<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period Commission file number 1-7901.
ended March 31, 1995
BARNETT BANKS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0560515
- ----------------------------------- -----------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
50 North Laura Street
Jacksonville, Florida 32202
--------------------------------------
(Address of Principal Executive Offices)
(904) 791-7720
-------------------------------------------------
(Registrants telephone number, Including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
----- -----
Barnett Banks, Inc. Common Stock - March 31, 1995:
97,127,142 shares outstanding
<PAGE>
BARNETT BANKS, INC.
Financial Review and Form 10-Q
TABLE OF CONTENTS
PART I--FINANCIAL INFORMATION
Consolidated Financial Highlights...................................... 3
Management Discussion (Item 2)......................................... 4
Quarterly Average Balances, Yields and Rates......................... 12
Financial Statements (Item 1):
Statements of Financial Condition.................................... 14
Statements of Income................................................. 15
Statements of Changes in Shareholders' Equity........................ 16
Statements of Cash Flows............................................. 17
Notes to Financial Statements........................................ 18
PART II--OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K (ITEM 6)
Exhibit 11, "Statement re computation of per share earnings," is included
in the Notes to Financial Statements on page 19 of this report.
A report on Form 8-K, dated March 16, 1995, filed exhibits related to a
Registration Statement on Form S-3.
BARNETT BANKS, INC. AND SUBSIDIARIES
FORM 10-Q, March 31, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BARNETT BANKS, INC.
Dated: May 11, 1995 /s/ Charles W. Newman
------------------------------
Charles W. Newman
Chief Financial Officer
Dated: May 11, 1995 /s/ Patrick J. McCann
-------------------------------
Patrick J. McCann
Controller
2
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months
For the Periods Ended March 31-- ---------------------------
Dollars in Millions Except Per Share Data 1995 1994 Change
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD
Net interest income (taxable-equivalent)................................... $430.5 $415.3 4%
Provision for loan losses.................................................. 24.3 19.4 25
Non-interest income........................................................ 169.7 137.3 24
Non-interest expense....................................................... 370.4 340.5 9
Net income................................................................. 128.7 118.0 9
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PER COMMON SHARE
Net income:
Primary.................................................................. $ 1.27 $ 1.15 10%
Fully diluted............................................................ 1.23 1.12 10
Dividends declared......................................................... .41 .36 14
Book value(1).............................................................. 32.29 29.00 11
Stock price:
High..................................................................... 45.75 45.88 --
Low...................................................................... 38.75 39.75 (3)
Close.................................................................... 45.50 44.13 3
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KEY PERFORMANCE RATIOS
Return on assets........................................................... 1.26% 1.26% --
Return on common equity.................................................... 16.51 16.71 (1)%
Return on total equity..................................................... 15.97 16.10 (1)
Net yield on earning assets................................................ 4.77 4.92 (3)
Overhead ratio............................................................. 61.72 61.59 --
Shareholders' equity to total assets(1).................................... 8.03 8.01 --
Leverage ratio............................................................. 6.25 7.43 (16)
Total risk-based capital ratio............................................. 11.39 13.75 (17)
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AVERAGE BALANCES
Assets..................................................................... $40,858 $37,565 9%
Deposits................................................................... 33,939 31,873 6
Loans, net of unearned income.............................................. 28,899 25,948 11
Earning assets............................................................. 36,286 33,795 7
Common equity.............................................................. 3,008 2,715 11
Total shareholders' equity................................................. 3,223 2,930 10
Primary shares (thousands)................................................. 97,693 98,272 (1)
Fully diluted shares (thousands)........................................... 104,571 105,094 --
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AT PERIOD-END
Assets..................................................................... $41,735 $37,983 10%
Deposits................................................................... 34,337 32,591 5
Loans, net of unearned income.............................................. 29,263 26,170 12
Long-term debt............................................................. 898 681 32
Preferred stock............................................................ 215 215 --
Total shareholders' equity................................................. 3,268 2,946 11
Common shares (thousands).................................................. 97,127 97,550 --
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<FN>
(1) Computed on equity before deduction of the employee stock ownership plan
obligation.
</TABLE>
3
<PAGE>
MANAGEMENT DISCUSSION
SUMMARY
Barnett's earnings rose 9% in the first quarter to $128.7
million, or $1.23 per fully diluted share, from $118.0 million, or $1.12 per
share, a year earlier. First quarter net income was up 3% from $125.4
million, or $1.21 per fully diluted share, in the fourth quarter of 1994.
Return on assets in the first quarter was 1.26%, consistent with the first
quarter of 1994 and slightly below the 1.28% in the fourth quarter of 1994.
Return on average common shareholders' equity decreased to 16.51% from 16.71%
last year and 16.70% in the fourth quarter.
Net interest income rose $15.2 million from the same period last year to
$430.5 million as income generated from a $2.5 billion increase in earning
assets more than offset a 15 basis point decline in the net yield on earning
assets. Non-interest income rose 24% to $169.7 million while non-interest
expense grew $29.9 million. These increases reflect the fee revenue and
overhead added by companies acquired during the quarter. The overhead ratio
rose slightly to 61.7% in the first quarter from 61.6% in the same period last
year and from 60.0% in the fourth quarter of 1994.
Average loans grew at a 14% annualized rate during the quarter to $28.9
billion and were up 11% from a year earlier. Loans to consumers, which
represented 73% of Barnett's portfolio, rose 15% while loans to businesses
increased 9%. The commercial real estate portfolio was down 3% from a year ago.
Non-performing assets were $297 million on March 31, representing 1.01% of
outstandings. Net charge-offs in the first quarter of $24.4 million were 26%
higher than last year and represented an annualized .34% of average loans.
On January 27, Barnett acquired EquiCredit Corporation, a consumer finance
company with 95 offices in 31 states. EquiCredit, which specializes in
originating, selling and servicing consumer loans secured by first or second
mortgages, originated in excess of $190 million of loans during the first
quarter. EquiCredit's servicing portfolio stood at $1.8 billion on March 31.
Barnett acquired BancPLUS Financial Corporation, a national retail mortgage
banking company with 49 retail origination offices doing business in 50 states,
on February 28. BancPLUS added $14 billion to Barnett's servicing portfolio,
which exceeded $32 billion at March 31.
EARNING ASSETS
LOANS. Average loans grew $1.0 billion during the first
quarter to $28.9 billion, an annualized growth rate of 14%. This represents a
$3.0 billion, or 11%, increase from the same period last year. Excluding
$133 million of installment loans added through the acquisition of EquiCredit
and $29 million of residential mortgages added through the acquisition of
BancPLUS, average loans grew at an annualized rate of 12% from the fourth
quarter. The continued growth in loans was paced by lending to consumers and
the sixth consecutive quarter of increases in commercial loans.
Installment loans grew $305 million during the quarter to $8.3 billion,
which was 15%, or $1.1 billion higher than the same period last year.
Automobile lending contributed $362 million to annual growth, as sales of new
and used cars were strong throughout 1994. However, the volume of automobile
loans is dependent upon sales volumes, which are cyclical. Consumer loans,
originated by EquiCredit and held for sale, added $133 million during the
quarter. Student loan growth was also brisk as loans grew $260 million, or
37%, from the first quarter of 1994. Home equity loans grew $178 million from
the same period last year.
