<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
- ------------------------------------------------------------------------------
Submission of Matters to a Vote of Security Holders (Item 4)
At the company's Annual Meeting of Shareholders held on April 16, 1997, the
following members were elected to the Board of Directors:
Votes Votes
For Withheld
----------- ---------
Marshall M. Criser 154,692,724 3,789,509
Jack B. Critchfield 155,815,688 2,666,545
Remedios Diaz Oliver 155,879,697 2,602,536
Allen L. Lastinger, Jr. 155,837,222 2,645,011
Stewart Turley 155,879,694 2,602,539
The following proposal was approved at the company's Annual Meeting:
Votes Votes Votes
For Against Abstained
----------- --------- ---------
Approval of the Company's
Performance-Based Incentive Plan 145,676,637 9,490,676 3,314,920
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 April 7, 1997, filed a press release announcing
the company's acquisition of Oxford Resources Corp.
Barnett Banks, Inc. and Subsidiaries
Form 10-Q, June 30, 1997
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: August 13, 1997 /s/ Charles W. Newman
------------------------------------
Charles W. Newman
Chief Financial Officer
Dated: August 13, 1997
/s/ Gregory M. Delaney
------------------------------------
Gregory M. Delaney
Controller
Barnett
2
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
Restated for 2-for-1 stock split in September 1996
<TABLE>
<CAPTION>
Three Months Six Months
------------------------------ ------------------------------------
For the Periods Ended June 30-
Dollars in Millions Except Per Share Data 1997 1996 Change 1997 1996 Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Period
Net interest income (taxable-equivalent)........ $458.9 $480.3 (4)% $932.9 $955.6 (2)%
Provision for loan losses....................... 36.2 39.5 (8) 67.9 81.0 (16)
Non-interest income (excluding
securities transactions)...................... 270.5 193.9 40 486.2 390.5 25
Securities transactions(1)...................... .1 .3 (67) .1 19.3 (99)
Non-interest expense............................ 433.0 400.8 8 848.8 808.3 5
Net income...................................... 157.0 139.5 13 302.7 287.7 5
- -----------------------------------------------------------------------------------------------------------------------
Per Share Data
Net income:
Primary....................................... $ .80 $ .71 13% $ 1.59 $ 1.47 8%
Fully diluted................................. .80 .71 13 1.58 1.45 9
Dividends declared.............................. .31 .27 15 .58 .51 14
Book value(2)................................... 18.84 17.43 8 18.84 17.43 8
Stock price:
High.......................................... 55.38 32.06 73 55.38 32.06 73
Low........................................... 44.75 29.50 52 40.00 27.75 44
Close......................................... 52.50 30.50 72 52.50 30.50 72
- -----------------------------------------------------------------------------------------------------------------------
Key Ratios
Return on assets................................. 1.44% 1.36% 6% 1.42% 1.40% 1%
Return on equity................................. 18.08 16.92 7 18.66 17.41 7
Net yield on earning assets...................... 5.05 5.30 (5) 5.16 5.29 (2)
Overhead ratio................................... 59.35 59.43 - 59.81 60.05 -
Shareholders' equity to total assets(2).......... 8.17 8.07 1 8.17 8.07 1
Leverage ratio................................... 7.56 6.67 13 7.56 6.67 13
Total risk-based capital ratio................... 12.39 11.93 4 12.39 11.93 4
- -----------------------------------------------------------------------------------------------------------------------
Average Balances
Assets........................................... $43,639 $41,117 6% $42,494 $41,126 3%
Deposits......................................... 33,083 33,486 (1) 33,111 33,665 (2)
Loans, net of unearned income.................... 31,155 30,364 3 30,842 30,355 2
Earning assets................................... 36,415 36,333 - 36,308 36,247 -
Shareholders' equity............................. 3,474 3,299 5 3,244 3,306 (2)
Fully diluted shares (thousands)................. 196,547 196,439 - 191,536 197,951 (3)
- -----------------------------------------------------------------------------------------------------------------------
Period End
Assets........................................... $44,005 $41,674 6%
Deposits......................................... 33,385 34,345 (3)
Loans, net of unearned income.................... 30,924 30,455 2
Long-term debt................................... 1,934 1,228 57
Shareholders' equity............................. 3,536 3,294 7
Common shares (thousands)........................ 190,668 192,830 (1)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the sale of Bank South stock in the first quarter of
1996.
(2) Computed on equity before deduction of the employee stock
ownership plan obligation.
Barnett
3
<PAGE>
MANAGEMENT DISCUSSION
<TABLE>
Table 1 Selected Quarterly Data
1997 1996
---------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dollars in Millions Except Per Share Data Second First Fourth Third Second First
------ ------ ------ ------ ------ ------
Net interest income (taxable equivalent)..................... $458.9 $474.0 $461.9 $469.0 $480.3 $475.3
Provisions for loan losses................................... 36.2 31.8 28.6 44.9 39.5 41.6
------ ------ ------ ------ ------ ------
Net interest income after provision for loan losses.......... 422.7 442.2 433.3 424.1 440.8 433.7
Non-interest income (excluding securities transactions)...... 270.5 215.7 206.0 194.8 193.9 196.6
Securities transactions...................................... .1 -- (.1) -- .3 19.0
Non-interest expense (excluding SAIF assessment)............. 433.0 415.9 399.7 384.4 400.8 407.6
SAIF assessment.............................................. -- -- -- 24.5 -- --
------ ------ ------ ------ ------ ------
Income before income taxes and minority interest............. 260.3 242.0 239.5 210.0 234.2 241.7
Income tax provision......................................... 91.9 84.5 83.4 78.8 90.3 88.6
Taxable-equivalent adjustment................................ 3.1 3.5 3.9 4.2 4.4 4.9
Minority interest expense, net of income taxes............... 8.3 8.3 2.4 -- -- --
------ ------ ------ ------ ------ ------
Net income................................................. $157.0 $145.7 $149.8 $127.0 $139.5 $148.2
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Primary earnings per common share............................ $.80 $.79 $.77 $.65 $.71 $.76
Fully diluted earnings per common share...................... .80 .78 .76 .65 .71 .74
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
SUMMARY
All historical data used in this report has been restated to reflect a
2-for-1 stock split in September 1996.
Barnett's second quarter earnings rose 13% from a year ago. The company
earned $157.0 million, or $.80 per fully diluted share, in the second quarter of
1997, compared to $139.5 million, or $.71 per share, a year earlier and $145.7
million, or $.78 per share, in the first quarter.
For the first six months of 1997, Barnett earned $302.7 million, or $1.58
per share, compared to $287.7 million, or $1.45 per share, a year earlier.
Second quarter results represented a return on assets of 1.44% and a return
on shareholders' equity of 18.08%, up from last year's second quarter results of
1.36% and 16.92%, respectively.
Second quarter revenue rose 8% from a year earlier and 6% from the first
quarter to $729.5 million, driven by strong growth in consumer credit.
Taxable-equivalent net interest income was $458.9 million compared to $480.3
million a year earlier and $474.0 million in the first quarter. This category
included for the first time the interest expense associated with Barnett's
automobile leasing subsidiary, Oxford Resources Corp. ("Oxford"), acquired April
1. The decrease from last year's second quarter also reflects the impact of the
transfer of the company's mortgage servicing operation to a joint venture,
HomeSide Lending, Inc. ("HomeSide"), and the sale of $776 million of non-core
credit card receivables to Household Credit Services, Inc. ("Household"), as
part of its strategic alliance.
Non-interest income rose 39% from a year earlier and 25% from the first
quarter to $270.6 million. These increases reflect the addition of Oxford lease
revenue and significant growth in consumer finance income. Non-interest income
now comprises 37% of the company's revenue, up from 29% a year ago, consistent
with the company's continuing objective to diversify the earnings stream.
Non-interest expense increased 8% from last year and 4% over the first
quarter to $433.0 million, primarily reflecting the addition of expenses
associated with Oxford and the company's continued investment in strategic
initiatives designed to increase future revenue. Barnett's second quarter
overhead ratio was 59.4%, down slightly from a year earlier and from the first
quarter.
The provision for loan losses fell 8% from last year, but increased 14%
from the first quarter, to $36.2 million. At June 30, the reserve for loan
losses stood at $482 million and represented 1.56% of period-end loans and 275%
of non-performing loans. Net charge-offs of $36.0 million were 9% below a year
earlier, but rose $4.3 million from the first quarter. Second quarter net
charge-offs represented an annualized .46% of average loans compared to .52% a
year earlier and .42% in the first quarter. Non-performing assets of $227
million on June 30 represented .73% of gross loans plus real estate held for
sale.
