercise or the exercise of a Corresponding SAR that is settled with Common Stock, the number of shares of Common Stock allocated to the Option or portion thereof may be reallocated to other Options, SARs, Performance Shares and -10- Stock Awards to be granted under this Plan. If an SAR is terminated, in whole or in part, for any reason other than its exercise that is settled with Common Stock or the exercise of a related Option, the number of shares of Common Stock allocated to the SAR or portion thereof may be reallocated to other Options, SARs, Performance Shares and Stock Awards to be granted under this Plan. If an award of Performance Shares is terminated, in whole or in part, for any reason other than its settlement with Common Stock, the number of shares of Common Stock allocated to the Performance Shares or portion thereof may be reallocated to other options, SARs, Performance Shares and Stock Awards to be granted under this Plan. If a Stock Award is forfeited, in whole or in part, for any reason, the number of shares of Common Stock allocated to the Stock Award or portion thereof may be reallocated to other Options, SARs, Performance Shares and Stock Awards to be granted under this Plan. ARTICLE VI OPTIONS 6.01. Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an Option is to be granted and will specify the number of shares of Common Stock covered by each such award; provided, however, that no individual may be granted Options in any calendar year covering more than 100,000 shares of Common Stock. -11- 6.02. Option Price. The price per share for Common Stock purchased on the exercise of an Option shall be determined by the Administrator on the date of grant, but shall not be less than the Fair Market Value on the date the Option is granted. 6.03. Maximum Option Period. The maximum period in which an Option may be exercised shall be ten years from the date such Option was granted. The terms of any Option may provide that it is exercisable for a period less than such maximum period. 6.04. Nontransferability. Except as provided in Section 6.05, each Option granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 6.05, during the lifetime of the Participant to whom the Option is granted, the Option may be exercised only by the Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 6.05. Transferable Options. Section 6.04 to the contrary notwithstanding, if the Agreement provides, an Option that is not an incentive stock option may be transferred by a Participant to the Participant's children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Securities Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an Option transferred pursuant to this section shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Option except -12- by will or the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities. 6.06. Employee Status. For purposes of determining the applicability of Section 422 of the Code (relating to incentive stock options), or in the event that the terms of any Option provide that it may be exercised only during employment or within a specified period of time after termination of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment. 6.07. Exercise. Subject to the provisions of this Plan and the applicable Agreement, an Option may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Administrator shall determine; provided, however, that incentive stock options (granted under the Plan and all plans of the Company and its Related Entities) may not be first exercisable in a calendar year for stock having a Fair Market (determined as of the date an Option is granted) exceeding the limit prescribed by Code section 422(d). An Option granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance -13- with this Plan and the applicable Agreement with respect to the remaining shares subject to the Option. The exercise of an Option shall result in the termination of any Corresponding SAR to the extent of the number of shares with respect to which the Option is exercised. 6.08. Payment. Unless otherwise provided by the Agreement, payment of the Option price shall be made in cash or a cash equivalent acceptable to the Administrator. Subject to rules established by the Administrator, payment of all or part of the Option price may be made with shares of Common Stock which have been owned by the Participant for at least six months and which have not been used for another exercise during the prior six months. If Common Stock is used to pay all or part of the Option price, the sum of the cash and cash equivalent and the Fair Market Value (determined as of the day preceding the date of exercise) of such shares must not be less than the Option price of the shares for which the Option is being exercised. 6.09. Change in Control. Section 6.07 to the contrary notwithstanding, each outstanding Option shall be fully exercisable (in whole or in part at the discretion of the holder) on and after a Control Change Date and during the period (i) beginning on the first day after a tender offer or exchange offer for shares of Common Stock (other than an offer made by the Company); provided that shares are acquired pursuant to such offer and (ii) ending on the thirtieth day following the expiration of such offer. 6.10. Shareholder Rights. No Participant shall have any rights as a shareholder with respect to shares subject to his Option until the date of exercise of such Option. -14- 6.11. Disposition of Stock. A Participant shall notify the Company of any sale or other disposition of Common Stock acquired pursuant to an Option that was an incentive stock option if such sale or disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the issuance of the Common Stock to the Participant. Such notice shall be in writing and directed to the Secretary of the Company. ARTICLE VII SARS 7.01. Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom SARs are to be granted and will specify the number of shares covered by each such award; provided, however, that no individual may be granted SARs in any calendar year covering more than 100,000 shares. For purposes of the preceding sentence, an Option and Corresponding SAR shall be treated as a single award. In addition, no Participant may be granted Corresponding SARs (under all incentive stock option plans of the Company and its Affiliates) that are related to incentive stock options which are first exercisable in any calendar year for stock having an aggregate Fair Market Value (determined as of the date the related Option is granted) that exceeds the limit prescribed by Code section 422(d). 7.02. Maximum SAR Period. The maximum period in which an SAR may be exercised shall be ten years from the date such SAR was granted. The terms of any SAR may provide that it has a term that is less than such maximum period. -15- 7.03. Nontransferability. Except as provided in Section 7.04, each SAR granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any such transfer, a Corresponding SAR and the related Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 7.04, during the lifetime of the Participant to whom the SAR is granted, the SAR may be exercised only by the Participant. No right or interest of a Participant in any SAR shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 7.04. Transferable SARs. Section 7.03 to the contrary notwithstanding, if the Agreement provides, an SAR, other than a Corresponding SAR that is related to an incentive stock option, may be transferred by a Participant to the Participant's children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Securities Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an SAR transferred pursuant to this section shall be bound by the same terms and conditions that governed the SAR during the period that it was held by the Participant; provided, however, that such transferee may not transfer the SAR except by will or the laws of descent and distribution. In the event of any transfer of a Corresponding SAR (by the Participant or his transferee), the Corresponding SAR and the related Option must be transferred to the same person or person or entity or entities. -16- 7.05. Exercise. Subject to the provisions of this Plan and the applicable Agreement, an SAR may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Administrator shall determine; provided, however, that a Corresponding SAR that is related to an incentive stock option may be exercised only to the extent that the related Option is exercisable and only when the Fair Market Value exceeds the option price of the related Option. An SAR granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the SAR could be exercised. A partial exercise of an SAR shall not affect the right to exercise the SAR from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the SAR. The exercise of a Corresponding SAR shall result in the termination of the related Option to the extent of the number of shares with respect to which the SAR is exercised. 7.06. Change in Control. Section 7.05 to the contrary notwithstanding, each outstanding SAR shall be fully exercisable (in whole or in part at the discretion of the holder) on and after a Control Change Date and during the period (i) beginning on the first day after any tender offer or exchange offer for shares of Common Stock (other than one made by the Company); provided that shares are acquired pursuant to such offer and (ii) ending on the thirtieth day following the expiration of such offer. -17- 7.07. Employee Status. If the terms of any SAR provide that it may be exercised only during employment or within a specified period of time after termination of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment. 7.08. Settlement. At the Administrator's discretion, the amount payable as a result of the exercise of an SAR may be settled in cash, Common Stock, or a combination of cash and Common Stock. No fractional share will be deliverable upon the exercise of an SAR but a cash payment will be made in lieu thereof. 7.09. Shareholder Rights. No Participant shall, as a result of receiving an SAR, have any rights as a shareholder of the Company until the date that the SAR is exercised and then only to the extent that the SAR is settled by the issuance of Common Stock. ARTICLE VIII STOCK AWARDS 8.01. Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom a Stock Award is to be made and will specify the number of shares of Common Stock covered by each such award; provided, however, that no Participant may receive Stock Awards in any calendar year for more than 30,000 shares of Common Stock. -18- 8.02. Vesting. The Administrator, on the date of the award, may prescribe that a Participant's rights in a Stock Award shall be forfeitable or otherwise restricted for a period of time or subject to such conditions as may be set forth in the Agreement. 8.03. Performance Objectives. In accordance with Section 8.02, the Administrator may prescribe that Stock Awards will become vested or transferable or both based on objectives stated with respect to the Company's, a Related Entity's or an operating unit's return on equity, earnings per share, total earnings, earnings growth, return on assets, Fair Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other measures as may be selected by the Administrator. If the Administrator, on the date of award, prescribes that a Stock Award shall become nonforfeitable and transferable only upon the attainment of performance objectives, the shares subject to such Stock Award shall become nonforfeitable and transferable only to the extent that the Administrator certifies that such objectives have been achieved. 8.04. Employee Status. In the event that the terms of any Stock Award provide that shares may become transferable and nonforfeitable thereunder only after completion of a specified period of employment, the Administrator may decide in each case to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment. -19- 8.05. Change in Control. Sections 8.02, 8.03 and 8.04 to the contrary notwithstanding, on and after a Control Change Date or the first day following a tender offer or exchange offer for shares of Common Stock (other than one made by the Company), provided that shares are acquired pursuant to such offer, each outstanding Stock Award shall be transferable and nonforfeitable as of the Control Change Date or the first day following such offer. 8.06. Shareholder Rights. Prior to their forfeiture (in accordance with the applicable Agreement and while the shares of Common Stock granted pursuant to the Stock Award may be forfeited or are nontransferable), a Participant will have all rights of a shareholder with respect to a Stock Award, including the right to receive dividends and vote the shares; provided, however, that during such period (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares of Common Stock granted pursuant to a Stock Award, (ii) the Company shall retain custody of the certificates evidencing shares of Common Stock granted pursuant to a Stock Award, and (iii) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to each Stock Award. The limitations set forth in the preceding sentence shall not apply after the shares of Common Stock granted under the Stock Award are transferable and are no longer forfeitable. ARTICLE IX PERFORMANCE SHARE AWARDS -20- 9.01. Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an award of Performance Shares is to be made and will specify the number of shares of Common Stock covered by each such award; provided, however, that the maximum number of shares of Common Stock that may be earned by a Participant under all Performance Share awards (whether settled in Common Stock, cash or a combination of Common Stock and cash) granted in a calendar year shall be the product of (i) 35,000 shares and (ii) the number of years (twelve consecutive months) during which one or more performance criteria is measured. 9.02. Earning the Award. The Administrator, on the date of the grant of an award, shall prescribe that the Performance Shares, or portion thereof, will be earned, and the Participant will be entitled to receive payment pursuant to the award of Performance Shares, only upon the satisfaction of performance objectives and such other criteria as may be prescribed by the Administrator during a performance measurement period of at least one year. The performance objectives may be stated with respect to the Company's, a Related Entity's or an operating unit's return on equity, earnings per share, total earnings, earnings growth, return on assets, Fair Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other measures as may be selected by the Administrator. No payments will be made with respect to Performance Shares unless, and then only to the extent that, the Administrator certifies that such objectives have been achieved. -21- 9.03. Payment. In the discretion of the Administrator, the amount payable when an award of Performance Shares is earned may be settled in cash, by the issuance of Common Stock or a combination of cash and Common Stock. A fractional share shall not be deliverable when an award of Performance Shares is earned, but a cash payment will be made in lieu thereof. 9.04. Shareholder Rights. No Participant shall, as a result of receiving an award of Performance Shares, have any rights as a shareholder until and to the extent that the award of Performance Shares is earned and settled by the issuance of Common Stock. After an award of Performance Shares is earned, if settled completely or partially in Common Stock, a Participant will have all the rights of a shareholder with respect to such Common Stock. 9.05. Nontransferability. Except as provided in Section 9.06, Performance Shares granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. No right or interest of a Participant in any Performance Shares shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 9.06. Transferable Performance Shares. Section 9.05 to the contrary notwithstanding, if the Agreement provides, an award of Performance Shares may be transferred by a Participant to the Participant's children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be -22 permitted under Securities Exchange Commission Rule 16b-3 as in effect from time to time. The holder of Performance Shares transferred pursuant to this section shall be bound by the same terms and conditions that governed the Performance Shares during the period that they were held by the Participant; provided, however that such transferee may not transfer Performance Shares except by will or the laws of descent and distribution. 9.07. Employee Status. In the event that the terms of any Performance Share award provide that no payment will be made unless the Participant completes a stated period of employment, the Administrator may decide to what extent leaves of absence for government or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment. 9.08. Change In Control. Section 9.02 to the contrary notwithstanding, a pro rata amount of each outstanding Performance Share award shall be earned and settled in whole shares of Common Stock as of a Control Change Date that occurs at least three months after the first day of the measurement period or on the first day after a tender offer or exchange offer for shares of Common Stock (other than one made by the Company), provided that such day is at least three months after the first day of the measurement period and provided further that shares are acquired pursuant to such offer. Such Common Stock shall be nonforfeitable and transferable. The number of shares of Common Stock issuable under this Section 9.02 shall be determined by multiplying the target amount of shares (as prescribed by the applicable Agreement), -23- by a fraction. The numerator shall be the number of days in the period beginning on the date of the first day of the measurement period and ending on the Control Change Date or the first day after the tender or exchange offer described in this Section 9.03. The denominator is the number of days in the period, or the longest of such periods, during which performance is measured under the Performance Share award. ARTICLE X INCENTIVE AWARDS 10.01. Award. The Administrator shall designate Participants to whom Incentive Awards are made. All Incentive Awards shall be finally determined exclusively by the Administrator under the procedures established by the Administrator; provided, however, that no Participant may receive an Incentive Award payment in any calendar year that exceeds the lesser of (i) $1,000,000 and (ii) 150% of the Participant's annual base salary (prior to any salary reduction or deferral elections) as of the date of grant of the Incentive Award. 