<PAGE>
FILED PURSUANT TO RULE 424(B)(5); FILE NUMBER 33-50387
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 9, 1994)
$150,000,000
CRESTAR FINANCIAL CORPORATION
8 3/4% SUBORDINATED NOTES DUE 2004
INTEREST PAYABLE MAY 15 AND NOVEMBER 15
THE NOTES WILL MATURE ON NOVEMBER 15, 2004 AND ARE NOT REDEEMABLE PRIOR TO
MATURITY. THE NOTES DO NOT PROVIDE FOR ANY SINKING FUND. THE NOTES ARE
UNSECURED AND SUBORDINATED TO ALL PRESENT AND FUTURE SENIOR
INDEBTEDNESS OF THE COMPANY. THE NOTES WILL BE REPRESENTED BY ONE
OR MORE GLOBAL SECURITIES (EACH A "GLOBAL SECURITY") REGISTERED
IN THE NAME OF THE DEPOSITARY'S NOMINEE. BENEFICIAL INTERESTS
IN THE GLOBAL SECURITIES WILL BE SHOWN ON, AND TRANSFERS
THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS
MAINTAINED BY THE DEPOSITARY OR ITS PARTICIPANTS.
EXCEPT AS DESCRIBED HEREIN, NOTES IN
DEFINITIVE FORM WILL NOT BE ISSUED.
SEE "DESCRIPTION OF NOTES."
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PRICE 99.740% AND ACCRUED INTEREST
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND COMPANY
PUBLIC (1) COMMISSIONS (2) (1)(3)
<S> <C> <C> <C>
PER NOTE............................................................. 99.740% .650% 99.090%
TOTAL................................................................ $149,610,000 $ 975,000 $148,635,000
</TABLE>
(1) PLUS ACCRUED INTEREST FROM NOVEMBER 15, 1994.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933.
(3) BEFORE DEDUCTION OF EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $240,000.
THE NOTES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE NOTES WILL BE MADE ON OR ABOUT NOVEMBER 16, 1994 THROUGH THE
BOOK-ENTRY FACILITIES OF THE DEPOSITORY TRUST COMPANY AGAINST PAYMENT THEREFOR
IN NEW YORK FUNDS.
MORGAN STANLEY & CO.
INCORPORATED
LEHMAN BROTHERS
CRAIGIE INCORPORATED
DAVENPORT & CO. OF VIRGINIA, INC.
SCOTT & STRINGFELLOW, INC.
WHEAT FIRST BUTCHER SINGER
NOVEMBER 9, 1994
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING MAY BE CONDUCTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds.............................................................................................. S- 3
Recent Developments.......................................................................................... S- 3
Capitalization............................................................................................... S- 4
Summary Consolidated Financial Data.......................................................................... S- 5
Management's Discussion and Analysis......................................................................... S- 7
Description of Notes......................................................................................... S-14
Underwriters................................................................................................. S-15
PROSPECTUS
Available Information........................................................................................ 2
Incorporation of Certain Documents by Reference.............................................................. 2
The Company.................................................................................................. 3
Use of Proceeds.............................................................................................. 3
Consolidated Ratios of Earnings to Fixed Charges............................................................. 3
Regulatory Matters........................................................................................... 4
Description of Debt Securities............................................................................... 6
Description of Preferred Stock............................................................................... 12
Description of Common Stock.................................................................................. 16
Plan of Distribution......................................................................................... 18
Legal Matters................................................................................................ 18
Experts...................................................................................................... 19
</TABLE>
S-2
<PAGE>
USE OF PROCEEDS
Net proceeds from the sale of the Notes will be used by Crestar for general
corporate purposes as set forth under the heading "Use of Proceeds" in the
accompanying Prospectus, including cash requirements for pending acquisitions.
RECENT DEVELOPMENTS
ACQUISITION STRATEGY
Crestar historically has grown by internal expansion and acquiring
commercial banks. Since 1990, Crestar's acquisition strategy has included
acquiring healthy and supervisory thrift institutions. Crestar targets specific
banking markets for expansion within the Virginia, Washington, D.C. and Maryland
region, with the goal of being a market leader in each geographic market in
which it competes. Although Crestar's 336 banking offices (as of September 30,
1994) serve customers throughout much of Virginia, Washington, D.C. and southern
Maryland, Crestar has concentrated its growth in the major population areas of
this geographic region -- the metropolitan areas of Richmond, Tidewater and
Northern Virginia in Virginia, Washington, D.C., and Maryland. Crestar's
strategic plan calls for continued pursuit of growth opportunities through
strategic bank and thrift acquisitions that meet Crestar's business and
financial criteria in the Virginia, Washington, D.C. and Maryland region, with
concentration in the more populous areas. Crestar also pursues growth
opportunities by the acquisition of small mortgage and investment management
companies throughout the United States.
PENDING ACQUISITIONS
Crestar has the following acquisitions pending as of the date of this
Prospectus Supplement.
On September 20, 1994, Crestar agreed to acquire TideMark Bancorp Inc.
("TideMark") of Newport News, Virginia, and its subsidiary TideMark Bank, F.S.B.
("TideMark Bank"). TideMark shareholders will receive Crestar common stock or
cash in a transaction valued at approximately $38 million. TideMark Bank has
nine branches in Hampton Roads, Virginia, with approximately $230 million in
deposits at June 30, 1994. TideMark had previously agreed to acquire eight
branches, with approximately $70 million in deposits at June 30, 1994, from Bay
Savings, a division of FirstFed Michigan Corp. The Bay Savings acquisition is
expected to be completed by December 31, 1994. Crestar's acquisition of
TideMark, which is expected to be completed during January 1995, will initially
bring to Crestar approximately $300 million in deposits.
On September 1, 1994, Crestar and Crestar Bank agreed to acquire Jefferson
Savings and Loan Association, F.A. ("Jefferson"), headquartered in Warrenton,
Virginia, in a merger of Jefferson into Crestar Bank. Jefferson shareholders
will receive Crestar common stock or cash in a transaction valued at
approximately $22 million. At June 30, 1994, Jefferson had total consolidated
assets of $298 million and total deposits of $269 million. The acquisition of
Jefferson is expected to be completed in January 1995.
On August 26, 1994, Crestar and Crestar Bank agreed to acquire Independent
Bank ("Independent"), headquartered in Manassas, Virginia, in a merger of
Independent into Crestar Bank. Independent shareholders will receive Crestar
common stock or cash in a transaction valued at approximately $12 million. At
June 30, 1994, Independent had total assets of $93 million and total deposits of
$85 million. The acquisition of Independent is expected to be completed in
January 1995.
Crestar continually seeks acquisition opportunities with other financial
institutions in which it may pay cash or issue common stock or other equity or
debt securities. As of the date of this Prospectus Supplement, Crestar has no
agreements or understandings to acquire or merge with any other businesses other
than as described herein.
ACQUISITIONS COMPLETED IN 1994
Crestar has completed the following acquisitions in 1994.
On September 16, 1994, Crestar Bank acquired from the Resolution Trust
Corporation approximately $17 million in deposits related to two branches of
Second National Federal Savings Association, Salisbury, Maryland, located in
Fairfax and Woodbridge, Virginia.
On June 10, 1994, Crestar acquired Annapolis Bancorp, Inc., the holding
company for Annapolis Federal Savings Bank, headquartered in Annapolis,
Maryland. Approximately $300 million in total assets, $210 million in loans,
$275 million in deposits, and nine branches were originally added to Crestar's
existing branch network. Crestar issued 264,208 shares of Crestar common stock
and paid approximately $3 million cash in the transaction.
S-3
<PAGE>
On May 14, 1994, Crestar Bank acquired from the Resolution Trust
Corporation approximately $150 million in deposits related to Piedmont Federal
Savings Association, Manassas, Virginia for a premium of $10 million.
On March 18, 1994, Crestar acquired Providence Savings and Loan
Association, F.A., headquartered in Vienna, Virginia. Approximately $300 million
in deposits, $250 million in loans and six branches were initially added to
Crestar's existing branch network. Crestar paid approximately $27 million cash
in the transaction.
On March 18, 1994, Crestar Bank acquired substantially all of the assets
(approximately $425 million) and assumed certain liabilities of NVR Federal
Savings Bank, headquartered in McLean, Virginia. Approximately $340 million in
deposits, $210 million in loans and two branches were initially added to
Crestar's operations. Crestar Bank paid approximately $43 million cash in the
transaction.
On January 28, 1994, Crestar acquired Virginia Federal Savings Bank,
headquartered in Richmond, Virginia. Approximately $500 million in deposits,
$550 million in loans and 10 branches were initially added to Crestar's existing
branch network. Crestar paid approximately $52 million cash in the transaction.
On January 11, 1994, Crestar Mortgage Corporation acquired the stock of
Mortgage Capital Corporation ("Mortgage Capital"), a wholesale mortgage loan
production company, with an initial purchase payment of $5.2 million. Under the
terms of the purchase agreement, an additional $2.4 million may be paid to the
sellers, depending on the performance of Mortgage Capital's operations over the
next five years.
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1994 and as adjusted to give effect to the receipt by the Company
of the proceeds from the sale of the Notes. See "Use of Proceeds" for additional
information.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
AS
ADJUSTED
FOR
ACTUAL OFFERING
<S> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
8 5/8% subordinated notes due 1998............................ $ 49,963 $ 49,963
8 1/4% subordinated notes due 2002............................ 125,000 125,000
8 3/4% subordinated notes due 2004............................ -- 150,000
Other notes and mortgages..................................... 43,601 43,601
Total long-term debt........................................ 218,564 368,564
Preferred stock. Authorized 2,000,000 shares.
No shares issued and outstanding............................ -- --
Common stock, $5 par value. Authorized 100,000,000 shares;
outstanding 37,597,723 shares............................... 187,989 187,989
Capital surplus............................................... 276,424 276,424
Retained earnings............................................. 683,133 683,133
Net unrealized loss on securities available for sale.......... (30,787) (30,787)
Total shareholders' equity.................................. 1,116,759 1,116,759
Total long-term debt and shareholders' equity............... $1,335,323 $1,485,323
</TABLE>
S-4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following consolidated income statement data of the Company for each of
the years in the five-year period ended December 31, 1993, and the respective
consolidated balance sheet data are derived from the Company's consolidated
financial statements, which have been audited by KPMG Peat Marwick LLP,
independent auditors. The selected consolidated financial data for the
nine-month periods ended September 30, 1994 and 1993 are derived from the
unaudited consolidated financial statements of the Company, and, in the opinion
of management, reflect all adjustments necessary for a fair presentation of the
financial position and results of operations, including adjustments related to
completed acquisitions. All such adjustments are of a normal recurring nature.