On April 1, the company completed its acquisition of Oxford, the nation's
largest independent automobile leasing company. This transaction extended the
company's vehicle finance activities geographically and into new product lines.
Oxford, which originated approximately $1 billion in loans and leases in 1996,
adds 2,000 new automobile dealer relationships in 21 states and provides new
lease products that can be sold through Barnett's existing vehicle finance
channels. The full quarter's impact of Oxford's operations is reflected in the
second quarter results. Oxford's primary revenue is rental income from leased
automobiles and is expressed as net rental income (gross rental income less
depreciation) within non-interest income. Interest expense associated with
funding Oxford's leasing activity is included as a part of Barnett's net
interest income.
In June, Barnett agreed to acquire the Florida franchise of First of
America Bank Corporation for $160 million in cash. The Florida franchise, which
consists of $931 million of deposits and $749 million of loans, is located
principally in the fast-growing southwest portion of the state. The transaction
is expected to close in 1997.
Barnett
4
<PAGE>
Selected quarterly data is provided in Table 1.
EARNING ASSETS
Loans. Average loans grew 3%, or $791 million, from a year earlier and at
an annualized rate of 8%, or $629 million, from the first quarter to $31.2
billion. These increases reflect growth in commercial and installment loan
balances, partially offset by declines in residential and commercial mortgage
outstandings. The increase from the second quarter of 1996 was also partially
offset by the sale of credit card accounts to Household.
Installment loans rose $1.6 billion, or 17%, from the same period last
year and $504 million, or an annualized growth rate of 18%, from the first
quarter to $11.4 billion. The expansion of indirect automobile lending (loans
made through dealers to consumers purchasing cars) to new markets and
increased home equity loans originated through the EquiCredit franchise were
the principal factors in the growth of the installment loan portfolio. The
volume of automobile loans, the largest component of installment loans, is
dependent upon new and used automobile sales, which can vary depending on
economic conditions and other factors.
Residential mortgage loans fell 6%, or $630 million, from last year and
$53 million from the first quarter to $9.7 billion. These reductions reflect
management's decision to utilize the liquidity from amortizing residential
mortgages to fund growth in loan categories with higher risk-adjusted rates
of return. Also contributing to the decline from last year was the sale of
the company's pipeline of mortgage loans held for sale to HomeSide.
At the end of the second quarter, 77% of the residential loan portfolio
consisted of adjustable-rate mortgages. Most of these mortgages reprice
annually based on a spread over the one-year Constant Maturity Treasury
index. This repricing is limited by annual and lifetime caps.
Commercial loans grew 12% from last year and at an annualized rate of 8%
from the first quarter to $5.5 billion. Commercial real estate loans
decreased 11% from a year earlier and $81 million from the first quarter to
$2.6 billion.
Table 2 Interest Rate Sensitivity Analysis
<TABLE>
<CAPTION>
Non-Rate
Sensitive
0-30 31-90 91-180 181-365 1-5 and Over
June 30, 1997--Dollars in Millions Days Days Days Days Years Five Years Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural.......... $ 4,001 $ 179 $ 119 $ 188 $ 819 $ 228 $ 5,534
Real estate construction........................ 782 9 6 4 10 2 813
Commercial mortgages............................ 813 69 131 177 468 49 1,707
Residential mortgages........................... 1,265 1,267 1,636 2,755 2,228 456 9,607
Installment..................................... 2,549 790 1,080 1,806 4,891 88 11,204
Other loans..................................... 1,621 -- -- -- 438 -- 2,059
- ----------------------------------------------------------------------------------------------------------------------------
Total loans(1)............................. 11,031 2,314 2,972 4,930 8,854 823 30,924
Securities(1)................................... 260 311 552 1,164 1,718 688 4,693
Federal funds sold and securities purchased
under agreements to resell.................... 145 145
- ----------------------------------------------------------------------------------------------------------------------------
Total earning assets....................... $ 11,436 $ 2,625 $ 3,524 $ 6,094 $ 10,572 $ 1,511 $ 35,762
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
NOW and money market accounts(1)................ $ 4,344 $ 83 $ 515 $ 6,938 $ 11,880
Savings deposits(1)............................. 579 54 342 1,876 2,851
Time deposits................................... 1,759 $ 1,999 $ 2,558 2,683 3,201 -- 12,200
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits............ 6,682 1,999 2,558 2,820 4,058 8,814 26,931
Short-term borrowings........................... 3,239 3,239
Long-term debt.................................. 27 404 77 155 407 864 1,934
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities......... $ 9,948 $ 2,403 $ 2,635 $ 2,975 $ 4,465 $ 9,678 $ 32,104
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Gap before interest rate swaps.................. $ 1,488 $ 222 $ 889 $ 3,119 $ 6,107 $(8,167)
Interest rate swaps............................. (1,310) (2,325) 400 1,000 1,900 335
- ----------------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap adjusted for
interest rate swaps........................... 178 (2,103) 1,289 4,119 8,007 (7,832)
Cumulative adjusted interest rate
sensitivity gap............................... 178 (1,925) (636) 3,483 11,490
Cumulative adjusted gap as a percentage of
earning assets:
June 30, 1997............................... .50% (5.38)% (1.78)% 9.74% 32.13%
June 30, 1996(2)............................ 2.32 .02 .87 8.92 27.34
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
remained 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.
Approximately 63% of the NOW and money market account balances and 78% of the
savings account balances are classified as over one year.
(2) In 1997, management changed certain assumptions used to estimate the
anticipated repricing sensitivity of non-maturity deposit products considered
to be non-rate sensitive. Prior year amounts have been restated to give
effect to the change.
Barnett
5
<PAGE>
Table 3 Derivative Financial Instruments
<TABLE>
<CAPTION>
Weighted Average Interest Rate
----------------------------------- Average
Notional Replacement Receive Pay Maturity
June 30--Dollars in Millions Amount Value Rate(1) Index Rate(1) Index In Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997
Interest rate swaps:
Basis swap.................... $ 50 $ .30 5.69% LIBOR 5.43% CMT .58
Generic swaps:
Receive fixed............... 3,870 (7.54) 6.05 FIXED 5.84 LIBOR 2.37
Pay fixed................... 15 .67 5.69 LIBOR 5.90 FIXED 11.17
Interest rate floors............ 250 .31 6.00(2) LIBOR -- -- .51
Options to purchase securities.. 1 -- -- -- -- -- .36
- -------------------------------------------------------------------------------------------------------------
Total........................... $4,186 $(6.26) 6.04% 5.84% 2.27
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
1996
Interest rate swaps:
Basis swap.................... $ 50 $ .71 5.49% LIBOR 5.98% CMT 1.58
Generic swaps:
Receive fixed............... 3,600 (31.34) 5.43 Fixed 5.50 LIBOR 1.40
Pay fixed................... 266 .76 5.57 LIBOR 6.38 Fixed 1.21
Interest rate floors............ 250 1.25 6.00(2) LIBOR -- -- 1.50
- -------------------------------------------------------------------------------------------------------------
Total........................... $4,166 $(28.62) 5.47% 5.57% 1.40
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon contractual rates at June 30.
(2) The company receives interest equal to the amount by which
LIBOR is less than 6.00%
Bank card outstandings fell 31%, or $548 million, from last year, but
increased $117 million from the first quarter to $1.2 billion. The reduction
from last year reflects the sale of $776 million in non-core credit card
outstandings during the fourth quarter of 1996 to Household. The growth from
the first quarter primarily reflects the purchase of Household's $148 million
Florida/Georgia credit card portfolio, partially offset by seasonal declines
in balances.
Investment Securities and Other Earning Assets. The company's $5.0 billion
securities portfolio, with an average life of 2.26 years, consists primarily of
AAA or equivalently rated securities. U.S. Treasury securities comprised 41% of
the portfolio at June 30. Average securities fell $327 million, or 6%, from the
same period last year and $140 million from last quarter, reflecting the use of
proceeds from maturing securities to fund growth in higher yielding earning
assets.
At June 30, the available-for-sale securities portfolio had a $10 million
pre-tax unrealized loss compared to a $4 million pre-tax unrealized loss at June
30, 1996 and a $21 million pre-tax unrealized loss at March 31, 1997. These
unrealized losses do not impact net income or regulatory capital but are
recorded as adjustments to shareholders' equity on an after-tax basis. The
adjustments to shareholders' equity at June 30, 1997 also include a $12 million
pre-tax unrealized loss on certain servicing assets associated with the
company's consumer finance franchise which resulted from the company's adoption
of Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
on January 1, 1997.