10.02. Terms and Conditions. The Administrator, at the time an Incentive Award is made, shall specify the terms and conditions which govern the award. Such terms and conditions shall prescribe that the Incentive Award shall be earned only upon, and to the extent that, performance objectives are satisfied. The performance objectives may be stated with respect to the Company's, a Related Entity's or an operating unit's return on equity, earnings per share, total earnings, earnings growth, return on assets, Fair Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other -24- measures as may be selected by the Administrator. Such terms and conditions also may include other limitations on the payment of Incentive Awards including, by way of example and not of limitation, requirements that the Participant complete a specified period of employment with the Company or a Related Entity. The Administrator, at the time an Incentive Award is made, shall also specify when amounts shall be payable under the Incentive Award and whether amounts shall be payable in the event of the Participant's death, Disability, or Retirement. No payments will be made with respect to an Incentive Award unless, and then only to the extent that, the Administrator certifies that the performance objectives have been achieved. 10.03. Nontransferability. Incentive Awards granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution and then only to the extent that the Administrator specified, at the time the Incentive Award was made, that amounts may be payable in the event of the Participant's death. No right or interest of a Participant in an Incentive Award shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 10.04. Employee Status. If the terms of an Incentive Award provide that a payment will be made thereunder only if the Participant completes a stated period of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment. -25- 10.05. Change in Control. Section 10.02 to the contrary notwithstanding, a pro rata amount of each Incentive Award shall be earned as of a Control Change Date that occurs at least three months after the first day of the measurement period or on the first day after a tender offer or exchange offer for shares of Common Stock (other than one made by the Company), provided that such day is at least three months after the first day of the measurement period and provided further that shares are acquired pursuant to such offer. The amount payable under this Section 10.05 shall be determined by multiplying the target amount (as prescribed by the applicable Agreement), by a fraction. The numerator shall be the number of days in the period beginning on the first day of the measurement period and ending on the Control Change Date or the first day after the tender or exchange offer described in this Section 10.05. The denominator shall be the number of days in the period, or the longest of such periods, during which performance is measured under the Incentive Award. 10.06. Shareholder Rights. No Participant shall, as a result of receiving an Incentive Award, have any rights as a shareholder of the Company or any Affiliate on account of such award. -26- ARTICLE XI ADJUSTMENT UPON CHANGE IN COMMON STOCK The maximum number of shares as to which Options, SARs, Performance Shares and Stock Awards may be granted under this Plan, the terms of outstanding Stock Awards, Options, Performance Shares, Incentive Awards, and SARs, and the per individual limitations on the number of shares for which Options, SARs, Performance Shares, and Stock Awards may be granted shall be adjusted as the Committee shall determine to be equitably required in the event that (a) the Company (i) effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or (ii) engages in a transaction to which Section 424 of the Code applies or (b) there occurs any other event which, in the judgment of the Committee necessitates such action. Any determination made under this Article XI by the Committee shall be final and conclusive. The issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the maximum number of shares as to which Options, SARs, Performance Shares and Stock Awards may be granted, the per individual limitations on the number of shares for which Options, SARs, Performance Shares and -27- Stock Awards may be granted or the terms of outstanding Stock Awards, Options, Performance Shares, Incentive Awards or SARs. The Committee may make Stock Awards and may grant Options, SARs, Performance Shares, and Incentive Awards in substitution for performance shares, phantom shares, stock awards, stock options, stock appreciation rights, or similar awards held by an individual who becomes an employee of the Company or a Related Entity in connection with a transaction described in the first paragraph of this Article XI. Notwithstanding any provision of the Plan (other than the limitation of Section 5.02), the terms of such substituted Stock Awards or Option, SAR, Performance Shares or Incentive Award grants shall be as the Committee, in its discretion, determines is appropriate. -28- ARTICLE XII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES No Option or SAR shall be exercisable, no Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Company is a party, and the rules of all domestic stock exchanges on which the Company's shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any share certificate issued to evidence Common Stock when a Stock Award is granted, a Performance Share is settled or for which an Option or SAR is exercised may bear such legends and statements as the Administrator may deem advisable to assure compliance with federal and state laws and regulations. No Option or SAR shall be exercisable, no Stock Award or Performance Share shall be granted, no Common Stock shall be issued, no certificate for shares shall be delivered, and no payment shall be made under this Plan until the Company has obtained such consent or approval as the Administrator may deem advisable from regulatory bodies having jurisdiction over such matters. -29- ARTICLE XIII GENERAL PROVISIONS 13.01. Effect on Employment and Service. Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof), shall confer upon any individual any right to continue in the employ or service of the Company or a Related Entity or in any way affect any right and power of the Company or a Related Entity to terminate the employment or service of any individual at any time with or without assigning a reason therefor. 13.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by grants under this Plan. Any liability of the Company to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. 13.03. Rules of Construction. Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law. 13.04. Tax Withholding. Each Participant shall be responsible for satisfying any income and employment tax withholding obligation attributable to participation in this -30- Plan. In accordance with procedures established by the Administrator, a Participant may surrender shares of Common Stock, or receive fewer shares of Common Stock than otherwise would be issuable, in satisfaction of all or part of that obligation. 13.05. Limitation on Benefits. (a) Despite any other provision of this Plan, if KPMG Peat Marwick (the "Accounting Firm") determines that receipt of benefits or payments under this Plan would subject a Participant to tax under Code section 4999, it must determine whether some amount of the benefits or payments would meet the definition of a "Reduced Amount." If the Accounting Firm determines that there is a Reduced Amount, the total benefits and payments must be reduced to such Reduced Amount, but not below zero. (b) If the Accounting Firm determines that the benefits and payments should be reduced to the Reduced Amount, the Company must promptly notify the Participant of that determination, including a copy of the detailed calculations by the Accounting Firm. All determinations made by the Accounting Firm under this section are binding upon the Company and the Participant. (c) It is the intention of the Company and the Participant to reduce the benefits and payments under this Plan only if the aggregate Net After Tax Receipts to the Participant would thereby be increased. As a result of the uncertainty in the application of Code section 4999 at the time of the initial determination by the Accounting Firm under this section, however, it is possible that amounts will have been paid or distributed under the Plan to or for the benefit of a Participant which should not -31- have been so paid or distributed ("Overpayment") or that additional amounts which will not have been paid or distributed under the Plan to or for the benefit of a Participant could have been so paid or distributed ("Underpayment") - - in each case, consistent with the calculation of the Reduced Amount. If the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant which the Accounting Firm believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment must be treated for all purposes as a loan ab initio to which Participant must repay to the Company together with interest at the applicable federal rate under Code section 7872(f)(2); provided, however, that no such loan may be deemed to have been made and no amount shall be payable by Participant to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which Participant is subject to tax under Code section 1 or 4999 or generate a refund of such taxes. If the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, the Accounting Firm must promptly notify the Administrator of the amount of the Underpayment. (d) For purposes of this section, (i) "Net After Tax Receipt" means the Present Value of a payment or benefit under this Plan net of all taxes imposed on Participant with respect thereto under Code sections 1 and 4999, determined by applying the highest marginal rate under Code section 1 which applied to the -32- Participant's taxable income for the immediately preceding taxable year; (ii) "Present Value" means the value determined in accordance with Code section 280G(d)(4); and (iii) "Reduced Amount" means the smallest aggregate amount of all payments or benefit under this Plan which (a) is less than the sum of all payments or benefit under this Plan and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate payments or benefit under this Plan were any other amount less than the sum of all payments or benefit under this Plan. ARTICLE XIV AMENDMENT The Board may amend or terminate this Plan from time to time; provided, however, that no amendment may become effective until shareholder approval is obtained if (i) the amendment increases the aggregate number of shares of Common Stock that may be issued under the Plan (other than an adjustment pursuant to Article XI) or (ii) the amendment changes the class of individuals eligible to become Participants. No amendment shall, without a Participant's consent, adversely affect any rights of such Participant under any Stock Award, Performance Share award, Option, SAR or Incentive Award outstanding at the time such amendment is made. -33- ARTICLE XV DURATION OF PLAN No Stock Award, Performance Share award, Option, SAR or Incentive Award may be granted under this Plan after February 27, 2007. Stock Awards, Performance Share awards, Options, SARs and Incentive Awards granted before that date shall remain valid in accordance with their terms. ARTICLE XVII EFFECTIVE DATE OF PLAN Options, SARs, Performance Shares and Incentive Awards may be granted under this Plan upon its adoption by the Board, provided that no Option, SAR, Performance Shares or Incentive Award granted on or after February 28, 1997, shall be effective or exercisable unless this amended and restated Plan is approved by a majority of the votes cast by the Company's shareholders, voting either in person or by proxy, at a duly held shareholders' meeting at which a quorum is present. Stock Awards may be granted under this amended and restated Plan on or after February 28, 1997, upon the later of its adoption by the Board or its approval by shareholders in accordance with the preceding sentence. -34- EX-10 4 EXHIBIT 10 (AL) Compensation Committee Meeting--12/18/97 Supplemental Executive Retirement Plan Resolutions (Committee Approval Only) - -------------------------------------------------------------------------------- RESOLVED, That, based on studies and recommendations of the Committee's outside consultant, the Committee hereby approves the following amendments to the Supplemental Executive Retirement Plan, effective December 17, 1997: 1. The definition of Years of Service in Section 1.31 of the Plan is revised to read as follows: YEARS OF SERVICE means the total years of service as determined under the terms of the Retirement Plan for purposes of determining the Participant's vested or nonforfeitable interest in the Retirement Plan. For any Participant who is not in pay status as of December 17, 1997, Years of Service means two times the total years of service as determined under the terms of the Retirement Plan for purposes of determining the Participant's vested or nonforfeitable interest in the Retirement Plan plus five additional Years of Service for employment with any prior employer other than the Corporation or an Affiliate. In addition, Years of Service includes service with a successor corporation following a Change in Control to the extent that such service would be recognized for purposes of determining the Participant's vested or nonforfeitable interest in the Retirement Plan if such successor were the Corporation. In the event of a Change in Control, Years of Service shall also include two additional Years of Service if the Participant becomes entitled to payments under a severance agreement under the Crestar Financial Corporation Executive Severance Plan (the "Executive Severance Plan") that provides for a lump sum severance amount based on two times his base pay and bonus or three additional Years of Service if the Participant becomes entitled to payments under a severance agreement under the Executive Severance Plan that provides for a lump sum severance amount based on three times his base pay and bonus. To the extent approved by the Committee, Years of Service shall include additional service with a predecessor employer or entity acquired by the Corporation or an Affiliate. Except as provided in the second sentence of this Section 1.31, a period of service with the Corporation, an Affiliate, a predecessor employer or entity, a successor or any other period shall only be counted once in determining a Participant's Years of Service. Notwithstanding the foregoing, a Participant's Years of Service shall not be less than the number of years determined in accordance with the provisions of Exhibit I to the Plan as approved by the Committee from time to time and in all events the total Years of Service credited to a Participant under this Section 1.31 and Exhibit I in excessof twenty Years of Service shall be disregarded. 2. The definition of "Offset Amount" in Section 1.23 is amended by adding the following sentence to the end of that Section: OFFSET AMOUNT shall also include for any Participant who is credited under Section 1.31 with five Years of Service for service with a prior employer or for any other service with an employer other than the Corporation or an Affiliate, the sum of the annual benefits, if any, payable to or on behalf of that Participant for his lifetime under any qualified or nonqualified defined benefit plan of a prior employer and assuming a benefit commencement date as of the date that benefits are scheduled to commence under Article III or IV. EX-10 5 EXHIBIT 10 (AO) - ------------------------------------------------------------------------------- AMENDMENT TO DIRECTORS' EQUITY PLAN o The amendment and resolution below permits Karen Williams and Gordon Rainey to participate in the Directors' Equity Plan o Previously, their firms required that stock payments could not be made to them directly. Such is no longer the case. o The plan must be revised to allow this change. - ------------------------------------------------------------------------------- CRESTAR FINANCIAL CORPORATION BOARD OF DIRECTORS MEETING September 26, 1997 RESOLUTION AMENDING THE DEFINITION OF A DIRECTOR UNDER THE DIRECTORS' EQUITY PROGRAM TO MEAN A DULY ELECTED OR APPOINTED MEMBER OF THE BOARD WHO IS NOT AN EMPLOYEE OF THE COMPANY OR AN AFFILIATE OR SUBSIDIARY OF THE COMPANY, EXCLUDING ANY MEMBER OF THE BOARD WHO IS REQUIRED TO TRANSFER, ASSIGN OR PAY HIS OR HER BENEFITS UNDER THE PLAN TO THE MEMBER'S EMPLOYER OR FIRM. BE IT RESOLVED, that Karen Hastie Williams and Gordon F. Rainey, Jr., duly elected directors of Crestar Financial Corporation, are hereby designated as active, eligible participants of the Directors' Equity Plan and, as such, are eligible to receive benefits under the Plan. - ------------------------------------------------------------------------------- EXPLANATION ----------- o Gordon Rainey and Karen Hastie-Williams are two directors who currently are required to transfer retainer fees to their respective law firms, Hunton & Williams and Crowell & Moring per firm policy. o Both firms have recently revised their policies to distinguish forms of director compensation between retainer fees and director benefits, therefore now permitting Mr. Rainey and Ms. Williams to receive directors' benefits even though their retainer fees must be transferred to their firms. 3 EX-21 6 EXHIBIT 21 EXHIBIT 21 All subsidiaries of the Registrant included in the Consolidated Financial Statements as of December 31, 1997 are listed below:
- ------------------------------------------- ------------------------------------------ --------------------------------- Subsidiary Description Of Activity Jurisdiction Of Incorporation - ------------------------------------------- ------------------------------------------ --------------------------------- Crestar Bank (1) Banking Services Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Crestar Mortgage Corporation (2) Mortgage Banking Services Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- CMC Oreo, Inc. (3) Real Estate Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Crestar Leasing Corporation (2) Equipment Leasing Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Capitoline Investment Services Investment Advisory Services Virginia Incorporated (2) - ------------------------------------------- ------------------------------------------ --------------------------------- Southern Service Corporation (2) Real Estate Mortgage Trustee Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Crestar Securities Corporation (1) Securities Brokerage Services Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Crestar Insurance Agency, Insurance Agency Virginia Incorporated (1) - ------------------------------------------- ------------------------------------------ --------------------------------- Annapolis Federal Funding Investment Securities Holding Maryland Corporation I (2) - ------------------------------------------- ------------------------------------------ --------------------------------- VA Properties, Inc. (2) Real Estate Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Fifth GWR REFG, Inc. (2) Real Estate Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Villages of KC Properties, Inc. (2) Real Estate Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Hilltop of Virginia, Inc. (2) Real Estate Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- MD Properties, Inc. (2) Real Estate Holding Maryland - ------------------------------------------- ------------------------------------------ ---------------------------------
Page 1 of 3
- ------------------------------------------- ------------------------------------------ --------------------------------- Subsidiary Description Of Activity Jurisdiction Of Incorporation - ------------------------------------------- ------------------------------------------ --------------------------------- MD Oreo, Inc. (2) Real Estate Holding Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- DC Properties, Inc. (2) Real Estate Holding (Inactive) District of Columbia - ------------------------------------------- ------------------------------------------ --------------------------------- DC Properties II, Inc. (2) Real Estate Holding (Inactive) District of Columbia - ------------------------------------------- ------------------------------------------ --------------------------------- Jefferson Funding Corporation I (2) Investment Securities Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Jefferson Funding Corporation II (2) Investment Securities Holding Virginia - ------------------------------------------- ------------------------------------------ --------------------------------- Covenant Towers Holding Corp. (2) Real Estate Development South Carolina - ------------------------------------------- ------------------------------------------ --------------------------------- Loyola Financial Corporation (1) Real Estate Holding Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Bay Woods, Inc. (4) Real Estate Development (Inactive) Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Loyola Financial and Development Real Estate Holding Maryland Corporation (2) - ------------------------------------------- ------------------------------------------ --------------------------------- Cromwell Station, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Dover Meadows, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Hunt Country, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Loyola Investors, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Mid-Atlantic Builders, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Valley Manor, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Woodmore Highlands, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- FSB Development, Inc. (2) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Mid-Atlantic Financial Group, Inc. (3) Mortgage Origination Maryland - ------------------------------------------- ------------------------------------------ ---------------------------------
Page 2 of 3
- ------------------------------------------- ------------------------------------------ --------------------------------- Subsidiary Description Of Activity Jurisdiction Of Incorporation - ------------------------------------------- ------------------------------------------ --------------------------------- Loyola Westpalm Corp. (2) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Crestar Capital Trust I (1) Issuer of Trust Preferred Securities Delaware - ------------------------------------------- ------------------------------------------ --------------------------------- J.J.K. Development Co. IV, Inc. (5) Real Estate Development Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Citizens Bank of Maryland (1) Banking Services Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Citizens Bank of Washington, N.A. Banking Services National Banking Association (1) - ------------------------------------------- ------------------------------------------ --------------------------------- Citizens Mortgage Company (6) Mortgage Banking Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- CBRE Holding Company (6) Real Estate Holding Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- CBRE II, Inc. (6) Real Estate Holding U.S. Virgin Islands - ------------------------------------------- ------------------------------------------ --------------------------------- BTH, Inc. (6) Real Estate Holding Maryland - ------------------------------------------- ------------------------------------------ --------------------------------- Citizens Community Development Real Estate Development Maryland Company (6) - ------------------------------------------- ------------------------------------------ ---------------------------------
Table - ----- (1) Wholly-owned by Crestar Financial Corporation (2) Wholly-owned by Crestar Bank (3) Wholly-owned by Crestar Mortgage Corporation (4) Wholly-owned by Loyola Financial Corporation (5) Wholly-owned by Loyola Financial and Development Corporation (6) Citizens Bank of Maryland Page 3 of 3 EX-23 7 EXHIBIT 23(A) CONSENT OF INDEPENDENT AUDITORS The Board of Directors Crestar Financial Corporation: We consent to incorporation by reference in Registration Statement No. 33-64351 on Form S-3, in Registration Statement No. 333-00049 on Form S-8, in Registration Statement No. 333-19321 on Form S-8, in Registration Statement No. 333-32807 on Form S-8, in Registration Statement No. 333-32817 on Form S-8, in Registration Statement No 333-40353 on Form S-8, in Registration Statement No. 333-40355 on Form S-8, in Registration Statement No. 333-40591 on Form S-8 and in Registration Statement No. 333-40619 on Form S-8 of Crestar Financial Corporation of our report dated January 14, 1998, relating to the consolidated balance sheets of Crestar Financial Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 1997, which report appears in the December 31, 1997 annual report on Form 10-K of Crestar Financial Corporation. Our report refers to our reliance on another auditors' report with respect to amounts related to Citizens Bancorp included in the aforementioned consolidated financial statements. Richmond, Virginia March 24, 1998 EX-23 8 EXHIBIT 23(B) Exhibit 23(b) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference of our report dated January 16, 1997, relating to the consolidated balance sheets of Citizens Bancorp and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. Such report is incorporated by reference in this Annual Report on Form 10-K of Crestar Financial Corporation for the year ended December 31, 1997. Registration Form Statement No. - ---- ------------- S-3 33-64351 S-8 333-00049 S-8 333-19321 S-8 333-32807 S-8 333-32817 S-8 333-40353 S-8 333-40355 S-8 333-40591 S-8 333-40619 /s/DELOITTE & TOUCHE LLP Richmond, Virginia March 27, 1998 EX-27 9 EXHIBIT 27
9 1,000 YEAR 12-MOS 12-MOS DEC-31-1997 DEC-31-1996 DEC-31-1995 DEC-31-1997 DEC-31-1996 DEC-31-1995 1,175,314 1,105,036 1,285,245 12,828,912 12,318,289 12,994,716 1,247,440 595,120 463,285 6,839 7,563 4,490 3,839,006 4,318,349 3,703,378 626,716 967,510 1,015,076 631,491 966,750 1,108,006 15,676,990 14,049,705 14,032,820 281,394 268,868 274,430 24,928,516 22,861,941 22,332,611 16,369,252 15,671,210 16,297,039 4,789,045 4,116,051 2,871,521 879,073 435,834 707,167 831,383 859,336 671,296 557,101 549,350 276,912 0 0 0 0 0 0 1,502,662 1,230,160 1,508,676 24,928,516 22,861,941 22,332,611 1,228,108 1,178,236 1,181,048 273,716 304,256 262,532 73,760 80,887 48,323 1,575,584 1,563,379 1,491,903 478,466 502,773 493,301 699,286 697,069 677,048 876,298 866,310 814,855 108,097 95,890 66,265 5,328 3,393 (2,067) 714,257 780,346 718,199 475,383 323,259 350,459 309,808 218,271 215,887 0 0 0 0 0 0 309,808 218,271 215,887 2.80 1.97 1.95 2.77 1.95 1.92 4.47 4.44 4.44 60,500 81,443 89,984 68,267 71,874 55,523 0 0 0 77,000 153,000 193,000 268,868 274,430 265,171 129,773 132,085 96,801 30,094 31,521 31,442 281,394 268,868 274,430 197,268 199,704 219,327 0 0 0 84,126 69,164 55,103 Basic EPS per Statement of Financial Accounting Standards No. 128 Diluted EPS per Statement of Financial Accounting Standards No. 128 Restated to conform to the 1997 presentation of the consolidated financial statements
EX-99 10 EXHIBIT 99(B) Federal Financial Institutions Examination Council Board of Governors of the Federal Reserve System OMB Number: 7100-0036 Federal Deposit Insurance Corporation OMB Number: 3064-0052 Office of the Comptroller of the Currency OMB Number: 1557-0081 Expires March 31, 2000 [LOGO] Please refer to page i, Table of Contents, for the required disclosure of estimated burden. Consolidated Reports of Condition and Income for A Bank With Domestic and Foreign Offices - FFIEC 031 Report at the close of business December 31, 1997 971231 (RCRI 9999) This report is required by law: 12 U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National banks). This report form is to be filed by banks with branches and consolidated subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries, or International Banking Facilities. NOTE: The Reports of Condition and Income must be signed by an authorized officer and the Report of Condition must be attested to by not less than two directors (trustees) for State nonmember banks and three directors for State member and National banks. I, Richard G. Tilghman, Chairman and Chief Executive Officer - ------------------------------------------------------------ Name and Title of Officer Authorized to Sign Report of the named bank do hereby declare that the Reports of Condition and Income (including the supporting schedules) for this report date have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and belief. /s/ RICHARD G. TILGHMAN - ------------------------------------- Signature of Officer Authorized to Sign Report Date of Signature 1/23/98 The Reports of Condition and Income are to be prepared in accordance with Federal regulatory authority instructions. We, the undersigned directors (trustees), attest to the correctness of the Report of Condition (including the supporting schedules) for this report date and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ J. Carter Fox - ---------------------------------- Director (Trustee) /s/ Frank E. McCarthy - ---------------------------------- Director (Trustee) /s/ Paul D. Miller - ---------------------------------- Director (Trustee) Submission of Reports Each bank must prepare its Reports of Condition and Income either: (a) in automated form and then file the computer data file directly with the banking agencies' collection agent, Electronic Data Systems Corporation (EDS), by modem or on computer diskette; or (b) in hard-copy (paper) form and arrange for another party to convert the paper report to automated form. That party (if other than EDS) must transmit the bank's computer data file to EDS. To fulfill the signature and attestation requirement for the Reports of Condition and Income this report date, for attach this signature page to the hard-copy record of the completed report that the bank places in its files. FDIC Certificate Number Crestar Bank P.O. Box 26665 Richmond, VA 23261 0000047920 55124300000 12543 December 31, 1997 31 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-1 Consolidated Report of Income for the period January 1, 1997 - December 31, 1997 All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars. Schedule RI--Income Statement
I480 Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Interest Income: a. Interest and fee income on loans: (1) In domestic offices: (a) Loans secured by real estate 4011 650,287 1.a.(1)(a) (b) Loans to depository institutions 4019 205 1.a.(1)(b) (c) Loans to finance agricultural production and other loans to farmers 4024 302 1.a.(1)(c) (d) Commercial and industrial loans 4012 181,013 1.a.(1)(d) (e) Acceptances of other banks 4026 0 1.a.(1)(e) (f) Loans to individuals for household, family, and other personal expenditures: (1) Credit cards and related plans 4054 194,918 1.a.(1)(f)(1) (2) Other 4055 240,932 1.a.(1)(f)(2) (g) Loans to foreign governments and official institutions 4056 0 1.a.(1)(g) (h) Obligations (other than securities and leases) of states and political subdivisions in the U.S.: (1) Taxable obligations 4503 1,360 1.a.(1)(h)(1) (2) Tax-exempt obligations 4504 13,337 1.a.(1)(h)(2) (i) All other loans in domestic offices 4058 13,828 1.a.(1)(i) (2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4059 0 1.a.(2) b. Income from lease financing receivables: (1) Taxable leases 4505 2,327 1.b.(1) (2) Tax-exempt leases 4307 0 1.b.(2) c. Interest income on balances due from depository institutions: (1) (1) In domestic offices 4105 1 1.c.(1) (2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4106 739 1.c.(2) d. Interest and dividend income on securities: (1) U.S. Treasury securities and U.S. Government agency obligations 4027 215,383 1.d.(1) (2) Securities issued by states and political subdivisions in the U.S.: (a) Taxable securities 4506 0 1.d.(2)(a) (b) Tax-exempt securities 4507 2,942 1.d.(2)(b) (3) Other domestic debt securities 3657 40,745 1.d.(3) (4) Foreign debt securities 3658 163 1.d.(4) (5) Equity securities (including investments in mutual funds) 3659 7,259 1.d.(5) e. Interest income from trading assets 4069 0 1.e.
__________ (1) Includes interest income on time certificates of deposit not held for trading. 3 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-2 Schedule RI--Continued
Year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Interest income (continued) f. Interest income on federal funds sold and securities purchased under agreements to resell 4020 4,471 1.f. g. Total interest income (sum of items 1.a through 1.f) 4107 1,570,212 1.g. 2. Interest expense: a. Interest on deposits: (1) Interest on deposits in domestic offices: (a) Transaction accounts (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) 4508 5,403 2.a.(1)(a) (b) Nontransaction accounts: (1) Money market deposit accounts (MMDAs) 4509 171,084 2.a.(1)(b)(1) (2) Other savings deposits 4511 37,997 2.a.(1)(b)(2) (3) Time deposits of $100,000 or more A517 63,378 2.a.(1)(b)(3) (4) Time deposits of less than $100,000 A518 200,157 2.a.(1)(b)(4) (2) Interest on deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs 4172 445 2.a.(2) b. Expense of federal funds purchased and securities sold under agreements to repurchase 4180 93,796 2.b. c. Interest on demand notes issued to the U.S. Treasury, trading liabilities, and other borrowed money 4185 81,335 2.c. d. Not applicable e. Interest on subordinated notes and debentures 4200 28,613 2.e. f. Total interest expense (sum of items 2.a through 2.e) 4073 682,208 2.f. 3. Net interest income (item 1.g minus 2.f) RIAD 4074 888,004 3. 4. Provisions: a. Provision for loan and lease losses RIAD 4230 107,867 4.a. b. Provision for allocated transfer risk RIAD 4243 0 4.b. 5. Noninterest income: a. Income from fiduciary activities 4070 50,874 5.a. b. Service charges on deposit accounts in domestic offices 4080 127,164 5.b. c. Trading revenue (must equal Schedule RI, sum of Memorandum items 8.a through 8.d) A220 1,513 5.c. d.-e. Not applicable f. Other noninterest income: (1) Other fee income 5407 126,939 5.f.(1) (2) All other noninterest income* 5408 95,281 5.f.(2) g. Total noninterest income (sum of items 5.a through 5.f) RIAD 4079 401,771 5.g 6. a. Realized gains (losses) on held-to-maturity securities RIAD 3521 0 6.a b. Realized gains (losses) on available-for-sale securities RIAD 3196 5,265 6.b. 7. Noninterest expense: a. Salaries and employee benefits 4135 371,232 7.a. b. Expenses of premises and fixed assets (net of rental income) (excluding salaries and employee benefits and mortgage interest) 4217 103,144 7.b. c. Other noninterest expense* 4092 242,338 7.c. d. Total noninterest expense (sum of items 7.a through 7.c) RIAD 4093 716,714 7.d. 8. Income (loss) before income taxes and extraordinary items and other adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) RIAD 4301 470,459 8. 9. Applicable income taxes (on item 8) RIAD 4302 164,330 9. 10. Income (loss) before extraordinary items and other adjustments (item 8 minus 9) RIAD 4300 306,129 10. 11. Extraordinary items and other adjustments, net of income taxes* RIAD 4320 0 11. 12. Net income (loss) (sum of items 10 and 11) RIAD 4340 306,129 12.
