CRESTAR FINANCIAL CORP, 424B3, 1994-11-10

CRESTAR FINANCIAL CORP
424B3, 1994-11-10
STATE COMMERCIAL BANKS

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FILED PURSUANT TO RULE 424(B)(3); FILE NUMBER 33-55651

INDEPENDENT BANK
8751 SUDLEY ROAD
MANASSAS, VIRGINIA 22110-1827
November 7, 1994
Dear Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Independent Bank ("Independent") on December 14, 1994 at 10:00 a.m., Eastern
Time, at the Holiday Inn, 10800 Vandor Lane, Manassas, Virginia. This is a very
important meeting regarding your investment in Independent.
The purpose of the meeting is to consider and vote upon the Agreement and
Plan of Reorganization, dated as of August 26, 1994, by and among Crestar
Financial Corporation ("Crestar"), Crestar Bank and Independent, and the related
Plan of Merger (together, the "Agreement"), pursuant to which, among other
things, Independent will be merged with and into Crestar Bank (the "Merger"). In
connection with the Merger, each share of common stock of Independent
outstanding immediately prior to consummation of the Merger (other than shares
held of record by Crestar) will be converted into and represent the right to
receive shares of common stock of Crestar and/or, subject to certain
limitations, cash, as described in the accompanying Proxy Statement/Prospectus.
In the Merger, each share of Independent common stock shall be converted into
the number of shares of Crestar common stock determined by dividing $12.25 by
the average closing price of Crestar Common Stock as reported by the New York
Stock Exchange for each of the ten trading days ending prior to the tenth day
prior to the Effective Time of the Merger. Alternatively, holders of up to 40%
of the outstanding shares of Independent Common Stock may elect to exchange
their shares for $12.25 per share in cash.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE AGREEMENT
AND THE MERGER, WHICH THE BOARD BELIEVES IS IN THE BEST INTERESTS OF THE
SHAREHOLDERS OF INDEPENDENT.
Enclosed is a Notice of Special Meeting of Shareholders, a Proxy
Statement/Prospectus containing a discussion of the Agreement and the Merger and
a proxy card. Please complete, sign and date the enclosed proxy card and return
it as soon as possible in the envelope provided. If you decide to attend the
special meeting, you may vote your shares in person whether or not you have
previously submitted a proxy. It is important to understand that the Agreement
and Merger must be approved by the holders of more than two-thirds of all
outstanding shares of common stock of Independent and that the failure to vote
will have the same effect as a vote against the Merger. On behalf of the Board,
thank you for your attention to this important matter.
Very truly yours,
Eugene F. Peters Richard C. Barnes Gary R. English
Chairman of the Board Vice Chairman of the Board President

<PAGE>
INDEPENDENT BANK
8751 SUDLEY ROAD
MANASSAS, VIRGINIA 22110-1827
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 14, 1994
TO THE SHAREHOLDERS OF INDEPENDENT BANK:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders has been
called by the Board of Directors of Independent Bank ("Independent") and will be
held at the Holiday Inn, 10800 Vandor Lane, Manassas, Virginia, on December 14,
1994 at 10:00 a.m. for the purpose of considering and voting upon the following
matters:
1. PROPOSED MERGER. To consider and vote upon the Agreement and Plan of
Reorganization dated as of August 26, 1994 (the "Agreement") and a related
Plan of Merger providing for the merger of Independent with and into
Crestar Bank (the "Merger"). The Agreement is attached to the accompanying
Proxy Statement/Prospectus as Annex I.
2. OTHER BUSINESS. To consider and vote upon such other matters as
may properly come before the meeting.
Only those Independent shareholders of record at the close of business on
November 7, 1994 shall be entitled to notice of and to vote at the meeting. The
affirmative vote of the holders of more than two-thirds of the issued and
outstanding shares of Independent common stock entitled to vote at the meeting
is required to approve the Merger.
By Order of the Board of Directors,
Stanley M. Keys, SECRETARY
November 7, 1994
Manassas, Virginia
THE BOARD OF DIRECTORS OF INDEPENDENT RECOMMENDS THAT THE HOLDERS OF
INDEPENDENT COMMON STOCK VOTE TO APPROVE THE PROPOSED MERGER.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING. SHAREHOLDERS
ATTENDING THE MEETING MAY PERSONALLY VOTE ON ALL MATTERS WHICH ARE CONSIDERED,
IN WHICH EVENT THE SIGNED PROXIES ARE REVOKED.