Federal funds sold and securities purchased under agreements to resell fell
$382 million from the same period last year and $274 million from the first
quarter as proceeds from maturities were used to fund growth in higher yielding
earning assets.
DEPOSITS AND OTHER FUNDING SOURCES
Deposits. Average deposits of $33.1 billion were 1%, or $403 million, lower
than a year ago and $55 million below the first quarter. Transaction, money
market and savings account balances dropped $232 million from a year ago and $51
million from the first quarter. The decrease from last year was primarily due to
the transfer of mortgage escrow deposits to HomeSide during the second quarter
of 1996. CD and other time deposit balances fell $171 million from a year ago
and slightly during the quarter.
Other Funding Sources. Average federal funds purchased, securities sold
under agreements to repurchase and other short-term borrowings increased $956
million from the same period last year and $1.1 billion during the quarter to
$3.2 billion, primarily reflecting increased funding requirements associated
with Oxford and the consumer lending business. Long-term debt increased $706
million from the same period last year and $713 million from the first quarter,
reflecting the addition of Oxford long-term debt.
The company issues commercial paper to fund certain consumer lending
activities. As of June 30, Barnett's commercial paper outstandings totaled $265
million compared to $871 million as of June 30, 1996 and $50 million as of March
31, 1997.
ASSET-LIABILITY MANAGEMENT
Net interest income, the company's primary source of revenue, is affected
by changes in interest rates as well as fluctuations in the level and duration
of
Barnett
6
<PAGE>
Table 4 Change in Net Interest Income
<TABLE>
<CAPTION>
Three Months Six Months
------------------------------------ --------------------------------------
Change from Change from
Previous Year Previous Year
Due to: Due to:
For the Periods Ended June 30, 1997-- ------------------------ Total ----------------------- Total
Dollars in Millions--Taxable-Equivalent Volume Rate(1) Change Volume Rate(1) Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans.................................. $ 9.2 $10.7 $ 19.9 $ 3.8 $ 4.5 $ 8.3
Taxable securities..................... (4.3) .7 (3.6) (5.2) 3.7 (1.5)
Tax-free securities.................... (1.4) (.4) (1.8) (2.9) (.4) (3.3)
Federal funds sold and securities
purchased under agreements to resell. (5.1) .2 (4.9) (5.5) -- (5.5)
- ----------------------------------------------------------------------------------------------------------------------
Total interest income................ (1.6) 11.2 9.6 (9.8) 7.8 (2.0)
- ----------------------------------------------------------------------------------------------------------------------
Interest expense:
NOW and money market accounts.......... (1.0) 6.1 5.1 (3.8) 8.7 4.9
Savings deposits....................... (1.3) -- (1.3) (2.9) (.2) (3.1)
Certificates of deposit under
$100,000.............................. (2.4) 1.6 (.8) (5.3) (2.6) (7.9)
Other time deposits.................... .2 .4 .6 1.6 (1.0) .6
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits...... (4.5) 8.1 3.6 (10.4) 4.9 (5.5)
Federal funds purchased and securities
sold under agreements to repurchase.. 19.8 2.5 22.3 30.7 1.3 32.0
Other short-term borrowings............ (8.1) .5 (7.6) (17.8) .3 (17.5)
Long-term debt......................... 12.9 (.2) 12.7 12.7 (1.0) 11.7
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense............... 20.1 10.9 31.0 15.2 5.5 20.7
- ----------------------------------------------------------------------------------------------------------------------
Net interest income.................. $(21.7) $ .3 $(21.4) $(25.0) $ 2.3 $(22.7)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes changes in interest income and expense not due solely to volume or
rate changes.
assets and liabilities contained on the company's balance sheet. The impact
of changes in interest rates on the company's net interest income represents
Barnett's level of interest rate risk.
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 June 30, with each maturity interval referring to the earliest repricing
opportunity (i.e., the earlier of scheduled contractual maturity or repricing
date) for each asset and liability category. The resulting gap is one 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 balances
shown in the table based on historical and industry data. An estimate of the
expected prepayments of amortizing loans and investment securities is reflected
in the balances in the table. Changes in the economic and interest rate
environments may impact these expected prepayments.
Similarly, an adjustment to deposits is made to reflect the behavioral
characteristics of certain core deposits that do not have specified maturities
(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 interest rate sensitivity analysis indicates that the
company was liability sensitive on June 30, with a cumulative six-month negative
gap of 1.78%.
In addition to gap analysis, management uses rate-shock simulation and
duration of equity analysis to measure the rate sensitivity of its balance
sheet. Rate-shock simulation is a modeling technique used to estimate the impact
of changes in rates on the company's net interest margin. Duration of equity
measures the change in the market value of the company's equity resulting from a
change in interest rates. It is designed to evaluate the economic impact of rate
changes for periods that extend beyond the time horizons targeted by gap and
rate-shock simulation analyses. These analyses, which consider longer term
impacts of rate changes, suggest that Barnett is relatively rate neutral. The
company's rate-shock simulation indicates that an instantaneous 100 basis point
change in interest rates would have less than a 2% impact on net interest income
over a twelve-month period. This simulation is based on the company's business
mix, as well as interest rate exposures at a point in time, and includes a
parallel shift of the yield curve. It also requires certain assumptions about
the future pricing of loans and deposits in response to changes in interest
rates. While this simulation is a useful measure of the company's sensitivity to
changing rates, it is not a forecast of future results and is based on many
assumptions, which are impacted by risks and uncertainties and if changed, could
cause a different outcome.
The primary objective of Barnett's asset-liability management is to
maximize net interest income while maintaining acceptable levels of interest
rate sensitivity. The Asset-Liability Management Committee sets specific
rate-sensitivity limits for the company. The committee monitors and adjusts the
company's exposure to changes in interest rates to achieve predetermined risk
targets that it believes are
Barnett
7
<PAGE>
Table 5 Other Non-Interest Expense
<TABLE>
<CAPTION>
1997 1996
----------------- ---------------------------------------
Dollars in Thousands Second First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising and marketing............. $ 16,484 $ 18,175 $ 10,256 $ 11,098 $ 12,693 $ 13,905
Amortization of intangibles........... 16,706 11,638 11,731 11,970 13,043 13,440
Communications........................ 12,398 13,663 12,388 11,554 11,416 10,970
Expenses and provision on real
estate held for sale................. 2,375 2,034 3,233 3,696 3,384 2,409
FDIC assessments...................... 1,170 1,628 -- 2,545 2,514 2,720
Outside computer services............. 10,947 13,316 10,737 8,637 8,973 9,739
Postage............................... 7,162 5,866 6,345 6,147 7,390 6,920
Stationery and supplies............... 8,985 7,787 7,545 5,936 5,634 5,762
Insurance, taxes and other............ 55,000 51,413 53,895 48,060 56,482 59,729
- ------------------------------------------------------------------------------------------------------------
Total............................. $131,227 $125,520 $116,130 $109,643 $121,529 $125,594
- ------------------------------------------------------------------------------------------------------------
</TABLE>
consistent with current and expected market conditions. Management strives to
minimize the negative impact on net interest income caused by changes in
interest rates. At this time, management believes the company's
asset-liability mix is sufficiently balanced within a broad range of interest
rate scenarios to minimize the impact of significant rate movements.
Barnett controls its interest rate risk by managing the level and
duration of certain balance sheet assets and liabilities. The company also
uses off-balance-sheet instruments (derivatives) 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 derivatives portfolio used for asset-liability management
purposes, summarized in Table 3 on page 6, had a notional amount of $4.2
billion at June 30. This portfolio consisted of $3.9 billion of interest rate
swaps and $250 million of interest rate floors. The swap portfolio consisted
of fixed-term, non-amortizing interest rate swaps, which mature through
September 2002. Most of the company's swaps involve receipt of fixed cash
flows in exchange for variable (primarily LIBOR-based) cash flows. The
purpose of the swaps is to convert cash flows from floating-rate loans to
fixed cash flows. The derivatives reduce the sensitivity of the net interest
margin to flat or falling interest rates.
The derivatives portfolio performed as expected during the quarter, as
the value of instruments designed to protect the company in a declining rate
environment rose in value due to a modest decline in interest rates during
the period. The replacement value related to the company's derivatives
portfolio was a negative $6.3 million compared to a negative $28.6 million on
the same date last year and a negative $24.6 million on March 31, 1997.
The derivatives portfolio, including the amortization of deferred gains
on interest rate floors, increased net interest income in the second quarter
of 1997 by $6.3 million, representing a 7 basis point increase in the net
yield on earning assets. The swap portfolio increased second quarter 1996 net
interest income by $1.0 million, representing a 1 basis point increase in the
net yield on earning assets.