The results of operations for an interim period are not necessarily indicative
of results that may be expected for a full year or any other interim period.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
EARNINGS (1):
Net interest income....................... $ 434.9 $ 389.1 $ 527.0 $ 482.1 $ 421.1 $ 414.2 $ 380.2
Provision for loan losses................. 27.0 35.3 48.8 99.2 209.5 131.1 44.8
Net interest income after provision for
loan losses............................. 407.9 353.8 478.2 382.9 211.6 283.1 335.3
Noninterest income........................ 197.0 184.6 248.3 218.4 233.8 166.8 148.4
Noninterest expense....................... 414.9 392.8 523.0 501.8 405.6 378.8 362.8
Income before income taxes................ 190.0 145.6 203.5 99.5 39.8 71.1 120.9
Income tax expense........................ 63.3 43.8 63.0 19.7 6.1 9.9 17.1
Net Income................................ $ 126.7 $ 101.8 $ 140.5 $ 79.8 $ 33.8 $ 61.1 $ 103.8
Net income applicable to common shares.... $ 126.7 $ 99.9 $ 138.3 $ 77.3 $ 31.2 $ 58.5 $ 101.0
PER COMMON SHARE DATA:
Net income (primary)...................... $ 3.34 $ 2.67 $ 3.68 $ 2.32 $ 0.98 $ 1.87 $ 3.28
Dividends declared (2).................... 1.13 0.81 1.14 0.80 0.86 1.32 1.20
Book value................................ 29.70 27.77 28.32 25.24 23.23 23.15 22.73
Average primary shares (thousands)........ 37,933 37,429 37,587 33,286 31,921 31,218 30,739
SELECTED PERIOD-END BALANCES:
Total assets.............................. $14,450.4 $12,987.1 $13,286.9 $12,674.7 $11,828.3 $11,881.2 $11,360.8
Earning assets............................ 13,120.4 11,810.2 12,050.6 11,358.9 10,249.2 10,547.0 9,922.5
Loans (net of unearned income)............ 8,647.9 7,052.3 7,287.1 6,581.7 7,065.8 7,680.2 7,769.3
Allowance for loan losses................. 225.9 213.0 211.0 205.0 210.0 149.4 93.2
Securities held to maturity............... 944.6 1,964.1 1,824.6 1,684.9 1,926.5 2,183.8 1,961.6
Securities available for sale............. 1,866.2 1,671.8 1,697.0 1,544.0 116.0 287.3 --
Money market investments.................. 1,327.5 687.4 650.6 1,181.0 978.8 271.6 62.0
Core deposits............................. 10,918.8 9,890.2 10,118.1 9,511.0 8,650.3 7,786.0 7,075.1
Total deposits............................ 10,986.1 9,935.7 10,165.8 9,581.5 8,889.6 8,506.1 8,467.3
Short-term borrowings..................... 1,905.0 1,506.7 1,616.7 1,608.0 1,699.6 2,293.7 1,776.9
Long-term debt............................ 218.6 190.6 191.2 210.4 161.9 168.4 170.1
Common shareholders' equity............... 1,116.8 1,049.9 1,062.5 913.9 749.9 726.3 705.3
Total shareholders' equity................ 1,116.8 1,094.9 1,062.5 958.9 794.9 771.3 750.3
AVERAGE BALANCES:
Total assets.............................. $13,611.5 $12,472.1 $12,585.4 $11,920.4 $11,440.7 $11,673.7 $10,659.4
Earning assets............................ 12,262.5 11,186.7 11,284.4 10,663.3 10,321.1 10,468.3 9,478.7
Loans (net of unearned income)............ 8,115.6 6,745.9 6,836.5 6,725.3 7,275.3 7,767.2 7,682.1
Securities held to maturity............... 816.0 1,806.2 1,813.2 2,516.3 1,943.7 2,268.6 1,606.2
Securities available for sale............. 2,339.0 1,553.5 1,591.4 65.3 207.0 93.1 --
Money market investments.................. 644.4 760.0 675.8 988.6 738.5 218.5 96.4
Core deposits............................. 10,831.3 9,526.0 9,636.2 9,420.1 8,115.7 7,209.2 6,668.4
Total deposits............................ 10,886.6 9,572.9 9,682.8 9,540.6 8,596.9 8,296.8 8,143.6
Short-term borrowings..................... 1,206.4 1,465.1 1,455.7 1,131.9 1,778.3 2,284.6 1,457.8
Long-term debt............................ 214.8 223.8 215.4 185.9 162.8 170.1 175.1
Common shareholders' equity............... 1,094.1 975.9 994.8 794.6 744.1 731.7 670.5
Total shareholders' equity................ 1,094.1 1,020.9 1,038.7 839.6 789.1 776.7 719.7
<CAPTION>
(continued)
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
RATIOS (3):
Return on average assets.................. 1.24% 1.09% 1.12% 0.67% 0.30% 0.52% 0.97%
Return on average total shareholders'
equity.................................. 15.44 13.29 13.53 9.50 4.28 7.87 14.43
Return on average common
shareholders' equity.................... 15.44 13.65 13.90 9.73 4.19 7.99 15.06
Net interest margin (4)................... 4.81 4.75 4.78 4.67 4.29 4.22 4.36
Noninterest expense to average assets..... 4.06 4.20 4.16 4.21 3.55 3.25 3.40
Earnings to fixed charges (5):
Excluding interest on deposits.......... 4.72x 3.88x 4.04x 2.63x 1.32x 1.35x 1.79x
Including interest on deposits.......... 1.75 1.62 1.65 1.26 1.07 1.10 1.18
CREDIT DATA (3):
Total nonperforming loans at
period end.............................. $ 62.9 $ 100.0 $ 79.8 $ 142.2 $ 270.3 $ 220.7 $ 68.1
Total nonperforming assets at
period end (6).......................... 86.6 134.8 96.8 220.8 350.0 237.2 75.1
Total nonperforming assets to
total assets at period end.............. 0.60% 1.04% 0.73% 1.74% 2.96% 2.00% 0.66%
Total nonperforming assets to loans and
foreclosed properties at period end..... 1.00 1.90 1.32 3.32 4.90 3.08 0.97
Net charge-offs........................... $ 27.7 $ 49.3 $ 64.8 $ 113.9 $ 150.7 $ 76.9 $ 42.3
Net charge-offs to average loans.......... 0.46% 0.97% 0.95% 1.69% 2.07% 0.99% 0.55%
Allowance for loan losses to:
Loans at period end..................... 2.61 3.02 2.89 3.11 2.97 1.94 1.20
Nonperforming loans at period end....... 359 213 264 144 78 68 137
Nonperforming assets at period end...... 261 158 218 93 60 63 124
CAPITAL DATA:
(at period end)
Tier 1 risk-adjusted capital.............. $ 1,053.4 $ 1,034.2 $ 1,014.2 $ 932.6 $ 767.3 $ 741.1 $ 723.9
Total risk-adjusted capital............... 1,346.0 1,322.0 1,299.9 1,235.7 1,028.6 1,003.6 958.0
Risk-adjusted capital ratios:
Tier 1.................................. 9.6% 10.5% 10.5% 10.4% 7.9% 7.5% 7.3%
Total capital........................... 12.2 13.5 13.5 13.7 10.6 10.1 9.6
Tier 1 leverage ratio..................... 7.7 8.1 7.9 7.7 6.7 6.2 6.8
Tangible leverage ratio (7)............... 6.9 7.7 7.3 7.0 6.0 5.8 5.8
Total shareholders' equity to total
assets.................................. 7.7 8.4 8.0 7.6 6.7 6.5 6.6
</TABLE>
(1) Amounts may not add due to rounding.
(2) In April 1991, the Company announced that, thereafter, its dividend
declaration would be made in the month following the end of each quarter
instead of in the last month of each quarter. As a result, 1991 included
only three dividend declarations; however, four dividend payments were made.
(3) Certain ratios for the nine months ended September 30, 1994 and 1993 have
been annualized for purposes of comparability with prior years.
(4) Net interest margin is calculated on a taxable equivalent basis, using a tax
rate of 34% for 1992, 1991, 1990 and 1989 and 35% for 1994 and 1993.
(5) Earnings represent pre-tax income plus fixed charges. Fixed charges,
including interest on deposits when indicated, include all interest expense,
one-third of net rental expense (which approximates the interest component
on such expense) and amortization of long-term debt expense.
(6) Nonperforming assets include nonaccrual loans, restructured loans and
foreclosed properties (including in-substance foreclosures).
(7) Calculated as total shareholders' equity less total intangible assets
divided by total assets less total intangible assets.
S-6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the
consolidated financial statements of the Company, including the notes thereto
and the related management's discussion and analysis, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993 and Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994,
and the consolidated financial statements of the Company for the quarter ended
September 30, 1994, including the notes thereto, included in the Company's
Current Report on Form 8-K dated November 9, 1994, which are incorporated herein
by reference. See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
EARNINGS OVERVIEW
Net income for the first nine months of 1994 totaled $126.7 million, a 25%
increase over the $101.8 million earned in 1993. Earnings per common share
increased 25% to $3.34 from the $2.67 earned in the first nine months of 1993.
The earnings improvement reflected increased net interest income, a lower
provision for loan losses, and increased noninterest operating income, the
combined effect of which was partially offset by an increase in noninterest
expenses.
Net interest income for the first nine months of 1994 increased $45.8
million or 12% over 1993, primarily due to an increased base of low-cost core
deposits, and a 9.6% increase in average earning assets. The net interest margin
of 4.81% for the first nine months of 1994 was six basis points higher than the
comparable period of 1993. This increase reflects favorable changes in the
composition of balance sheet earning assets, as well as in Crestar's funding
mix, the combination of which offset narrower interest rate spreads. Decreased
levels of nonperforming assets also contributed to Crestar's improved net
interest margin.
Growth in average earning assets and core deposits is a result, in part, of
acquisitions completed during the first nine months of 1994. On January 28,
Crestar purchased Virginia Federal Savings Bank, a thrift institution
headquartered in Richmond, Virginia. Initially, approximately $500 million in
deposits and $550 million in loans were acquired for a purchase price of $51.7
million. On March 18, Crestar acquired Providence Savings and Loan Association
of Vienna, Virginia ("Providence") for a purchase price of $27.0 million.
Providence initially added approximately $300 million in deposits and $250
million in loans. Also on March 18, Crestar acquired the assets and assumed
certain liabilities of NVR Savings Bank ("NVR"), for a purchase price of $42.6
million. Based in McLean, Virginia, NVR initially added approximately $340
million in deposits and $210 million in loans. Previously, on January 11,
Crestar acquired Mortgage Capital Corporation, a wholesale mortgage loan
production company, with an initial purchase payment of $5.2 million. Under
terms of the purchase agreement, an additional $2.4 million may be paid to the
former owners, depending on the future performance of Mortgage Capital
Corporation's operations over the next five years.
Crestar completed two acquisitions during the second quarter of 1994. On
June 10, Annapolis Bancorp, Inc. ("Annapolis"), based in Annapolis, Maryland,
and its subsidiary Annapolis Federal Savings Bank were purchased for
approximately $15 million in a combination of cash and Crestar stock. This
acquisition initially added approximately $275 million in deposits and $210
million in loans. On May 14, Crestar acquired the deposits of Piedmont Federal
Savings Association, a Manassas, Virginia-based thrift which had been operating
under Resolution Trust Corporation ("RTC") conservatorship. Crestar paid a $10
million premium to the RTC for the institution's $150 million in deposits.
On September 16, 1994, Crestar acquired from the RTC approximately $17
million in deposits related to two branches of Second National Federal Savings
Association, Salisbury, Maryland, located in Fairfax and Woodbridge, Virginia.
In connection with the acquisition, Crestar paid a $112 thousand premium to the
RTC.
Each of these acquisitions was accounted for under the purchase method of
accounting whereby the purchase price has been allocated to the underlying
assets acquired and liabilities assumed based on their respective fair values at
the date of acquisition. In the aggregate, acquisitions completed during the
first nine months of 1994 are expected to contribute positively to earnings per
share for 1994.
The provision for loan losses for the first nine months of 1994 was $27.0
million, down from the $35.3 million for the first nine months of 1993. The
decrease reflected a continuing trend of improved credit quality. Nonperforming
assets were $86.6 million at September 30, 1994, down from $134.8 million at
September 30, 1993. Annualized net charge-offs to average loans were 0.46% for
the first nine months of 1994, compared to 0.97% for the comparable 1993 period.
S-7
<PAGE>
For the first nine months of 1994, noninterest income of $197.0 million
increased 7% over 1993 results. Excluding securities gains (losses), noninterest
income increased 9% in the first nine months of 1994, or $16.4 million, when
compared to prior year results. These gains were driven primarily by growth in
bank-card related income and deposit account income, and gains on sale of
mortgage servicing rights. These gains were partially offset by declines in
trading account activities, mortgage origination volume, and trust and
investment advisory income when compared to 1993 levels.
Noninterest expense increased $22.1 million or 6% from the first nine
months of 1993. Crestar's foreclosed properties expense declined, reflecting an
improved credit environment in Crestar's market area. Excluding foreclosed
properties expense, noninterest expense increased $52.3 million or 14% on a
year-to-date basis. Expense increases in the mortgage, bank card, trust and
investment advisory, and investment banking and sales groups amounted to
approximately $19.1 million for the nine months year-to-date, as Crestar
continues its emphasis on expanding its sources of noninterest income. Employee
benefits expense increased $11.3 million year-to-date, primarily due to
acquisition activity, adoption of Statement of Financial Accounting Standards
No. 112 (postemployment benefits) on January 1, 1994, and to employee benefits
that are tied to earnings. Additional noninterest expenses arising from bank and
thrift acquisitions completed in the first nine months of 1994 were
approximately $16.9 million.
The effective tax rate for the first nine months of 1994 was 33.3%,
compared to 30.1% for 1993. The increase in the effective tax rate is primarily
attributable to reduced proportions of tax-exempt interest and dividends, higher
provisions for state income taxes, and a favorable deferred tax adjustment,
recorded in the third quarter of 1993, reflecting an increase in net deferred
tax assets due to provisions of the Omnibus Budget Reconciliation Act of 1993.
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," ("SFAS 114") will become effective for
fiscal years beginning after December 15, 1994. This accounting standard
requires that impaired loans within the scope of the statement be measured and
reported on the basis of the present value of expected cash flows discounted at
the loan's effective interest rate. Crestar currently believes that the future
effect on results of operations and financial position of adopting SFAS 114 will
be immaterial.
BALANCE SHEET OVERVIEW
Total assets at September 30, 1994 and 1993 were $14.5 billion and $13.0
billion, respectively. Earning assets averaged $12.3 billion for the first nine
months of 1994, up 10% from the first nine months of 1993. Acquisitions
completed during the first nine months of 1994 (see " -- Earnings Overview")
added approximately $1.1 billion in average earning assets for the first nine
months of 1994.
Average total loans increased $1.4 billion or 20% for the first nine months
of 1994. Approximately $0.8 billion of this growth in average loans was
attributable to acquisitions completed by Crestar during 1994, and was
concentrated in residential real estate loans. Other average loan balances
experiencing growth during the first nine months of the year included bank card
loans, up 66% to $1.1 billion, and instalment loans, which averaged $1.7 billion
in the first nine months of 1994 compared to $1.4 billion in the same period of
1993.
Effective January 1, 1994, Crestar adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities." In accordance with SFAS 115, securities are
classified as either securities held to maturity, securities available for sale
or trading account securities. Securities held to maturity are carried at
amortized cost, as the Company has the ability and positive intent to hold these
securities to maturity. Trading account securities are carried at fair value as
they are intended to be sold in the near term; trading securities are classified
as money market investments on the Company's Consolidated Balance Sheets.
Securities available for sale are carried at fair value and represent securities
not classified as held to maturity or as trading account securities.
With the adoption of SFAS 115, unrealized gains and losses on securities
available for sale are excluded from the Consolidated Statements of Income and
reported, net of tax, as a separate component of shareholders' equity. On
January 1, 1994, securities having an amortized cost of $2.932 billion, and a
fair value of $2.983 billion, were classified as securities available for sale.