_________ *Describe on Schedule RI-E--Explanations. 4 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-3 Schedule RI--Continued
I481 Year-to-date RIAD Bil Mil Thou Memoranda Dollar Amounts in Thousands 1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after August 7, 1986, that is not deductible for federal income tax purposes 4513 5,149 M.1. 2. Income from the sale and servicing of mutual funds and annuities in domestic offices (included in Schedule RI, item 8) 8431 494 M.2. 3.-4. Not applicable 5. Number of full-time equivalent employees at end of current period Number (round to nearest whole number) 4150 8,215 M.5. 6. Not applicable 7. If the reporting bank has restated its balance sheet as a result of applying push down accounting this calendar year, report the date of the bank's RIAD CC YY MM DD acquisition(1) 9106 00 00 00 00 M.7. 8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) (sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): Bil Mil Thou a. Interest rate exposures 8757 378 M.8.a. b. Foreign exchange exposures 8758 1,135 M.8.b. c. Equity security and index exposures 8759 0 M.8.c. d. Commodity and other exposures 8760 0 M.8.d. 9. Impact on income of off-balance sheet derivatives held for purposes other than trading: a. Net increase (decrease) to interest income 8761 (2,881) M.9.a. b. Net (increase) decrease to interest expense 8762 (2,203) M.9.b. c. Other (noninterest) allocations 8763 0 M.9.c. 10. Credit losses on off-balance sheet derivatives (see instructions) A251 0 M.10. 11. Does the reporting bank have a Subchapter S election in effect for federal YES NO income tax purposes for the current tax year? A530 X M.11. Bil Mil Thou 12. Deferred portion of total applicable income taxes included in Schedule RI, items 9 and 11 (to be reported with the December Report of Income) 4772 13,505 M.12.
__________ (1) For example, a bank acquired on June 1, 1997, would report 19970601. 5 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-4 Schedule RI-A--Changes in Equity Capital Indicate decreases and losses in parentheses.
I483 Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Total equity capital originally reported in the December 31, 1996, Reports of Condition and Income 3215 1,267,765 1. 2. Equity capital adjustments from amended Reports of Income, net* 3216 0 2. 3. Amended balance end of previous calendar year (sum of items 1 and 2) 3217 1,267,765 3. 4. Net income (loss) (must equal Schedule RI, item 12) 4340 306,129 4. 5. Sale, conversion, acquisition, or retirement of capital stock, net 4346 (191,409) 5. 6. Changes incident to business combinations, net 4356 405,914 6. 7. LESS: Cash dividends declared on preferred stock 4470 0 7. 8. LESS: Cash dividends declared on common stock 4460 105,639 8. 9. Cumulative effect of changes in accounting principles from prior years* (see instructions for this schedule) 4411 0 9. 10. Corrections of material accounting errors from prior years* (see instructions for this schedule) 4412 0 10. 11. Change in net unrealized holding gains (losses) on available-for-sale securities 8433 22,576 11. 12. Foreign currency translation adjustments 4414 0 12. 13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) 4415 0 13. 14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, item 28) 3210 1,705,336 14.
__________ *Describe on Schedule RI-E--Explanations. Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance for Loan and Lease Losses Part I. Charge-offs and Recoveries on Loans and Leases Part I excludes charge-offs and recoveries through the allocated transfer risk reserve.
I486 (Column A) (Column B) Charge-offs Recoveries Calendar year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou 1. Loans secured by real estate: a. To U.S. addressees (domicile) 4651 8,042 4661 7,441 1.a. b. To non-U.S. addressees (domicile) 4652 0 4662 0 1.b. 2. Loans to depository institutions and acceptances of other banks: a. To U.S. banks and other U.S. depository institutions 4653 0 4663 0 2.a. b. To foreign banks 4654 0 4664 0 2.b. 3. Loans to finance agricultural production and other loans to farmers 4655 0 4665 17 3. 4. Commercial and industrial loans: a. To U.S. addressees (domicile) 4645 3,275 4617 2,167 4.a. b. To non-U.S. addressees (domicile) 4646 0 4618 0 4.b. 5. Loans to individuals for household, family, and other personal expenditures: a. Credit cards and related plans 4656 92,848 4666 9,924 5.a. b. Other (includes single payment, installment, and all student loans) 4657 25,010 4667 9,673 5.b. 6. Loans to foreign governments and official institutions 4643 0 4627 0 6. 7. All other loans 4644 306 4628 869 7. 8. Lease financing receivables: a. Of U.S. addressees (domicile) 4658 6 4668 0 8.a. b. Of non-U.S. addressees (domicile) 4659 0 4669 0 8.b. 9. Total (sum of items 1 through 8) 4635 129,487 4605 30,091 9.
6 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-5 Schedule RI-B--Continued Part I. Continued
(Column A) (Column B) Charge-offs Recoveries Memoranda Calendar year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou 1-3. Not applicable 4. Loans to finance commercial real estate, construction, and land development activities (not secured by real estate) included in Schedule RI-B, part I, items 4 and 7, above 5409 0 5410 0 M.4. 5. Loans secured by real estate in domestic offices (included in Schedule RI-B, part I, item 1, above): a. Construction and land development 3582 1,756 3583 387 M.5.a. b. Secured by farmland 3584 0 3585 13 M.5.b. c. Secured by 1-4 family residential properties: (1) Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit 5411 1,929 5412 767 M.5.c.(1) (2) All other loans secured by 1-4 family residential properties 5413 3,362 5414 884 M.5.c.(2) d. Secured by multifamily (5 or more) residential properties 3588 17 3589 13 M.5.d. e. Secured by nonfarm nonresidential properties 3590 978 3591 5,377 M.5.e.
Part II. Changes in Allowance for Loan and Lease Losses
Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Balance originally reported in the December 31, 1996, Reports of Condition and Income 3124 233,836 1. 2. Recoveries (must equal part I, item 9, column B above) 4605 30,091 2. 3. LESS: Charge-offs (must equal part I, item 9, column A above) 4635 129,487 3. 4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) 4230 107,867 4. 5. Adjustments* (see instructions for this schedule) 4815 39,112 5. 6. Balance end of current period (sum of items 1 through 5)(must equal Schedule RC, item 4.b) 3123 281,419 6.
__________ *Describe on Schedule RI-E--Explanations. 7 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-6 Schedule RI-D--Income from International Operations For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations account for more than 10 percent of total revenues, total assets, or net income. Part I. Estimated Income from International Operations
I492 Year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, and IBFs: a. Interest income booked 4837 N/A 1.a. b. Interest expense booked 4838 N/A 1.b. c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs (item 1.a minus 1.b) 4839 N/A 1.c. 2. Adjustments for booking location of international operations: a. Net interest income attributable to international operations booked at domestic offices 4840 N/A 2.a. b. Net interest income attributable to domestic business booked at foreign offices 4841 N/A 2.b. c. Net booking location adjustment (item 2.a minus 2.b) 4842 N/A 2.c. 3. Noninterest income and expense attributable to international operations: a. Noninterest income attributable to international operations 4097 N/A 3.a. b. Provision for loan and lease losses attributable to international operations 4235 N/A 3.b. c. Other noninterest expense attributable to international operations 4239 N/A 3.c. d. Net non interest income (expense) attributable to international operations (item 3.a minus 3.b and 3.c) 4843 N/A 3.d. 4. Estimated pretax income attributable to international operations before capital allocation adjustment (sum of items 1.c, 2.c, and 3.d) 4844 N/A 4. 5. Adjustment to pretax income for internal allocations to international operations to reflect the effects of equity capital on overall bank funding costs 4845 N/A 5. 6. Estimated pretax income attributable to international operations after capital allocation adjustment (sum of items 4 and 5) 4846 N/A 6. 7. Income taxes attributable to income from international operations as estimated in item 6 4797 N/A 7. 8. Estimated net income attributable to international operations (item 6 minus 7) 4341 N/A 8. Memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Intracompany interest income included in item 1.a above 4847 N/A M.1. 2. Intracompany interest expense included in item 1.b above 4848 N/A M.2.
Part II. Supplementary Details on Income from International Operations Required by the Departments of Commerce and Treasury for Purposes of the U.S. International Accounts and the U.S. National Income and Product Accounts
Year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou 1. Interest income booked at IBFs 4849 N/A 1. 2. Interest expense booked at IBFs 4850 N/A 2. 3. Noninterest income attributable to international operations booked at domestic offices (excluding IBFs): a. Gains (losses) and extraordinary items 5491 N/A 3.a. b. Fees and other noninterest income 5492 N/A 3.b. 4. Provision for loan and lease losses attributable to international operations booked at domestic offices (excluding IBFs) 4852 N/A 4. 5. Other noninterest expense attributable to international operations booked at domestic offices (excluding IBFs) 4853 N/A 5.
8 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-7 Schedule RI-E--Explanations Schedule RI-E is to be completed each quarter on a calendar year-to-date basis. Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
I495 Year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou 1. All other noninterest income (from Schedule RI, item 5.f.(2)) Report amounts that exceed 10% of Schedule RI, item 5.f.(2): a. Net gains (losses) on other real estate owned 5415 0 1.a. b. Net gains (losses) on sales of loans 5416 22,050 1.b. c. Net gains (losses) on sales of premises and fixed assets 5417 0 1.c. Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, item 5.f.(2): d. TEXT 4461 Personalized Check Sales 4461 10,842 1.d. e. TEXT 4462 Other Operating Income 4462 10,624 1.e. f. TEXT 4463 Gain on Sale of Merchant Card Processing 4463 17,767 1.f. 2. Other noninterest expense (from Schedule RI, item 7.c): a. Amortization expense of intangible assets 4531 14,543 2.a. Report amounts that exceed 10% of Schedule RI, item 7.c: b. Net (gains) losses on other real estate owned 5418 0 2.b. c. Net (gains) losses on sales of loans 5419 0 2.c. d. Net (gains) losses on sales of premises and fixed assets 5420 0 2.d. Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, item 7.c: e. TEXT 4464 Communications 4464 26,757 2.e. f. TEXT 4467 Professional Fees 4467 25,119 2.f. g. TEXT 4468 4468 36,539 2.g. 3. Extraordinary items and other adjustments and applicable income tax effect (from Schedule RI, item 11) (itemize and describe all extraordinary items and other adjustments): a. (1) TEXT 4469 4469 3.a.(1) (2) Applicable income tax effect RIAD 4486 3.a.(2) b. (1) TEXT 4487 4487 3.b.(1) (2) Applicable income tax effect RIAD 4488 3.b.(2) c. (1) TEXT 4489 4489 3.c.(1) (2) Applicable income tax effect RIAD 4491 3.c.(2) 4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) (itemize and describe all adjustments): a. TEXT 4492 4492 4.a. b. TEXT 4493 4493 4.b. 5. Cumulative effect of changes in accounting principles from prior years (from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): a. TEXT A546 Effect of change to GAAP from previous non-GAAP instructions A546 0 5.a. b. TEXT 4495 4495 5.b. 6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) (itemize and describe all corrections): a. TEXT 4496 4496 6.a. b. TEXT 4497 4497 6.b.
9 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RI-8 Schedule RI-E--Continued
Year-to-date Dollar Amounts in Thousands RIAD Bil Mil Thou 7. Other transactions with parent holding company (from Schedule RI-A, item 13) (itemize and describe all such transactions): a. TEXT 4498 4498 7.a. b. TEXT 4499 4499 7.b. 8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) (itemize and describe all adjustments): a. TEXT 4521 Bank Mergers 4521 39,112 8.a. b. TEXT 4522 4522 8.b. 9. Other explanations (the space below is provided for the bank to briefly describe, at its option, any other significant items affecting the Report of Income): I498 I499 No comment __ (RIAD 4769) Other explanations (please type or print clearly): (TEXT 4769)
10 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-1 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for June 30, 1997 All schedules are to be reported in thousands of dollars. Unless otherwise , All schedules are to be reported in thousands of d indicated, report the amount outstanding as of the last business day of the quarter. Schedule RC--Balance Sheet
C400 Dollar Amounts in Thousands RCFD Bil Mil Thou ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1) 0081 1,185,425 1.a. b. Interest-bearing balances(2) 0071 150,042 1.b. 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 628,956 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) 1773 3,685,704 2.b. 3. Federal funds sold and securities purchased under agreements to resell 1350 541,097 3. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 16,772,024 4.a. b. LESS: Allowance for loan and lease losses RCFD 3123 281,419 4.b. c. LESS: Allocated transfer risk reserve RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c) 2125 16,490,605 4.d. 5. Trading assets (from Schedule RC-D) 3545 0 5. 6. Premises and fixed assets (including capitalized leases) 2145 462,079 6. 7. Other real estate owned (from Schedule RC-M) 2150 27,178 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 944 8. 9. Customers' liability to this bank on acceptances outstanding 2155 4,297 9. 10. Intangible assets (from Schedule RC-M) 2143 245,872 10. 11. Other assets (from Schedule RC-F) 2160 751,907 11. 12. Total assets (sum of items 1 through 11) 2170 24,174,106 12.
__________ (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 11 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-2 Schedule RC--Continued
Dollar Amounts in Thousands Bil Mil Thou LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) RCON 2200 16,478,555 13.a. (1) Noninterest-bearing(1) RCON 6631 2,766,463 13.a.(1) (2) Interest-bearing RCON 6636 13,712,092 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II) RCFN 2200 0 13.b. (1) Noninterest-bearing RCFN 6631 0 13.b.(1) (2) Interest-bearing RCFN 6636 0 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 2,584,240 14. 15. a. Demand notes issued to the U.S. Treasury RCON 2840 335,164 15.a. b. Trading liabilities (from Schedule RC-D) RCFD 3548 0 15.b. 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): a. With a remaining maturity of one year or less RCFD 2332 1,632,032 16.a. b. With a remaining maturity of more than one year through three years RCFD A547 79 16.b. c. With a remaining maturity of more than three years RCFD A548 293,830 16.c. 17. Not applicable 18. Bank's liability on acceptances executed and outstanding RCFD 2920 4,297 18. 19. Subordinated notes and debentures (2) RCFD 3200 335,000 19. 20. Other liabilities (from Schedule RC-G) RCFD 2930 805,573 20. 21. Total liabilities (sum of items 13 through 20) RCFD 2948 22,468,770 21. 22. Not applicable EQUITY CAPITAL 23. Perpetual preferred stock and related surplus RCFD 3838 0 23. 24. Common stock RCFD 3230 153,125 24. 25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 223,812 25. 26. a. Undivided profits and capital reserves RCFD 3632 1,329,550 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities RCFD 8434 (1,151) 26.b. 27. Cumulative foreign currency translation adjustments RCFD 3284 0 27. 28. Total equity capital (sum of items 23 through 27) RCFD 3210 1,705,336 28. 29. Total liabilities and equity capital (sum of items 21 and 28) RCFD 3300 24,174,106 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the Number bank by independent external auditors as of any date during 1996 RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work __________ (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. 12 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-3 Schedule RC-A--Cash and Balances Due From Depository Institutions Exclude assets held for trading.