Barnett manages the counterparty exposure of its derivatives 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 derivatives counterparties in order to
control the level of credit exposure to these entities.
NET INTEREST INCOME
Barnett's taxable-equivalent net interest income, which represented 63%
of second quarter revenues, was $458.9 million, 4% below last year and 3%
below the first quarter. These decreases were primarily due to incremental
interest expense associated with funding Oxford's automobiles under operating
leases. In addition, the decrease from last year's second quarter reflects
the impact of the HomeSide and Household transactions. Table 4 on page 7
shows the changes in net interest income by category due to shifts in volume
and rate.
The net yield on earning assets of 5.05% was down from 5.30% a year
earlier and 5.28% in the first quarter. Excluding the effect of Oxford, the
net yield on earning assets would have increased slightly.
The decrease from last year was partially offset by a change in loan mix
from residential mortgages to higher yielding commercial and installment
loans. The decrease from last quarter was partially offset by a $215 million
increase in average earning assets and the positive impact of capital
securities issued during the fourth quarter of 1996 and the first quarter of
1997.
NON-INTEREST INCOME
Non-interest income rose 39% from a year ago and 25% from the first
quarter to $270.6 million. These increases reflect the addition of Oxford
revenue and significant growth in consumer finance income. The increase from
last year was partially offset by lower mortgage banking income and lower
credit card discounts and fees stemming from the HomeSide and Household
transactions, respectively.
Net rental income of $45.5 million reflects a full quarter's results from
Oxford's operations.
Consumer finance income of $48.6 million represents revenue generated
through the company's consumer loan securitization program and related loan
servicing. Consumer finance income doubled from the same period a year ago
and rose 17% from the first quarter, reflecting increased loan securitization
volume.
Mortgage banking income fell $7.1 million from the same period last year
Barnett
8
<PAGE>
and $4.6 million from the first quarter to $11.7 million. The decrease from
the second quarter of 1996 primarily reflects the impact of entering into the
HomeSide venture while first quarter results reflected the impact of
HomeSide's initial public offering of common stock which provided a $2.1
million benefit.
Other service charges and fees rose 19%, or $6.9 million, from last year
and 14%, or $5.2 million, from last quarter, to $42.9 million, reflecting
higher retail fees.
Brokerage income grew 14% from a year ago and 15% from the first quarter
to $13.4 million, primarily reflecting growth in sales.
Credit card discounts and fees fell $3.9 million, or 30%, from last
year's second quarter, reflecting the sale of non-core credit card
outstandings to Household. Credit card fees rose 7% from the first quarter,
reflecting increased seasonal transaction volume and the addition of accounts
purchased from Household.
Service charges on deposit accounts rose 10%, or $5.7 million, from last
year and other income rose 36%, or $4.0 million.
NON-INTEREST EXPENSE
Non-interest expense rose 8%, or $32.3 million, from a year ago and 4%,
or $17.1 million, from the first quarter, primarily reflecting the addition
of expenses associated with Oxford. Barnett also continued to make
significant investments in initiatives such as supermarket banking, enhanced
electronic delivery and sales forces and tools aimed at enhancing the
company's customer relationships and future revenue. The increase from last
year was somewhat offset by the impact of the HomeSide venture. The overhead
ratio improved to 59.4% in the second quarter from the first quarter's 60.3%.
Salaries and benefits increased $15.4 million from the same period last
year and $5.2 million from the first quarter. The company had an average of
21,399 full-time equivalent employees in the second quarter, compared to
20,539 during the first quarter and 20,288 a year ago. The purchase of Oxford
added 617 employees this quarter.
Net occupancy expense increased $4.3 million from last year and $5.1
million from the first quarter. Furniture and equipment expense increased
$2.9 million from last year and $1.1 million from last quarter. Other expense
increased $9.7 million from last year and $5.7 million from the first
quarter. The increase from the first quarter primarily reflects the addition
of expenses associated with Oxford. The increase from last year also reflects
increased marketing and technology expenses for strategic initiatives,
partially offset by the impact of HomeSide. Other expense for the past six
quarters is shown in Table 5.
Barnett has established a company-wide task force to review all
computer-based systems and applications and to develop a company-wide
preparation and action plan for the century date change for the year 2000.
Barnett's goal is to have all systems and applications compliant with the
century change by December 31, 1998. Preliminary cost estimates have not been
finalized, but remediation efforts will be expensed. Barnett could possibly
be affected by the century change to the extent other entities not affiliated
with the company are unsuccessful in addressing this issue.
ASSET QUALITY
Risk Elements. As shown in Table 6, non-performing assets were $227
million on June 30, or .73% of outstandings. By comparison, non-performing
assets stood at $252 million, or .82% of outstandings, on the same date last
year, and $233 million, or .76% of outstandings, on March 31, 1997.
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%.
Barnett has reduced its exposure to commercial real estate from a high of
28% of loans in 1988 to 8%. The commercial loan portfolio, representing 18%
of total loans, is not concentrated in any single industry but reflects the
broad-based economies in Florida and southern Georgia.
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.
At June 30, 4.55% of residential loans were 30 days or more past due
compared to 4.36% a year earlier and 4.43% at March 31, 1997. At the end of
the second quarter, 1.21% of residential loans were non-performing compared
to 1.04% a year earlier and 1.27% on March 31, 1997. The loss ratio in this
portfolio was 7 basis points in the second quarter.
Table 6 Non-Performing Assets
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Percentage Percentage
of Total of Total
June 30--Dollars in Thousands Amount Outstanding(1) Amount Outstanding(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-accruing loans:
Less than 90 days past due........... $ 18,939 .06% $ 26,164 .09%
90 days past due..................... 151,418 .49 158,830 .52
- --------------------------------------------------------------------------------------------------
Total non-accruing loans........... 170,357 .55 184,994 .61
Reduced-rate loans..................... 4,835 .01 7,717 .02
- --------------------------------------------------------------------------------------------------
Total non-performing loans......... 175,192 .56 192,711 .63
Real estate held for sale.............. 51,689 .17 59,258 .19
- --------------------------------------------------------------------------------------------------
Total non-performing assets........ $ 226,881 .73% $ 251,969 .82%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Non-performing loans by category:
Commercial, financial and
agricultural....................... $ 26,855 .09% $ 39,775 .13%
Real estate construction............. 4,068 .01 8,142 .02
Commercial mortgages................. 28,225 .09 41,946 .14
Residential mortgages................ 116,044 .37 102,848 .34
- --------------------------------------------------------------------------------------------------
Total.............................. $ 175,192 .56% $ 192,711 .63%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
90 days past due accruals.............. $ 54,673 .18% $ 62,304 .20%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deduction for unearned income.
Barnett
9
<PAGE>
Table 7 Loan Quality Information
<TABLE>
1997 1996
-------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dollars in Thousands Second First Fourth Third Second First
-------- -------- -------- -------- -------- --------
Net charge-offs (recoveries):
Commercial, financial and agricultural..................... $ 6,072 $ 3,300 $ 667 $ 3,271 $ (740) $ (334)
Real estate construction................................... (23) (20) 28 (13) -- (175)
Commercial mortgages....................................... (1,060) 162 (572) (2,931) (2,184) (1,850)
Residential mortgages...................................... 1,764 793 1,129 781 608 508
Installment................................................ 14,690 19,769 19,672 11,666 12,795 15,428
Bank card.................................................. 13,053 6,756 6,260 31,186 28,254 26,797
Credit lines............................................... 1,552 1,015 1,252 1,133 711 1,031
-------- -------- -------- -------- -------- --------
Total net charge-offs.................................... $36,048 $31,775 $28,436 $45,093 $39,444 $41,405
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Gross charge-offs............................................ $ 44,119 $ 39,850 $ 43,278 $ 61,037 $ 53,284 $ 51,500
Allowance for loan losses.................................... 481,965 477,188 476,709 507,109 506,892 506,315
Non-performing loans......................................... 175,192 184,071 190,425 192,216 192,711 181,382
Non-performing assets........................................ 226,881 233,400 233,980 251,137 251,969 244,638
Non-performing asset ratio................................... .73% .76% .77% .82% .82% .80%
Net charge-offs to average loans (annualized)................ .46 .42 .38 .59 .52 .55
Allowance to non-performing loans............................ 275 259 250 264 263 279
Allowance to period-end loans................................ 1.56 1.55 1.58 1.66 1.66 1.67
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
At June 30, the percentage of installment loans 30 days or more past due
was 1.28% compared to 1.08% a year earlier and 1.25% at March 31. Barnett's
installment loan portfolio consists primarily of loans secured by new and used
automobiles (62%), home equity loans (20%), government-guaranteed student loans
(14%) and other secured loans (2%). The remaining 2% of installment loans are
unsecured.