The initial effect of adoption of SFAS 115 was an increase in shareholders'
equity of $32.2 million, which was the amount by which the fair value of
securities available for sale exceeded the amortized cost of such securities on
January 1, 1994, net of tax.
The average balance of investments classified as securities available for
sale was $2.339 billion for the first nine months of 1994. Investments
classified as securities held to maturity averaged $816 million for the first
nine months of 1994. At September 30, 1994, the amortized cost of securities
available for sale exceeded the fair value of such securities, net of tax,
S-8
<PAGE>
by $30.8 million. The net unrealized gain or loss of securities available for
sale, which is recorded as a component of shareholders' equity, will continue to
be subject to change in future periods due to fluctuations in market value,
acquisition activities, and sales, purchases, maturities and calls of securities
classified as available for sale.
In accordance with SFAS 115, the Company's consolidated financial
statements for periods prior to January 1, 1994 have not been retroactively
changed to conform to current securities classifications. Prior to January 1,
1994, investment securities which management intended to sell as a part of its
asset/liability management strategy, or that may have been sold in response to
changes in interest rates, prepayment risk or similar factors, were classified
as securities held for sale, and were stated at the lower of aggregate amortized
cost or market value. The average balance of such securities for the first nine
months of 1993 was $1.554 billion. Investments classified similarly to
securities held to maturity averaged $1.806 billion for the first nine months of
1993.
Total core deposits averaged $10.8 billion for the first nine months of
1994, an increase of $1.3 billion or 14% from the first nine months of 1993.
Average deposits arising from acquisitions completed in the first half of 1994
represented approximately $0.9 billion of this increase.
Money market investments averaged $644 million in the first nine months of
1994, down from $760 million in the first nine months of 1993. Short-term
borrowings also experienced a decline in average balances, falling from $1.5
billion in the first nine months of 1993 to $1.2 billion in the same period of
1994.
ASSET QUALITY
The Company's loan portfolio totaled $8.6 billion at September 30, 1994, an
increase of 23% from September 30, 1993 and an increase of 19% from December 31,
1993. The major components of the September 30, 1994 portfolio were: commercial
and tax-exempt loans -- $2.9 billion or 34%; instalment loans -- $1.7 billion or
20%; bank card loans -- $1.2 billion or 14%; residential mortgage loans -- $1.7
billion or 20%; income property mortgage loans -- $0.8 billion or 9%; and
construction loans -- $0.2 billion or 3%. Average loan balances for the nine
month period ended September 30, 1994 of $8.1 billion were up $1.4 billion or
20% over the same period of 1993. As previously noted, approximately $0.8
billion of this increase was attributable to acquisitions completed during the
first nine months of 1994.
The Company's outstanding loans to real estate developers and investors
("REDI"), encompassing certain real estate related loans included in the balance
sheet classifications of commercial, tax-exempt, real estate mortgage and
construction loans, totaled $1.1 billion at September 30, 1994 or 13% of total
loans, compared with $1.2 billion or 17% of total loans at September 30, 1993.
The concentration level of REDI loans relative to total loans continues to
decrease as loan growth occurs, despite additions to the REDI loan portfolio
arising from acquisitions of financial institutions. The REDI portfolio was the
primary source of weaker credit quality for the recessionary period from 1990
into 1993. At September 30, 1994, REDI nonperforming assets were $56.4 million,
compared to $79.8 million at September 30, 1993.
With improvement in commercial and REDI loan charge-off levels, the largest
proportion of net charge-offs during 1994 has occurred in bank card loans. The
increase in bank card net charge-offs is attributable to growth in bank card
loan balances, which due to increased promotional efforts, increased from $976
million at December 31, 1993 to $1.224 billion at September 30, 1994.
Total nonperforming assets dropped to $86.6 million or 1.00% of loans and
foreclosed properties at September 30, 1994, compared to $134.8 million or 1.90%
of loans and foreclosed properties at September 30, 1993. Table 2 provides a
quarterly analysis of the change in nonperforming assets since the second
quarter of 1993.
Accruing loans past due 90 days or more totaled $32.5 million at September
30, 1994, compared to $26.9 million at September 30, 1993 and $25.2 million at
December 31, 1993. Potential problem loans, consisting of loans currently
performing in accordance with contractual terms but for which potential credit
problems of the borrowers have caused management to have serious doubts as to
the ability of such borrowers to comply with present repayment terms, totaled
$144 million at September 30, 1994 (excluding any such loans included in total
nonperforming assets or past due loans), compared with $224 million at September
30, 1993 and with $205 million at December 31, 1993. The reason for the decline
in potential problem loans from September 30, 1993 to September 30, 1994 relates
to the continued improvement in credit quality throughout the loan portfolio
during this time period.
The allowance for loan losses totaled $225.9 million and represented 359%
of nonperforming loans at September 30, 1994, up from $211.0 million or 264% of
nonperforming loans at year-end 1993. Table 3 details activity in the allowance
for loan losses for the past seven quarters.
S-9
<PAGE>
TABLE 1: NONPERFORMING ASSETS (1)
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
TOTAL
COMPANY
<S> <C>
(DOLLARS IN MILLIONS)
Nonaccrual loans:
Commercial................................................................................. $ 26.2
Instalment................................................................................. 2.8
Real estate................................................................................ 30.3
Construction............................................................................... 3.7
Total nonperforming loans.............................................................. 63.0
Foreclosed properties...................................................................... 23.6
Total nonperforming assets............................................................. $ 86.6
Nonperforming assets to loans and foreclosed properties.................................... 1.00%
</TABLE>
TABLE 2: NONPERFORMING ASSETS -- QUARTERLY ACTIVITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30,
1994 1994 1994 1993 1993
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Beginning balance................................................ $ 102.4 $114.0 $ 96.8 $134.8 $ 162.8
Acquisition additions............................................ -- 10.1 23.9 -- --
Other additions.................................................. 22.2 19.4 30.2 24.7 13.8
Payments, sales and reductions................................... (26.6) (30.2) (28.4) (41.0) (28.0)
Charge-offs and write-downs...................................... (4.9) (6.8) (7.1) (12.5) (11.0)
Reinstatements to accrual status................................. (5.5) (4.1) (2.7) (10.3) (2.8)
Foreclosed properties provision for losses....................... (1.0) -- 1.3 1.1 --
Net increase (decrease).......................................... (15.8) (11.6) 17.2 (38.0) (28.0)
Ending balance................................................... 86.6 $102.4 $114.0 $ 96.8 $ 134.8
Nonperforming assets to loans and foreclosed properties.......... 1.00% 1.19% 1.38% 1.32% 1.90%
<CAPTION>
JUNE 30,
1993
<S> <C>
Beginning balance................................................ $193.9
Acquisition additions............................................ 18.4
Other additions.................................................. 27.6
Payments, sales and reductions................................... (47.1)
Charge-offs and write-downs...................................... (13.1)
Reinstatements to accrual status................................. (9.4)
Foreclosed properties provision for losses....................... (7.5)
Net increase (decrease).......................................... (31.1)
Ending balance................................................... $162.8
Nonperforming assets to loans and foreclosed properties.......... 2.24%
</TABLE>
S-10
<PAGE>
TABLE 3: ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT.
SEPT. 30, JUNE 30, MAR. 31, DEC. 31, 30, JUNE 30, MAR. 31,
1994 1994 1994 1993 1993 1993 1993
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Allowance for loan losses --
Beginning balance........................... $ 226,666 $226,577 $210,958 $212,982 $212,981 $202,979 $205,017
Allowance from acquisitions................... (21) 79 15,629 -- -- 22,000 --
Provision for loan losses..................... 8,100 8,850 10,032 13,500 13,769 3,006 18,500
Net charge-offs (recoveries):
Commercial.................................. 769 2,345 877 1,364 4,796 6,113 6,466
Instalment.................................. 1,138 1,016 620 1,213 878 935 1,412
Bank card................................... 5,990 5,709 4,573 3,893 3,965 4,202 4,122
Real estate................................. 2,489 (282) 4,818 10,965 4,917 1,789 6,664
Construction................................ (1,529) 76 (844) (1,886) (765) 1,968 1,898
Foreign..................................... (2) (24) (2) (25) (23) (3) (24)
Total net charge-offs..................... 8,855 8,840 10,042 15,524 13,768 15,004 20,538
Allowance for loan losses --
Ending balance.............................. $ 225,890 $226,666 $226,577 $210,958 $212,982 $212,981 $202,979
Net charge-offs to:
Average total loans (1)..................... 0.42% 0.43% 0.53% 0.87% 0.78% 0.89% 1.28%
Provision for loan losses................... 109.32 99.89 100.10 114.99 99.99 499.14 111.02
Allowance for loan losses to:
Period-end loans............................ 2.61 2.64 2.75 2.89 3.02 2.95 3.19
Period-end nonperforming loans.............. 359 293 253 264 213 181 171
Period-end nonperforming assets............. 261 221 199 218 158 131 105
</TABLE>
(1) Annualized.
CAPITAL
Total shareholders' equity at September 30, 1994 was $1.117 billion,
representing 7.73% of total assets. At September 30, 1993, total shareholders'
equity was $1.095 billion, or 8.43% of total assets. Shareholders' equity at
September 30, 1994 reflects a $30.8 million reduction for the excess of
amortized cost of securities available for sale over the fair value, net of tax,
as prescribed by SFAS 115 (see " -- Balance Sheet Overview"). In the nine month
period ended September 30, 1994, 684,400 shares of common stock were purchased
and retired by Crestar, at an average price of $44.55 per share. In December
1993, all 900,000 shares of the Adjustable Rate Cumulative Preferred Stock
Series B were redeemed for a total of $46.4 million.
The Company's September 30, 1994 risk-adjusted capital ratios of 9.6% for
Tier 1 and 12.2% for total risk-adjusted capital exceed the regulatory minimums
of 4.0% and 8.0%, respectively. Each of Crestar's three subsidiary banks
continued to be "well capitalized" as of September 30, 1994, the highest level
of capitalization defined by the Federal Deposit Insurance Corporation for
purposes of determining deposit insurance rates.
Intangible assets at September 30, 1994 totaled $126.2 million, and
consisted primarily of goodwill and deposit base intangibles arising from
acquisitions of financial institutions in purchase transactions. Purchased
mortgage servicing rights, included in intangible assets, totaled $18.2 million
at September 30, 1994.
LIQUIDITY
Bank liquidity is a measure of the ability to generate and maintain
sufficient cash flows to fund operations and to meet financial obligations to
depositors and borrowers promptly and in a cost-effective manner. Crestar's core
deposit base provides a typically stable source of liquidity. Interest-bearing
core deposits represented 67% of total funding sources at September 30, 1994,
compared with 66% at September 30, 1993. Additional liquidity in the form of
short-term borrowings is also normally available from both national and local
markets. While the Company's short-term borrowings consist largely of local
customer funds, national sources are also utilized to acquire term funds.
Furthermore, $30 million of backup lines of credit are maintained by the parent
as an additional source of short-term liquidity. As an additional indication of
strong liquidity,
S-11
<PAGE>
money market investments represented 10.1% of Crestar's earning assets at
September 30, 1994, compared to 5.8% at September 30, 1993.
Table 4 reflects the earlier of the maturity or repricing dates for various
assets and liabilities at September 30, 1994. On a cumulative six-month basis,
the Company had a liability sensitive "static gap" at September 30, 1994 with a
$3.3 billion excess of interest-sensitive sources of funds over uses of funds.
This generally indicates that earnings should improve in a declining interest
rate environment as liabilities reprice more quickly than assets. Table 4 also
presents interest sensitivity on an adjusted basis. The adjustments reflect the
fact that certain consumer deposit rates are less interest-sensitive than
market-based rates, such as rates paid on commercial paper, and that many of the
Company's commercial demand deposits are sensitive to the level of interest
rates. On a cumulative six-month basis, the Company had a liability sensitive
"adjusted gap" of $645 million excess of interest-sensitive sources of funds
over uses of funds.
The primary tool used by Crestar in assessing interest rate exposure is net
interest income simulations. A two year net interest income forecast based on a
"most likely" interest rate scenario is prepared regularly, as are net interest
income forecasts based on alternative high and low interest rate scenarios. The
high and low rate scenarios are based upon an assessment of the historic
volatility of interest rates. The expected dynamics of the balance sheet,
including shifts in loans and deposits, are included in the simulations. By its
nature, this simulation process includes numerous assumptions, for both long-
term and short-term timeframes, including assumptions on average balances and
yields. Many of these assumptions are both qualitative and subjective. The high
rate and low rate forecasts generated by this process are then compared to the
"most likely" scenario. Crestar's current estimate of pre-tax earnings at risk,
as a percentage of the next twenty-four month's net interest income under a
"most likely" scenario, is 0.9 percent for a high interest rate scenario and 3.6
percent for a falling interest rate scenario. This earnings at risk percentage
does not consider discretionary actions, including hedging activity, that may be
entered into to manage future earnings volatility.