TABLE 1 SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1995 1994
---- ----------------------------------
Dollars in Millions Except Per Share Data--Taxable-Equivalent First Fourth Third Second First
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income............................................... $430.5 $426.2 $419.8 $416.2 $415.3
Provision for loan losses......................................... 24.3 25.6 15.4 13.7 19.3
- ---------------------------------------------------------------------------------------------------------------
Net interest income after loan loss provision..................... 406.2 400.6 404.4 402.5 396.0
Non-interest income............................................... 169.7 129.8 138.1 137.4 137.3
Non-interest expense.............................................. 370.4 341.5 340.3 341.8 340.6
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes........................................ 205.5 188.9 202.2 198.1 192.7
Income tax provision.............................................. 66.5 52.6 67.6 65.9 63.7
Taxable-equivalent adjustment..................................... 10.3 10.9 11.2 11.0 11.0
- ---------------------------------------------------------------------------------------------------------------
Net income................................................ $128.7 $125.4 $123.4 $121.2 $118.0
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Primary net income per common share............................... $1.27 $1.24 $1.21 $1.19 $1.15
Fully diluted net income per common share......................... 1.23 1.21 1.18 1.15 1.12
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</TABLE>
4
<PAGE>
TABLE 2 INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
Non-Rate
Sensitive
0-30 31-90 91-180 181-365 and Over
March 31, 1995--Dollars in Millions Days Days Days Days One Year Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural......................... $3,070 $ 182 $ 180 $ 209 $ 859 $ 4,500
Real estate construction....................................... 848 6 23 6 52 935
Commercial mortgages........................................... 1,069 101 185 280 728 2,363
Residential mortgages.......................................... 703 1,316 1,871 3,712 3,399 11,001
Installment.................................................... 1,624 459 663 1,264 4,348 8,358
Other loans.................................................... 1,381 -- -- 43 682 2,106
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Total loans.............................................. 8,695 2,064 2,922 5,514 10,068 29,263
Securities..................................................... 210 218 245 2,808 3,466 6,947
Federal funds sold and other earning assets.................... 100 100
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Total earning assets..................................... $9,005 $2,282 $3,167 $8,322 $13,534 $36,310
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
NOW accounts................................................... $5,907 $ 5,907
Money market accounts.......................................... 7,134 7,134
Savings deposits............................................... 3,541 3,541
Time deposits.................................................. 1,861 $1,733 $2,232 $2,924 $ 3,406 12,156
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits........................................... 18,443 1,733 2,232 2,924 3,406 28,738
Short-term borrowings.......................................... 2,190 350 2,540
Long-term debt................................................. 145 175 89 489 898
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Total interest-bearing liabilities....................... $ 20,778 $2,258 $2,232 $3,013 $ 3,895 $32,176
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Gap before interest rate swaps and management adjustments...... $(11,773) $ 24 $ 935 $5,309 $ 9,639
Management adjustments(1)...................................... 8,111 691 774 7 (9,583)
Interest rate swaps............................................ (1,038) (497) (63) 1,465 133
- ----------------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap adjusted for interest rate swaps
and management adjustments..................................... (4,700) 218 1,646 6,781 189
Cumulative adjusted interest rate sensitivity gap.............. (4,700) (4,482) (2,836) 3,945
Cumulative adjusted gap as a percentage of earning assets:
March 31, 1995............................................... (12.94)% (12.34)% (7.81)% 10.86%
March 31, 1994............................................... (14.23) (11.44) (6.32) 5.72
- -------------------------------------------------------------------------------------------------------------------------------
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<FN>
(1) Management adjustments reflect the company's estimates of the effects of early principal repayments on residential and other
amortizing loans and securities and the anticipated repricing sensitivity of non-maturity deposit products. Historically,
balances on non-maturity deposit accounts have reamined relatively stable despite changes in market interest rates. Management
has classified certain of these accounts as non-rate sensitive based on management's historical pricing practices and runoff
experience. Two-thirds of the NOW and savings account balances and approximately 20% of the money market account balances, are
classified as non-rate sensitive.
</TABLE>
Residential loans totaled $10.8 billion, up 14% from $9.5 billion last
year. That represented annualized growth of 21% from the fourth quarter.
Mortgage loan originations during the first quarter declined to $819 million
from $1.0 billion in the fourth quarter, reflecting fewer applications due to
the higher rate environment for adjustable-rate mortgages. Adjustable-rate
loans, which Barnett has historically retained in its portfolio, fell to 72%
of originations from 80% in the fourth quarter. At the end of the first
quarter, 74% of the residential loan portfolio consisted of adjustable-rate
mortgages. Most of the adjustable-rate portfolio reprices annually based upon
a spread over the one-year constant maturity Treasury index and is limited by
annual and lifetime caps.
The company expects the rate of its residential loan growth to slow in the
future as it may sell higher portions of mortgage production under its asset-
liability management strategy.
Barnett generally retains the servicing rights on the loans it sells, which
provides an ongoing source of fee income. At March 31, the mortgage servicing
portfolio exceeded $32 billion. This portfolio has grown from $13 billion a
year ago, largely as a result of acquisitions.
Bank card outstandings of $1.4 billion were 25% higher than a year earlier
and grew at an annualized rate of 28% during the quarter.
Commercial loans grew 9% from last year to $4.4 billion. Commercial real
estate loans fell $16 million during the quarter to $3.3 billion and
represented 11% of total loans. Commercial mortgage loans declined $45 million
from last quarter and $185 million from the same period last year to $2.4
billion.
INVESTMENT SECURITIES AND OTHER EARNING ASSETS. The company's securities
portfolio consists primarily of AAA or equivalent-rated securities, including
44% U.S. Treasury securities, with an average life of 1.4 years. Average
securities were $465 million, or 6%, lower than the same period last year, as
liquidity from maturing
5
<PAGE>
TABLE 3 RISK MANAGEMENT INSTRUMENTS
<TABLE>
<CAPTION>
Weighted Average Interest Rate
------------------------------------ Average
Notional Replacement Receive Pay Maturity
March 31, 1995-- Dollars in Millions Amount Value Rate(1) Index Rate(1) Index in Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate swaps:
Basis swap................................ $ 50 $ .81 6.13% LIBOR 6.14% CMT 2.83
Generic swaps:
Receive fixed........................... 1,040 (20.65) 4.38 Fixed 6.42 LIBOR .90
Pay fixed............................... 167 1.62 6.24 LIBOR 6.71 Fixed 2.65
Index-principal swaps..................... 1,010 (40.80) 4.64 Fixed 6.31 LIBOR 2.06(2)
Interest rate floors........................ 2,000 10.00 6.00(3) LIBOR -- -- 2.76
- ---------------------------------------------------------------------------------------------------------------------------
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<FN>
(1) Based upon contractual rates at March 31, 1995.
(2) The maturity of index-principal swaps can extend to a maximum average of
2.35 years.
(3) The company receives interest equal to the amount by which LIBOR is less than 6.00%.
</TABLE>
securities was utilized to fund loan growth. Securities fell 3% from the
fourth quarter to $7.3 billion. The available-for-sale securities portfolio
had a $1.1 million unrealized gain on March 31 compared to a $45 million
unrealized loss on December 31, 1994.
DEPOSITS AND OTHER FUNDING SOURCES
DEPOSITS. Average deposits rose $2.1 billion, or 6%, from the first quarter
of last year to $33.9 billion, reflecting the acquisition of $3.4 billion in
deposits of the Florida deposit franchise of Glendale Federal on December 15,
1994. Certificates of deposit and other time deposits rose 29% from last year
to $11.7 billion. Period-end certificates of deposit and other time deposits
grew $623 million during the first quarter.
Average money market deposits fell $418 million from the same period last
year to $7.4 billion. Savings deposits increased $141 million to $3.6 billion.
Demand deposits fell $158 million from last year's levels to $5.4 billion and
NOW accounts fell $135 million to $5.8 billion.