C405 (Column A) (Column B) Consolidated Domestic Bank Offices Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou 1. Cash items in process of collection, unposted debits, and currency and coin 0022 905,483 1. a. Cash items in process of collection and unposted debits 0020 635,891 1.a. b. Currency and coin 0080 269,592 1.b. 2. Balances due from depository institutions in the U.S. 0082 53,571 2. a. U.S. branches and agencies of foreign banks (including their IBFs) 0083 0 2.a. b. Other commercial banks in the U.S. and other depository institutions in the U.S. (including their IBFs) 0085 53,571 2.b. 3. Balances due from banks in foreign countries and foreign central banks 0070 152,647 3. a. Foreign branches of other U.S. banks 0073 0 3.a. b. Other banks in foreign countries and foreign central banks 0074 152,647 3.b. 4. Balances due from Federal Reserve Banks 0090 223,766 0090 223,766 4. 5. Total (sum of items 1 through 4) (total of column A must equal Schedule RC, sum of items 1.a and 1.b) 0010 1,335,467 0010 1,335,467 5.
Memorandum RCON Bil Mil Thou Dollar Amounts in Thousands 1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, column B above) 0050 53,530 M.1.
Schedule RC-B--Securities Exclude assets held for trading.
C410 Held-to-maturity Available-for-sale (Column A) (Column B) (Column C) (Column D) Amortized Cost Fair Value Amortized Cost Fair Value(1) Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 1. U.S. Treasury securities 0211 187,056 0213 187,267 1286 98,722 1287 98,085 1. 2. U.S. Government agency obligations (exclude mortgage-backed securities): a. Issued by U.S. Government agencies(2) 1289 5,002 1290 5,000 1291 0 1293 0 2.a. b. Issued by U.S. Government- sponsored agencies(3) 1294 4,948 1295 5,058 1297 99,569 1298 99,632 2.b.
__________ (1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D. (2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and Export-Import Bank participation certificates. (3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority. 13 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-4 Schedule RC-B--Continued
Held-to-maturity Available-for-sale (Column A) (Column B) (Column C) (Column D) Amortized Cost Fair Value Amortized Cost Fair Value(1) Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 3. Securities issued by states and political subdivisions in the U.S.: a. General obligations 1676 6,525 1677 6,549 1678 0 1679 0 3.a. b. Revenue obligations 1681 39,440 1686 40,373 1690 0 1691 0 3.b. c. Industrial development and similar obligations 1694 290 1695 293 1696 0 1697 0 3.c. 4. Mortgage-backed securities (MBS): a. Pass-through securities: (1) Guaranteed by GNMA 1698 2,049 1699 2,250 1701 80,914 1702 80,476 4.a.(1) (2) Issued by FNMA and FHLMC 1703 24,725 1705 25,411 1706 2,319,492 1707 2,313,754 4.a.(2) (3) Other pass-through securities 1709 0 1710 0 1711 0 1713 0 4.a.(3) b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): (1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1714 353,433 1715 355,829 1716 186,486 1717 187,915 4.b.(1) (2) Collateralized by MBS issued or guaranteed by FNMA, FHLMC, or GNMA 1718 0 1719 0 1731 17,461 1732 17,546 4.b.(2) (3) All other mortgage-backed securities 1733 2,550 1734 2,550 1735 88,385 1736 88,793 4.b.(3) 5. Other debt securities: a. Other domestic debt securities 1737 688 1738 685 1739 677,059 1741 678,417 5.a. b. Foreign debt securities 1742 2,250 1743 2,250 1744 0 1746 0 5.b. 6. Equity securities: a. Investments in mutual funds and other equity securities with readily determinable fair values A510 19,985 A511 21,245 6.a. b. All other equity securities(1) 1752 99,841 1753 99,841 6.b. 7. Total (sum of items 1 through 6) (total of column A must equal Schedule RC, item 2.a) (total of column D must equal Schedule RC, item 2.b) 1754 628,956 1771 633,515 1772 3,687,914 1773 3,685,704 7.
__________ (1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D. 14 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-5 Schedule RC-B--Continued
Memoranda C412 Dollar Amounts in Thousands RCFD Bil Mil Thou 1. Pledged securities(1) 0416 2,374,349 M.1. 2. Maturity and repricing data for debt securities(1),(2) (excluding those in nonaccrual status): a. Securities issued by the U.S. Treasury, U.S. Government agencies, and states and political subdivisions in the U.S.; other non-mortgage debt securities; and mortgage pass-through securities other than those backed by closed-end first lien 1-4 family residential mortgages with a remaining maturity or repricing frequency of: (3) (4) (1) Three months or less A549 102,247 M.2.a.(1) (2) Over three months through 12 months A550 107,206 M.2.a.(2) (3) Over one year through three years A551 155,222 M.2.a.(3) (4) Over three years through five years A552 172,752 M.2.a.(4) (5) Over five years through 15 years A553 262,004 M.2.a.(5) (6) Over 15 years A554 322,902 M.2.a.(6) b. Mortgage pass-through securities backed by closed-end first lien 1-4 family residential mortgages with a remaining maturity or repricing frequency of: (3) (5) (1) Three months or less A555 34,893 M.2.b.(1) (2) Over three months through 12 months A556 1,454 M.2.b.(2) (3) Over one year through three years A557 15,829 M.2.b.(3) (4) Over three years through five years A558 57,982 M.2.b.(4) (5) Over five years through 15 years A559 2,245,620 M.2.b.(5) (6) Over 15 years A560 65,226 M.2.b.(6) c. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS; exclude mortgage pass-through securities) with an expected average life of: (6) (1) Three years or less A561 71,710 M.2.c.(1) (2) Over three years A562 578,527 M.2.c.(2) d. Fixed rate AND floating rate debt securities with a REMAINING MATURITY of one year or less (included in Memorandum items 2.a through 2.c above) A248 118,902 M.2.d. 3.-6. Not applicable 7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or trading securities during the calendar year-to-date (report the amortized cost at date of sale or transfer) 1778 0 M.7. 8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale accounts in Schedule RC-B, item 4.b): a. Amortized cost 8780 10,423 M.8.a. b. Fair value 8781 10,838 M.8.b. 9. Structured notes (included in the held-to-maturity and available-for-sale accounts in Schedule RC-B, items 2, 3, and 5): a. Amortized cost 8782 1,473 M.9.a. b. Fair value 8783 1,473 M.9.b.
- ------------------ (1) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value. (2) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock. (3) Report fixed rate debt securities by remaining maturity and floating rate debt securities by repricing frequency. (4) Sum of Memorandum items 2.a.(1) through 2.a.(6) plus any nonaccrual debt securities in the categories of debt securities reported in Memorandum item 2.a that are included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, sum of items 1, 2, 3, and 5, columns A and D, plus mortgage pass-through securities other than those backed by closed-end first lien 1-4 family residential mortgages included in Schedule RC-B, item 4.a, columns A and D. (5) Sum of Memorandum items 2.b.(1) through 2.b.(6) plus any nonaccrual mortgage pass-through securities backed by closed-end first lien 1-4 family residential mortgages included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, item 4.a, sum of columns A and D, less the amount of mortgage pass-through securities other than those backed by closed-end first lien 1-4 family residential mortgages included in Schedule RC-B, item 4.a, columns A and D. (6) Sum of Memorandum items 2.c.(1) and 2.c.(2) plus any nonaccrual "Other mortgage-backed securities" included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, item 4.b, sum of columns A and D. 15 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-6 Schedule RC-C--Loans and Lease Financing Receivables Part I. Loans and Leases Do not deduct the allowance for loan and lease losses from amounts reported in this schedule. Report total loans and leases, net of unearned income. Exclude assets held for trading and commercial paper.
C415 (Column A) (Column B) Consolidated Domestic Bank Offices Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou 1. Loans secured by real estate 1410 8,994,935 1. a. Construction and land development 1415 371,939 1.a. b. Secured by farmland (including farm residential and other improvements) 1420 21,444 1.b. c. Secured by 1-4 family residential properties: (1) Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit 1797 1,272,351 1.c.(1) (2) All other loans secured by 1-4 family residential properties: (a) Secured by first liens 5367 4,441,496 1.c.(2)(a) (b) Secured by junior liens 5368 715,005 1.c.(2)(b) d. Secured by multifamily (5 or more) residential properties 1460 153,903 1.d. e. Secured by nonfarm nonresidential properties 1480 2,018,797 1.e. 2. Loans to depository institutions: a. To commercial banks in the U.S. 1505 3,948 2.a. (1) To U.S. branches and agencies of foreign banks 1506 0 2.a.(1) (2) To other commercial banks in the U.S. 1507 3,948 2.a.(2) b. To other depository institutions in the U.S. 1517 0 1517 0 2.b. c. To banks in foreign countries 1510 1,424 2.c. (1) To foreign branches of other U.S. banks 1513 0 2.c.(1) (2) To other banks in foreign countries 1516 1,424 2.c.(2) 3. Loans to finance agricultural production and other loans to farmers 1590 2,545 1590 2,545 3. 4. Commercial and industrial loans: a. To U.S. addressees (domicile) 1763 2,753,869 1763 2,753,869 4.a. b. To non-U.S. addressees (domicile) 1764 0 1764 0 4.b. 5. Acceptances of other banks: a. Of U.S. banks 1756 0 1756 0 5.a. b. Of foreign banks 1757 0 1757 0 5.b. 6. Loans to individuals for household, family, and other personal expenditures (i.e., consumer loans) (includes purchased paper) 1975 4,138,351 6. a. Credit cards and related plans (includes check credit and other revolving credit plans) 2008 1,214,503 6.a. b. Other (includes single payment, installment, and all student loans) 2011 2,923,848 6.b. 7. Loans to foreign governments and official institutions (including foreign central banks) 2081 541 2081 541 7. 8. Obligations (other than securities and leases) of states and political subdivisions in the U.S. (includes nonrated industrial development obligations) 2107 260,941 2107 260,941 8. 9. Other loans 1563 542,725 9. a. Loans for purchasing or carrying securities (secured and unsecured) 1545 113,311 9.a. b. All other loans (exclude consumer loans) 1564 429,414 9.b. 10. Lease financing receivables (net of unearned income) 2165 72,745 10. a. Of U.S. addressees (domicile) 2182 72,745 10.a. b. Of non-U.S. addressees (domicile) 2183 0 10.b. 11. LESS: Any unearned income on loans reflected in items 1-9 above 2123 0 2123 0 11. 12. Total loans and leases, net of unearned income (sum of items 1 through 10 minus item 11) (total of column A must equal Schedule RC, item 4.a) 2122 16,772,024 2122 16,772,024 12.
16 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-7 Schedule RC-C--Continued Part I. Continued
Memoranda Dollar Amounts in Thousands Bil Mil Thou 1. Not applicable 2. Loans and leases restructured and in compliance with modified terms (included in Schedule RC-C, part I, above and not reported as past due or nonaccrual in Schedule RC-N, Memorandum item 1): a. Loans secured by real estate: (1) To U.S. addressees (domicle) RCFD 1687 0 M.2.a.(1) (2) To non-U.S. addressees (domicile) RCFD 1689 0 M.2.a.(2) b. All other loans and all lease financing receivables (exclude loans to individuals for household, family, and other personal expenditures) RCFD 8691 0 M.2.b. c. Commercial and industrial loans to and lease financing receivables of non-U.S. addresses (domicile) included in Memorandum item 2.b above RCFD 8692 0 M.2.c. 3. Maturity and repricing data for loans and leases (excluding those in nonaccrual status): a. Closed-end loans secured by first liens on 1-4 family residential properties in domestic offices with a remaining maturity or repricing frequency of:(1)(2) (1) Three months or less RCON A564 1,424,731 M.3.a.(1) (2) Over three months through 12 months RCON A565 1,159,972 M.3.a.(2) (3) Over one year through three years RCON A566 532,178 M.3.a.(3) (4) Over three years through five years RCON A567 395,684 M.3.a.(4) (5) Over five years through 15 years RCON A568 734,101 M.3.a.(5) (6) Over 15 years RCON A569 166,183 M.3.a.(6) b. All loans and leases other than closed-end loans secured by first liens on 1-4 family residential properties in domestic offices with a remaining maturity or repricing frequency of:(1)(3) (1) Three months or less RCFD A570 7,559,906 M.3.b.(1) (2) Over three months through 12 months RCFD A571 1,174,031 M.3.b.(2) (3) Over one year through three years RCFD A572 2,408,739 M.3.b.(3) (4) Over three years through five years RCFD A573 331,522 M.3.b.(4) (5) Over five years through 15 years RCFD A574 823,788 M.3.b.(5) (6) Over 15 years RCFD A575 0 M.3.b.(6) c. Fixed rate AND floating rate loans and leases with a REMAINING MATURITY of one year or less (included in Memorandum items 3.a and 3.b above) RCFD A247 6,202,869 M.3.c. d. Fixed rate AND floating rate loans secured by nonfarm nonresidential properties in domestic offices(4) with a REMAINING MATURITY of over five years (included in Memorandum item 3.b above) RCON A577 161,272 M.3.d. e. Fixed rate AND floating rate commercial and industrial loans(5) with a REMAINING MATURITY of over three years (included in Memorandum item 3.b above) RCFD A578 86,890 M.3.e.
__________ (1) Report fixed rate loans and leases by remaining maturity and floating rate loans by repricing frequency. (2) Sum of Memorandum items 3.a.(1) through 3.a.(6) plus total nonaccrual closed-end loans secured by first liens on 1-4 family residential properties in domestic offices included in Schedule RC-N, Memorandum item 3.c.(2), column C, must equal total closed-end loans secured by first liens on 1-4 family residential properties from Schedule RC-C, part I, item 1.c.(2)(a), column B. (3) Sum of Memorandum items 3.b.(1) through 3.b.(6), plus total nonaccrual loans and leases from Schedule RC-N, sum of items 1 through 8, column C, minus nonaccrual closed-end loans secured by first liens on 1-4 family residential properties in domestic offices included in Schedule RC-N, Memorandum item 3.c.(2), column C, must equal total loans and leases from Schedule RC-C, part I, sum of items 1 through 10, column A, minus total closed-end loans secured by first liens on 1-4 family residential properties in domestic offices from Schedule RC-C, part I, item 1.c.(2)(a), column B. (4) As defined for Schedule RC-C, part I, item 1.e, column B. (5) As defined for Schedule RC-C, part I, item 4, column A. 17 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-8 Schedule RC-C--Continued Part I. Continued
Memoranda (continued) Dollar Amounts in Thousands Bil Mil Thou 4. Loans to finance commercial real estate, construction, and land development activities (not secured by real estate) included in Schedule RC-C, part I, items 4 and 9, column A, page RC-6(1) RCFD 2746 0 M.4. 5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6) RCFD 5369 964,697 M.5. 6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties in domestic offices (included in Schedule RC-C, part I, item 1.c.(2)(a), column B, page RC-6) RCON 5370 1,473,598 M.6.