<PAGE>
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
OF
INDEPENDENT BANK
TO BE HELD ON DECEMBER 14, 1994
PROSPECTUS
OF
CRESTAR FINANCIAL CORPORATION
COMMON STOCK
PAR VALUE $5.00
This Proxy Statement/Prospectus is being furnished to the holders of common
stock, par value $1.00 per share (the "Independent Common Stock") of Independent
Bank, a Virginia banking corporation ("Independent" or the "Bank"), in
connection with the solicitation of proxies by the Independent Board of
Directors (the "Independent Board") for use at a special meeting of Independent
shareholders to be held at 10:00 a.m. on December 14, 1994, at the Holiday Inn,
10800 Vandor Lane, Manassas, Virginia (the "Independent Shareholder Meeting").
At the Independent Shareholder Meeting, the shareholders of record of
Independent Common Stock as of the close of business on November 7, 1994, will
consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization (the "Agreement"), dated as of August 26, 1994, by and among
Crestar Financial Corporation ("Crestar"), Crestar Bank, a Virginia banking
corporation wholly owned by Crestar ("Crestar Bank"), and Independent, pursuant
to which, among other things, Independent will merge with and into Crestar Bank
(the "Merger"). Upon consummation of the Merger, which is expected to occur in
January 1995, each outstanding share of Independent Common Stock (other than
shares held of record by Crestar) shall be converted into either (i) $12.25 in
cash (provided that the number of shares of Independent Common Stock for which
shareholders elect to receive cash shall not exceed 40% of the outstanding
shares of Independent Common Stock); or (ii) the number of shares of Crestar
Common Stock determined by dividing the $12.25 price per share (the "Price Per
Share") by the average closing price of Crestar Common Stock (the "Average
Closing Price") as reported on the New York Stock Exchange ("NYSE") for each of
the 10 trading days ending on the tenth day prior to the day of the Effective
Time of the Merger (the quotient determined by dividing the Price Per Share by
the Average Closing Price and rounded to the nearest ten thousandths decimal
point being hereinafter called the "Exchange Ratio"), subject to adjustment as
set forth in the Agreement, but in no case shall the Exchange Ratio be less than
.2269 shares or greater than .3063 shares of Crestar Common Stock for each share
of Independent Common Stock. Based on the closing price of Crestar Common Stock
on the NYSE on October 31, 1994 of $41.25, each share of Independent Common
Stock would have been exchanged for .2970 shares of Crestar Common Stock. Such
number of shares of Crestar Common Stock may increase or decrease depending on
the Average Closing Price as described herein. See "The Merger -- Determination
of Exchange Ratio and Exchange for Crestar Common Stock." For a description of
the Agreement, which is included herein in its entirety as Annex I to this Proxy
Statement/Prospectus, see "The Merger."
This Proxy Statement/Prospectus and the accompanying proxy appointment
cards are first being mailed to shareholders of Independent on or about November
7, 1994.
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 PROXY
STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Proxy Statement/Prospectus is November 7, 1994.

<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES,
NOR DOES IT CONSTITUTE AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY
JURISDICTION TO WHOM IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION................................ 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.... 2
SUMMARY.............................................. 3
Parties to the Merger.............................. 3
Shareholder Meeting................................ 3
Vote Required; Record Date......................... 3
The Merger......................................... 4
The Exchange Ratio................................. 4
Cash Election...................................... 4
Effective Time..................................... 4
Opinion of Financial Advisor....................... 4
Conditions to Consummation......................... 4
Conduct of Business Pending the Merger............. 5
Interests of Certain Persons in the Merger......... 5
Resale of Crestar Common Stock..................... 5
Certain Federal Income Tax Consequences of the
Merger............................................. 5
Market Prices Prior to Announcement of the
Merger............................................. 5
Comparative Per Share Data......................... 5
Selected Financial Data............................ 8
GENERAL INFORMATION.................................. 10
THE MERGER........................................... 10
Background of the Merger........................... 10
Reasons and Basis for the Merger................... 11
Opinion of Financial Advisor....................... 11
Effective Time of the Merger....................... 13
Determination of Exchange Ratio and Exchange for
Crestar Common Stock............................. 14
Cash Election; Election Procedures................. 14
Business of Independent Pending the Merger......... 15
Conditions to Consummation of the Merger........... 15
Termination........................................ 16
Accounting Treatment............................... 17
Operations After the Merger........................ 17
Interest of Certain Persons in the Merger.......... 17
Effect on Independent Employee Benefits Plans...... 18
Certain Federal Income Tax Consequences............ 18
Exchange of Independent Common Stock for Crestar
Common Stock..................................... 19
Exchange of Independent Common Stock for Cash and
Crestar Common Stock............................. 19
Exchange of Independent Common Stock for Cash...... 19
Section 318 of the Code............................ 20
No Dissenters' Rights of Appraisal................. 21
BUSINESS OF CRESTAR.................................. 21
Recent Developments................................ 21
BUSINESS OF INDEPENDENT.............................. 22
INDEPENDENT MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 22
</TABLE>