The increase in CDs and declines in transaction and money market accounts
from the fourth quarter reflect consumer preference for higher yielding time
deposits and seasonal outflows as winter residents began returning home.
OTHER FUNDING SOURCES. Average federal funds purchased, securities sold
under agreements to repurchase and other short-term borrowings of $2.3 billion
were $529 million higher than the previous year but $719 million lower than
the fourth quarter. These wholesale funding sources are being utilized to fund
loan growth and manage the liquidity of the company.
ASSET-LIABILITY MANAGEMENT
Net interest income, Barnett's primary source of revenue, is affected by
changes in interest rates as well as the level and mix of earning assets and
interest-bearing liabilities. The impact of changes in interest rates on the
company's net interest income represents Barnett's level of interest-rate
sensitivity. Barnett uses several asset-liability management techniques to
measure its interest-rate sensitivity and manage this risk within specific
rate-sensitivity limits.
Interest rate sensitivity is primarily a function of the repricing
structure of the company's balance sheet. TABLE 2 on page 5 shows this
structure as of March 31, with each maturity interval referring to the
earliest repricing opportunity (i.e., the earlier of scheduled contractual
maturity or next rate reset date) for each asset and liability. The resultant
gaps are a measure of the sensitivity of earnings to changes in interest rates.
In order to more appropriately reflect the repricing structure of the
company's balance sheet, management has made certain adjustments to the table.
Based on historical and industry data, an estimate of the expected prepayments
of amortizing loans and investment securities is included in the analysis.
Similarly, an adjustment is made to reflect the behavioral characteristics of
certain core deposits without contractual maturity (i.e., interest-bearing
checking, savings and money market deposit accounts). The footnote
accompanying the table more fully explains the specific adjustments made to
the analysis. This analysis indicates that the company was moderately
liability sensitive on March 31, with a six-month negative gap of 7.81%.
In addition to gap analysis, management uses rate-shock simulation and
duration of equity to measure the rate sensitivity of its balance sheet.
These measures of risk show that a 1.00% change in interest rates would not
have a material impact on the net interest margin over a twelve month period.
Barnett controls its interest rate risk principally by managing the
level and duration of certain balance sheet
6
<PAGE>
TABLE 4 CHANGE IN NET INTEREST INCOME
<TABLE>
<CAPTION>
Change From
Previous
Year Due to:
For the Period Ended March 31, 1995-- --------------------- Total
Taxable-Equivalent Dollars in Millions Volume Rate(1) Change
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans.............................................................................. $61.4 $33.7 $ 95.1
Taxable securities................................................................. (2.9) 15.5 12.6
Tax-free securities................................................................ (5.4) 3.1 (2.3)
Other earning assets............................................................... (.2) .6 .4
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income....................................................... 52.9 52.9 105.8
- ---------------------------------------------------------------------------------------------------------------------------
Interest expense:
NOW accounts....................................................................... (.5) 3.2 2.7
Money market accounts.............................................................. (2.3) 14.3 12.0
Savings deposits................................................................... .6 4.0 4.6
Certificates of deposit under $100,000............................................. 23.3 18.0 41.3
Other time deposits................................................................ 3.4 4.6 8.0
- ---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits............................................. 24.5 44.1 68.6
Federal funds purchased and securities sold under agreements to repurchase......... .8 11.4 12.2
Other short-term borrowings........................................................ 3.8 3.9 7.7
Long-term debt..................................................................... 2.9 (.8) 2.1
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense...................................................... 32.0 58.6 90.6
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income......................................................... $20.9 $(5.7) $ 15.2
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes changes in interest income and expense not due solely to volume or rate changes.
</TABLE>
assets and liabilities. The company also uses off-balance-sheet instruments
to manage its interest rate sensitivity position. Barnett ensures that both
balance sheet and off-balance-sheet instruments used for asset-liability
management purposes are consistent with safe and sound banking practices.
The company's current risk management instruments portfolio used for asset
liability management purposes has a notional amount of $4.3 billion. This
portfolio consists of $2.3 billion of interest rate swaps and $2.0 billion of
interest rate floors. Most of the company's swaps involve receipt of fixed
cash flows in exchange for variable (primarily LIBOR-based) cash flows. The
$2.0 billion interest rate floor contracts are indexed to the 3 month LIBOR
and have terms which span 1996 and 1997. The swaps are linked to prime rate
loans and create a net fixed-rate cash flow. These swaps and floors were
executed to reduce the company's risk to flat or falling interest rates.
Approximately half of the interest rate swap portfolio is fixed-term
non-amortizing interest rate swaps which mature in early 1996. The other half
of the swap portfolio is indexed amortizing instruments with expected
maturities of approximately two years. These instruments have similar
characteristics to cash instruments typically used by the company to reduce
asset sensitivity or hedge against flat or falling interest rates which are a
combination of short-term CMOs and Treasuries.
The interest rate swaps and floors have operated as intended, reducing the
company's exposure to falling or flat interest rates. The replacement value
related to the portfolio was a negative $49 million on March 31 and a negative
$104 million on December 31, 1994. TABLE 3 shows a summary of Barnett's risk
management portfolio.
Interest rate swaps reduced net and gross interest income in
the first quarter of 1995 by $8.6 million, representing a ten basis point
reduction in the net yield in earning assets. Swaps and floors increased
first quarter 1994 net interest income by $2.3 million, or a three basis
point increase in the net yield. The increase consisted of a $3.4 million
increase to interest income and a $1.1 million increase to interest expense.
Barnett manages its credit exposure relative to the notional amount of
its interest rate swaps and floors in a manner consistent with the granting
of credit. Any exposure is generally measured by the market replacement value
at any point in time. Barnett utilizes collateral exchange agreements with
swap counterparties in order to minimize this credit exposure.
NET INTEREST INCOME
Barnett's taxable-equivalent net interest income in the first quarter was
$430.5 million, up $4.3 million from the fourth quarter and $15.2 million from
last year's level. These increases reflect earning asset growth, as discussed
in the EARNING ASSETS section, partially offset by a lower net yield on earning
assets.
TABLE 4 shows the changes in net interest income by category due to shifts
in volume and rate.
7
<PAGE>
TABLE 5 OTHER NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
1995 1994
------- ---------------------------------------
Dollars in Thousands First Fourth Third Second First
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advertising and marketing......... $ 5,416 $ 8,600 $ 7,427 $ 6,594 $ 6,680
Communications.................... 9,321 8,663 8,928 9,130 7,024
Expenses and provision on real
estate held for sale............. 3,513 2,087 3,083 4,483 6,419
FDIC assessments.................. 18,533 17,467 17,760 18,042 18,140
Franchise and credit card fees.... 4,398 4,271 4,150 3,887 4,139
Outside computer services......... 10,404 9,205 9,754 8,499 9,250
Postage........................... 6,311 6,170 5,420 5,831 5,756
Stationery and supplies........... 4,708 4,694 3,428 3,939 3,706
Insurance, taxes and other........ 45,724 45,258 46,374 44,167 43,775
- -----------------------------------------------------------------------------------------
Total excluding amortization.... 108,328 106,415 106,324 104,572 104,889
Amortization of intangibles....... 12,326 6,592 6,557 7,508 7,870
Amortization of purchased mortgage
servicing rights................. 6,873 2,643 2,172 1,630 1,604
- -----------------------------------------------------------------------------------------
Total........................... $127,527 $115,650 $115,053 $113,710 $114,363
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
The net yield on earning assets declined to 4.77% from 4.92% a year
earlier and 4.80% last quarter. The earning asset yield increases of 70 basis
points and 30 basis points from the first and fourth quarters of last year,
which reflect repricing in the loan and securities portfolios, were more than
offset by increased funding costs and changes in deposit mix.