__________ (1) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A. Schedule RC-D--Trading Assets and Liabilities Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
C420 Dollar Amounts in Thousands Bil Mil Thou ASSETS 1. U.S. Treasury securities in domestic offices RCON 3531 0 1. 2. U.S. Government agency obligations in domestic offices (exclude mortgage-backed securities) RCON 3532 0 2. 3. Securities issued by states and political subdivisions in the U.S. in domestic offices RCON 3533 0 3. 4. Mortgage-backed securities (MBS) in domestic offices: a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA RCON 3534 0 4.a. b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA (include CMOs, REMICs, and stripped MBS) RCON 3535 0 4.b. c. All other mortgage-backed securities RCON 3536 0 4.c. 5. Other debt securities in domestic offices RCON 3537 0 5. 6. Certificates of deposit in domestic offices RCON 3538 0 6. 7. Commercial paper in domestic offices RCON 3539 0 7. 8. Bankers acceptances in domestic offices RCON 3540 0 8. 9. Other trading assets in domestic offices RCON 3541 0 9. 10. Trading assets in foreign offices RCFN 3542 0 10. 11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity contracts: a. In domestic offices RCON 3543 0 11.a. b. In foreign offices RCFN 3543 0 11.b. 12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) RCFD 3545 0 12. LIABILITIES Bil Mil Thou 13. Liability for short positions RCFD 3546 0 13. 14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity contracts RCFD 3547 0 14. 15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) RCFD 3548 0 15.
18 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-9 Schedule RC-E--Deposit Liabilities Part I. Deposits in Domestic Offices
C425 Nontransaction Transaction Accounts Accounts (Column A) (Column B) (Column C) Total transaction Memo: Total Total accounts (including demand deposits nontransaction total demand (included in accounts deposits) column A) (including MMDAs) Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou Deposits of: 1. Individuals, partnerships, and corporations 2201 2,629,893 2240 2,233,840 2346 13,149,021 1. 2. U.S. Government 2202 24,669 2280 18,847 2520 1,637 2. 3. States and political subdivisions in the U.S. 2203 187,051 2290 163,201 2530 134,645 3. 4. Commercial banks in the U.S. 2206 252,409 2310 252,409 2550 533 4. 5. Other depository institutions in the U.S. 2207 54,282 2312 54,282 2349 531 5. 6. Banks in foreign countries 2213 2,836 2320 2,836 2236 0 6. 7. Foreign governments and official institutions (including foreign central banks) 2216 0 2300 0 2377 0 7. 8. Certified and official checks 2330 41,048 2330 41,048 8. 9. Total (sum of items 1 through 8) (sum of columns A and C must equal Schedule RC, item 13.a) 2215 3,192,188 2210 2,766,463 2385 13,286,367 9.
Memoranda Dollar Amounts in Thousands RCON Bil Mil Thou 1. Selected components of total deposits (i.e., sum of item 9, columns A and C): a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts 6835 1,176,975 M.1.a. b. Total brokered deposits 2365 665,000 M.1.b. c. Fully insured brokered deposits (included in Memorandum item 1.b above): (1) Issued in denominations of less than $100,000 2343 0 M.1.c.(1) (2) Issued either in denominations of $100,000 or in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 2344 0 M.1.c.(2) d. Maturity data for brokered deposits: (1) Brokered deposits issued in denominations of less than $100,000 with a remaining maturity of one year or less (included in Memorandum item 1.c.(1) above) A243 0 M.1.d.(1) (2) Brokered deposits issued in denominations of $100,000 or more with a remaining maturity of one year or less (included in Memorandum item 1.b above) A244 665,000 M.1.d.(2) e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. reported in item 3 above which are secured or collateralized as required under state law) 5590 300,011 M.1.e. 2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d must equal item 9, column C above): a. Savings deposits: (1) Money market deposit accounts (MMDAs) 6810 6,713,726 M.2.a.(1) (2) Other savings deposits (excludes MMDAs) 0352 1,448,589 M.2.a.(2) b. Total time deposits of less than $100,000 6648 3,842,078 M.2.b. c. Total time deposits of $100,000 or more 2604 1,281,974 M.2.c. 3. All NOW accounts (included in column A above) 2398 425,725 M.3. 4. Not applicable
19 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-10 Schedule RC-E--Continued Part I. Continued Memoranda (continued)
Dollar Amounts in Thousands RCON Bil Mil Thou 5. Maturity and repricing data for time deposits of less than $100,000: a. Time deposits of less than $100,000 with a remaining maturity or repricing frequency of: (1) (2) (1) Three months or less A579 1,010,744 M.5.a.(1) (2) Over three months through 12 months A580 1,692,499 M.5.a.(2) (3) Over one year through three years A581 882,800 M.5.a.(3) (4) Over three years A582 256,035 M.5.a.(4) b. Fixed rate AND floating rate time deposits of less than $100,000 with a REMAINING MATURITY of one year or less (included in Memorandum items 5.a.(1) through 5.a.(4) above) A241 2,703,243 M.5.b. 6. Maturity and repricing data for time deposits of $100,000 or more: a. Time deposits of $100,000 or more with a remaining maturity or repricing frequency of: (1) (3) (1) Three months or less A584 661,507 M.6.a.(1) (2) Over three months through 12 months A585 502,069 M.6.a.(2) (3) Over one year through three years A586 95,717 M.6.a.(3) (4) Over three years A587 22,681 M.6.a.(4) b. Fixed rate AND floating rate time deposits of $100,000 or more with a REMAINING MATURITY of one year or less (included in Memorandum items 6.a.(1) through 6.a.(4) above) A242 1,163,576 M.6.b.
__________ (1) Report fixed rate time deposits by remaining maturity and floating rate time deposits by repricing frequency. (2) Sum of Memorandum items 5.a.(1) through 5.a.(4) must equal Schedule RC-E, Memorandum item 2.b above. (3) Sum of Memorandum items 6.a.(1) through 6.a.(4) must equal Schedule RC-E, Memorandum item 2.c above. 20 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-11 Schedule RC-E--Continued Part II. Deposits in Foreign Offices (including Edge and Agreement subsidiaries and IBFs)
Dollar Amounts in Thousands RCFN Bil Mil Thou Deposits of: 1. Individuals, partnerships, and corporations 2621 0 1. 2. U.S. banks (including IBFs and foreign branches of U.S. banks) 2623 0 2. 3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) 2625 0 3. 4. Foreign governments and official institutions (including foreign central banks) 2650 0 4. 5. Certified and official checks 2330 0 5. 6. All other deposits 2668 0 6. 7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) 2200 0 7.
Memorandum Dollar Amounts in Thousands RCFN Bil Mil Thou 1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) A245 0 M.1.
Schedule RC-F--Other Assets
C430 Dollar Amounts in Thousands Bil Mil Thou 1. Income earned, not collected on loans RCFD 2164 130,224 1. 2. Net deferred tax assets (1) RCFD 2148 110,743 2. 3. Interest-only strips receivable (not in the form of a security) (2) on: a. Mortgage loans RCFD A519 0 3.a. b. Other financial assets RCFD A520 0 3.b. 4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2168 510,940 4. a. TEXT 3549 Accounts Receivable Trade Date Settlement RCFD 3549 529,585 4.a. b. TEXT 3550 RCFD 3550 4.b. c. TEXT 3551 RCFD 3551 4.c. 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) RCFD 2160 751,907 5.
Memorandum Dollar Amounts in Thousands Bil Mil Thou 1. Deferred tax assets disallowed for regulatory capital purposes RCFD 5610 0 M.1.
Schedule RC-G--Other Liabilities
C435 Dollar Amounts in Thousands Bil Mil Thou 1. a. Interest accrued and unpaid on deposits in domestic offices (3) RCON 3645 41,409 1.a. b. Other expenses accrued and unpaid (includes accrued income taxes payable) RCFD 3646 186,502 1.b. 2. Net deferred tax liabilities (1) RCFD 3049 0 2. 3. Minority interest in consolidated subsidiaries RCFD 3000 0 3. 4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2938 577,662 4. a. TEXT 3552 Accounts Payable-Trade Date Settlement RCFD 3552 478,175 4.a. b. TEXT 3553 RCFD 3553 4.b. c. TEXT 3554 RCFD 3554 4.c. 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) RCFD 2930 805,573 5.
__________ (1) See discussion of deferred income taxes in Glossary entry on "income taxes." (2) Report interest-only strips receivable in the form of a security as available-for-sale securities in Schedule RC, item 2.b, or as trading assets in Schedule RC, item 5, as appropriate. (3) For savings banks, include "dividends" accrued and unpaid on deposits. 21 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-12 Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
C440 Domestic Offices Dollar Amounts in Thousands RCON Bil Mil Thou 1. Customers' liability to this bank on acceptances outstanding 2155 4,297 1. 2. Bank's liability on acceptances executed and outstanding 2920 4,297 2. 3. Federal funds sold and securities purchased under agreements to resell 1350 541,097 3. 4. Federal funds purchased and securities sold under agreements to repurchase 2800 2,584,240 4. 5. Other borrowed money 3190 1,925,941 5. EITHER 6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs 2163 152,004 6. OR 7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs 2941 N/A 7. 8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) 2192 24,022,102 8. 9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs) 3129 22,468,770 9.
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
RCON Bil Mil Thou 10. U.S. Treasury securities 1779 285,141 10. 11. U.S. Government agency obligations (exclude mortgage-backed securities) 1785 109,582 11. 12. Securities issued by states and political subdivisions in the U.S. 1786 46,255 12. 13. Mortgage-backed securities (MBS): a. Pass-through securities: (1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1787 2,421,004 13.a.(1) (2) Other pass-through securities 1869 0 13.a.(2) b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): (1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1877 541,348 13.b.(1) (2) All other mortgage-backed securities 2253 108,889 13.b.(2) 14. Other domestic debt securities 3159 679,105 14. 15. Foreign debt securities 3160 2,250 15. 16. Equity securities: a. Investments in mutual funds and other equity securities with readily determinable fair values A513 21,245 16.a. b. All other equity securities 3169 99,841 16.b. 17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) 3170 4,314,660 17.
Memorandum (to be completed only by banks with IBFs and other "foreign" offices) Dollar Amounts in Thousands RCON Bil Mil Thou EITHER 1. Net due from the IBF of the domestic offices of the reporting bank 3051 N/A M.1. OR 2. Net due to the IBF of the domestic offices of the reporting bank 3059 N/A M.2.
22 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-13 Schedule RC-I--Selected Assets and Liabilities of IBFs To be completed only by banks with IBFs and other "foreign" offices.
C445 Dollar Amounts in Thousands RCFN Bil Mil Thou 1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) 2133 N/A 1. 2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, column A) 2076 N/A 2. 3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) 2077 N/A 3. 4. Total IBF liabilities (component of Schedule RC, item 21) 2898 N/A 4. 5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, part II, items 2 and 3) 2379 N/A 5. 6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) 2381 N/A 6.
Schedule RC-K--Quarterly Averages (1)
C455 Dollar Amounts in Thousands Bil Mil Thou ASSETS 1. Interest-bearing balances due from depository institutions RCFD 3381 39,130 1. 2. U.S. Treasury securities and U.S. Government agency obligations(2) RCFD 3382 3,000,880 2. 3. Securities issued by states and political subdivisions in the U.S.(2) RCFD 3383 46,738 3. 4. a. Other debt securities(2) RCFD 3647 747,820 4.a. b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) RCFD 3648 115,894 4.b. 5. Federal funds sold and securities purchased under agreements to resell RCFD 3365 68,649 5. 6. Loans: a. Loans in domestic offices: (1) Total loans RCON 3360 16,103,193 6.a.(1) (2) Loans secured by real estate RCON 3385 8,752,561 6.a.(2) (3) Loans to finance agricultural production and other loans to farmers RCON 3386 3,238 6.a.(3) (4) Commercial and industrial loans RCON 3387 2,526,218 6.a.(4) (5) Loans to individuals for household, family, and other personal expenditures RCON 3388 4,232,365 6.a.(5) b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN 3360 0 6.b. 7. Trading assets RCFD 3401 0 7. 8. Lease financing receivables (net of unearned income) RCFD 3484 38,794 8. 9. Total assets(4) RCFD 3368 22,014,141 9. LIABILITIES 10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) (exclude demand deposits) RCON 3485 221,818 10. 11. Nontransaction accounts in domestic offices: a. Money market deposit accounts (MMDAs) RCON 3486 5,791,724 11.a. b. Other savings deposits RCON 3487 1,455,579 11.b. c. Time deposits of $100,000 or more RCON A514 1,594,156 11.c. d. Time deposits of less than $100,000 RCON A529 3,781,410 11.d. 12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN 3404 1,971 12. 13. Federal funds purchased and securities sold under agreements to repurchase RCFD 3353 1,913,652 13. 14. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) RCFD 3355 1,411,814 14.