S-12
<PAGE>
TABLE 4: INTEREST SENSITIVITY ANALYSIS
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
MATURITY/RATE SENSITIVITY
WITHIN 2-3 4-6 7-12 OVER
ONE MONTH MONTHS MONTHS MONTHS ONE YEAR
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
USES OF FUNDS
Loans:
Commercial............................................. $2,045.2 $ 35.2 $ 56.9 $ 60.1 $ 511.3
Tax-exempt............................................. 156.5 3.5 1.5 2.7 43.6
Instalment............................................. 509.5 67.8 94.9 471.8 620.0
Bank card.............................................. 221.7 79.0 103.9 189.6 629.9
Real estate............................................ 544.6 277.2 277.3 563.9 857.3
Foreign................................................ 1.3 -- -- -- --
Construction........................................... 179.8 12.5 0.9 4.2 24.2
Securities held to maturity.............................. 25.4 24.4 26.1 94.0 774.7
Securities available for sale............................ 256.0 56.2 98.3 195.8 1,259.9
Money market investments................................. 1,322.4 5.0 0.1 -- --
Mortgage loans held for sale............................. 334.3 -- -- -- --
Total earning assets................................. 5,596.7 560.8 659.9 1,582.1 4,720.9
Interest sensitivity hedges on assets.................... (861.9 ) (346.9) 50.7 35.4 1,122.7
Total uses........................................... $4,734.8 $ 213.9 $ 710.6 $ 1,617.5 $5,843.6
SOURCES OF FUNDS
Interest checking deposits............................... $1,865.8 $ -- $ -- $ -- $ --
Money market deposit accounts............................ 2,367.6 -- -- -- --
Regular savings deposits................................. 1,460.4 -- -- -- --
Money market certificates and other domestic time
deposits............................................... 355.9 338.7 638.2 832.1 943.8
Certificates of deposit $100,000 and over................ 28.0 15.1 8.5 8.6 7.2
Short-term borrowings.................................... 1,904.9 0.1 -- -- --
Long-term debt........................................... -- 0.3 0.3 10.7 207.3
Total interest-bearing liabilities................... 7,982.6 354.2 647.0 851.4 1,158.3
Other sources -- net..................................... -- -- -- -- 2,126.9
Total sources...................................... $7,982.6 $ 354.2 $ 647.0 $ 851.4 $3,285.2
Cumulative maturity/rate sensitivity gap................. $(3,247.8) $(3,388.1) $(3,324.5) $(2,558.4) $ --
ADJUSTMENTS
Beta adjustments:
Interest checking (beta factor .21).................... $1,474.0
Money market accounts (beta factor .57)................ 1,018.1
Regular savings (beta factor .13)...................... 1,270.5
Demand deposit sensitivity............................... (1,083.2 )
Cumulative adjusted maturity/rate sensitivity gap........ $ (568.4 ) $ (708.7) $ (645.1) $ 121.0 $ --
<CAPTION>
TOTAL
<S> <C>
USES OF FUNDS
Loans:
Commercial............................................. $ 2,708.7
Tax-exempt............................................. 207.8
Instalment............................................. 1,764.0
Bank card.............................................. 1,224.1
Real estate............................................ 2,520.3
Foreign................................................ 1.3
Construction........................................... 221.6
Securities held to maturity.............................. 944.6
Securities available for sale............................ 1,866.2
Money market investments................................. 1,327.5
Mortgage loans held for sale............................. 334.3
Total earning assets................................. 13,120.4
Interest sensitivity hedges on assets.................... --
Total uses........................................... $13,120.4
SOURCES OF FUNDS
Interest checking deposits............................... $ 1,865.8
Money market deposit accounts............................ 2,367.6
Regular savings deposits................................. 1,460.4
Money market certificates and other domestic time
deposits............................................... 3,108.7
Certificates of deposit $100,000 and over................ 67.4
Short-term borrowings.................................... 1,905.0
Long-term debt........................................... 218.6
Total interest-bearing liabilities................... 10,993.5
Other sources -- net..................................... 2,126.9
Total sources...................................... $13,120.4
Cumulative maturity/rate sensitivity gap................. $ --
ADJUSTMENTS
Beta adjustments:
Interest checking (beta factor .21)....................
Money market accounts (beta factor .57)................
Regular savings (beta factor .13)......................
Demand deposit sensitivity...............................
Cumulative adjusted maturity/rate sensitivity gap........ $ --
</TABLE>
S-13
<PAGE>
THIRD QUARTER -- SELECTED FINANCIAL DATA
Table 5 presents summarized unaudited consolidated financial data for the
quarters ended September 30, 1994 and 1993. For the third quarter of 1994, net
income totaled $43.6 million, an increase of 17% over the year-ago period.
TABLE 5: SUMMARIZED QUARTERLY INCOME STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1994 1993
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Net interest income................................................. $149,278 $135,646
Provision for loan losses........................................... 8,100 13,769
Noninterest income.................................................. 65,389 61,354
Noninterest expense................................................. 140,104 129,148
Income tax expense.................................................. 22,859 16,930
Net income.......................................................... $ 43,604 $ 37,153
Per common share data:
Net income........................................................ $ 1.15 $ 0.96
Cash dividends declared........................................... 0.40 0.28
</TABLE>
DESCRIPTION OF NOTES
The following description of the specific terms of the Company's 8 3/4%
Subordinated Notes due 2004 (the "Notes") offered hereby supplements the
description of the general terms and provisions of the Notes set forth under the
heading "Description of Debt Securities" in the accompanying Prospectus.
The Notes offered hereby will be limited to $150,000,000 aggregate
principal amount, will constitute subordinated indebtedness of the Company, and
are to be issued under the Indenture as defined in the accompanying Prospectus.
The Notes will bear interest from November 15, 1994, payable semiannually
on each May 15 and November 15, beginning May 15, 1995, (i) in the case of all
Notes represented by one or more Global Securities registered in the name of a
depositary or its nominee, to such depositary or such nominee for the account of
the beneficial owners of the Notes as reflected on the records of such
depositary or such nominee or its participants and (ii) in the case of any Notes
issued in definitive certificated form, to the persons in whose names such
certificated Notes are registered, in each case, to the persons who are
registered holders at the close of business on the April 30 or October 31, as
the case may be, next preceding such May 15 or November 15. The per annum rate
of interest is 8 3/4%.
The Notes will mature on November 15, 2004 and are not redeemable prior to
maturity. The Notes do not provide for any sinking fund.
The Notes will be issued initially solely in book-entry form. See
" -- Book-Entry System." The Notes will be sold in denominations of $1,000 and
integral multiples of $1,000 in excess thereof. Any transfer, payments or other
transactions in respect of Notes held in book-entry form shall be made as set
forth in the accompanying Prospectus.
Any Notes that are issued and held in definitive certificated form may be
presented for payment of principal and interest, transfer and exchange at the
offices or agencies of the Company maintained for such purposes in Richmond,
Virginia and at the Corporate Trust Office of the Trustee in New York, New York.
Payment of interest on any such certificated Notes may be made at the option of
the Company by check to the account of the person entitled thereto as it appears
on the Note register.
BOOK-ENTRY SYSTEM
Upon issuance, the Notes will be represented by one or more Global
Securities. Each Global Security representing the Notes will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York (the
"Depositary") and registered in the name of a nominee of the Depositary. Notes
represented by a Global Security will not be exchangeable for certificated notes
and, except under the circumstances described in the Prospectus under
"Description of Debt Securities -- Global Securities," will not otherwise be
issuable in definitive certificated form.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
S-14
<PAGE>
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. The Depositary was created to hold securities of its participants
and to facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodian relationship with a participant, either directly or
indirectly.
A further description of the Depositary's procedures with respect to Global
Securities representing the Notes is set forth in the accompanying Prospectus
under "Description of Debt Securities -- Global Securities." The Depositary has
confirmed to the Company and the Trustee that it intends to follow such
procedures.
UNDERWRITERS
Under the terms and subject to the conditions in an Underwriting Agreement
dated the date hereof, the Underwriters named below have severally agreed to
purchase, and the Company has agreed to sell to them, severally, the respective
principal amounts of Notes set forth opposite their respective names below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
NAME OF NOTES
<S> <C>
Morgan Stanley & Co. Incorporated..................................................... $ 55,000,000
Lehman Brothers Inc................................................................... 55,000,000
Craigie Incorporated.................................................................. 10,000,000
Davenport & Co. of Virginia, Inc...................................................... 10,000,000
Scott & Stringfellow, Inc............................................................. 10,000,000
Wheat, First Securities, Inc.......................................................... 10,000,000
Total............................................................................ $150,000,000
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the Notes
offered hereby if any are taken.
The Underwriters initially propose to offer part of the Notes directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
.40% of the principal amount of the Notes. Any Underwriter may allow, and such
dealers may reallow, a concession not in excess of .25% of the principal amount
of the Notes to certain other dealers. After the initial offering of the Notes,
the offering price and other selling terms may be varied from time to time by
the Underwriters.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
The Company has agreed in the Underwriting Agreement not to offer, sell,
contract to sell or otherwise dispose of any other debt securities of the
Company substantially similar to the Notes during the period beginning on the
date hereof and ending on the closing date for the sale of the Notes without the
prior written consent of Morgan Stanley & Co. Incorporated, as representative of
the several underwriters.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Notes.
Certain of the Underwriters engage in transactions with and perform
services for the Company in the ordinary course of business.
S-15
<PAGE>
PROSPECTUS
$300,000,000
CRESTAR FINANCIAL CORPORATION
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
Crestar Financial Corporation ("Crestar" or the "Company") intends to issue
from time to time in one or more series up to $300,000,000 of its (i) unsecured
subordinated debt securities (the "Debt Securities"), (ii) shares of preferred
stock (the "Preferred Stock"), which may be issued in the form of depositary
shares evidenced by depositary receipts (the "Depositary Shares"), or (iii)
shares of common stock (the "Common Stock"), on terms to be determined at the
time of sale (the Debt Securities, Preferred Stock, Depositary Shares and Common
Stock, collectively, the "Securities"). The Securities offered hereby
(collectively, the "Offered Securities") may be offered separately or as units
with other Offered Securities, in separate series in amounts, at prices and on
terms to be determined at the time of sale and to be set forth in a supplement
to this Prospectus (a "Prospectus Supplement").
The Debt Securities will be subordinate to all existing and future Senior
Indebtedness, as defined in the Indenture (as defined herein). The holders of
Debt Securities of any series may be obligated at maturity to exchange such Debt
Securities for Capital Securities of the Company. Unless otherwise indicated in
the applicable Prospectus Supplement, the maturity of the Debt Securities will
be subject to acceleration only in the event of certain events of bankruptcy or
reorganization of the Company. See "Description of Debt Securities."
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered, such as, where applicable, (i) in the case of
Debt Securities, the specific designation, aggregate principal amount, currency,
denomination, maturity, priority, interest rate (which may be variable or
fixed), time of payment of interest, terms for optional redemption or repayment
or for sinking fund payments, terms for conversion into or exchange for Capital
Securities or other Offered Securities, and the initial public offering price;
(ii) in the case of Preferred Stock, the specific title and stated value, number
of shares or fractional interests therein, and the dividend, liquidation,
redemption, conversion, voting and other rights, the initial public offering
price, and whether interests in the Preferred Stock will be represented by
Depositary Shares; (iii) in the case of Common Stock, the initial offering
price; and (iv) in the case of all Offered Securities, whether such Offered
Security will be offered separately or as a unit with other Offered Securities,
will be set forth in a Prospectus Supplement. The Prospectus Supplement will
also contain information, where applicable, about certain United States federal
income tax considerations relating to, and any listing on a securities exchange
of, the Offered Securities covered by the Prospectus Supplement.
The Offered Securities may be sold for public offering to underwriters or
dealers, which may be a group of underwriters represented by one or more
managing underwriters, which may include Morgan Stanley & Co. Incorporated, or
through such firms or other firms acting alone or through dealers. The Offered
Securities may also be sold through agents to investors. See "Plan of
Distribution." The names of any agents, dealers or managing underwriters, and of
any underwriters, involved in the sale of the Offered Securities in respect of
which this Prospectus is being delivered and the applicable agent's commission,
dealer's purchase price or underwriter's discount will be set forth in the
Prospectus Supplement. The net proceeds to the Company from such sale will also
be set forth in the Prospectus Supplement. Any underwriters, dealers or agents
participating in the offering of Offered Securities may be deemed "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
This Prospectus may not be used to consummate the sale of the Securities
unless accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 9, 1994.
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, AGENT OR DEALER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, New York, New York 10045.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the New York Stock Exchange,
Inc. at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act with respect to
the Securities to which this Prospectus relates. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all the
information set forth in the Registration Statement, including the exhibits
thereto, which may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
Section 13 of the Exchange Act are hereby incorporated by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993; (ii) the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1994 and June 30, 1994; and (iii) the Company's
Current Reports on Form 8-K dated March 10, 1994, September 23, 1994 and
November 9, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which is deemed to be incorporated
by reference herein modifies or supersedes such earlier statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or the Prospectus
Supplement.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS). WRITTEN OR TELEPHONE REQUESTS SHOULD BE
DIRECTED TO CRESTAR FINANCIAL CORPORATION, 919 EAST MAIN STREET, P.O. BOX 26665,
RICHMOND, VIRGINIA 23261-6665, ATTENTION: EUGENE S. PUTNAM, JR., VICE PRESIDENT,
(804) 782-5619.
2
<PAGE>
THE COMPANY
Crestar Financial Corporation ("Crestar" or the "Company") is the holding
company for Crestar Bank of Virginia, Crestar Bank N.A. of Washington, D.C. and
Crestar Bank MD of Maryland. At September 30, 1994, Crestar had approximately
$14.5 billion in total assets, $11.0 billion in total deposits and $1.1 billion
in total shareholders' equity.