The rate on interest bearing liabilities rose 91 basis points from first
quarter 1994, reflecting the Federal Reserve's actions to increase short-term
interest rates during the last 12 months. That rate in the first quarter
increased 28 basis points over the fourth quarter level, primarily reflecting
the changing deposit mix to higher CD balances and continued upward repricing
of existing CD balances.
NON-INTEREST INCOME
Barnett's non-interest income of $169.7 million was
24% higher than the $137.3 million reported a year ago and 31% higher than
the $129.8 million earned last quarter.
These increases from last year were generated by the acquisitions of
EquiCredit and BancPLUS during the first quarter. Consumer finance income
of $17.6 million represented the revenue generated through EquiCredit's
regular quarterly securitization program and fees for consumer loan
servicing. Mortgage banking income rose $7.3 million over the same period
last year, primarily due to the acquisitions of Loan America Financial
Corporation on October 1, 1994 and BancPLUS on February 27, 1995.
Non-interest income, excluding securities transactions, rose $27.0 million,
or 19%, from the fourth quarter, primarily reflecting the fee revenue
contributed by acquisitions consummated during the quarter, as previously
discussed.
NON-INTEREST EXPENSE
Non-interest expense rose 9%, or $29.9 million, from a year ago and 8%, or
$28.9 million, from last quarter. The overhead ratio of 61.7% in the first
quarter was consistent with last year's ratio and higher than the prior
quarter's 60.0%, primarily due to higher salaries and benefits and the increased
amortization of purchased mortgage servicing rights and intangible assets
related to acquisitions.
Salaries and benefits increased 9% from the same period last year and from
last quarter to $176.9 million. These increases reflect the addition of 1,431
full-time equivalent employees through acquisitions in the first quarter.
Full-time equivalent employees increased to 20,183 from 18,929 on December 31,
1994 and 18,470 a year ago.
Occupancy and equipment expenses rose from the first and fourth quarters of
last year, reflecting the net addition of 11 branches
in the Glendale acquisition and the national mortgage and consumer loan
distribution systems of BancPLUS and EquiCredit.
Other expense grew 12%, or $13.2 million, from last year's level and $11.9
million from the fourth quarter, primarily reflecting higher amortization of
purchased mortgage servicing rights and intangible assets due to acquisitions.
Details of other expense for the past five quarters are shown in TABLE 5.
ASSET QUALITY
RISK ELEMENTS. As shown in TABLE 6, non-performing assets
stood at $297 million on March 31, representing 1.01% of gross loans plus
real estate held for sale. In comparison, non-performing assets stood at $396
million, or 1.50% of outstandings, on the same date last year, and $291
million, or 1.01%, at the end of 1994. The decrease from last year is the
result of the continued resolution of problem loans, either through
8
<PAGE>
repayment, workout of satisfactory credit arrangements with the borrower,
foreclosure, or reductions due to charge-offs. The increase in non-performing
assets from the fourth quarter is due to the impact of first quarter
acquisitions.
Effective January 1, 1995, Barnett adopted Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan", which prescribes how the allowance for loan losses
related to impaired loans should be determined. A loan is considered impaired
when, based on current information and events, it is probable that a creditor
will be unable to collect principal or interest due according to the
contractual terms of the loan. SFAS No. 114 specifically excludes from the
definition of impaired loans large groups of smaller balance homogenous
loans. In accordance with this standard, Barnett considers all non-performing
loans, excluding residential and small business, as impaired. The adoption of
this standard had no significant impact on the level of the allowance. For
more information, see Note C of Notes to Financial Statements.
During the last several years, Barnett has worked to reduce its exposure to
commercial real estate from a high of 28% of loans in 1988 to 11% this
quarter. The corporate loan portfolio is not concentrated in any single
industry, but reflects the broad-based service sectors in Florida and
southern Georgia.
Installment loans 30 days or more past due decreased
to .74% from .94% at the end of the fourth quarter but were up from .51% last
year. The bank card delinquency ratio declined to 2.74% from 2.77% at the end
of the fourth quarter but rose from 2.63% in the same period in 1994.
Barnett's consumer delinquencies remain below the national peer average.
Barnett's residential loans generally are secured by 1-4 family homes,
conform to federal agency underwriting standards and have a maximum
loan-to-value ratio of 80%, unless they are protected by mortgage insurance.
Barnett's consumer loan portfolio during the first quarter consisted
primarily of loans secured by new and used automobiles (65%), first and
second mortgages on 1-4 family homes (16%) and government guaranteed student
loans (12%).
Borrower experience and financial capacity are critical
factors in underwriting and approving all loan requests. Barnett's commercial
real estate loan policies generally require a maximum loan-to-value ratio of
75% and a minimum equity requirement of 20% of cost.
NET CHARGE-OFFS. As shown in TABLE 7 on page 10, net charge-offs were
$24.4 million, up from $19.4 million a year earlier but down from $43.9 million
in the fourth quarter. While net charge-offs were higher than the same period
last year, the ratio of net charge-offs to average loans remained below the
company's expected long-term range of 50 to 60 basis points. Net charge-offs
in the first quarter represented an annualized .34% of average outstandings,
compared to .30% in last year's first quarter, but were consistent with all
of 1994.
PROVISION/ALLOWANCE FOR LOAN LOSSES. Barnett's provision
expense in the first quarter was $24.3 million, 25% higher than the $19.3
million in last year's first quarter but lower than the $25.6 million
reported in the fourth quarter.
The reserve for loan losses stood at $502.8 million on March 31, 4% lower
than the same date last year and slightly higher than the fourth quarter.
The decline in the reserve from last year, though modest in relation to the
reduction in non-performing loans, reflects the increasing percentage of loans
to consumers in the portfolio. During the late 1980s, Barnett's loan portfolio
was more heavily weighed towards large commercial and commercial real estate
loans. During the recession beginning in 1990, these portfolios produced higher
levels of charge-offs, non-performing loans and foreclosures. Since that time,
management has reduced the investment
TABLE 6 NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
1995 1994
Percentage Percentage
of Total of Total
March 31--Dollars in Thousands Amount Outstanding(1) Amount Outstanding(1)
- ----------------------------------------------------------------------------------------------
Non-accruing loans: <C> <C> <C> <C>
Less than 90 days past due...... $ 80,887 .27% $ 89,934 .34%
90 days past due................ 132,367 .45 177,275 .67
- ----------------------------------------------------------------------------------------------
Total non-accruing loans...... 213,254 .72 267,209 1.01
Reduced-rate loans................ 8,689 .03 1,783 .01
- ----------------------------------------------------------------------------------------------
Total non-performing loans.... 221,943 .75 268,992 1.02
Real estate held for sale........ 75,280 .26 126,800 .48
- ----------------------------------------------------------------------------------------------
Total non-performing assets... $297,223 1.01% $395,792 1.50%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Non-performing loans by category:
Commercial, financial and
agricultural................... $ 45,852 .15% $ 87,867 .33%
Real estate construction........ 20,943 .07 22,675 .09
Commercial mortgages............ 100,402 .34 101,014 .38
Residential mortgages........... 54,746 .19 57,436 .22
- ----------------------------------------------------------------------------------------------
Total........................ $221,943 .75% $268,992 1.02%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
90 days past due accruals......... $36,217 .12% $26,260 .10%
- -------------------------------------------------------------------------------------- -------
- ----------------------------------------------------------------------------------------------
<FN>
(1) Before deduction for unearned income.
</TABLE>
9
<PAGE>
in commercial real estate loans and significantly reduced its investment in
loans to large corporate customers.