__________ (1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or (2) an average of weekly figures (i.e., the Wednesday of each week of the quarter). (2) Quarterly averages for all debt securities should be based on amortized cost. (3) Quarterly averages for all equity securities should be based on historical cost. (4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity securities without readily determinable fair values at historical cost. 23 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-14 Schedule RC-L--Off-Balance Sheet Items Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
C460 Dollar Amounts in Thousands RCFD Bil Mil Thou 1. Unused commitments: a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity lines 3814 1,157,030 1.a. b. Credit card lines 3815 2,918,849 1.b. c. Commercial real estate, construction, and land development: (1) Commitments to fund loans secured by real estate 3816 697,770 1.c.(1) (2) Commitments to fund loans not secured by real estate 6550 0 1.c.(2) d. Securities underwriting 3817 0 1.d. e. Other unused commitments 3818 5,297,688 1.e. 2. Financial standby letters of credit and foreign office guarantees 3819 322,519 2. a. Amount of financial standby letters of credit conveyed to others RCFD 3820 3,888 2.a. 3. Performance standby letters of credit and foreign office guarantees 3821 150,440 3. a. Amount of performance standby letters of credit conveyed to others RCFD 3822 252 3.a. 4. Commercial and similar letters of credit 3411 54,559 4. 5. Participations in acceptances (as described in the instructions) conveyed to others by the reporting bank 3428 0 5. 6. Participations in acceptances (as described in the instructions) acquired by the reporting (nonaccepting) bank 3429 0 6. 7. Securities borrowed 3432 0 7. 8. Securities lent (including customers' securities lent where the customer is indemnified against loss by the reporting bank) 3433 0 8. 9. Financial assets transferred with recourse that have been treated as sold for Call Report purposes: a. First lien 1-to-4 family residential mortgage loans: (1) Outstanding principal balance of mortgages transferred as of the report date A521 119,157 9.a.(1) (2) Amount of recourse exposure on these mortgages as of the report date A522 119,157 9.a.(2) b. Other financial assets (excluding small business obligations reported in item 9.c): (1) Outstanding principal balance of assets transferred as of the report date A523 0 9.b.(1) (2) Amount of recourse exposure on these assets as of the report date A524 0 9.b.(2) c. Small business obligations transferred with recourse under Section 208 of the Riegle Community Development and Regulatory Improvement Act of 1994: (1) Outstanding principal balance of small business obligations transferred as of the report date A249 0 9.c.(1) (2) Amount of retained recourse on these obligations as of the report date A250 0 9.c.(2) 10. Notional amount of credit derivatives: a. Credit derivatives on which the reporting bank is the guarantor A534 0 10.a. b. Credit derivatives on which the reporting bank is the beneficiary A535 0 10.b. 11. Spot foreign exchange contracts 8765 41,575 11. 12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 3430 1,558,141 12. a. TEXT 3555 Mortgage Servicing With Recourse RCFD 3555 1,558,141 12.a. b. TEXT 3556 RCFD 3556 12.b. c. TEXT 3557 RCFD 3557 12.c. d. TEXT 3558 RCFD 3558 12.d.
24 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-15 Schedule RC-L--Continued Dollar Amounts in Thousands RCFD Bil Mil Thou 13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 5591 0 13. a. TEXT 5592 RCFD 5592 13.a. b. TEXT 5593 RCFD 5593 13.b. c. TEXT 5594 RCFD 5594 13.c. d. TEXT 5595 RCFD 5595 13.d.
C461 (Column A) (Column B) (Column C) (Column D) Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou 14. Gross amounts (e.g., notional amounts) (for each column, sum of items 14.a through 14.e must equal sum of items 15, 16.a, and 16.b): a. Future contracts 0 0 0 0 14.a. RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696 b. Forward contracts 1,459,888 6,499 0 0 14.b. RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700 c. Exchange-traded option contracts: (1) Written options 0 0 0 0 14.c.(1) RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704 (2) Purchased options 0 0 0 0 14.c.(2) RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708 d. Over-the-counter option contracts: (1) Written options 21,888 0 0 0 14.d.(1) RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712 (2) Purchased options 2,431,888 0 0 0 14.d.(2) RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716 e. Swaps 1,748,857 0 0 0 14.e. RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720 15. Total gross notional amount of derivative contracts held for trading 0 6,499 0 0 15. RCFD A126 RCFD A127 RCFD 8723 RCFD 8724 16. Gross notional amount of derivative contracts held for purposes other than trading: a. Contracts marked to market 0 0 0 0 16.a. RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728 b. Contracts not marked to market 5,662,521 0 0 0 16.b. RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732 c. Interest rate swaps where the bank has agreed to pay a fixed rate 0 16.c. RCFD A589
25 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-16 Schedule RC-L--Continued
C462 (Column A) (Column B) (Column C) (Column D) Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 17. Gross fair values of derivative contracts: a. Contracts held for trading: (1) Gross positive fair value 8733 0 8734 201 8735 0 8736 0 17.a.(1) (2) Gross negative fair value 8737 0 8738 195 8739 0 8740 0 17.a.(2) b. Contracts held for purposes other than trading that are marked to market: (1) Gross positive fair value 8741 0 8742 0 8743 0 8744 0 17.b.(1) (2) Gross negative fair value 8745 0 8746 0 8747 0 8748 0 17.b.(2) c. Contracts held for purposes other than trading that are not marked to market: (1) Gross positive fair value 8749 20,438 8750 0 8751 0 8752 0 17.c.(1) (2) Gross negative fair value 8753 8,397 8754 0 8755 0 8756 0 17.c.(2)
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou 1.-2. Not applicable 3. Unused commitments with an original maturity exceeding one year that are reported in Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments that are fee paid or otherwise legally binding) 3833 4,871,306 M.3. a. Participations in commitments with an original maturity exceeding one year conveyed to others RCFD 3834 0 M.3.a. 4. To be completed only by banks with $1 billion or more in total assets: Standby letters of credit and foreign office guarantees (both financial and performance) issued to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above 3377 41 M.4. 5. Installment loans to individuals for household, family, and other personal expenditures that have been securitized and sold (with servicing retained), amounts outstanding by type of loan: a. Loans to purchase private passenger automobiles (to be completed for the September report only) 2741 N/A M.5.a. b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) 2742 0 M.5.b. c. All other consumer installment credit (including mobile home loans) (to be completed for the September report only) 2743 N/A M.5.c.
26 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-17 Schedule RC-M--Memoranda
C465 Dollar Amounts in Thousands RCFD Bil Mil Thou 1. Extensions of credit by the reporting bank to its executive officers, directors, principal shareholders, and their related interests as of the report date: a. Aggregate amount of all extensions of credit to all executive officers, directors, principal shareholders, and their related interests 6164 28,041 1.a. b. Number of executive officers, directors, and principal shareholders to whom the amount of all extensions of credit by the reporting bank (including extensions of credit to related interests) equals or exceeds the lesser of $500,000 or 5 percent of total capital as defined for this Number purpose in agency regulations RCFD 6165 3 1.b. 2. Federal funds sold and securities purchased under agreements to resell with U.S. branches and agencies of foreign banks(1) (included in Schedule RC, item 3) 3405 0 2. 3. Not applicable. 4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others (include both retained servicing and purchased servicing): a. Mortgages serviced under a GNMA contract 5500 232,544 4.a. b. Mortgages serviced under a FHLMC contract: (1) Serviced with recourse to servicer 5501 15,834 4.b.(1) (2) Serviced without recourse to servicer 5502 2,311,453 4.b.(2) c. Mortgages serviced under a FNMA contract: (1) Serviced under a regular option contract 5503 87,402 4.c.(1) (2) Serviced under a special option contract 5504 2,605,507 4.c.(2) d. Mortgages serviced under other servicing contracts 5505 6,137,060 4.d. 5. To be completed only by banks with $1 billion or more in total assets: Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must equal Schedule RC, item 9): a. U.S. addressees (domicile) 2103 4,297 5.a. b. Non-U.S. addressees (domicile) 2104 0 5.b. 6. Intangible assets: a. Mortgage servicing assets 3164 63,101 6.a. (1) Estimated fair value of mortgage servicing assets RCFD A590 88,591 6.a.(1) b. Other identifiable intangible assets: (1) Purchased credit card relationships 5506 0 6.b.(1) (2) All other identifiable intangible assets 5507 3,429 6.b.(2) c. Goodwill 3163 179,342 6.c. d. Total (sum of items 6.a, 6.b.(1), 6.b.(2), and 6.c) (must equal Schedule RC, item 10) 2143 245,872 6.d. e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or are otherwise qualifying for regulatory capital purposes 6442 72 6.e. 7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to redeem the debt 3295 0 7.
__________ (1) Do not report federal funds sold and securities purchased under agreements to resell with other commercial banks in the U.S. in this item. 27 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-18 Schedule RC-M--Continued
Dollar Amounts in Thousands Bil Mil Thou 8. a. Other real estate owned: (1) Direct and indirect investments in real estate ventures RCFD 5372 0 8.a.(1) (2) All other real estate owned: (a) Construction and land development in domestic offices RCON 5508 0 8.a.(2)(a) (b) Farmland in domestic offices RCON 5509 0 8.a.(2)(b) (c) 1-4 family residential properties in domestic offices RCON 5510 9,391 8.a.(2)(c) (d) Multifamily (5 or more) residential properties in domestic offices RCON 5511 0 8.a.(2)(d) (e) Nonfarm nonresidential properties in domestic offices RCON 5512 17,787 8.a.(2)(e) (f) In foreign offices RCFN 5513 0 8.a.(2)(f) (3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) RCFD 2150 27,178 8.a.(3) b. Investments in unconsolidated subsidiaries and associated companies: (1) Direct and indirect investments in real estate ventures RCFD 5374 944 8.b.(1) (2) All other investments in unconsolidated subsidiaries and associated companies RCFD 5375 0 8.b.(2) (3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) RCFD 2130 944 8.b.(3) 9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, item 23, "Perpetual preferred stock and related surplus" RCFD 3778 0 9. 10. Mutual fund and annuity sales in domestic offices during the quarter (include proprietary, private label, and third party products): a. Money market funds RCON 6441 1,466,502 10.a. b. Equity securities funds RCON 8427 78,305 10.b. c. Debt securities funds RCON 8428 15,901 10.c. d. Other mutual funds RCON 8429 42,115 10.d. e. Annuities RCON 8430 47,366 10.e. f. Sales of proprietary mutual funds and annuities (included in items 10.a through 10.e above) RCON 8784 26,088 10.f. 11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative contracts included in assets and liabilities reported in Schedule RC RCFD A525 4,213 11. 12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices (other than insured branches in Puerto Rico and U.S. territories and possessions) on the balance sheet (Schedule RC) in accordance with generally accepted accounting principles (1) RCFD A526 0 12. 13. Outstanding principal balance of loans other than 1-4 family residential mortgage loans that are serviced for others (to be completed if this balance is more than $10 million and exceeds ten percent of total assets) RCFD A591 0 13.
Dollar Amounts in Thousands Memorandum RCFD Bil Mil Thou 1. Reciprocal holdings of banking organizations' capital instruments (to be completed for the December report only) 3836 0 M.1.
- ------------- (1) Exclude netted on-balance sheet amounts associated with off-balance sheet derivative contracts, deferred tax assets netted against deferred tax liabilities, and assets netted in accounting for pensions. 28 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-19 Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets The FFIEC regards the information reported in all of Memorandum item 1, in items 1 through 10, column A, and in Memorandum items 2 through 4, column A, as confidential.
C470 (Column A) (Column B) (Column C) Past due Past due 90 Nonaccrual 30 through 89 days or more days and still and still accruing accruing Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 1. Loans secured by real estate: a. To U.S. addressees (domicile) 1245 140,803 1246 16,500 1247 53,508 1.a. b. To non-U.S. addressees (domicile) 1248 0 1249 0 1250 0 1.b. 2. Loans to depository institutions and acceptances of other banks: a. To U.S. banks and other U.S. depository institutions 5377 0 5378 0 5379 0 2.a. b. To foreign banks 5380 0 5381 0 5382 0 2.b. 3. Loans to finance agricultural production and other loans to farmers 1594 35 1597 6 1583 0 3. 4. Commercial and industrial loans: a. To U.S. addressees (domicile) 1251 2,358 1252 2,509 1253 3,817 4.a. b. To non-U.S. addressees (domicile) 1254 0 1255 0 1256 0 4.b. 5. Loans to individuals for household, family, and other personal expenditures: a. Credit cards and related plans 5383 33,048 5384 24,221 5385 0 5.a. b. Other (includes single payment, installment, and all student loans) 5386 77,562 5387 29,987 5388 2,238 5.b. 6. Loans to foreign governments and official institutions 5389 0 5390 0 5391 0 6. 7. All other loans 5459 3,134 5460 95 5461 1,626 7. 8. Lease financing receivables: a. Of U.S. addressees (domicile) 1257 0 1258 0 1259 0 8.a. b. Of non-U.S. addressees (domicile) 1271 0 1272 0 1791 0 8.b. 9. Debt securities and other assets (exclude other real estate owned and other repossessed assets) 3505 0 3506 0 3507 0 9.
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items 1 through 8.
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 10. Loans and leases reported in items 1 through 8 above which are wholly or partially guaranteed by the U.S. Government. 5612 42,137 5613 25,831 5614 96 10. a. Guaranteed portion of loans and leases included in item 10 above. 5615 42,137 5616 25,831 5617 96 10.a.
29 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-20 Schedule RC-N--Continued
C473 (Column A) (Column B) (Column C) Past due Past due 90 Nonaccrual 30 through 89 days or more days and still and still accruing accruing Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 1. Restructured loans and leases included in Schedule RC-N, items 1 through 8, above (and not reported in Schedule RC-C, part I, Memorandum item 2) 1658 0 1659 0 1661 1,290 M.1. 2. Loans to finance commercial real estate, construction, and land development activities (not secured by real estate) included in Schedule RC-N, items 4 and 7, above 6558 0 6559 0 6560 0 M.2. RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou 3. Loans secured by real estate in domestic offices (included in Schedule RC-N, item 1, above): a. Construction and land development 2759 8,105 2769 199 3492 13,944 M.3.a. b. Secured by farmland 3493 0 3494 74 3495 30 M.3.b. c. Secured by 1-4 family residential properties: (1) Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit 5398 34,413 5399 5,665 5400 937 M.3.c.(1) (2) All other loans secured by 1-4 family residential properties 5401 82,271 5402 9,050 5403 28,648 M.3.c.(2) d. Secured by multifamily (5 or more) residential properties 3499 49 3500 46 3501 1,144 M.3.d. e. Secured by nonfarm nonresidential properties 3502 15,965 3503 1,466 3504 8,805 M.3.e.
(Column A) (Column B) Past due 30 Past due 90 through 89 days days or more RCFD Bil Mil Thou RCFD Bil Mil Thou 4. Interest rate, foreign exchange rate, and other commodity and equity contracts: a. Book value of amounts carried as assets 3522 0 3528 0 M.4.a. b. Replacement cost of contracts with a positive replacement cost 3529 0 3530 0 M.4.b.