At June 30, the percentage of bank card outstandings 30 days or more past
due was 3.35%, up from 3.05% in the first quarter but down from 3.48% a year
earlier.
Net Charge-Offs. As shown in Table 7, net charge-offs declined 9% from a
year earlier to $36.0 million due to reduced losses on credit card loans. Net
charge-offs rose $4.3 million from the first quarter, reflecting increased
credit card and commercial charge-offs offset by reduced installment loan
losses. Bank card net charge-offs were $15.2 million lower than the same period
last year, as a result of the sale of $776 million of non-core credit card
receivables, but were $6.3 million higher than the first quarter. Credit card
charge-offs represented 4.36% of outstandings.
Commercial loan net charge-offs were up by $2.8 million from the first
quarter while installment loan net charge-offs were down $5.1 million. Total net
charge-offs in the second quarter represented an annualized .46% of average
outstandings, compared to .42% in the first quarter and .52% for the same period
last year.
Provision/Allowance for Loan Losses. Barnett's provision expense in the
second quarter was $36.2 million, compared to $39.4 million in last year's
second quarter and $31.8 million in the first quarter.
At June 30, the allowance for loan losses stood at $482 million, or 1.56%
of period-end loans. The ratio of the allowance for loan losses to
non-performing loans rose to 275% at June 30, compared to 263% a year earlier
and 259% in the first quarter. The allowance for loan losses is based on such
factors as the company's mix of loans, historical and expected loss experience
and the overall economic environment. Management considers the allowance
appropriate and adequate to cover potential losses inherent in the loan
portfolio based, in part, on the current composition of the loan portfolio,
credit quality trends and the economic environment.
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 effective tax rate for 1997
is expected to be 36% compared with 38% for 1996, primarily due to increased
income exempt from tax.
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, 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 proceeds from maturing securities and
loans, the sale of securities, asset securitization and other non-relationship
funding sources, such as senior or subordinated debt, bank notes, commercial
paper and wholesale purchased funds.
The high proportion of residential and installment loans on Barnett's
balance sheet provides it with an exceptional amount of contingent liquidity
through the conventional securitization programs that exist today.
The company has a commercial paper program to provide funding for certain
consumer lending operations. This facility is supported by $760 million in
back-up lines of credit. At June 30,
Barnett
10
<PAGE>
Table 8 Capital Ratios
<TABLE>
<CAPTION>
June 30--Dollars in Millions 1997 1996
- ---------------------------- ------- -------
<S> <C> <C>
Tier I capital . . . . . . . . . . . . . $ 3,219 $ 2,705
Total risk-based capital . . . . . . . . 4,217 3,699
Total risk-adjusted assets . . . . . . . 34,498 31,009
------ ------
Tier I capital ratio . . . . . . . . . . 9.33% 8.72%
Total risk-based capital ratio . . . . . 12.22 11.93
Tier I leverage ratio. . . . . . . . . . 7.56 6.67
------ ------
------ ------
</TABLE>
there was $216 million in borrowings under these lines.
As of June 30, the company had $1.4 billion in debt and preferred stock
available under existing shelf registrations with the Securities and Exchange
Commission. Management believes that the level of liquidity is sufficient to
meet current and future funding requirements.
CAPITAL
At June 30, shareholders' equity totaled $3.5 billion. Fully diluted shares
outstanding increased to 196.5 million from 185.6 million in the first quarter,
as the company issued 13.6 million shares of common stock to acquire Oxford.
Barnett declared a $.31 per share dividend for the second quarter, up 15% from
$.27 per share declared last quarter, representing a quarterly dividend payout
ratio of 39%.
In the fourth quarter of 1996 and the first quarter of 1997, the company
established statutory business trusts for the sole purpose of issuing capital
securities and investing the proceeds in the company's junior subordinated
debentures. The parent company issued two fixed-rate junior subordinated
debentures totaling $500 million to the trusts and one floating-rate junior
subordinated debenture totaling $250 million. The trust preferred securities are
reflected in the consolidated financial statements as minority interest and
included in Tier I capital for the risk-based capital ratio and leverage ratio
calculations.
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 exceeded these capital guidelines on June 30,
with a Tier I capital ratio of 9.33% and a total risk-based capital ratio of
12.22%.
In addition, a leverage ratio is 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 June
30, 1997, Barnett's leverage ratio was 7.56%, up 89 basis points from a year
earlier.
- -------------------------------------------------------------------------------
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
This report contains "forward-looking statements" within the meaning of the
federal securities laws such as interest rate sensitivity projections, revenue
and expense trends and long-term objectives. The forward-looking statements in
this report are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed in or implied by the
statements.
Barnett
11
<PAGE>
QUARTERLY AVERAGE BALANCES, YIELDS AND RATES
Consolidated--Barnett Banks, Inc. and Subsidiaries
<TABLE>
1997
--------------------------------------------------------------------------------
Second First
----------------------------------- ------------------------------------
Average Average
Average Yield Average Yield
Dollars in Millions--Taxable-Equivalent Balance Interest or Rate Balance Interest or Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans:(1)
Commercial, financial and agricultural . . . $ 5,459 $115.3 8.47% $ 5,347 $110.8 8.41%
Real estate construction . . . . . . . . . . 807 19.4 9.62 817 19.4 9.63
Commercial mortgages . . . . . . . . . . . . 1,745 40.3 9.26 1,816 40.2 8.97
Residential mortgages. . . . . . . . . . . . 9,673 189.7 7.85 9,726 189.0 7.77
Installment. . . . . . . . . . . . . . . . . 11,440 258.1 9.05 10,936 242.7 9.00
Bank card. . . . . . . . . . . . . . . . . . 1,198 44.7 14.97 1,081 41.0 15.38
Credit lines . . . . . . . . . . . . . . . . 833 20.3 9.78 803 19.3 9.72
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . . . 31,155 687.2 8.84 30,526 659.6 8.73
- -----------------------------------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable. . . . . . . . . . . . . . . . . . . 4,805 76.0 6.33 4,937 78.0 6.36
Tax-free . . . . . . . . . . . . . . . . . . 148 3.8 10.36 156 4.3 11.17
- -----------------------------------------------------------------------------------------------------------------------------------
Total securities . . . . . . . . . . . . . 4,953 79.8 6.45 5,093 82.3 6.50
- -----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . 307 4.3 5.56 581 7.7 5.38
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . . . 36,415 $771.3 8.49% 36,200 $749.6 8.36%
- -----------------------------------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . . . . 2,000 2,132
Other assets . . . . . . . . . . . . . . . . . 5,709 3,482
Allowance for loan losses. . . . . . . . . . . (485) (477)
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . . $43,639 $41,337
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities, Minority Interest and Equity
NOW and money market accounts . . . . . . . . $12,047 $ 63.8 2.12% $12,040 $ 61.7 2.08%
Savings deposits . . . . . . . . . . . . . . . 2,894 12.5 1.73 2,947 12.6 1.73
Certificates of deposit under $100,000 . . . . 9,557 120.0 5.04 9,639 118.6 4.99
Other time deposits. . . . . . . . . . . . . . 2,589 34.9 5.40 2,511 33.0 5.34
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits. . . . . . . 27,087 231.2 3.42 27,137 225.9 3.38
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . 2,774 37.3 5.39 1,860 23.0 5.01
Other short-term borrowings. . . . . . . . . . 442 6.5 5.87 289 4.2 5.94
Long-term debt . . . . . . . . . . . . . . . . 2,033 37.4 7.36 1,221 22.5 7.35
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . . . . 32,336 $312.4 3.87% 30,507 $275.6 3.66%
Demand deposits. . . . . . . . . . . . . . . . 5,996 6,001
Other liabilities. . . . . . . . . . . . . . . 1,083 1,120
Minority interest. . . . . . . . . . . . . . . 750 697
Preferred equity . . . . . . . . . . . . . . . -- --
Common equity. . . . . . . . . . . . . . . . . 3,474 3,012
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority interest and
equity . . . . . . . . . . . . . . . . . $43,639 $41,337
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Spread and Net Yield
Interest rate spread . . . . . . . . . . . . . 4.62% 4.70%
Cost of funds supporting earning assets 3.44 3.08
Net yield on earning assets. . . . . . . . . . $458.9 5.05 $474.0 5.28
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Income on non-accruing loans is recognized on a cash basis. Interest income
on individual loan categories is at contractual rates, while total loan
interest income is net of reversals of interest on non-accruing loans.