<TABLE>
<CAPTION>
PAGE
<S> <C>
Comparison of Financial Condition and Operating
Results for the Six Months Ended June 30, 1994
and 1993......................................... 23
Comparison of Financial Condition and Operating
Results for the Years Ended December 31, 1993 and
1992............................................. 25
Comparison of Financial Condition and Operating
Results for the Years Ended December 31, 1992 and
1991............................................. 28
Capital Resources and Adequacy..................... 29
MARKET FOR AND DIVIDENDS PAID ON INDEPENDENT COMMON
STOCK.............................................. 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF INDEPENDENT BANK..................... 45
SUPERVISION AND REGULATION OF CRESTAR................ 46
Bank Holding Companies............................. 46
Capital Requirements............................... 46
Limits on Dividends and Other Payments............. 47
Banks.............................................. 48
Other Safety and Soundness Regulations............. 48
DESCRIPTION OF CRESTAR CAPITAL STOCK................. 49
Common Stock....................................... 49
Preferred Stock.................................... 49
Rights............................................. 49
Virginia Stock Corporation Act..................... 50
COMPARATIVE RIGHTS OF SHAREHOLDERS................... 51
Capitalization..................................... 51
Amendment of Articles or Bylaws.................... 51
Required Shareholder Vote for Certain Actions...... 51
Director Nominations............................... 52
Directors and Classes of Directors; Vacancies and
Removal of Directors............................. 52
Anti-Takeover Provisions........................... 52
Preemptive Rights.................................. 52
Assessment......................................... 53
Conversion; Redemption; Sinking Fund............... 53
Liquidation Rights................................. 53
Dividends and Other Distributions.................. 53
Special Meetings of Shareholders................... 53
Indemnification.................................... 53
Shareholder Proposals.............................. 54
Shareholder Inspection Rights; Shareholder Lists... 54
Shareholder Rights Plan............................ 54
RESALE OF CRESTAR COMMON STOCK....................... 54
EXPERTS.............................................. 55
LEGAL OPINION........................................ 55
INDEX TO FINANCIAL STATEMENTS OF INDEPENDENT......... F-1
ANNEX I -- Agreement and Plan of Reorganization
ANNEX II -- Fairness Opinion of Baxter Fentriss and
Company
</TABLE>