The company has focused its lending efforts on the consumer and small
business segments. These market segments generate higher volumes of smaller
loans with more predictable loss experience throughout the economic cycles.
These loans also produce fewer non-performing assets. The company's accounting
policies require that most installment and creditline loans be charged off after
120 days of delinquency, credit card advances after 180 days of delinquency and
residential mortgage loans, with a five-year average loss rate of only .04%,
upon foreclosure which is after approximately 120 days of delinquency. Small
business loans are often secured by real estate, but the average loan size is
approximately $72,000, limiting the company's exposure to potential loss from
an individual borrower.
The ratio of the allowance for loan losses to non-performing loans remained
strong as of quarter-end at 227%, compared to 194% a year earlier.
Management believes it is prudent to maintain a strong allowance for loan
losses and considers the current level adequate to cover losses inherent in the
loan portfolio based on current economic conditions.
TAXES
Barnett's income tax expense in interim reporting periods is
determined by estimating the combined federal and state effective tax rate
for the year and applying this rate to taxable income. The company's
estimated effective tax rate for 1995 is 34%.
LIQUIDITY
For banks, liquidity represents the ability to meet both loan
commitments and deposit withdrawals. Funds to meet these needs can be
obtained by converting liquid assets to cash or by attracting new deposits or
other sources of funding. Many factors affect a bank's ability to meet
liquidity needs, including variations in the markets served by its office
network, its asset-liability mix, its reputation and credit standing in the
market, and general economic conditions.
In addition to its traditional in-market deposit sources, Barnett has many
other sources of liquidity, including securities available for sale, asset
securitization and other non-relationship funding sources such as bank notes,
commercial paper and wholesale purchased funds.
The high concentration of residential and installment loans in Barnett's
balance sheet provides it with an exceptional amount of contingent liquidity
through the conventional securitization programs that exist today. Management
believes that the level of liquidity is sufficient to meet current and future
funding requirements.
On April 1, the company commenced a commercial paper program to provide
the primary funding for its mortgage banking and consumer finance operations.
The company has secured $650 million in back-up lines of credit for this
program.
During the first quarter, the company issued $375 million of medium-term
notes, the proceeds of which were primarily used to fund the acquisitions of
BancPLUS and EquiCredit.
Effective March 9, 1995, the company filed a shelf registration with the
Securities and Exchange Commission, registering $1.1 billion in debt and
preferred stock. As of March 31, 1995, there was $1 billion for debt and
$85 million for preferred stock
TABLE 7 LOAN QUALITY INFORMATION
<TABLE>
<CAPTION>
1995 1994
----- --------------------------------------------------
Dollars in Thousands FIRST Fourth Third Second First
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net charge-offs:
Commercial, financial and agricultural ............ $ (2,781) $ 2,365 $ 844 $ (5,243) $ (991)
Real estate construction .......................... 190 115 18 1,014 640
Commercial mortgages .............................. 499 16,239 (4,368) (1,621) (2,318)
Residential mortgages ............................. 739 423 369 576 435
Installment ....................................... 12,381 12,994 8,196 9,184 12,159
Bank card ......................................... 12,683 10,609 9,564 8,695 8,887
Credit lines ...................................... 727 1,123 793 1,013 601
- -------------------------------------------------------------------------------------------------------------------
Total net charge-offs .......................... $ 24,438 $ 43,868 $15,416 $13,618 $ 19,413
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Gross charge-offs .................................. $ 36,125 $ 57,578 $30,775 $28,222 $ 31,875
Allowance for loan losses .......................... 502,800 501,447 521,871 521,843 521,763
Non-performing loans ............................... 221,943 200,455 218,582 225,064 268,992
Non-performing assets .............................. 297,223 290,862 303,776 335,638 395,792
Non-performing asset ratio ......................... 1.01% 1.01% 1.10% 1.25% 1.50%
Net charge-offs to average loans (annualized)....... .34 .63 .23 .21 .30
Allowance to non-performing loans .................. 227 250 239 232 194
Allowance to period-end loans ...................... 1.72 1.76 1.91 1.95 1.99
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
10 Barnett Banks, Inc.
<PAGE>
TABLE 8 CAPITAL RATIOS
<TABLE>
<CAPTION>
March 31--Dollars in Millions 1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Tier I capital ........................... $ 2,506 $ 2,785
Total risk-based capital ................. 3,283 3,567
Total risk-adjusted assets ............... 28,836 25,941
- ------------------------------------------------------------------
Tier I capital ratio ..................... 8.69% 10.74%
Total risk-based capital ratio ........... 11.39 13.75
Tier I leverage ratio .................... 6.25 7.43
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
available to be issued under existing shelf registrations.
CAPITAL
On March 31, shareholders' equity totaled $3.3 billion, up 11%
from a year earlier. Shareholders' equity, before deducting the Employee
Stock Ownership Plan obligation, was 8.03% of assets at the end of the first
quarter, compared to 8.01% a year earlier.
The growth of shareholders' equity was provided primarily through retained
earnings. During the last 12 months, this source added $317 million to capital.
Barnett declared a dividend of $.41 for the first quarter, representing a
common dividend payout ratio of 33%.
The company is subject to risk-based capital guidelines that measure
capital relative to risk-weighted assets and off-balance-sheet financial
instruments. Capital guidelines issued by the Federal Reserve Board require
bank holding companies to have a minimum total risk-based capital ratio of 8%,
with at least half of total capital in the form of Tier I capital.
As TABLE 8 shows, Barnett significantly exceeded these capital
guidelines on March 31, with a Tier I capital ratio of 8.69% and a total
risk-based capital ratio of 11.39%.
In addition, a leverage ratio is being used in connection with the
risk-based capital standards and is defined as Tier I capital divided by
average assets for the most recent quarter. The minimum leverage ratio under
this standard is 3% for the highest-rated bank holding companies which are not
undertaking significant expansion programs. An additional 1% to 2% may be
required for other companies, depending upon their regulatory ratings and
expansion plans. On March 31, Barnett's leverage ratio was 6.25%, well in excess
of regulatory requirements, but 118 basis points lower than last year and
72 basis points below the year-end level. The declines in the leverage ratio
reflect asset growth and the addition of intangible assets, resulting from
acquisitions, which are deductions from Tier I capital.