(2) Average yields on investment securities available for sale have been
calculated on amortized cost.
Barnett
12
<PAGE>
<TABLE>
<CAPTION>
1996
- --------------------------------------------------------------------------------------------------------------------------------
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>
$ 5,158 $107.6 8.29% $ 4,963 $103.3 8.28% $ 4,873 $100.8 8.32% $ 4,821 $ 99.5 8.30%
817 19.9 9.69 805 19.9 9.84 795 19.8 10.02 826 20.9 10.15
1,943 43.2 8.83 2,028 44.8 8.79 2,078 46.1 8.92 2,155 47.8 8.92
9,865 190.0 7.70 10,006 191.4 7.65 10,303 200.5 7.79 10,729 211.4 7.88
10,596 240.3 9.02 10,188 226.3 8.84 9,813 216.3 8.86 9,301 206.0 8.91
1,046 39.0 14.85 1,793 69.4 15.40 1,746 68.0 15.67 1,756 68.0 15.56
781 18.8 9.62 764 18.8 9.78 756 18.6 9.87 759 19.0 10.08
- --------------------------------------------------------------------------------------------------------------------------------
30,206 656.3 8.66 30,547 671.9 8.76 30,364 667.3 8.83 30,347 671.2 8.88
- --------------------------------------------------------------------------------------------------------------------------------
4,863 78.4 6.44 4,986 77.9 6.23 5,084 79.6 6.28 4,992 75.9 6.09
160 4.7 11.53 175 5.0 11.60 196 5.6 11.36 209 5.8 11.18
- --------------------------------------------------------------------------------------------------------------------------------
5,023 83.1 6.60 5,161 82.9 6.41 5,280 85.2 6.47 5,201 81.7 6.29
- --------------------------------------------------------------------------------------------------------------------------------
322 4.4 5.48 135 1.8 5.33 689 9.2 5.35 613 8.3 5.44
- --------------------------------------------------------------------------------------------------------------------------------
35,551 $743.8 8.34% 35,843 $756.6 8.41% 36,333 $761.7 8.42% 36,161 $761.2 8.45%
- --------------------------------------------------------------------------------------------------------------------------------
2,172 1,979 1,926 1,980
3,411 3,336 3,365 3,501
(480) (507) (507) (506)
- --------------------------------------------------------------------------------------------------------------------------------
$40,654 $40,651 $41,117 $41,136
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
$11,806 $ 60.8 2.05% $11,683 $ 59.4 2.02% $12,268 $ 58.7 1.93% $12,599 $ 61.9 1.97%
2,970 12.9 1.73 3,075 13.4 1.73 3,213 13.8 1.73 3,310 14.4 1.75
9,812 123.3 5.00 9,799 122.5 4.98 9,747 120.8 4.98 9,867 125.7 5.12
2,508 33.7 5.34 2,643 35.7 5.38 2,570 34.3 5.36 2,408 33.0 5.52
- --------------------------------------------------------------------------------------------------------------------------------
27,096 230.7 3.39 27,200 231.0 3.38 27,798 227.6 3.29 28,184 235.0 3.35
1,690 21.8 5.12 2,075 27.0 5.17 1,215 15.0 4.96 1,046 13.3 5.14
471 6.7 5.69 443 6.6 5.90 1,045 14.1 5.42 942 14.1 6.00
1,227 22.7 7.40 1,228 23.0 7.51 1,337 24.7 7.40 1,242 23.5 7.56
- --------------------------------------------------------------------------------------------------------------------------------
30,484 $281.9 3.68% 30,946 $287.6 3.70% 31,395 $281.4 3.60% 31,414 $285.9 3.66%
5,626 5,473 5,688 5,661
993 921 735 748
179 -- -- --
-- -- 1 97
3,372 3,311 3,298 3,216
- --------------------------------------------------------------------------------------------------------------------------------
$40,654 $40,651 $41,117 $41,136
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
4.66% 4.71% 4.82% 4.79%
3.16 3.19 3.12 3.18
$461.9 5.18 $469.0 5.22 $480.3 5.30 $475.3 5.27
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
13
<PAGE>
STATEMENTS OF FINANCIAL CONDITION
Consolidated--Barnett Banks, Inc. and Subsidiaries
<TABLE>
<CAPTION>
June 30 December 31
(Unaudited) (Audited)
-------------------------- -----------
Dollars in Thousands 1997 1996 1996
- -------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Assets
Cash and due from banks...................................................... $ 2,388,144 $ 2,109,441 $ 2,781,146
Federal funds sold and securities purchased under agreements to resell....... 4,800 1,054,475 2,500
Investment securities available for sale..................................... 4,579,544 5,024,079 5,031,123
Investment securities held to maturity (fair value $122,552,
$184,187 and $139,999)..................................................... 113,555 173,083 129,595
Loans........................................................................ 31,022,124 30,484,664 30,297,954
Less: Allowance for loan losses............................................. (481,965) (506,892) (476,709)
Unearned income........................................................ (98,482) (29,399) (45,430)
----------- ----------- -----------
Net loans.......................................................... 30,441,677 29,948,373 29,775,815
Assets under operating leases................................................ 1,789,064 -- --
Premises and equipment....................................................... 1,185,205 1,076,949 1,135,644
Intangible assets............................................................ 1,105,915 616,017 592,142
Other assets................................................................. 2,397,167 1,672,037 1,783,410
----------- ----------- -----------
Total assets....................................................... $ 44,005,071 $ 41,674,454 $ 41,231,375
----------- ----------- -----------
----------- ----------- -----------
Liabilities
Demand deposits.............................................................. $ 6,453,827 $ 5,673,099 $ 6,528,006
NOW and money market accounts................................................ 11,880,355 11,715,564 12,163,289
Savings deposits............................................................. 2,850,778 3,149,093 2,938,243
Certificates of deposit under $100,000....................................... 9,555,051 9,729,532 9,708,311
Other time deposits 2,645,014 4,077,923 2,482,409
----------- ----------- -----------
Total deposits..................................................... 33,385,025 34,345,211 33,820,258
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase......................................... 2,973,449 957,787 1,265,837
Commercial paper......................................................... 264,558 870,783 42,297
Other short-term borrowings.............................................. 1,313 110,127 1,233
Other liabilities............................................................ 1,161,308 869,154 1,004,890
Long-term debt............................................................... 1,933,627 1,227,716 1,226,529
----------- ----------- -----------
Total liabilities.................................................. 39,719,280 38,380,778 37,361,044
----------- ----------- -----------
Minority Interest
Company obligated mandatorily redeemable securities of trusts holding
solely parent debentures................................................... 750,000 -- 500,000
Shareholders' Equity
Preferred stock, $.10 par value: 20,000,000 shares
authorized; 8,489, 10,669 and 8,489 shares
outstanding................................................................ 212 267 212
Common stock, $2 par value: 400,000,000 shares
authorized; 190,668,090, 192,830,212 and
189,668,922 shares outstanding............................................ 397,336 385,660 395,338
Contributed capital.......................................................... 518,343 343,227 220,041
Net unrealized gain (loss) on investment
securities available for sale and certain
other financial assets..................................................... (721) (2,358) 8,187
Retained earnings............................................................ 2,677,885 2,634,837 2,808,749
Less: Employee stock ownership plan obligation,
collateralized by 3,547,064, 4,209,410
and 3,852,556 shares................................................. (57,264) (67,957) (62,196)
----------- ----------- -----------
Total shareholders' equity......................................... 3,535,791 3,293,676 3,370,331
----------- ----------- -----------
Total liabilities, minority interest and shareholders' equity...... $ 44,005,071 $ 41,674,454 $ 41,231,375
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Barnett
14
<PAGE>
STATEMENTS OF INCOME
Consolidated--Barnett Banks, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Three Months Six Months
--------------------------- --------------------------
For the Periods Ended June 30--Dollars in Thousands (Unaudited) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Loans............................................................. $ 685,188 $ 664,872 $ 1,342,675 $ 1,333,429
Investment securities............................................. 78,679 83,180 159,514 162,611
Federal funds sold and securities purchased under agreements
to resell....................................................... 4,257 9,175 11,956 17,465
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest income......................................... 768,124 757,227 1,514,145 1,513,505
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Expense
Deposits.......................................................... 231,238 227,609 457,134 462,559
Federal funds purchased and securities sold under agreements
to repurchase................................................... 37,261 14,990 60,221 28,347
Other short-term borrowings....................................... 6,467 14,081 10,692 28,157
Long term debt.................................................... 37,396 24,718 59,833 48,189
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense........................................ 312,362 281,398 587,880 567,252
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income........................................... 455,762 475,829 926,265 946,253
Provision for loan losses......................................... 36,170 39,444 67,945 81,042