In 1963, six Virginia banks combined to form United Virginia Bankshares
Incorporated ("UVB"), a bank holding company formed under the Bank Holding
Company Act of 1956 (the "BHCA"). UVB (parent company of United Virginia Bank)
extended its operations into the District of Columbia by acquiring NS&T Bank,
N.A. on December 27, 1985 and into Maryland by acquiring Bank of Bethesda on
April 1, 1986. On September 1, 1987, UVB became Crestar Financial Corporation
and its bank subsidiaries adopted their present names.
Crestar serves customers through a network of 336 banking offices and 276
automated teller machines (as of September 30, 1994). Crestar's subsidiary banks
(the "Bank Subsidiaries") offer a broad range of banking services, including
various types of deposit accounts and instruments, commercial and consumer
loans, trust and investment management services, bank credit cards and
international banking services. Crestar's subsidiary, Crestar Insurance Agency,
Inc., offers a variety of personal and business insurance products. Securities
brokerage and investment banking services are offered by Crestar's subsidiary,
Crestar Securities Corporation. Mortgage loan origination, servicing and
wholesale lending are offered by Crestar Mortgage Corporation, and investment
advisory services are provided by Capitoline Investment Services Incorporated,
both of which are subsidiaries of Crestar Bank of Virginia. These various
Crestar subsidiaries provide banking and non-banking services throughout
Virginia, Maryland and Washington, as well as certain non-banking services to
customers in other states.
The executive offices of the Company are located in Richmond, Virginia at
Crestar Center, 919 East Main Street. Crestar's Operations Center is located in
Richmond. Regional headquarters are located in Norfolk and Roanoke, Virginia and
in Washington, D.C.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used for general
corporate purposes, including Crestar's working capital needs, the funding of
investments in, or extensions of credit to, Crestar's banking and nonbanking
subsidiaries, possible acquisitions of other financial institutions or their
assets, possible acquisitions of failed financial institutions offered for sale
by regulatory authorities, possible acquisitions of, or investments in, other
businesses of a type eligible for bank holding companies and possible reduction
of outstanding indebtedness or repurchase of outstanding equity securities of
Crestar. Pending such use, Crestar may temporarily invest the net proceeds in
investment grade securities. Based upon its historical and anticipated future
growth, including future acquisitions, and the financial needs of its
subsidiaries, Crestar may engage in additional financings of a character and in
amounts to be determined as the need arises.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges and
the ratios of earnings to combined fixed charges and preferred stock dividend
requirements for each of the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to fixed charges:
Excluding interest on deposits..................... 4.7 3.9 4.0 2.6 1.3 1.4 1.8
Including interest on deposits..................... 1.7 1.6 1.7 1.3 1.1 1.1 1.2
Earnings to combined fixed charges and preferred
stock dividend requirements:
Excluding interest on deposits..................... 4.7 3.7 3.9 2.5 1.3 1.3 1.8
Including interest on deposits..................... 1.7 1.6 1.6 1.2 1.1 1.1 1.2
</TABLE>
For purposes of computing the preceding ratios, earnings represent pre-tax
income from continuing operations plus fixed charges. Fixed charges represent
interest expense (exclusive of interest on deposits in one case and inclusive of
such interest in the other), capitalized interest, amortization of debt issuance
costs, and one-third (the amount deemed to represent an appropriate interest
factor) of rent expense (net of income from subleases) under lease commitments.
Preferred stock dividend requirements represent pre-tax earnings that would be
required to cover preferred stock dividends on outstanding preferred stock.
3
<PAGE>
REGULATORY MATTERS
Bank holding companies and banks are extensively regulated under both
federal and state law. The following description briefly discusses certain
provisions of federal and state laws and certain regulations and proposed
regulations and the potential impact of such provisions on Crestar and its Bank
Subsidiaries. To the extent that the following information describes statutory
or regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions.
BANK HOLDING COMPANIES
As a bank holding company registered under the BHCA, Crestar is subject to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"). The Federal Reserve Board has jurisdiction under the BHCA to
approve any bank or nonbank acquisition, merger or consolidation proposed by a
bank holding company. The BHCA generally limits the activities of a bank holding
company and its subsidiaries to that of banking, managing or controlling banks,
or any other activity which is so closely related to banking or to managing or
controlling banks as to be a proper incident thereto.
The BHCA currently prohibits the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by statute of the state in which the bank whose shares
are to be acquired is located. However, under recently enacted federal
legislation, the restriction on interstate acquisitions will be abolished on
September 29, 1995; thereafter, bank holding companies from any state will be
able to acquire banks and bank holding companies located in any other state. The
legislation also provides for interstate bank mergers and de novo interstate
bank branching, subject to state action in some respects.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the Federal Deposit Insurance
Corporation ("FDIC") insurance fund in the event the depository institution
becomes in danger of default or in default. For example, under a policy of the
Federal Reserve Board with respect to bank holding company operations, a bank
holding company is required to serve as a source of financial strength to its
subsidiary depository institutions and to commit resources to support such
institutions in circumstances where it might not do so absent such policy. In
addition, the "cross-guarantee" provisions of the Federal Deposit Insurance Act
(the "FDIA") require insured depository institutions under common control to
reimburse the FDIC for any loss suffered or reasonably anticipated by either the
Savings Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF")
as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.
Crestar is registered under the bank holding company laws of Virginia.
Accordingly, Crestar and its Bank Subsidiaries are subject to regulation and
supervision by the State Corporation Commission of Virginia (the "SCC").
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of the Currency
(the "OCC") and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to United States banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels because of its
financial condition or actual or anticipated growth. Under the risk-based
capital requirements of these federal bank regulatory agencies, Crestar and its
Bank Subsidiaries are required to maintain a minimum ratio of total capital to
risk-weighted assets of at least 8%. At least half of the total capital is
required to be "Tier 1 capital", which consists principally of common and
certain qualifying preferred shareholders' equity, less certain intangibles and
other adjustments. The remainder "Tier 2 capital" consists of a limited amount
of subordinated and other qualifying debt (including certain hybrid capital
instruments) and a limited amount of the general loan loss allowance. Crestar's
Tier 1 and total capital to risk-weighted asset ratios as of September 30, 1994
were 9.6% and 12.2%, respectively, exceeding the minimums required.
4
<PAGE>
In addition, each of the federal regulatory agencies has established a
minimum Tier 1 leverage capital ratio (Tier 1 capital to average tangible
assets). These guidelines provide for a minimum ratio of 3% for banks and bank
holding companies that meet certain specified criteria, including that they have
the highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the minimum. The Tier 1 leverage
ratio of Crestar as of September 30, 1994 was 7.7%. The guidelines also provide
that banking organizations experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires each federal banking agency to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risks of nontraditional activities,
as well as reflect the actual performance and expected risk of loss on
multi-family mortgages. The Federal Reserve Board, the FDIC and the OCC have
issued a joint advance notice of proposed rulemaking, and have issued a revised
proposal, soliciting comments on a proposed framework for implementing the
interest rate risk component of the risk-based capital guidelines. Under the
proposal, an institution's assets, liabilities, and off-balance sheet positions
would be weighted by risk factors that approximate the instruments' price
sensitivity to a 100 basis point change in interest rates. Institutions with
interest rate risk exposure in excess of a threshold level would be required to
hold additional capital proportional to that risk.
The Federal Reserve Board, the FDIC, the OCC and the Office of Thrift
Supervision also issued a joint notice of proposed rulemaking soliciting
comments on a proposed revision to the risk-based capital guidelines to take
account of concentration of credit risk and the risk of non-traditional
activities. The proposal would amend each agency's risk-based capital standards
by explicitly identifying concentration of credit risk and the risk arising from
non-traditional activities, as well as an institution's ability to manage those
risks, as important factors to be taken into account by the agency in assessing
an institution's overall capital adequacy. The proposal was adopted without
modification as a final rule by the Federal Reserve Board on August 3, 1994, and
by the FDIC on August 9, 1994. Publication of a final interagency rule is
subject to the completion of each agency's approval process. The final rule will
not become effective until 30 days after publication. Crestar does not expect
the final rule to have a material impact on its capital requirements.
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
Crestar is a legal entity separate and distinct from its subsidiary
institutions. Most of the revenues of Crestar result from dividends paid to
Crestar by its Bank Subsidiaries. There are various legal limitations applicable
to the payment of dividends to Crestar as well as the payment of dividends by
Crestar to its respective shareholders.
Under federal law, the Bank Subsidiaries may not, subject to certain
limited exceptions, make loans or extensions of credit to, or investments in the
securities of, Crestar, as the case may be, or take securities of Crestar, as
the case may be, as collateral for loans to any borrower. The Bank Subsidiaries
are also subject to collateral security requirements for any loans or extensions
of credit permitted by such exceptions.
The Bank Subsidiaries are subject to various statutory restrictions on
their ability to pay dividends to Crestar. Under the current supervisory
practices of the Bank Subsidiaries' regulatory agencies, prior approval from
those agencies is required if cash dividends declared in any given year exceed
net income for that year plus retained earnings of the two preceding years.
Under these supervisory practices, at January 1, 1994, the Bank Subsidiaries
could have paid additional dividends to Crestar of approximately $106.0 million
without obtaining prior regulatory approval. The payment of dividends by the
Bank Subsidiaries or Crestar may also be limited by other factors, such as
requirements to maintain capital above regulatory guidelines. Bank regulatory
agencies have authority to prohibit any Bank Subsidiary or Crestar from engaging
in an unsafe or unsound practice in conducting their business. The payment of
dividends, depending upon the financial condition of the Bank Subsidiary in
question, or Crestar, could be deemed to constitute such an unsafe or unsound
practice. The Federal Reserve Board has stated that, as a matter of prudent
banking, a bank or bank holding company should not maintain its existing rate of
cash dividends on common stock unless (1) the organization's net income
available to common shareholders over the past year has been sufficient to fund
fully the dividends and (2) the prospective rate of earnings retention appears
consistent with the organization's capital needs, asset quality, and overall
financial condition.
Under the FDIA, insured depository institutions such as the Bank
Subsidiaries are prohibited from making capital distributions, including the
payment of dividends, if, after making such distribution, the institution would
become "undercapitalized" (as such term is used in the statute). Based on the
Bank Subsidiaries' current financial condition, Crestar does not expect that
this provision will have any impact on its ability to obtain dividends from its
Bank Subsidiaries.
5
<PAGE>
BANKS
The Bank Subsidiaries are supervised and regularly examined by the Federal
Reserve Board, the SCC, the Maryland State Bank Commissioner and the OCC, as the
case may be. The various laws and regulations administered by the regulatory
agencies affect corporate practices, such as payment of dividends, incurring
debt and acquisition of financial institutions and other companies, and affect
business practices, such as payment of interest on deposits, the charging of
interest on loans, types of business conducted and location of offices.
The Bank Subsidiaries also are subject to the requirements of the Community
Reinvestment Act (the "CRA"). The CRA imposes on financial institutions an
affirmative and ongoing obligation to meet the credit needs of their local
communities, including low-and moderate-income neighborhoods, consistent with
the safe and sound operation of those institutions. Each financial institution's
efforts in meeting community credit needs currently are evaluated as part of the
examination process pursuant to twelve assessment factors. These factors also
are considered in evaluating mergers, acquisitions and applications to open a
branch or facility. Recently, the federal banking agencies released a revised
CRA proposal that will emphasize "performance" and will utilize "lending,
investment and service tests" as the primary method of evaluating an
institution's CRA performance.
As institutions with deposits insured by the BIF, the Bank Subsidiaries
also are subject to insurance assessments imposed by the FDIC. The FDIC has
implemented a risk-based assessment schedule, imposing assessments ranging from
0.23% to 0.31% of an institution's average assessment base. The actual
assessment to be paid by each BIF member is based on the institution's
assessment risk classification, which is determined based on whether the
institution is considered "well capitalized," "adequately capitalized" or
"undercapitalized," as such terms have been defined in applicable federal
regulations, and whether such institution is considered by its supervisory
agency to be financially sound or to have supervisory concerns. Based on the
current financial condition and capital levels of the Bank Subsidiaries (all
being "well-capitalized"), Crestar does not expect that the current BIF
risk-based assessment schedule will have a material adverse effect on the
earnings of its bank subsidiaries. Because a portion of the Bank Subsidiaries
deposits are treated as being insured by the SAIF, however, Crestar's future
deposit insurance premium expenses may be affected by changes in the SAIF
assessment rate. Under current law, the SAIF assessment is determined pursuant
to the same risk-based assessment system that applies to BIF-insured
institutions. In addition, however, current federal law provides that the SAIF
assessment rate may not be less than 0.18% from January 1, 1994 through December
31, 1997. After December 31, 1997, the SAIF assessment rate must be a rate
determined by the FDIC to be appropriate to increase the SAIF's reserve ratio to
1.25% of insured deposits or such higher percentage as the FDIC determines to be
appropriate, but the assessment rate may not be less than 0.15%. As of September
30, 1994, approximately 34% of the total deposits of the Bank Subsidiaries were
SAIF-insured and subject to the SAIF assessment rate.
OTHER SAFETY AND SOUNDNESS REGULATIONS
The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," as such terms are defined under uniform regulations defining
such capital levels issued by each of the federal banking agencies.
In addition, FDIC regulations now require that management report on its
institution's responsibility for preparing financial statements, and
establishing and maintaining an internal control structure and procedures for
financial reporting and compliance with designated laws and regulations
concerning safety and soundness; and that independent auditors attest to and
report separately on assertions in management's reports concerning compliance
with such laws and regulations, using FDIC-approved audit procedures.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of
September 1, 1993 (the "Indenture"), between the Company and Chemical Bank, as
Trustee (the "Trustee"). A copy of the Indenture is an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions therein of certain terms.