11
<PAGE>
QUARTERLY AVERAGE BALANCES, YIELDS AND RATES
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
1995
---------------------------------------
First
---------------------------------------
Average
Average Yield
Dollars in Millions--Taxable-Equivalent Balance Interest or Rate
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Loans:
Commercial, financial and agricultural ................ $ 4,442 $ 91.9 8.39%
Real estate construction .............................. 925 24.2 10.62
Commercial mortgages .................................. 2,383 50.5 8.60
Residential mortgages ................................. 10,755 198.9 7.40
Installment ........................................... 8,301 176.6 8.63
Bank card ............................................. 1,375 53.0 15.64
Credit lines .......................................... 718 16.9 9.53
- ------------------------------------------------------------------------------------------------
Total loans, net of unearned income ................. 28,899 608.0 8.49
- ------------------------------------------------------------------------------------------------
Securities(1):
Taxable ............................................... 6,666 91.6 5.53
Tax-free .............................................. 593 21.3 14.34
- ------------------------------------------------------------------------------------------------
Total securities .................................... 7,259 112.9 6.25
- ------------------------------------------------------------------------------------------------
Other earning assets .................................... 128 1.9 6.15
- ------------------------------------------------------------------------------------------------
Total earning assets ................................ 36,286 $722.8 8.04%
- ------------------------------------------------------------------------------------------------
Cash .................................................... 2,064
Other assets ............................................ 3,007
Allowance for loan losses ............................... (499)
- ------------------------------------------------------------------------------------------------
Total assets ........................................ $40,858
- -------------------------------- ---------------------------------------------------------------
- -------------------------------- ---------------------------------------------------------------
LIABILITIES AND EQUITY
NOW accounts ............................................ $ 5,750 $ 26.0 1.84%
Money market accounts ................................... 7,448 55.0 3.00
Savings deposits ........................................ 3,619 20.3 2.27
Certificates of deposit under $100,000 .................. 9,698 116.3 4.86
Other time deposits ..................................... 1,983 24.6 5.02
- ------------------------------------------------------------------------------------------------
Total interest-bearing deposits ..................... 28,498 242.2 3.45
Federal funds purchased and securities sold
under agreements to repurchase .......................... 1,734 24.4 5.71
Other short-term borrowings ............................. 579 8.6 6.02
Long-term debt .......................................... 815 17.1 8.40
- ------------------------------------------------------------------------------------------------
Total interest-bearing liabilities .................. 31,626 $292.3 3.75%
Demand deposits ......................................... 5,441
Other liabilities ....................................... 568
Preferred equity ........................................ 215
Common equity ........................................... 3,008
- ------------------------------------------------------------------------------------------------
Total liabilities and equity ........................ $40,858
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread .................................... 4.29%
Cost of funds supporting earning assets ................. 3.27
Net yield on earning assets ............................. $430.5 4.77
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<FN>
(1) Average yields on investment securities available for sale have been
calculated on amortized cost.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
1994
- --------------------------------------------------------------------------------------------------------------
Fourth Third Second First
- --------------------------------------------------------------------------------------------------------------
Average Average Average Average
Average Yield Average Yield Average Yield Average Yield
Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate Balance Interest or Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 4,350 $ 87.8 8.01% $ 4,285 $ 84.1 7.79% $ 4,165 $ 80.0 7.71% $ 4,075 $ 72.4 7.20%
896 22.5 9.94 833 19.5 9.31 820 17.7 8.66 856 16.5 7.83
2,428 51.5 8.42 2,456 51.9 8.38 2,517 52.0 8.29 2,568 51.2 8.08
10,229 185.7 7.26 9,769 175.2 7.17 9,577 168.9 7.06 9,453 168.3 7.12
7,996 168.8 8.38 7,770 162.7 8.31 7,537 154.4 8.22 7,220 148.8 8.25
1,286 48.6 15.01 1,165 47.6 16.21 1,118 46.6 16.70 1,101 44.3 16.30
704 15.4 8.69 690 14.7 8.45 679 12.7 7.51 675 12.2 7.31
- --------------------------------------------------------------------------------------------------------------
27,889 578.1 8.25 26,968 553.0 8.16 26,413 530.8 8.05 25,948 513.0 7.95
- --------------------------------------------------------------------------------------------------------------
6,815 86.7 5.07 6,785 82.4 4.84 6,804 79.3 4.67 6,955 79.5 4.60
660 23.3 14.10 691 23.3 13.49 742 22.9 12.32 769 23.6 12.28
- --------------------------------------------------------------------------------------------------------------
7,475 110.0 5.87 7,476 105.7 5.64 7,546 102.2 5.42 7,724 103.1 5.36
- --------------------------------------------------------------------------------------------------------------
67 .8 5.26 50 .6 4.61 66 .7 4.08 123 .9 3.17
- --------------------------------------------------------------------------------------------------------------
35,431 $688.9 7.74% 34,494 $659.3 7.61% 34,025 $633.7 7.46% 33,795 $617.0 7.34%
- --------------------------------------------------------------------------------------------------------------
2,061 1,985 2,094 2,233
2,302 2,159 2,105 2,055
(524) (519) (519) (518)
- --------------------------------------------------------------------------------------------------------------
$39,270 $38,119 $37,705 $37,565
- --------------------------------------------------------------------------------------------------------------
$ 5,639 $ 25.7 1.81% $ 5,572 $ 24.6 1.75% $ 5,809 $ 23.8 1.65% $ 5,885 $ 23.3 1.61%
7,714 54.5 2.80 7,904 53.4 2.68 7,909 49.5 2.51 7,866 43.0 2.22
3,477 20.1 2.29 3,450 19.4 2.23 3,473 17.6 2.03 3,478 15.7 1.83
7,801 88.8 4.52 7,409 80.4 4.30 7,379 76.7 4.17 7,397 75.0 4.11
1,655 19.0 4.55 1,608 17.5 4.32 1,647 16.9 4.12 1,648 16.6 4.08
- --------------------------------------------------------------------------------------------------------------
26,286 208.1 3.14 25,943 195.3 2.99 26,217 184.5 2.82 26,274 173.6 2.68
2,838 36.7 5.12 2,488 28.1 4.48 1,748 16.7 3.84 1,675 12.2 2.96
194 2.7 5.60 96 1.0 4.31 99 1.1 4.30 109 .9 3.25
690 15.2 8.84 681 15.1 8.87 681 15.1 8.88 682 15.0 8.82
- --------------------------------------------------------------------------------------------------------------
30,008 $262.7 3.47% 29,208 $239.5 3.26% 28,745 $217.4 3.03% 28,740 $201.7 2.84%
5,562 5,391 5,573 5,599
584 470 370 296
215 215 215 215
2,901 2,835 2,802 2,715
- --------------------------------------------------------------------------------------------------------------
$39,270 $38,119 $37,705 $37,565
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
4.27% 4.35% 4.43% 4.50%
2.94 2.76 2.56 2.42
$426.2 4.80 $419.8 4.85 $416.3 4.90 $415.3 4.92
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
STATEMENTS OF FINANCIAL CONDITION
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
March 31 December 31
------------------------------ -------------
Dollars in Thousands (Unaudited) 1995 1994 1994
- ------------------------------------------------------------------------------------ -------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks ........................... $ 2,604,363 $ 2,572,048 $ 2,872,855
Federal funds sold and securities
purchased under agreements to resell ............. 99,750 15,400 35,040
Investment securities held to maturity
(fair value $4,418,050; $5,410,719
and $4,864,666) .................................. 4,445,366 5,379,501 4,944,808
Investment securities available for sale .......... 2,501,869 2,328,928 2,738,600
Loans ............................................. 29,321,614 26,332,400 28,594,523
Less: Allowance for loan losses ................... (502,800) (521,763) (501,447)
Unearned income ............................. (58,511) (162,521) (73,370)
- -----------------------------------------------------------------------------------------------------
Net loans ................................... 28,760,303 25,648,116 28,019,706
Premises and equipment ............................ 1,022,592 1,021,138 1,015,187
Intangible assets ................................. 774,600 226,444 498,264
Other assets ...................................... 1,526,372 791,377 1,153,859
- -----------------------------------------------------------------------------------------------------
Total assets ................................ $41,735,215 $37,982,952 $41,278,319
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Demand deposits .................................. $ 5,599,784 $ 5,923,384 $ 5,957,700
NOW accounts ..................................... 5,906,691 6,204,638 6,186,427
Money market accounts ............................ 7,133,590 7,937,170 7,747,453
Savings deposits ................................. 3,540,981 3,525,691 3,683,880
Certificates of deposit under $100,000 ........... 10,075,511 7,360,756 9,585,472
Other time deposits .............................. 2,080,864 1,639,595 1,947,699
- -----------------------------------------------------------------------------------------------------
Total deposits .............................. 34,337,421 32,591,234 35,108,631
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase ........... 1,823,018 1,317,073 1,250,506
Other short-term borrowings .................... 716,729 117,910 403,398
Other liabilities ................................ 692,105 330,029 604,925
Long-term debt ................................... 898,381 681,144 776,676
- -----------------------------------------------------------------------------------------------------
Total liabilities ............................ 38,467,654 35,037,390 38,144,136
- -----------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.10 par value,
20,000,000 shares authorized:
Series A, outstanding 2,000,000 shares ........ 100,000 100,000 100,000
Series B, outstanding 12,289; 13,628
and 12,289 shares ............................ 307 341 307
Series C, outstanding 2,300,000 shares ........... 115,000 115,000 115,000
Common stock, $2 par value, 200,000,000
shares authorized; issued 97,127,142;
97,549,526 and 96,732,754 shares ................ 194,254 195,099 193,466
Contributed capital .............................. 758,206 773,915 741,654
Net unrealized gain (loss) on investment
securities available for sale ................... 716 (7,150) (26,998)
Retained earnings ................................ 2,183,318 1,866,816 2,098,977
Less: Employee stock ownership plan
obligation, collateralized by 2,609,003;
3,049,387 and 2,732,372 shares ............... (84,240) (98,459) (88,223)
- -----------------------------------------------------------------------------------------------------
Total shareholders' equity .................. 3,267,561 2,945,562 3,134,183
- -----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity .. $41,735,215 $37,982,952 $41,278,319
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<FN>
The accompanying Notes to Financial Statements are an integral part of these financial statements.