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses........... 419,592 436,385 858,320 865,211
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Interest Income
Service charges on deposit accounts............................... 63,674 58,023 126,043 115,933
Consumer finance income........................................... 48,563 24,342 90,206 55,789
Net rental income................................................. 45,496 -- 45,496 --
Trust income...................................................... 20,339 20,586 41,364 41,776
Credit card discounts and fees.................................... 9,200 13,137 17,783 24,672
Mortgage banking income........................................... 11,700 18,772 27,952 40,135
Brokerage income.................................................. 13,427 11,796 25,098 23,015
Other service charges and fees.................................... 42,862 35,941 80,483 65,714
Securities transactions........................................... 56 340 56 19,302
Other income...................................................... 15,303 11,259 31,817 23,419
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income..................................... 270,620 194,196 486,298 409,755
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Interest Expense
Salaries and employee benefits.................................... 222,823 207,437 440,449 418,687
Net occupancy expense............................................. 38,186 33,933 71,232 67,353
Furniture and equipment expense................................... 40,718 37,805 80,379 75,134
Other expense..................................................... 131,227 121,529 256,747 247,123
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense.................................... 432,954 400,704 848,807 808,297
- ----------------------------------------------------------------------------------------------------------------------------------
Net non-interest expense...................................... 162,334 206,508 362,509 398,542
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings
Income before income taxes and minority interest.................. 257,258 229,877 495,811 466,669
Income tax provision.............................................. 91,922 90,346 176,514 178,939
Minority interest expense, net of income taxes.................... 8,308 -- 16,619 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income.................................................... $ 157,028 $ 139,531 $ 302,678 $ 287,730
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings Per Common Share
Restated for 2-for-1 stock split in September 1996
Primary: Earnings per share................................ $.80 $.71 $1.59 $1.47
Average number of shares.......................... 196,062,719 196,187,050 190,797,935 194,120,142
Dividends on preferred stock...................... -- $1 -- $2,168
Fully Diluted: Earnings per share................................ $.80 $.71 $1.58 $1.45
Average number of shares.......................... 196,546,702 196,439,044 191,536,447 197,951,134
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Barnett
15
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Consolidated--Barnett Banks, Inc. and Subsidiaries
<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, 1996............... $ 97,753 $ 379,461 $ 385,734 $ 38,242 $ 2,445,810 $ (74,814) $ 3,272,186
Net income............................... 287,730 287,730
Change in net unrealized gain (loss) on
investment securities available for
sale................................... (40,600) (40,600)
Cash dividends declared:
Common ($.51 per share)................ (96,523) (96,523)
Preferred.............................. (2,180) (2,180)
Issuances of common stock:
Stock purchase, option and employee
benefit plans........................ 2,966 38,924 6,857 48,747
Preferred stock conversions............ (97,486) 14,636 82,287 (563)
Repurchases of common stock.............. (11,403) (163,718) (175,121)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996................. $ 267 $ 385,660 $ 343,227 $ (2,358) $ 2,634,837 $ (67,957) $ 3,293,676
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
For the Period
Balance at January 1, 1997............... $ 212 $ 395,338 $ 220,041 $ 8,187 $ 2,808,749 $ (62,196) $ 3,370,331
Net income............................... 302,678 302,678
Change in net unrealized gain (loss) on
investment securities available for
sale and certain other financial
assets................................. (8,908) (8,908)
Cash dividends declared:
Common ($.58 per share)................ (107,076) (107,076)
Preferred.............................. (11) (11)
Issuances of common stock:
Stock purchase, option and employee
benefit plans........................ 3,419 30,529 4,932 38,880
Acquisition of Oxford Resources Corp... 27,262 550,540 577,802
Repurchases of common stock.............. (28,683) (282,767) (326,455) (637,905)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997................. $ 212 $ 397,336 $ 518,343 $ (721) $ 2,677,885 $ (57,264) $ 3,535,791
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Barnett
16
<PAGE>
STATEMENTS OF CASH FLOWS
Consolidated--Barnett Banks, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the Periods Ended June 30--
Dollars in Thousands (Unaudited) 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 302,678 $ 287,730
Reconcilement of net income to net cash
provided by operating activities:
Provision for loan losses. . . . . . . . . . . . . . . 67,945 81,042
Gains from securities transactions . . . . . . . . . . (56) (19,302)
Gain on securitization and sale of loans . . . . . . . (81,022) (47,934)
Depreciation on assets under operating leases. . . . . 41,011 --
Depreciation and amortization, excluding
depreciation on assets under operating leases . . . 136,196 130,433
Employee benefits funded by equity . . . . . . . . . . 13,830 12,216
Deferred income tax provision (benefit). . . . . . . . 26,861 (4,562)
Decrease (increase) in interest receivable . . . . . . (9,304) 16,776
Increase (decrease) in interest payable. . . . . . . . 3,430 (10,592)
Increase in other assets . . . . . . . . . . . . . . . (516,200) (296,494)
Increase in other liabilities. . . . . . . . . . . . . 87,930 276,567
Originations of loans held for sale. . . . . . . . . .(2,735,567) (3,030,481)
Proceeds from sales of loans held for sale . . . . . . 2,783,796 2,879,074
Other . . . . . . . . . . . . . . . . . . . . . . . . (28,002) (11,799)
- ------------------------------------------------------------------------------------
Net cash provided by operating activities. . . . . . 93,526 262,674
- ------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchases of investment securities available
for sale . . . . . . . . . . . . . . . . . . . . . . . (687,294) (2,191,971)
Proceeds from sales of investment securities
available for sale . . . . . . . . . . . . . . . . . . 1,720 379,665
Proceeds from maturities of investment securities
available for sale . . . . . . . . . . . . . . . . . . 1,140,706 1,926,142
Purchases of investment securities held to maturity. . . -- (2,932)
Proceeds from maturities of investment securities
held to maturity . . . . . . . . . . . . . . . . . . . 16,285 31,074
Net decrease (increase) in loans . . . . . . . . . . . . (609,179) 17,539
Purchases of vehicles under operating leases . . . . . . (300,429) --
Proceeds from sales of vehicles under operating leases 120,862 --
Proceeds from sales of premises and equipment. . . . . . 16,828 15,179
Purchases of premises and equipment. . . . . . . . . . . (118,508) (73,916)
Receipts related to dispositions and
acquisitions, net of cash acquired . . . . . . . . . . -- 378,249
- ------------------------------------------------------------------------------------
Net cash provided by (used for)investing
activities . . . . . . . . . . . . . . . . . . . . (419,009) 479,029
- ------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net decrease in demand, NOW, savings and
money market accounts . . . . . . . . . . . . . . . . (444,578) (1,534,036)
Net increase in certificates of deposit and
other time deposits . . . . . . . . . . . . . . . . . 9,345 1,528,310
Net increase (decrease) in short-term borrowings . . . . 1,917,800 (140,252)
Principal repayments of long-term debt . . . . . . . . .(1,077,844) (213,098)
Proceeds from issuance of long-term debt . . . . . . . . -- 250,000
Proceeds from issuance of company obligated
mandatorily redeemable securities of trusts
holding solely parent debentures . . . . . . . . . . . 250,000 --
Issuances of common stock. . . . . . . . . . . . . . . . 25,050 35,968
Repurchases of common stock. . . . . . . . . . . . . . . (637,905) (175,121)
Cash dividends . . . . . . . . . . . . . . . . . . . . . (107,087) (98,703)
- -------------------------------------------------------------------------------------
Net cash used for financing activities . . . . . . (65,219) (346,932)
- -------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (390,702) 394,771
Cash and cash equivalents, January 1 . . . . . . . . . 2,783,646 2,769,145
- ------------------------------------------------------------------------------------
Cash and cash equivalents, June 30 . . . . . . . . . . $2,392,944 $3,163,916
- ----------------------------------------------------------------------------------
For the periods ended June 30, 1997 and 1996, income tax payments
of $69 million and $198 million were paid and interest of $584
million and $578 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 each of the periods ended June 30, 1997 and 1996, $32 million
and $24 million of loans, respectively, were transferred to real
estate held for sale.
During the period ended June 30, 1997, the company acquired $2.4
billion of non-cash assets and $1.9 billion of liabilities.
During the period ended June 30, 1996, the company disposed of
$559 million of non-cash assets and $55 million of liabilities.