Whenever particular Sections, Articles or defined terms of the Indenture are
referred to, it is intended that such Sections, Articles or defined terms shall
be incorporated herein by reference. The following sets
6
<PAGE>
forth certain general terms and provisions of the Debt Securities offered
hereby. Further terms of the Offered Securities will be set forth in the
applicable Prospectus Supplement.
GENERAL
The Debt Securities to be offered by this Prospectus are limited to
$300,000,000 in aggregate principal amount of unsecured subordinated debt
obligations of the Company. However, the Indenture does not limit the aggregate
principal amount of Debt Securities which may be issued thereunder and provides
that Debt Securities may be issued thereunder from time to time in one or more
series. (Section 301) No Debt Securities are currently issued and outstanding
under the Indenture, although the Company has $175,000,000 aggregate principal
amount of subordinated debt securities outstanding under an Indenture, dated as
of February 1, 1985 (the "Prior Indenture"), as supplemented by a First
Supplemental Indenture dated as of March 1, 1986, a Second Supplemental
Indenture dated as of September 1, 1986, and a Third Supplemental Indenture
dated as of July 1, 1992, between the Company and the Trustee. Neither the
Indenture nor the Debt Securities will limit or otherwise restrict the amount of
other indebtedness which may be incurred or the other Debt Securities which may
be issued by the Company or any of its Subsidiaries. The Debt Securities will
not be deposits or other obligations of a bank and will not be insured by the
FDIC.
Because the Company is a holding company, its rights and the rights of its
creditors, including any Holder of the Securities offered hereby, to participate
in any distribution of the assets of any subsidiary of the Company upon the
latter's liquidation or recapitalization will be subject to the prior claims of
such subsidiary's creditors (including, in the case of a Bank Subsidiary, its
depositors), except to the extent that the Company may itself be a creditor with
recognized claims against such subsidiary. Claims on subsidiaries of the Company
by creditors other than the Company include claims with respect to long-term
debt and substantial obligations with respect to deposit liabilities, federal
funds purchased, securities sold under repurchase agreements and other
short-term borrowings.
Unless otherwise indicated in the applicable Prospectus Supplement, the
maturity of the Debt Securities will be subject to acceleration only in the
event of certain events of bankruptcy or reorganization of the Company. See
" -- Events of Default and Rights of Acceleration."
The holders of Debt Securities of a specified series that are convertible
into Common Stock ("Convertible Debt Securities") will be entitled at certain
times specified in the Prospectus Supplement relating to such Convertible Debt
Securities, subject to prior redemption, repayment or repurchase, to convert any
Convertible Debt Securities of such series into Common Stock, at the conversion
price set forth in such Prospectus Supplement, subject to adjustment and to such
other terms as are set forth in such Prospectus Supplement.
The holders of Debt Securities of any series may be obligated at maturity,
or at any earlier time as set forth in the Prospectus Supplement relating to
such series, to exchange them for Capital Securities of the Company. The terms
of any such exchange and the Capital Securities issuable upon such exchange will
be described in the Prospectus Supplement relating to such series of Debt
Securities. (Article Thirteen) Capital Securities may consist of Common Stock,
perpetual preferred stock or other capital securities of the Company acceptable
to its primary federal banking regulator. Currently, the Company's primary
federal banking regulator is the Federal Reserve Board. Whenever Debt Securities
are exchangeable for Capital Securities, the Company will be obligated to
deliver Capital Securities with a market value equal to the principal amount of
such Debt Securities. In addition, the Company will unconditionally undertake,
at the expense of the Company, to sell the Capital Securities in a sale (the
"Secondary Offering") on behalf of any holders who elect to receive cash for the
Capital Securities. The Common Stock is described below under "Description of
Common Stock." A general description of the preferred stock of the Company is
set forth below under "Description of Preferred Stock."
The staff of the Commission has advised the Company that Rule 13e-4 of the
Commission's rules and regulations relating to tender offers by issuers, as
currently in effect and interpreted, would be applicable to the exchange of Debt
Securities of any series for Capital Securities and to any Secondary Offering.
If, at the time of the exchange of Debt Securities of any series for Capital
Securities and the Secondary Offering, Rule 13e-4 (or any successor rule or
rules) applies to such transactions, the Company will comply with such rule (or
any successor rule or rules) and will afford holders of such Debt Securities all
rights and will make all filings required by such rule (or successor rule or
rules). If fewer than all of the Debt Securities of a series may be exchanged
for Capital Securities pursuant to the terms of such Debt Securities, the
particular Debt Securities to be exchanged shall be selected by the Trustee
utilizing a method the Trustee deems fair and equitable, provided that such
method shall comply with the requirements of applicable law, including federal
securities law.
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<PAGE>
Reference is made to the applicable Prospectus Supplement for the specific
terms of the series of Debt Securities offered thereby including (1) the title
of the Debt Security; (2) the aggregate principal amount and denominations; (3)
the maturity or maturities; (4) the price to be received by the Company from the
sale of such Debt Securities; (5) the interest rate or rates (or the method of
calculation thereof) to be established for the Debt Securities, which rate or
rates may vary from time to time; (6) the date or dates on which principal of
the Debt Securities is payable; (7) the date or dates from which interest on the
Debt Securities shall accrue and the payment and record date or dates for
payments of interest or the methods by which any such dates will be determined;
(8) the place or places where principal of (premium, if any) and interest, if
any, on the Debt Securities is payable; (9) the terms of any sinking fund and
analogous provisions with respect to the Debt Securities; (10) the respective
redemption and repayment rights, if any, of the Company and of the holders of
the Debt Securities and the related redemption and repayment prices and any
limitations on such redemption or repayment rights; (11) any provisions relating
to the conversion or exchange of the Debt Securities; (12) any addition to or
change in the affirmative or negative covenants, if any, to be imposed upon the
Company relating to any of the Debt Securities; (13) any trustee or fiscal or
authenticating or payment agent, issuing and paying agent, transfer agent or
registrar or any other person or entity to act in connection with such Debt
Securities for or on behalf of the holders thereof or the Company or an
affiliate; (14) whether such Debt Securities are to be issuable initially in
temporary global form and whether any such Debt Securities are to be issuable in
permanent global form and, if so, whether beneficial owners of interests in any
such permanent global security may exchange such interests for Debt Securities
of like tenor of any authorized form and denomination and the circumstances
under which any such exchanges may occur; (15) the listing of the Debt
Securities on any securities exchange or inclusion in any other market or
quotation or trading system; and (16) any other specific terms, conditions and
provisions of the Debt Securities.
Unless otherwise provided in the Prospectus Supplement, principal of and
any premium and interest on the Debt Securities shall be payable, and the
transfer of the Debt Securities will be registrable, at the office of the
Trustee, except that, at the option of the Company, interest may be paid by
mailing a check to the address of the person entitled thereto as it appears on
the register for the Debt Securities. (Sections 305 and 1002)
Unless otherwise indicated in the Prospectus Supplement, the Debt
Securities will be issued only in fully registered form without coupons and in
denominations of $1,000 or any integral multiple thereof. (Section 302) No
service charge will be made for any registration of transfer or exchange of the
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Sections 302 and 305)
Debt Securities may be issued as Original Issue Discount Securities (as
defined in the Indenture) to be sold at a substantial discount below their
principal amount. Special federal income tax and other considerations applicable
thereto will be described in the Prospectus Supplement relating thereto.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
fully registered securities in global form (each, a "Global Security") that will
be deposited with, or on behalf of, a depositary (the "Depositary") identified
in the Prospectus Supplement relating to such series and will be registered in
the name of the Depositary or its nominee. In such case, one or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the aggregate principal amount of outstanding Debt Securities of the series
represented by such Global Security or Securities. Unless and until any such
Global Security is exchanged in whole or in part for Debt Securities in
definitive certificated form, such Global Security may not be transferred except
as a whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor and except as
described in the applicable Prospectus Supplement. (Section 303)
The specific terms of the depositary arrangement with respect to a series
of Debt Securities to be represented by a Global Security will be described in
the Prospectus Supplement relating to such series. The Company anticipates that
the following provisions will apply to all depositary arrangements.
Upon the issuance of any Global Security, and the deposit of such Global
Security with or on behalf of the Depositary for such Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions ("participants") that have accounts
with such Depositary or its nominee. The accounts to be credited will be
designated by the underwriters or agents engaging in the distribution or
placement of such Debt Securities or by the Company, if such Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in
such Global Security will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such
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Global Security will be shown by book-keeping entries on, and the transfer of
that ownership interest will be effected only through book-keeping entries to,
records maintained by the Depositary or its nominee for such Global Security.
Ownership of beneficial interests in such Global Security by persons that hold
through participants will be shown by book-keeping entries on, and the transfer
of that ownership interest among or through such participants will be effected
only through book-keeping entries to, records maintained by such participants.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive certificated form rather
than book-entry form. Such laws may impair the ability to own, transfer or
pledge beneficial interests in any Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as set forth below or otherwise specified in the applicable
Prospectus Supplement, owners of beneficial interests in a Global Security will
not be entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in definitive certificated
form and will not be considered the holders thereof for any purposes under the
Indenture. Accordingly, each person owning a beneficial interest in such Global
Security must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person directly or indirectly owns its interest, to exercise any rights of a
holder under the Indenture. The Indenture provides that the Depositary may grant
proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the Indenture. (Section 104) The
Company understands that under existing industry practices, if the Company
requests any action of holders or any owner of a beneficial interest in such
Global Security desires to give any notice or take any action that a holder is
entitled to give or take under the Indenture, the Depositary for such Global
Security would authorize the participants holding the relevant beneficial
interest to give such notice or take such action, and such participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Principal and any premium and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to such Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any paying agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in any Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. (Section 308)
The Company expects that the Depositary for any series of Debt Securities
represented by a Global Security, upon receipt of any payment of principal,
premium or interest, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depositary. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security or Securities held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in "street name," and will be the responsibility of such participants.
If the Depositary for any series of Debt Securities represented by a Global
Security is at any time unwilling or unable to continue as Depositary and a
successor Depositary is not appointed by the Company within 90 days, the Company
will issue such Debt Securities in definitive certificated form in exchange for
such Global Security. In addition, the Company may at any time and in its sole
discretion determine not to have the Debt Securities of a series represented by
one or more Global Securities and, in such event, will issue Debt Securities of
such series in definitive certificated form in exchange for the Global Security
representing such series of Debt Securities. (Section 305)
Further, an owner of a beneficial interest in a Global Security
representing Debt Securities of a series may, on terms acceptable to the Company
and the Depositary for such Global Security, receive Debt Securities of such
series in definitive certificated form, if the Company so specifies with respect
to the Debt Securities of such series. In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to have Debt
Securities of the series represented by such Global Security equal in principal
amount to such beneficial interest registered in its name and will be entitled
to physical delivery of such Debt Securities in definitive certificated form.
Debt Securities of such series so issued in definitive certificated form will,
except as set forth in the applicable Prospectus Supplement, be issued in
denominations of $1,000 and integral multiples thereof and will be issued in
registered form. (Section 305)
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SUBORDINATION OF DEBT SECURITIES
The obligations of the Company to make any payment on account of the
principal of and premium, if any, and interest on the Debt Securities will be
subordinate and junior in right of payment, to the extent set forth in the
Indenture, to all Senior Indebtedness (as defined in the Indenture) of the
Company. (Article 15) In the event that the Company shall default in the payment
of any principal of or any premium or interest on any Senior Indebtedness when
the same becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration of acceleration or otherwise, then, unless and
until such default shall have been cured or waived or shall have ceased to
exist, no direct or indirect payment (in cash, property, securities by set-off
or otherwise) will be made or agreed to be made for principal of or any premium
or interest on the Debt Securities, or in respect of any redemption, retirement,
purchase or other acquisition of any of the Debt Securities. (Section 1501)
Senior Indebtedness is defined in the Indenture generally as any debt for
borrowed money other than that which is expressly made pari passu or subordinate
to the Debt Securities, together with certain obligations of general creditors.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness. As of September 30, 1994, the Company had approximately $152
million of outstanding indebtedness within the definition of Senior Indebtedness
and $175 million of indebtedness subordinated to Senior Indebtedness.
In the event of (1) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property; (2) any proceeding for the
liquidation, dissolution or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings; (3)
any assignment by the Company for the benefit of creditors; or (4) any other
marshalling of the assets of the Company, all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, is made to any holder of any of the Debt
Securities on account thereof. In such event, any payment or distribution on
account of the principal of or any premium or interest on the Debt Securities,
whether in cash, securities or other property (other than securities of the
Company or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in the subordination provisions with respect to the Debt Securities, to
the payment of all Senior Indebtedness at the time outstanding, and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for the subordination provisions) be
payable or deliverable in respect of the Debt Securities, shall be paid or
delivered directly to the holders of Senior Indebtedness in accordance with the
priorities then existing among such holders until all Senior Indebtedness
(including any interest thereon accruing after the commencement of any such
proceedings) has been paid in full. In the event of any such proceeding, after
payment in full of all sums owing with respect to Senior Indebtedness, the
Holder or Holders of Debt Securities, together with the holders of any
obligations of the Company ranking on a parity with the Debt Securities, shall
be entitled to be paid from the remaining assets of the Company the amounts at
the time due and owing on account of unpaid principal of (and premium, if any)
and interest on the Debt Securities and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, shall be
made on account of any capital stock or obligations of the Company ranking
junior to the Debt Securities and such other obligations. If any payment or
distribution on account of the principal of or any premium or interest on the
Debt Securities of any character, whether in cash, securities or other property
(other than securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in the subordination provisions with respect to the
Debt Securities, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), or any security shall be received by the
Trustee or any Holder of any Debt Securities in contravention of any of the
terms of the Indenture and before all the Senior Indebtedness shall have been
paid in full, such payment or distribution or security will be received in trust
for the benefit of, and will be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness in full. (Section 1501)
By reason of such subordination, in the event of the insolvency of the
Company, holders of Senior Indebtedness may receive more, ratably, and any
Holder or Holders of the Debt Securities having a claim pursuant to such Debt
Securities may receive less, ratably, than the other creditors of the Company.