Person to whom questions about the Reports of Condition and Income should be directed: C477 Natie P. Hennelly (804)782-5320 Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902) 30 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-21 Schedule RC-O--Other Data for Deposit Insurance and FICO Assessments
C475 Dollar Amounts in Thousands RCON Bil Mil Thou 1. Unposted debits (see instructions): a. Actual amount of all unposted debits 0030 N/A 1.a. OR b. Separate amount of unposted debits: (1) Actual amount of unposted debits to demand deposits 0031 0 1.b.(1) (2) Actual amount of unposted debits to time and savings deposits (1) 0032 0 1.b.(2) 2. Unposted credits (see instructions): a. Actual amount of all unposted credits 3510 N/A 2.a. OR b. Separate amount of unposted credits: (1) Actual amount of unposted credits to demand deposits 3512 0 2.b.(1) (2) Actual amount of unposted credits to time and savings deposits (1) 3514 0 2.b.(2) 3. Uninvested trust funds (cash) held in bank's own trust department (not included in total deposits in domestic offices) 3520 0 3. 4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto Rico and U.S. territories and possessions (not included in total deposits): a. Demand deposits of consolidated subsidiaries 2211 79,440 4.a. b. Time and savings deposits (1) of consolidated subsidiaries 2351 0 4.b. c. Interest accrued and unpaid on deposits of consolidated subsidiaries 5514 0 4.c. 5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: a. Demand deposits in insured branches (included in Schedule RC-E, Part II) 2229 0 5.a. b. Time and savings deposits (1) in insured branches (included in Schedule RC-E, Part II) 2383 0 5.b. c. Interest accrued and unpaid on deposits in insured branches (included in Schedule RC-G, item 1.b) 5515 0 5.c. 6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on behalf of its respondent depository institutions that are also reflected as deposit liabilities of the reporting bank: a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, column B) 2314 66 6.a. b. Amount reflected in time and savings deposits (1) (included in Schedule RC-E, Part I, item 4 or 5, column A or C, but not column B) 2315 0 6.b. 7. Unamortized premiums and discounts on time and savings deposits:(1),(2) a. Unamortized premiums 5516 0 7.a. b. Unamortized discounts 5517 0 7.b. 8. To be completed by banks with "Oakar deposits." a. Deposits purchased or acquired from other FDIC-insured institutions during the quarter (exclude deposits purchased or acquired from foreign offices other than insured branches in Puerto Rico and U.S. territories and possessions): (1) Total deposits purchased or acquired from other FDIC-insured institutions during the quarter A531 314,743 8.a.(1) (2) Amount of purchased or acquired deposits reported in item 8.a.(1) above attributable to a secondary fund (i.e., BIF members report deposits attributable to SAIF; SAIF members report deposits attributable to BIF) A532 314,743 8.a.(2) b. Total deposits sold or transferred to other FDIC-insured institutions during the quarter (exclude sales or transfers by the reporting bank of deposits in foreign offices other than insured branches in Puerto Rico and U.S. territories and possessions) A533 0 8.b.
__________ (1) For FDIC insurance and FICO assessment purposes, "time and savings deposits" consists of nontransaction accounts and all transaction accounts other than demand deposits. (2) Exclude core deposit intangibles. 31 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-22 Schedule RC-O--Continued
Dollar Amounts in Thousands RCON Bil Mil Thou 9. Deposits in lifeline accounts 5596 9. 10. Benefit-responsive "Depository Institution Investment Contracts" (included in total deposits in domestic offices) 8432 0 10. 11. Adjustments to demand deposits in domestic offices and in insured branches in Puerto Rico and U.S. territories and possessions reported in Schedule RC-E for certain reciprocal demand balances: a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal demand balances with the domestic offices of U.S. banks and savings associations and insured branches in Puerto Rico and U.S. territories and possessions that were reported on a gross basis in Schedule RC-E had been reported on a net basis 8785 0 11.a. b. Amount by which demand deposits would be increased if the reporting bank's reciprocal demand balances with foreign banks and foreign offices of other U.S. banks (other than insured branches in Puerto Rico and U.S. territories and possessions) that were reported on a net basis in Schedule RC-E had been reported on a gross basis A181 0 11.b. c. Amount by which demand deposits would be reduced if cash items in process of collection were included in the calculation of the reporting bank's net reciprocal demand balances with the domestic offices of U.S. banks and savings associations and insured branches in Puerto Rico and U.S. territories and possessions in Schedule RC-E A182 0 11.c. 12. Amount of assets netted against deposit liabilities in domestic offices and in insured branches in Puerto Rico and U.S. territories and possessions on the balance sheet (Schedule RC) in accordance with generally accepted accounting principles (exclude amounts related to reciprocal demand balances): a. Amount of assets netted against demand deposits A527 0 12.a. b. Amount of assets netted against time and savings deposits A528 0 12.b.
Memoranda (to be completed each quarter except as noted)
Dollar Amounts in Thousands RCON Bil Mil Thou 1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a. (1) and 1.b.(1) must equal schedule RC, item 13.a): a. Deposit accounts of $100,000 or less: (1) Amount of deposit accounts of $100,000 or less 2702 11,128,540 M.1.a.(1) (2) Number of deposit accounts of $100,000 or less (to be completed for the June report only) Number RCON 3779 N/A M.1.a.(2) b. Deposit accounts of more than $100,000: (1) Amount of deposit accounts of more than $100,000 2710 5,350,015 M.1.b.(1) Number (2) Number of deposit accounts of more than $100,000 RCON 2722 17,474 M.1.b.(2) 2. Estimated amount of uninsured deposits in domestic offices of the bank: a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2) above by $100,000 and subtracting the result from the amount of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(1) above. Indicate in the appropriate box at the right whether your bank has a method or procedure for determining a better estimate of uninsured deposits than the estimate described above Yes No 6861 X M.2.a. b. If the box marked YES has been checked, report the estimate of uninsured RCON Bil Mil Thou deposits determined by using your bank's method or procedure 5597 N/A M.2.b. 3. Has the reporting institution been consolidated with a parent bank or savings association in that parent bank's or parent savings association's Call Report or Thrift Financial Report? If so, report the legal title and FDIC Certificate Number of the parent bank or parent savings association: FDIC Cert No. TEXT A545 N/A RCON A545 N/A M.3.
32 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-23 Schedule RC-R--Regulatory Capital This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1996, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than $1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed only by banks with total assets of less than $1 billion. C480 Indicate in the appropriate box at the right whether the bank has total capital Yes No greater than or equal to eight percent of adjusted total assets. RCFD 6056 1.
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions). If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked NO has been checked, the bank must complete the remainder of this schedule. A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight percent or that the bank is not in compliance with the risk-based capital guidelines. NOTE: All banks are required to complete items 2 and 3 below. See optional worksheet for items 3.a through 3.f.
Dollar Amounts in Thousands RCFD Bil Mil Thou 2. Portion of qualifying limited-life capital instruments (original weighted average maturity of at least five years) that is includible in Tier 2 capital: a. Subordinated debt(1) and intermediate term preferred stock A515 252,000 252,000 2.a. b. Other limited-life capital instruments A516 0 2.b. 3. Amounts used in calculating regulatory capital ratios (report amounts determined by the bank for its own internal regulatory capital analyses consistent with applicable capital standards): a. Tier 1 capital 8274 1,523,315 3.a. b. Tier 2 capital 8275 504,241 3.b. c. Total risk-based capital 3792 2,027,556 3.c. d. Excess allowance for loan and lease losses (amount that exceeds 1.25% of gross risk-weighted assets) A222 28,706 3.d. e. Net risk-weighted assets (gross risk-weighted assets less excess allowance reported in item 3.d above and all other deductions) A223 20,188,364 3.e. f. "Average total assets" (quarterly average reported in Schedule RC-K, item 9, less all assets deducted from Tier 1 capital)(2) A224 21,830,969 3.f.
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks that answered NO to item 1 above and by banks with total assets of $1 billion or more.
(Column A) (Column B) Assets Credit Equiv- Recorded alent Amount on the of Off-Balance Balance Sheet Sheet Items(3) RCFD Bil Mil Thou RCFD Bil Mil Thou 4. Assets and credit equivalent amounts of off-balance sheet items assigned to the Zero percent risk category: a. Assets recorded on the balance sheet 5163 885,200 4.a. b. Credit equivalent amount of off-balance sheet items 3796 0 4.b.
__________ (1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7. (2) Do not deduct excess allowance for loan and lease losses. (3) Do not report in column B the risk-weighted amount of assets reported in column A. 33 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 FFIEC 031 Page RC-24 Schedule RC-R--Continued
(Column A) (Column B) Assets Credit Equiv- Recorded alent Amount on the of Off-Balance Balance Sheet Sheet Items (1) Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou 5. Assets and credit equivalent amounts of off-balance sheet items assigned to the 20 percent risk category: a. Assets recorded on the balance sheet 5165 5,458,948 5.a. b. Credit equivalent amount of off-balance sheet items 3801 28,870 5.b. 6. Assets and credit equivalent amounts of off-balance sheet items assigned to the 50 percent risk category: a. Assets recorded on the balance sheet 3802 4,243,936 6.a. b. Credit equivalent amount of off-balance sheet items 3803 927,717 6.b. 7. Assets and credit equivalent amounts of off-balance sheet items assigned to the 100 percent risk category: a. Assets recorded on the balance sheet 3804 13,868,592 7.a. b. Credit equivalent amount of off-balance sheet items 3805 2,848,733 7.b. 8. On-balance sheet asset values excluded from and deducted in the calculation of the risk-based capital ratio (2) 3806 (1,151) 8. 9. Total assets recorded on the balance sheet (sum of items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, item 12 plus items 4.b and 4.c) 3807 24,455,525 9.
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Thou 1. Current credit exposure across all off-balance sheet derivative contracts covered by the risk-based capital standards 8764 20,438 M.1.
With a remaining maturity of (Column A) (Column B) (Column C) One year or less Over one year Over five years through five years RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou 2. Notional principal amounts of off-balance sheet derivative contracts (3): a. Interest rate contracts 3809 331,851 8766 3,662,142 8767 186,753 M.2.a. b. Foreign exchange contracts 3812 6,499 8769 0 8770 0 M.2.b. c. Gold contracts 8771 0 8772 0 8773 0 M.2.c. d. Other precious metals contracts 8774 0 8775 0 8776 0 M.2.d. e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e. f. Equity derivative contracts A000 0 A001 0 A002 0 M.2.f.
__________ (1) Do not report in column B the risk-weighted amount of assets reported in column A. (2) Include the difference between the fair value and the amortized cost of available-for-sale debt securities in item 8 and report the amortized cost of these debt securities in items 4 through 7 above. For available-for-sale equity securities, if fair value exceeds cost, include the difference between the fair value and the cost in item 8 and report the cost of these equity securities in items 5 through 7 above; if cost exceeds fair value, report the fair value of these equity securities in items 5 through 7 above and include no amount in item 8. Item 8 also includes on-balance sheet asset values (or portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g., futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables not included in the calculation of credit equivalent amounts of off-balance sheet derivatives as well as any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital. (3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts. 34 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 Optional Narrative Statement Concerning the Amounts Reported in the Reports of Condition and Income at close of business on December 31, 1997 CRESTAR BANK Richmond, Virginia Legal Title of Bank City State The management of the reporting bank may, if it wishes, submit a brief narrative statement on the amounts reported in the Reports of Condition and Income. This optional statement will be made available to the public, along with the publicly available data in the Reports of Condition and Income, in response to any request for individual bank report data. However, the information reported in column A and in all of Memorandum item 1 of Schedule RC-N is regarded as confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a statement may check the "No comment" box below and should make no entries of any kind in the space provided for the narrative statement; i.e., DO NOT enter in this space such phrases as "No statement," "Not applicable," "N/A," "No comment," and "None." The optional statement must be entered on this sheet. The statement should not exceed 100 words. Further, regardless of the number of words, the statement must not exceed 750 characters, including punctuation, indentation, and standard spacing between words and sentences. If any submission should exceed 750 characters, as defined, it will be truncated at 750 characters with no notice to the submitting bank and the truncated statement will appear as the bank's statement both on agency computerized records and in computer-file releases to the public. All information furnished by the bank in the narrative statement must be accurate and not misleading. Appropriate efforts shall be taken by the submitting bank to ensure the statement's accuracy. The statement must be signed, in the space provided below, by a senior officer of the bank who thereby attests to its accuracy. If, subsequent to the original submission, material changes are submitted for the data reported in the Reports of Condition and Income, the existing narrative statement will be deleted from the files, and from disclosure; the bank, at its option, may replace it with a statement, under signature, appropriate to the amended data. The optional narrative statement will appear in agency records and in release to the public exactly as submitted (or amended as described in the preceding paragraph) by the management of the bank (except for the truncation of statements exceeding the 750-character limit described above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK. No comment [ ] (RCON 6979) C471 C472 BANK MANAGEMENT STATEMENT (please type or print clearly): (TEXT 6980) _____________________________________ _________________ Signature of Executive Officer of Bank Date of Signature 35 Legal Title of Bank: CRESTAR BANK Address: P.O. Box 26665 City, State Zip: Richmond, VA 23261-6665 FDIC Certificate No.: 12543 Call Date: 12/31/97 ST-BK: 51-2430 THIS PAGE IS TO BE COMPLETED BY ALL BANKS CRESTAR BANK OMB No. for OCC: 1557-0081 P.O. BOX 26665 OMB No. For FDIC: 3064-0052 RICHMOND, VA 23261 OMB No. For Federal Reserve: 7100-0036 0000047920 55124300000 12543 Expiration Date: 3/31/2000 31 SPECIAL REPORT December 31, 1997 (Dollar Amounts in Thousands) CLOSE OF BUSINESS FDIC Certificate Number DATE 12/31/97 12543 C-700 LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date) The following information is required by Public Laws 90-44 and 102- 242, but does not constitute a part of the Report of Condition. With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other extensions of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation O) for the definitions of "executive officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and principal shareholders who are not executive officers.
a. Number of loans made to executive officers since the previous Call Report date RCFD 3561 0 a. b. Total dollar amount of above loans (in thousands of dollars) RCFD 3562 0 b. c. Range of interest charged on above loans (example: 9 3/4% = 9.75) RCFD 7701 0.00% to RCFD 7702 0.00% c.
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year) /s/ Peter C. Toms Senior Vice President 1/28/98
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION (TEXT 8904) NATIE P. HENNELLY (804)782-5320
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