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
</TABLE>
Barnett
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
In September 1996, Barnett completed a 2-for-1 stock split. All historical
data in this report has been restated to reflect the split.
A. General
The accounting and reporting policies of Barnett Banks, Inc. and its
subsidiaries conform to generally accepted accounting principles and to
predominant practices within the banking industry. Except as noted below, the
company has not changed its accounting and reporting policies from those
disclosed in its 1996 Annual Report on Form 10-K.
On January 1, 1997, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This Statement
establishes new ground rules for determining whether a transfer of financial
assets constitutes a sale and, if so, the determination of any resulting gain
or loss. This statement requires that an enterprise recognize only assets it
controls and liabilities it has incurred, to remove assets only when control
has been surrendered and to remove liabilities only when they have been
extinguished. The adoption of SFAS No. 125 did not have a material impact on
the financial position or results of operations of the company.
The results of operations for the three and six-month periods ended June
30, 1997 may not be indicative of operating results for the year ending
December 31, 1997. Certain prior year and prior quarter amounts have been
reclassified to conform to current classifications.
On April 1, 1997, the company acquired all of the outstanding common stock
of Oxford Resources Corp., the nation's largest independent automobile
leasing company for 13.6 million shares of company common stock. The
acquisition was accounted for as a purchase transaction, and, accordingly,
the results of operations of Oxford are included from the date of purchase.
The primary asset of Oxford was automobiles under operating leases of $1.6
billion. The company enters into or purchases leases on new and used
automobiles from automobile dealers. All of the leases which are entered into
are accounted for as operating leases. At the inception of the lease, no
revenue is recognized and the leased vehicle, together with the initial
direct costs of originating the lease, which are capitalized, appear on the
statements of financial condition as "Assets Under Operating Leases." The
capitalized cost of each vehicle is depreciated over the lease term on a
straight line basis down to the company's original estimate of the projected
value of the vehicle at the end of the scheduled lease term. Income from
Oxford's automobile leasing program is included in the statements of income
as net rental income and is presented net of related depreciation. The
purchase price in excess of the fair value of net assets acquired was $515
million and may change as certain estimates are finalized.
In the opinion of the company's management, all adjustments necessary to
fairly present the financial position as of June 30, 1997 and 1996, 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.
B. Loans
June 30--Dollars in Thousands
Net of Unearned Income 1997 1996
------------ ------------
Commercial, financial and agricultural....... $ 5,533,593 $ 4,902,115
Real estate construction..................... 813,043 818,364
Commercial mortgages......................... 1,706,892 2,049,812
Residential mortgages........................ 9,606,952 10,095,321
Installment.................................. 11,204,123 10,045,435
Bank card.................................... 1,202,098 1,785,464
Credit lines................................. 856,941 758,754
------------ ------------
Total...................................... $ 30,923,642 $ 30,455,265
------------ ------------
------------ ------------
C. Allowance for Loan Losses
For the Six Months Ended June 30--
Dollars in Thousands 1997 1996
------------ ------------
Beginning balance............................ $476,709 $ 505,148
Recoveries................................... 16,146 23,935
Provision expense............................ 67,945 81,042
Loans charged off............................ (83,969) (104,784)
Other, net................................... 5,134 1,551
------------ ------------
Ending Balance............................... $481,965 $ 506,892
------------ ------------
------------ ------------
D. Long-Term Debt
June 30--Dollars in Thousands 1997 1996
------------ ------------
Parent Company:
7.75% Sinking Fund Debentures, due 1997...... -- $ 9,500
Less: Face value of debentures repurchased
and held for future retirements............ -- (72)
------------ ------------
Total outstanding.......................... -- 9,428
Medium-term notes, due in varying
maturities through 2003, with interest
from a floating 5.87% to a fixed 9.83%.... $ 251,500 401,500
8.50% Subordinated Capital Notes, due 1999... 200,000 200,000
9.875% Subordinated Capital Notes, due 2001.. 100,000 100,000
10.875% Subordinated Capital Notes, due 2003. 55,000 55,000
6.90% Subordinated Capital Notes, due 2005... 150,000 150,000
8.50% Subordinated Capital Notes, due 2007... 100,000 100,000
Senior Notes, with interest from a
floating 5.85%, due 1998................... 200,000 200,000
Subsidiaries:
Notes payable to finance the purchase of
leased vehicles, fixed interest rates
ranging from 6.11% to 9.05%................ 364,673 --
Capitalized lease obligations................ 512,454 11,788
------------ ------------
Total...................................... $ 1,933,627 $ 1,227,716
------------ ------------
------------ ------------
Notes payable to finance the purchase of leased vehicles are due in
installments equal to the lease rentals receivable by the company from the
lease. The final payments on these borrowings are equal to the residual value
of the vehicle at lease termination.
Barnett
18
<PAGE>
E. Earnings Per Common Share
The weighted-average number of shares used in the computation of earnings
per share are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
For the Periods Ended June 30-- ------------------------- -------------------------
Dollars in Thousands 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary Shares
Average common shares outstanding.......................... 190,801,184 193,206,438 185,922,564 191,140,266
Common shares assumed outstanding to reflect dilutive
effect of:
Convertible preferred stock............................ 44,122 55,552 44,122 56,224
Common stock options................................... 5,217,413 2,925,060 4,831,249 2,923,652
- -------------------------------------------------------------------------------------------------------------------
Total.................................................. 196,062,719 196,187,050 190,797,935 194,120,142
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Adjustments for preferred dividends........................ -- $1 -- $2,168
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Six Months
------------------------- -------------------------
For the Periods Ended June 30-- 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fully Diluted Shares
Average common shares outstanding.......................... 190,801,184 193,206,438 185,922,564 191,140,266
Common shares assumed outstanding to reflect dilutive
effect of:
Convertible preferred stock............................ 44,122 307,546 44,122 3,887,216
Common stock options................................... 5,701,396 2,925,060 5,569,761 2,923,652
- -------------------------------------------------------------------------------------------------------------------
Total.................................................. 196,546,702 196,439,044 191,536,447 197,951,134
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" which, when adopted, will replace the current
methodology for calculating and presenting earnings per share. Under SFAS No.
128, primary and fully diluted earnings per share will be replaced with the
presentation of basic and diluted earnings per share. Basic earnings per
share excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed similarly
to fully diluted earnings per share. The Statement will be effective for the
company's December 31, 1997 consolidated financial statements.
Barnett
19
<PAGE>
BARNETT
Shareholder Assistance
Shareholders requiring a change of address, records or
information about lost certificates, dividend checks or dividend
reinvestment should contact:
First Chicago Trust, Agent
P. O. Box 2500
Jersey City, NJ 07303-2500
Telephone: 800/328-5822
Information
Analysts, investors and others seeking financial data should
contact John C. Glover, Director of Investor Relations, at
904/791-7254.
Others seeking general information should contact Robert L.
Stickler, Manager of External Communications, or Jerri R. Franz,
Manager of Media Relations, at 904/791-7668.
Publications
For printed material (annual and quarterly reports, proxy
statements, 10-K and 10-Q reports), contact Corporate
Communications at 904/791-5516. Barnett's press releases are
available through the company's web site at
http://www.barnett.com and by fax through Company News on Call at
800/758-5804, ext. 089575.
How to reach us
If you need to contact Barnett's corporate headquarters, call
or write:
50 North Laura Street
P. O. Box 40789
Jacksonville, FL
32203-0789
904/791-7720
Internet address
http://www.barnett.com
Email address
[email protected]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,388
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,580
<INVESTMENTS-CARRYING> 114
<INVESTMENTS-MARKET> 123
<LOANS> 30,924
<ALLOWANCE> 482
<TOTAL-ASSETS> 44,005
<DEPOSITS> 33,385
<SHORT-TERM> 3,239
<LIABILITIES-OTHER> 1,161
<LONG-TERM> 1,934
750
0
<COMMON> 397
<OTHER-SE> 3,139
<TOTAL-LIABILITIES-AND-EQUITY> 44,005
<INTEREST-LOAN> 1,343
<INTEREST-INVEST> 159
<INTEREST-OTHER> 12
<INTEREST-TOTAL> 1,514
<INTEREST-DEPOSIT> 457
<INTEREST-EXPENSE> 588
<INTEREST-INCOME-NET> 926
<LOAN-LOSSES> 68
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 849
<INCOME-PRETAX> 496
<INCOME-PRE-EXTRAORDINARY> 303
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 5.16
<LOANS-NON> 175
<LOANS-PAST> 55
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 477
<CHARGE-OFFS> 84
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 482
<ALLOWANCE-DOMESTIC> 482
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