<PAGE>
AVAILABLE INFORMATION
Crestar is subject to the reporting and 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 "SEC"). Reports, proxy statements and other information
filed with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611-2511
and Seven World Trade Center (13th Floor), New York, New York 10048. Copies of
such material can be obtained from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
reports, proxy statements and other information also may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. As permitted by the Rules and Regulations of the SEC, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement on Form S-4, of which this Proxy Statement/Prospectus is
a part, and exhibits thereto (together with the amendments thereto, the
"Registration Statement"), which has been filed by Crestar with the SEC under
the Securities Act of 1933 (the "1933 Act") with respect to Crestar Common Stock
and to which reference is hereby made.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
RELATING TO CRESTAR THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. CRESTAR
DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM CRESTAR'S INVESTOR
RELATIONS DEPARTMENT, CRESTAR FINANCIAL CORPORATION, 919 EAST MAIN STREET,
RICHMOND, VIRGINIA 23261-6665, (804) 782-7152. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY DECEMBER 7, 1994.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Crestar are incorporated by reference in
this Proxy Statement/Prospectus: (i) Crestar's Annual Report on Form 10-K for
the year ended December 31, 1993; (ii) Crestar's Quarterly Reports on Form 10-Q
for the periods ended March 31, 1994 and June 30, 1994; (iii) the description of
Crestar Common Stock and the associated preferred share purchase rights in
Crestar's registration statements filed under the Exchange Act with respect to
Crestar Common Stock and the associated preferred share purchase rights,
including all amendments and reports filed for the purpose of updating such
description; and (iv) Crestar's Current Reports on Form 8-K, dated March 10,
1994 and September 23, 1994.
All documents filed by Crestar pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Independent Shareholder Meeting are hereby incorporated by reference in this
Proxy Statement/Prospectus and shall be deemed a part hereof from the date of
filing of such documents. Any statement contained in any supplement hereto or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, in any
supplement hereto or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus or any supplement hereto.
Also incorporated by reference herein is the Agreement and Plan of
Reorganization among Crestar, Crestar Bank, and Independent, which is attached
to this Proxy Statement/Prospectus as Annex I.
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<PAGE>
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding Crestar, Independent and the matters to be considered
at the Independent Shareholder Meeting and is qualified in all respects by the
information appearing elsewhere or incorporated by reference in this Proxy
Statement/Prospectus, the Annexes hereto and the documents referred to herein.
PARTIES TO THE MERGER
CRESTAR. Crestar is the holding company for Crestar Bank, Crestar Bank N.A.
of Washington, D.C. and Crestar Bank MD of Maryland. At June 30, 1994, Crestar
had approximately $14.3 billion in total assets, $11.4 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 332 banking offices and 272
automated teller machines (as of June 30, 1994). Crestar offers a broad range of
banking services, including various types of deposit accounts and instruments,
commercial and consumer loans, trust and investment management services, bank
credit cards and international banking services. 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 offered by Capitoline Investment Services
Incorporated, both of which are subsidiaries of Crestar Bank. These various
Crestar subsidiaries provide banking and non-banking services throughout
Virginia, Maryland and Washington, D.C., as well as certain non-banking services
to customers in other states.
The executive offices of Crestar are located in Richmond, Virginia at
Crestar Center, 919 East Main Street. Regional headquarters are located in
Norfolk and Roanoke, Virginia and in Washington, D.C. Crestar's principal
Operations Center is located in Richmond.
INDEPENDENT. Independent, a Virginia banking corporation, offers general
banking services, including accepting demand, savings, and time accounts;
accepting certificates of deposit; and granting and collecting installment
loans, time and demand loans, consumer loans, commercial loans, real estate
loans and lines of credit. Independent offers safe deposit boxes and drive-up
teller facilities.
Independent commenced operations on July 1, 1978 and has four branches, and
four automated teller machines, in Prince William County, Virginia. At June 30,
1994, Independent had total assets of $92.6 million, total deposits of $85.4
million and total shareholders' equity of $5.5 million.
SHAREHOLDER MEETING
The Independent Shareholder Meeting will be held on December 14, 1994 at
10:00 a.m. at the Holiday Inn, Manassas, Virginia, for the purpose of
considering and voting upon a proposal to approve the Agreement and a related
Plan of Merger.
VOTE REQUIRED; RECORD DATE
Only Independent shareholders of record at the close of business on
November 7, 1994 (the "Record Date") will be entitled to notice of and to vote
at the Independent Shareholder Meeting. The affirmative vote of the holders of
more than two-thirds of the shares of Independent Common Stock outstanding on
such date is required to approve the Merger. As of the Record Date, there were
1,020,000 shares of Independent Common Stock entitled to be voted, held by
approximately 380 shareholders of record.
A majority of the directors of Independent, who beneficially owned, as of
the Record Date, 352,044 shares or approximately 34.5% of the 1,020,000
outstanding shares of Independent Common Stock, have agreed to vote such shares
in favor of the Merger. See "Security Ownership of Certain Beneficial Owners and
Management of Independent Bank."
The Boards of Directors of Crestar and Crestar Bank have approved the
Merger and approval of the Merger by Crestar and Crestar Bank shareholders is
not required by the Virginia Stock Corporation Act ("VSCA").
3