Such subordination will not prevent the occurrence of an Event of Default in
respect of the Debt Securities. See " -- Events of Default and Rights of
Acceleration" for limitations on the right of acceleration.
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NO RESTRICTION ON SALE OR ISSUANCE OF STOCK OF CRESTAR BANK
The Indenture contains no covenant that the Company will not sell, transfer
or otherwise dispose of any shares of, or securities convertible into, or
options, warrants, or rights to subscribe for or purchase shares of, voting
stock of any of its subsidiaries, including Bank Subsidiaries, nor does it
prohibit any subsidiary from issuing any shares of, securities convertible into,
or options, warrants or rights to subscribe for or purchase shares of, voting
stock of such subsidiary.
However, the Prior Indenture prohibits the issuance, sale, assignment,
transfer or other disposition of shares of, or securities convertible into, or
options, warrants or rights to subscribe for, or purchase shares of, Voting
Stock (as defined below) of the Bank (as defined below) if, after giving effect
to any such transaction and to the issuance of the maximum number of shares of
Voting Stock of the Bank issuable upon the exercise of all such convertible
securities, options, warrants or rights, the Company would own, directly or
indirectly, 80% or less of the shares of the Bank, except that the covenant does
not prohibit such sales, assignments, transfers or dispositions (1) made in
compliance with an order of a court or regulatory authority of competent
jurisdiction or made as a condition imposed by such court or authority to the
acquisition by the Company, directly or indirectly, of any other corporation or
entity or (2) when the proceeds are within 270 days, or such longer period of
time as may be necessary to obtain regulatory approval in connection therewith,
to be invested pursuant to an understanding or agreement in principle reached at
the time of such sale, assignment, transfer or disposition in a Controlled
Subsidiary (as defined below) (including any person which upon such investment
becomes a Controlled Subsidiary) engaged in a banking business or any other
business then legally permissible for bank holding companies. The Prior
Indenture also prohibits (1) the merger or consolidation of the Bank with or
into any other corporation unless the surviving corporation is, or upon
consummation of the merger or consolidation will become, a Controlled Subsidiary
and (2) the lease, sale or transfer of all or substantially all of the
properties and assets of the Bank to any corporation or other person, except to
a Controlled Subsidiary or a person that, upon such lease, sale or transfer,
will become a Controlled Subsidiary. The term "Bank" is defined in the Prior
Indenture to mean Crestar Bank of Virginia and (i) any successor or successors
to all or substantially all the business of Crestar Bank of Virginia as
presently constituted and (ii) any surviving corporation or transferee
corporation described in the foregoing covenant. The term "Controlled
Subsidiary" is defined in the Prior Indenture to mean a Subsidiary more than 80%
of the outstanding shares of Voting Stock of which is owned by the Company
and/or other Controlled Subsidiaries. The term "Voting Stock" is defined to mean
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holder or Holders of any of the
outstanding Debt Securities, may consolidate or merge with or into, or convey,
transfer or lease its properties and assets substantially as an entirety, to any
corporation organized under the laws of any domestic jurisdiction, provided that
the successor corporation assumes the Company's obligations on the Debt
Securities and under the Indenture and that after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time would become an Event of Default, has occurred and is continuing, and that
certain other conditions are met. (Section 801)
EVENTS OF DEFAULT AND RIGHTS OF ACCELERATION
EVENTS OF DEFAULT. The Indenture defines an Event of Default with respect
to any series of Debt Securities as being certain events involving the
bankruptcy or reorganization of the Company and such other events as may be
established for the Debt Securities of a particular series. (Section 501) No
Event of Default with respect to a particular series of Debt Securities issued
under the Indenture necessarily constitutes an Event of Default with respect to
any other series of Debt Securities issued thereunder. If an Event of Default
with respect to Debt Securities of any series at the time outstanding occurs and
is continuing, either the Trustee or the Holder or Holders of at least 25% in
aggregate principal amount of the outstanding Debt Securities of that series may
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of that series) of all the Debt Securities of that
series to be due and payable immediately. At any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on acceleration has been obtained, the Holder
or Holders of a majority in aggregate principal amount of outstanding Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 502)
LIMITED RIGHTS OF ACCELERATION. The Indenture does not provide for any
right of acceleration of the payment of principal of the Debt Securities upon a
default in the payment of principal or any premium or interest or in the
performance of any covenant or agreement in the Debt Securities or Indenture. In
the event of a default in the payment of principal or any
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premium or interest or the performance of any covenant or agreement in the
Indenture, the Trustee may, subject to certain limitations and conditions, seek
to enforce payment of such principal, premium, if any, or interest (including
the delivery of any Capital Securities in exchange for Debt Securities), or the
performance of such covenant or agreement. (Section 503)
The Indenture provides that, subject to the duty of the Trustee in the case
of an Event of Default to act with the required standard of care, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holder
or Holders shall have offered to the Trustee reasonable indemnity. (Sections 601
and 603) Subject to such provisions for the indemnification of the Trustee, the
Holder or Holders of a majority in aggregate principal amount of the outstanding
Debt Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of that series. (Section 512)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1007)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holder or Holders of a majority in
principal amount of the Debt Securities of all affected series; provided,
however, that no such modification or amendment may, without the consent of the
Holder or Holders of all of the outstanding Debt Securities affected thereby,
(i) change the stated maturity date of the principal of, or any installment of
principal of (or premium, if any) or any interest on, any Debt Security; (ii)
reduce the principal amount of (or premium, if any), or interest on, any Debt
Security, change the method of calculation thereon or reduce the amount payable
on redemption thereof; (iii) reduce the amount of principal of a Debt Security
payable upon acceleration of the maturity thereof; (iv) change the place or
currency of payment of principal of (or premium, if any), or interest on, any
Debt Security; (v) impair the rights of any Holder of any Debt Securities to
conversion rights; (vi) impair the right to institute suit for the enforcement
of any payment on or with respect to any Debt Security; or (vii) reduce the
percentage in principal amount of the Debt Security, the consent of whose Holder
or Holders is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (Sections 901 and 902)
The Holder or Holders of a majority in principal amount of the Debt
Securities of all affected series may, on behalf of the Holder or Holders of
such Debt Securities, waive compliance by the Company with certain restrictive
provisions of the Indenture. The Holder or Holders of a majority in principal
amount of the Debt Securities of all affected series also may, on behalf of the
Holder or Holders of all such Debt Securities, waive any past default under the
Indenture with respect to such Debt Securities, except a default in the payment
of the principal (or premium, if any), or interest on, any Debt Security or in
respect of a provision which under the Indenture cannot be modified or amended
without the consent of the Holder or Holders of all of the outstanding Debt
Securities affected thereby. (Section 513)
REGARDING THE TRUSTEE
Chemical Bank is the Trustee under the Indenture. Notice to Chemical Bank
should be directed to its Corporate Trust Office, 55 Water Street, New York, New
York 10041, Attention: Corporate Trustee Administration Department. Chemical
Bank serves as trustee with respect to $50,000,000 aggregate principal amount of
the Company's 8 5/8% Subordinated Notes due 1998 and $125,000,000 aggregate
principal amount of the Company's 8 1/4% Subordinated Notes due 2002. The
Company and certain of the Company's subsidiaries maintain deposit accounts and
banking relations with the Trustee.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following summary does not purport to be complete and is subject in all
respects to applicable Virginia law, the Company's Restated Articles of
Incorporation and Bylaws.
The Company is authorized by its Restated Articles of Incorporation to
issue 2,000,000 shares of Preferred Stock. Preferred Stock of the Company may be
issued in series which may vary as to title and stated value, number of shares
or fractional interests therein, and the dividend, liquidation, redemption,
conversion, voting and other rights, the initial public offering price and
whether interests in the Preferred Stock will be represented by Depositary
Shares. The Board of Directors may fix such terms of any new series of Preferred
Stock from time to time. The ability of the Board of Directors to issue
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Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting powers of holders of Common Stock and, under certain
circumstances, may discourage an attempt by others to gain control of the
Company. The Company may amend from time to time its Restated Articles of
Incorporation to increase the number of authorized shares of preferred stock.
Any such amendment would require the approval of the holders of a majority of
the outstanding shares of Common Stock, and the approval of the holders of a
majority of the outstanding shares of all series of preferred stock voting
together as a single class without regard to series. As of the date of this
Prospectus, the Company has no series of preferred stock outstanding.
Pursuant to Crestar's Restated Articles of Incorporation, the Board of
Directors has designated a series of 100,000 shares of Participating Cumulative
Preferred Stock, Series C (the "Series C Preferred Stock"), no shares of which
have been issued. The Series C Preferred Stock was created in connection with
Crestar's shareholder rights plan. See "Description of Common Stock."
The Prospectus Supplement relating to each series of the Preferred Stock
will describe the following terms thereof:
(a) title and stated value of such series;
(b) the number of shares in such series;
(c) the dividend payment dates and the dividend rate or method of
determination or calculation of such terms applicable to the series;
(d) applicable redemption provisions, if any;
(e) sinking fund or purchase fund provisions, if any;
(f) the fixed liquidation price and fixed liquidation premium, if any,
applicable to the series;
(g) the rate or basis of exchange or conversion into other securities or
method of determination thereof applicable to the series, if any;
(h) the conversion rights, if any;
(i) applicable voting rights; and
(j) any other terms applicable thereto.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or in part, at
the option of the Company, and may be subject to mandatory redemption pursuant
to a sinking fund, in each case upon terms, at the times and at the redemption
prices set forth in the Prospectus Supplement relating to such series.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption shall specify the number of shares of such
series of Preferred Stock which shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption. The redemption price may be payable in cash,
capital stock or in cash received from the net proceeds of the issuance of
capital stock of the Company, as specified in the Prospectus Supplement relating
to such series of Preferred Stock. If the redemption price is payable only from
the net proceeds of the issuance of capital stock of the Company, the terms of
such series may provide that, if no such capital stock shall have been issued or
to the extent the net proceeds from any issuances are insufficient to pay in
full the aggregate redemption price then due, the applicable shares of such
series of Preferred Stock shall automatically and mandatorily be converted into
shares of the applicable capital stock of the Company pursuant to conversion
provisions specified in the Prospectus Supplement relating to such series of
Preferred Stock.
If fewer than all the outstanding shares of any series of the Preferred
Stock are to be redeemed, whether by mandatory or optional redemption, the
selection of the shares to be redeemed shall be determined by lot or pro rata as
may be determined by the Board of Directors or a duly authorized committee
thereof, or by any other method which may be determined by the Board of
Directors or such committee to be equitable. From and after the date of
redemption (unless default shall be made by the Company in providing for the
payment of the redemption price), dividends shall cease to accrue on the shares
of Preferred Stock called for redemption and all rights of the holders thereof
(except the right to receive the redemption price) shall cease.
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CONVERSION RIGHTS
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of preferred stock of the Company. As described
under "Redemption" above, under certain circumstances, the Preferred Stock may
be mandatorily converted into Common Stock or another series of preferred stock
of the Company. The Preferred Stock will have no preemptive rights.
DIVIDEND RIGHTS
The holders of the Preferred Stock of each series shall be entitled to
receive, if and when declared payable by the Board of Directors, out of assets
available therefor, dividends at, but not exceeding, the dividend rate for such
series (which may be fixed or variable), payable at such intervals and on such
dates as are provided in the resolution of the Board of Directors creating such
series. If such intervals and dividend payment dates shall vary from time to
time for such series, such resolution shall set forth the method by which such
intervals and such dates shall be determined. Such dividends on Preferred Stock
shall be paid before any dividends, other than a dividend payable in Common
Stock of the Company, may be paid upon or set apart for any shares of capital
stock ranking junior to the Preferred Stock in respect of dividends or
liquidation rights (referred to in this Prospectus as "stock ranking junior to
the Preferred Stock").
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by the
laws of the Commonwealth of Virginia or other applicable law, the holders of the
Preferred Stock will not be entitled to vote. Except as indicated in the
Prospectus Supplement relating to a particular series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of the Preferred Stock are entitled to vote. However, as more fully
described below under " -- Depositary Shares," if the Company elects to issue
Depositary Shares representing a fraction of a share of a series of Preferred
Stock, each such Depositary Share will, in effect, be entitled to such fraction
of a vote, rather than a full vote. Since each full share of any series of
Preferred Stock shall be entitled to one vote, the voting power of such series,
on matters on which holders of such series and holders of other series of
preferred stock are entitled to vote as a single class, shall depend on the
number of shares in such series, not the aggregate liquidation preference or
initial offering price of the shares of such series of Preferred Stock.