</TABLE>
14
<PAGE>
STATEMENTS OF INCOME
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
Three Months
-----------------------------
For The Periods Ended March 31--Dollars in Thousands (Unaudited) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans........................................................... $605,166 $510,506
Investment securities........................................... 105,422 94,616
Other earning assets............................................ 1,935 961
- ---------------------------------------------------------------------------------------------------
Total interest income..................................... 712,523 606,083
- ---------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits........................................................ 242,222 173,657
Federal funds purchased and securities sold under
agreements to repurchase....................................... 24,422 12,216
Other short-term borrowings..................................... 8,585 875
Long-term debt.................................................. 17,110 15,020
- ---------------------------------------------------------------------------------------------------
Total interest expense.................................... 292,339 201,768
- ---------------------------------------------------------------------------------------------------
Net interest income....................................... 420,184 404,315
Provision for loan losses....................................... 24,277 19,350
- ---------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses....... 395,907 384,965
- ---------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts............................. 55,436 54,494
Mortgage banking income......................................... 15,867 8,556
Trust income.................................................... 19,357 20,714
Consumer finance income......................................... 17,559 -
Credit card discounts and fees.................................. 14,155 12,889
Brokerage income................................................ 6,637 8,714
Other service charges and fees.................................. 27,644 25,595
Securities transactions......................................... 17 (433)
Other income.................................................... 13,027 6,730
- ---------------------------------------------------------------------------------------------------
Total non-interest income................................. 169,699 137,259
- ---------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits.................................. 176,935 162,571
Net occupancy expense........................................... 30,626 29,415
Furniture and equipment expense................................. 35,319 34,183
Other expense................................................... 127,527 114,363
- ---------------------------------------------------------------------------------------------------
Total non-interest expense................................ 370,407 340,532
- ---------------------------------------------------------------------------------------------------
Net non-interest expense.................................. 200,708 203,273
- ---------------------------------------------------------------------------------------------------
EARNINGS
Income before income taxes...................................... 195,199 181,692
Provision for income taxes...................................... 66,500 63,730
- ---------------------------------------------------------------------------------------------------
Net income................................................ $128,699 $117,962
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Primary: Earnings per share............................... $1.27 $1.15
Average number of shares......................... 97,693,415 98,271,990
Dividends on preferred stock..................... $4,550 $4,550
Fully Diluted: Earnings per share............................... $1.23 $1.12
Average number of shares......................... 104,571,029 105,094,378
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
15
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CONSOLIDATED-BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
Contri- Net
Preferred Common buted Unrealized Retained ESOP
Dollars in Thousands (Unaudited) Stock Stock Capital Gain (Loss) Earnings Obligation Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Balance at January 1, 1994................ $215,351 $194,809 $775,719 $ 3,772 $1,786,561 $(102,121) $2,874,091
Net income................................... 117,962 117,962
Change in net unrealized gain (loss) on
investment securities available for sale... (10,922) (10,922)
Cash dividends declared:
Common ($.36 per share).................... (33,148) (33,148)
Preferred:
Series A................................ (2,250) (2,250)
Series B................................ (9) (9)
Series C................................ (2,300) (2,300)
Net issuances (repurchases) of common stock:
Stock purchase, option and
employee benefit plans..................... 288 (1,812) 3,662 2,138
Preferred stock conversions................ (10) 2 8 --
- ----------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1994................. $215,341 $195,099 $773,915 $ (7,150) $1,866,816 $ (98,459) $2,945,562
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
Balance at January 1, 1995................ $215,307 $193,466 $741,654 $(26,998) $2,098,977 $(88,223) $3,134,183
Net income................................... 128,699 128,699
Change in net unrealized gain (loss) on
investment securities available for sale.... 27,714 27,714
Cash dividends declared:
Common ($.41 per share) (39,800) (39,800)
Preferred:
Series A (2,250) (2,250)
Series B (8) (8)
Series C (2,300) (2,300)
Net issuances of common stock under stock
purchase, option and employee benefit
plans.................................... 788 16,552 3,983 21,323
- ----------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1995................$215,307 $194,254 $758,206 $ 716 $2,183,318 $(84,240) $3,267,561
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
16
<PAGE>
STATEMENTS OF CASH FLOWS
CONSOLIDATED-BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
For the Periods Ended March 31--Dollars in Thousands (Unaudited) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................................................... $ 128,699 $ 117,962
Reconcilement of net income to net cash provided by operating activities:
Provision for loan losses.................................................................... 24,277 19,350
Depreciation and amortization................................................................ 47,877 35,835
Employee benefits funded by equity........................................................... 7,163 6,632
Deferred income tax provision................................................................ 7,305 828
Decrease (increase) in interest receivable................................................... 3,185 (8,317)
Increase (decrease) in interest payable...................................................... 2,806 (5,073)
Decrease (increase) in other assets.......................................................... 12,437 (10,622)
(Decrease) increase in other liabilities..................................................... (96,164) 31,958
Originations of loans held for sale.......................................................... (353,881) (204,000)
Proceeds from sales of loans held for sale................................................... 358,327 238,393
Other........................................................................................ (12,769) (7,274)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities............................................... 129,262 215,672
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale........................................... (194,028) (870,846)
Proceeds from sales of investment securities available for sale................................. 173,525 --
Proceeds from maturities of investment securities available for sale............................ 313,568 575,294
Purchases of investment securities held to maturity............................................. (30,158) (1,324,352)
Proceeds from maturities of investment securities held to maturity.............................. 532,225 1,735,307
Net increase in loans........................................................................... (508,638) (289,975)
Purchases of premises and equipment............................................................. (28,727) (26,563)
Proceeds from sales of premises and equipment................................................... 14,063 17,727
Payments for purchases of acquired companies, net of cash acquired.............................. (465,563) --
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities.................................................... (193,733) (183,408)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in demand, NOW, savings and money market accounts....................... (1,394,414) 126,882
Net increase (decrease) in other time deposits.................................................. 623,204 (169,414)
Net increase (decrease) in federal funds purchased and securities sold under
agreements to repurchase....................................................................... 572,512 (404,760)
Net (decrease) increase in other short-term borrowings.......................................... (256,177) 7,732
Principal repayments of long-term debt.......................................................... (29,238) (980)
Proceeds from issuance of medium-term notes..................................................... 375,000 --
Net issuance (repurchases) of common and preferred stock........................................ 14,160 (4,494)
Cash dividends.................................................................................. (44,358) (37,707)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities.................................................... (139,311) (482,741)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents....................................................... (203,782) (450,477)
Cash and cash equivalents, January 1......................................................... 2,907,895 3,037,925
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, March 31.......................................................... $2,704,113 $ 2,587,448
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
For the periods ended March 31, 1995 and 1994, income tax payments of
$11 million and $5 million were paid and interest of $291 million and
$202 million was paid, respectively. Cash and cash equivalents includes cash
and due from banks, interest-bearing deposits in other banks, securities
purchased under agreements to resell and federal funds sold.