In addition to the foregoing voting rights, under the Virginia Stock
Corporation Act as now in effect, the holders of Preferred Stock will have the
voting rights set forth under " -- General" above with respect to amendments to
the Company's Restated Articles of Incorporation which would increase the number
of authorized shares of preferred stock of the Company.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Company,
the holders of the Preferred Stock shall be entitled to receive, for each share
thereof, the fixed liquidation or stated value for the respective series
together in all cases with all dividends accrued or in arrears thereon, before
any distribution of the assets shall be made to the holders of any stock ranking
junior to the Preferred Stock. If the assets distributable among the holders of
the Preferred Stock should be insufficient to permit the payment of the full
preferential amounts fixed for all series, then the distribution shall be made
among the holders of each series ratably in proportion to the full preferential
amounts to which they are respectively entitled.
DEPOSITARY SHARES
GENERAL. The Company may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event
such option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a bank or trust company selected by the Company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary Bank"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
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The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. If Depositary
Shares are issued, copies of the forms of Deposit Agreement and Depositary
Receipt will be incorporated by reference to the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such documents.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary Bank may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Depositary Bank will distribute all
cash dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the Depositary Bank will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary Bank determines that it is not feasible
to make such distribution, in which case the Depositary Bank may, with the
approval of the Company, sell such property and distribute the net proceeds from
such sale to such holders.
REDEMPTION OF DEPOSITARY SHARES. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary Bank resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary Bank. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary Bank, the Depositary Bank will redeem as
of the same redemption date the number of Depositary Shares representing the
shares of Preferred Stock so redeemed. If fewer than all the Depositary Shares
are to be redeemed, the Depositary Shares to be redeemed will be selected by lot
or pro rata as may be determined by the Depositary Bank.
VOTING THE PREFERRED STOCK. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary Bank
will mail the information contained in such notice of meeting to the record
holders of the Depositary Shares relating to such Preferred Stock. Each record
holder of such Depositary Shares on the record date (which will be the same date
as the record date for the Preferred Stock) will be entitled to instruct the
Depositary Bank as to the exercise of the voting rights pertaining to the amount
of the Preferred Stock represented by such holder's Depositary Shares. The
Depositary Bank will endeavor, insofar as practicable, to vote the amount of the
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all action which may be deemed
necessary by the Depositary Bank in order to enable the Depositary Bank to do
so. The Depositary Bank may abstain from voting shares of the Preferred Stock to
the extent it does not receive specific instructions from the holders of
Depositary Shares representing such Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT. The form of
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary Bank. However, any amendment that materially and adversely
alters the rights of the holders of Depositary Shares will not be effective
unless such amendment has been approved by the holders of at least a majority of
the Depositary Shares then outstanding. The Deposit Agreement may be terminated
by the Company or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed or (ii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up of
the Company and such distribution has been distributed to the holders of
Depositary Receipts.
CHARGES OF DEPOSITARY BANK. The Company will pay all transfer and other
taxes and governmental charges arising solely from the existence of the
depositary arrangements. The Company will pay charges of the Depositary Bank in
connection with the initial deposit of the Preferred Stock and any redemption of
the Preferred Stock. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges, including a fee for
the withdrawal of shares of Preferred Stock upon surrender of Depositary
Receipts, as are expressly provided in the Deposit Agreement to be for their
accounts.
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MISCELLANEOUS. The Depositary Bank will forward to holders of Depository
Receipts all reports and communications from the Company that are delivered to
the Depositary Bank and that the Company is required to furnish to the holders
of the Preferred Stock.
Neither the Depositary Bank nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the Deposit Agreement. The obligations of the Company and
the Depositary Bank under the Deposit Agreement will be limited to performance
in good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or upon information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Receipts
or other persons believed to be competent and on documents believed to be
genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY BANK. The Depositary Bank may resign
at any time by delivering to the Company notice of its election to do so, and
the Company may at any time remove the Depositary Bank, any such resignation or
removal to take effect upon the appointment of a successor Depositary Bank and
its acceptance of such appointment. Such successor Depositary Bank must be
appointed within 60 days after delivery of the notice of resignation or removal
and must be a bank or trust company having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock when issued and full consideration is received for such
Preferred Stock will be fully paid and nonassessable.
DESCRIPTION OF COMMON STOCK
GENERAL
The following summary does not purport to be complete and is subject in all
respects to applicable Virginia law, the Company's Restated Articles of
Incorporation and Bylaws, and the Rights Agreement dated June 23, 1989.
The Company is authorized by its Restated Articles of Incorporation to
issue 100,000,000 shares of Common Stock. The Company had 37,597,723 shares of
Common Stock outstanding at September 30, 1994. Each share of Common Stock is
entitled to one vote on all matters submitted to a vote of shareholders. Holders
of Common Stock are entitled to receive dividends when and as declared by the
Board of Directors of the Company out of funds legally available therefor.
Dividends may be paid on the Common Stock only if all dividends on any
outstanding Preferred Stock have been paid or provided for.
The issued and outstanding shares of Common Stock are fully paid and
nonassessable. Holders of Common Stock have no preemptive or conversion rights
and are not subject to further calls or assessments by the Company.
In the event of the voluntary or involuntary dissolution, liquidation or
winding up of the Company, holders of Common Stock are entitled to receive, pro
rata, after satisfaction in full of the prior rights of creditors and holders of
Preferred Stock, if any, all the remaining assets of the Company available for
distribution.
Directors are elected by a vote of the holders of Common Stock. Holders of
Common Stock are not entitled to cumulative voting rights.
Mellon Bank, N.A. acts as the transfer agent and registrar for the Common
Stock.
RIGHTS
In 1989, pursuant to the Company's shareholder rights plan, the Company
distributed as a dividend one Right for each outstanding share of Common Stock.
Each Right entitles the holder to buy one one-thousandth of a share of Junior
Preferred Stock at an exercise price of $115, subject to adjustment. The Rights
will become exercisable only if a person or group acquires or announces a tender
offer for 10% or more of the outstanding Common Stock. When exercisable, Crestar
may issue a share of Common Stock in exchange for each Right other than those
held by such person or group. If a person or group acquires 30% or more of the
outstanding Common Stock, each Right will entitle the holder, other than the
acquiring person, upon payment of the exercise price, to acquire Series C
Preferred Stock or, at the option of the Company, Common Stock, having a value
equal to twice the Right's exercise price. If Crestar is acquired in a merger or
other business combination or if 50% of its earnings power is sold, each Right
will entitle the holder, other than the acquiring person, to purchase
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securities of the surviving company having a market value equal to twice the
exercise price of the Right. The Rights will expire on June 23, 1999, and may be
redeemed by the Company at any time prior to the tenth day after an announcement
that a 10% position has been acquired, unless such time period has been extended
by the Board of Directors.
Until such time as a person or group acquires or announces a tender offer
for 10% or more of the Common Stock, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, and (ii) the surrender for transfer of any certificate for
Common Stock will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Rights may not be transferred,
directly or indirectly (i) to any person or group that has acquired, or obtained
the right to acquire, beneficial ownership of 10% or more of the Rights (an
"Acquiring Person"); (ii) to any person in connection with a transaction in
which such person becomes an Acquiring Person; or (iii) to any affiliate or
associate of any such person. Any Right that is the subject of a purported
transfer to any such person will be null and void.
The Rights may have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that acquires more than 10% of the
outstanding shares of Common Stock of the Company if certain events thereafter
occur without the Rights having been redeemed. However, the Rights should not
interfere with any merger or other business combination approved by the Board of
Directors and the shareholders because the Rights are redeemable under certain
circumstances.
VIRGINIA STOCK CORPORATION ACT
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions." These provisions, with several exceptions discussed
below, require approval of material acquisition transactions between a Virginia
corporation and any holder of more than 10% of any class of its outstanding
voting shares (an "Interested Shareholder") by the holders of at least
two-thirds of the remaining voting shares. Affiliated Transactions subject to
this approval requirement include mergers, share exchanges, material
dispositions of corporate assets not in the ordinary course of business, any
dissolution of the corporation proposed by or on behalf of an Interested
Shareholder, or any reclassification, including reverse stock splits,
recapitalization or merger of the corporation with its subsidiaries which
increases the percentage of voting shares owned beneficially by an Interested
Shareholder by more than 5%.
For three years following the time that an Interested Shareholder becomes
an owner of 10% of the outstanding voting shares, a Virginia corporation cannot
engage in an Affiliated Transaction with such Interested Shareholder without
approval of two-thirds of the voting shares other than those shares beneficially
owned by the Interested Shareholder, and majority approval of the "Disinterested
Directors." A Disinterested Director means, with respect to a particular
Interested Shareholder, a member of the Company's Board of Directors who was (1)
a member on the date on which an Interested Shareholder became an Interested
Shareholder and (2) recommended for election by, or was elected to fill a
vacancy and received the affirmative vote of, a majority of the Disinterested
Directors then on the Board. At the expiration of the three year period, the
statute requires approval of Affiliated Transactions by two-thirds of the voting
shares other than those beneficially owned by the Interested Shareholder.
The principal exceptions to the special voting requirement apply to
transactions proposed after the three year period has expired and require either
that the transaction be approved by a majority of the corporation's
Disinterested Directors or that the transaction satisfy the fair-price
requirements of the statute. In general, the fair-price requirement provides
that in a two-step acquisition transaction, the Interested Shareholder must pay
the shareholders in the second step either the same amount of cash or the same
amount and type of consideration paid to acquire the Virginia corporation's
shares in the first step.
None of the foregoing limitations and special voting requirements applies
to a transaction with an Interested Shareholder whose acquisition of shares
making such person an Interested Shareholder was approved by a majority of the
Virginia corporation's Disinterested Directors.
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. The Company has not "opted out" of the
Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a transaction that would
cause the acquiring person's voting strength to meet or exceed any of three
thresholds (20%, 33 1/3% or 50%) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Virginia corporation. This provision
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empowers an acquiring person to require the Virginia corporation to hold a
special meeting of shareholders to consider the matter within 50 days of its
request.
PLAN OF DISTRIBUTION
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered, such as, where applicable, (i) in the case of
Debt Securities, the specific designation, aggregate principal amount, currency,
denomination, maturity, priority, interest rate (which may be variable or
fixed), time of payment of interest, terms for optional redemption or repayment
or for sinking fund payments, terms for conversion into or exchange for Capital
Securities or other Offered Securities, and the initial public offering price;
(ii) in the case of Preferred Stock, the specific title and stated value, number
of shares or fractional interests therein, and the dividend, liquidation,
redemption, conversion, voting and other rights, the initial public offering
price, and whether interests in the Preferred Stock will be represented by
Depositary Shares; (iii) in the case of Common Stock, the initial offering
price; and (iv) in the case of all Offered Securities, whether such Offered
Security will be offered separately or as a unit with other Offered Securities,
will be set forth in a Prospectus Supplement. The Prospectus Supplement will
also contain information, where applicable, about certain United States federal
income tax considerations relating to, and any listing on a securities exchange
of, the Offered Securities covered by the Prospectus Supplement.
The Offered Securities may be sold for public offering to underwriters or
dealers, which may be a group of underwriters represented by one or more
managing underwriters, which may include Morgan Stanley & Co. Incorporated, or
through such firms or other firms acting alone or through dealers. The Offered
Securities may also be sold through agents to investors. The names of any
agents, dealers or managing underwriters, and of any underwriters, involved in
the sale of the Offered Securities in respect of which this Prospectus is being
delivered and the applicable agent's commission, dealer's purchase price or
underwriter's discount will be set forth in the Prospectus Supplement. The net
proceeds to the Company from such sale will also be set forth in the Prospectus
Supplement. Any underwriters, dealers or agents participating in the offering of
Offered Securities may be deemed "underwriters" within the meaning of the
Securities Act.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Offered Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act.
If an underwriter or underwriters are utilized in the sale of the Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
The underwriter or underwriters with respect to an underwritten offering of
Offered Securities will be set forth in the Prospectus Supplement relating to
such offering and, if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover of such Prospectus
Supplement. If any underwriter or underwriters are utilized in the sale of the
Offered Securities, the underwriting agreement will provide that the obligations
of the underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Offered Securities will be obligated to
purchase all such Offered Securities if any are purchased. In connection with
the sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent. Under such
underwriting agreements, underwriters, dealers and agents who participate in the
distribution of the Offered Securities, may be entitled to indemnification by
the Company against certain civil liabilities, including liabilities under the
Securities Act or contribution with respect to payments which the underwriters,
dealers or agents may be required to make in respect thereof.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Company and its
Subsidiaries and the Trustee in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Hunton & Williams, Richmond, Virginia, counsel for the Company, and
for the Underwriters by Davis Polk & Wardwell, New York, New York, counsel for
the Underwriters. Hunton & Williams may from time to time represent certain of
the Underwriters in connection with various legal matters. Gordon F. Rainey,
Jr., a member of Crestar's Board of Directors, is a partner with Hunton &
Williams.
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EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 have been so incorporated in reliance upon the report of
KPMG Peat Marwick LLP, independent auditors, incorporated herein by reference,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1993 consolidated
financial statements refers to changes in accounting for postretirement benefits
other than pensions and accounting for income taxes. To the extent that KPMG
Peat Marwick LLP audit and report on future consolidated financial statements of
the Company and consent to the use of their reports thereon, such future
consolidated financial statements also will be incorporated by reference in the
Registration Statement in reliance upon their reports and said authority.
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