For the periods ended March 31, 1995 and 1994, $13 million and $18 million of
loans, respectively, were transferred to real estate held for sale.
During the period ended March 31, 1995, the company acquired $990 million of
non-cash assets and $525 million of liabilities.
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. GENERAL
The accounting and reporting policies of Barnett Banks, Inc. and its
affiliates conform to generally accepted accounting principles and to
predominant practices within the banking industry. The company has not
changed its accounting and reporting policies from those disclosed in its
1994 Annual Report on Form 10K, except as described in Note C.
In the opinion of the company's management, all adjustments necessary to
fairly present the financial position as of March 31, 1995 and 1994, and
the results of operations and cash flows for the periods then ended, all of
which are of a normal and recurring nature, have been included.
The results of operations for the three-month period ended March 31, 1995
may not be indicative of operating results for the year ending December 31,
1995. Certain prior year and prior quarter amounts have been reclassified
to conform to current classifications.
In January 1995, the company acquired EquiCredit Corporation, a
Jacksonville-based consumer finance company, for $332 million. EquiCredit
specializes in originating, selling and servicing fixed-rate consumer loans
secured by first or second mortgages.
In February 1995, the company acquired BancPLUS Financial Corporation, a
Texas-based full-service mortgage banking company, for $162 million. In
addition to mortgage loans held for sale, the primary asset of BancPLUS was
purchased mortgage servicing rights of $227 million. The purchase price in
excess of net assets acquired was $88 million.
B. LOANS
<TABLE>
<CAPTION>
March 31--Dollars in Thousands
Net of Unearned Income 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural............. $ 4,499,729 $ 4,086,015
Real estate construction........................... 934,728 856,137
Commercial mortgages............................... 2,363,142 2,536,475
Residential mortgages.............................. 11,001,532 9,507,132
Installment........................................ 8,357,907 7,410,970
Bank card.......................................... 1,387,851 1,100,846
Credit lines....................................... 718,214 672,304
- ------------------------------------------------------------------------------
Total........................................... $29,263,103 $26,169,879
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
C. ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
For The Three Months Ended March 31--
Dollars in Thousands 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance................................... $501,447 $521,827
Recoveries.......................................... 11,687 12,461
Provision expense................................... 24,277 19,350
Loans charged off................................... (36,125) (31,875)
Other, net.......................................... 1,514 --
- ------------------------------------------------------------------------------
Ending balance...................................... $502,800 $521,763
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1995, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment
of a Loan," which prescribes how the allowance for loan losses related to
impaired loans should be determined. The company defined impaired loans as
all non-performing loans except residential mortgages and small business
loans.
SFAS No. 114 specifies that the allowance for credit losses related to
impaired loans be determined by measuring the amount of impairment for these
loans. Impairment is measured by comparing the recorded investment in the
loan to the present value of expected future cash flows from the loan or to
the fair value of the underlying collateral. At March 31, 1995, impaired
loans totalled $151 million. Of that amount, approximately $83 million in
impaired loans have related reserves of $17 million, as calculated under
the provisions of SFAS No. 114. An additional $68 million in impaired
loans were determined to be carried at or below fair value and, accordingly,
have no reserves as determined in accordance with SFAS No. 114. The allowance
for loan losses is established to cover potential losses inherent in the
portfolio as a whole.
The company recognizes income on impaired loans primarily on the cash
basis. Any change in the present value of expected cash flows is recognized
through the allowance for loan losses. For the three-month period ended
March 31, 1995, the average carrying amount of impaired loans was $153 million,
on which the company recognized income of $1.3 million.
The definition of insubstance foreclosure loans was also changed by
SFAS 114. As a result, substantially all of these assets were reclassified
from other assets to loans, effective January 1. Because the amounts were
immaterial, prior periods were not reclassified.
18
<PAGE>
D. LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31--Dollars in Thousands 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
7.75% Sinking Fund Debentures, due 1997, with
annual sinking fund payments of $700,000
through 1996....................................... $ 10,200 $ 10,900
Less: Face value of debentures repurchased and
held for future retirements........................ (772) (1,472)
- ------------------------------------------------------------------------------
Total outstanding................................ 9,428 9,428
8.50% Subordinated Capital Notes, due 1999.......... 200,000 200,000
Medium-term notes, due in varying maturities
through 2003, with interest from a floating 4.275%
to a fixed 10.00%.................................. 276,150 201,900
9.875% Subordinated Capital Notes, due 2001......... 100,000 100,000
10.875% Subordinated Capital Notes, due 2003........ 55,000 55,000
8.50% Subordinated Capital Notes, due 2007.......... 100,000 100,000
Term notes, due in quarterly installments
through 2000, with interest at the federal
funds rate plus 1.625%............................. 72,736 -
Mortgage Collateralized Bonds, due 1996, with
interest from a floating 6.348%.................... 71,927 -
Capitalized lease obligations....................... 13,140 14,816
- ------------------------------------------------------------------------------
Total............................................ $898,381 $681,144
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
E. EARNINGS PER COMMON SHARE
The weighted-average number of shares used in the computation of earnings per
share is as follows:
<TABLE>
<CAPTION>
For The Three Months Ended March 31--
Dollars in Thousands 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY SHARES
Average common shares outstanding.................. 96,980,567 97,423,343
Common shares assumed outstanding to reflect
dilutive effect of:
Convertible preferred stock...................... 31,936 36,296
Common stock options............................. 680,912 812,351
- ------------------------------------------------------------------------------
Total.......................................... 97,693,415 98,271,990
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Adjustments for preferred dividends................ $4,550 $4,550
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For The Three Months Ended March 31-- 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
FULLY DILUTED SHARES
Average common shares outstanding.................. 96,980,567 97,423,343
Common shares assumed outstanding to reflect
dilutive effect of:
Convertible preferred stock...................... 6,716,876 6,721,236
Common stock options............................. 873,586 949,799
- ------------------------------------------------------------------------------
Total.......................................... 104,571,029 105,094,378
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
BACK
BARNETT BANKS, INC.
POST OFFICE BOX 40789
JACKSONVILLE FLORIDA 32203-0789
TELEPHONE: 904/791-7720
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,604
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,502
<INVESTMENTS-CARRYING> 4,445
<INVESTMENTS-MARKET> 4,418
<LOANS> 29,263
<ALLOWANCE> 503
<TOTAL-ASSETS> 41,735
<DEPOSITS> 34,337
<SHORT-TERM> 2,540
<LIABILITIES-OTHER> 693
<LONG-TERM> 898
<COMMON> 194
0
215
<OTHER-SE> 2,858
<TOTAL-LIABILITIES-AND-EQUITY> 41,735
<INTEREST-LOAN> 605
<INTEREST-INVEST> 106
<INTEREST-OTHER> 2
<INTEREST-TOTAL> 713
<INTEREST-DEPOSIT> 242
<INTEREST-EXPENSE> 292
<INTEREST-INCOME-NET> 420
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 370
<INCOME-PRETAX> 195
<INCOME-PRE-EXTRAORDINARY> 195
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