<PAGE>
THE MERGER
Pursuant to the Agreement, at the Effective Time of the Merger, Independent
will merge into Crestar Bank in accordance with the Plan of Merger whereby the
separate existence of Independent will cease. At the Effective Time of the
Merger, each outstanding share of Independent Common Stock (other than shares
held of record by Crestar) shall be converted into and represent the right to
receive (upon a shareholder's election prior to or at the Independent
Shareholder Meeting) either (i) $12.25 in cash (provided that the number of
shares of Independent Common Stock for which shareholders elect to receive cash
shall not exceed 40% of the outstanding shares of Independent Common Stock) or
(ii) a number of shares of Crestar Common Stock, determined by the Exchange
Ratio, subject to adjustment as set forth in the Agreement.
THE EXCHANGE RATIO
For the purpose of determining the Exchange Ratio, each share of
Independent Common Stock has been valued at $12.25. The number of shares of
Crestar Common Stock to be delivered for each share of Independent Common Stock
will be determined by dividing $12.25 by the Average Closing Price of Crestar
Common Stock as reported on the NYSE for each of the 10 trading days ending on
the tenth day prior to the Effective Time of the Merger but in no case shall the
Exchange Ratio be less than .2269 shares or greater than .3063 shares of Crestar
Common Stock for each share of Independent Common Stock. The Exchange Ratio
would be appropriately adjusted in the event of any distribution (other than
cash dividends) with respect to Crestar Common Stock which occurs prior to the
Effective Date of the Merger.
CASH ELECTION
Holders of Independent Common Stock will be given the option of exchanging
all or any part of their shares for $12.25 cash per share of Independent Common
Stock. The number of shares exchanged for cash may not exceed 40% of the
outstanding shares of Independent Common Stock.
IF AN INDEPENDENT SHAREHOLDER ELECTS TO SURRENDER SHARES FOR CASH, HE/SHE
MUST SUBMIT TO INDEPENDENT FOR DELIVERY TO CRESTAR BANK THE CASH OPTION FORM
ACCOMPANYING THIS PROXY STATEMENT/PROSPECTUS PRIOR TO OR AT THE INDEPENDENT
SHAREHOLDER MEETING. ANY INDEPENDENT SHAREHOLDER WHO DOES NOT COMPLETE AND
RETURN A CASH OPTION FORM PRIOR TO OR AT THE INDEPENDENT SHAREHOLDER MEETING CAN
ONLY RECEIVE CRESTAR COMMON STOCK IN THE MERGER. ONCE THE VOTE ON THE MERGER HAS
BEEN TAKEN AT THE INDEPENDENT SHAREHOLDER MEETING, THE CASH ELECTION IS
IRREVOCABLE. THE CASH OPTION FORM MUST BE ACCOMPANIED BY THE STOCK CERTIFICATES
TO BE EXCHANGED FOR CASH, AND WILL BE HELD IN ESCROW BY CRESTAR BANK IN
ACCORDANCE WITH THE AGREEMENT.
See "The Merger -- Cash Election; Election Procedures."
EFFECTIVE TIME
The Merger is expected to be consummated in January 1995. Independent and
Crestar each has the right, acting unilaterally, to terminate the Agreement
should the Merger not be consummated by March 31, 1995. See "The Merger --
Termination."
OPINION OF FINANCIAL ADVISOR
Independent has received an opinion of Baxter Fentriss and Company ("Baxter
Fentriss") that the terms of the Merger are fair to the Independent shareholders
from a financial point of view. For additional information concerning Baxter
Fentriss and its opinion, see "The Merger -- Opinion of Financial Advisor" and
the opinion of such firm attached as Annex II to this Proxy
Statement/Prospectus.
CONDITIONS TO CONSUMMATION
Consummation of the Merger would be accomplished by the statutory merger of
Independent into Crestar Bank. The Merger is contingent upon the approvals of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") and the Bureau of Financial Institutions of the Virginia State
Corporation Commission (the "SCC"), which approvals have been applied for and
are expected to be received. The Merger is also subject to other usual
conditions, including receipt by Crestar and Independent of the legal opinion of
Hunton & Williams that the Merger will constitute a tax-free reorganization
under Section 368(a) of the Internal Revenue Code (the "Code"). See "The
Merger -- Conditions to Consummation of the Merger."
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<PAGE>
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the terms of the Agreement, Independent has agreed not to take
certain actions relating to the operation of its business pending consummation
of the Merger without the prior approval of Crestar, except as otherwise
permitted by the Agreement. See "The Merger -- Business of Independent Pending
the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Independent's management and the Independent Board of
Directors have interests in the Merger in addition to their interests as
shareholders of Independent generally. These include, among other things,
provisions in the Agreement relating to indemnification and eligibility for
certain Crestar employee benefits. See "The Merger -- Interests of Certain
Persons in the Merger."
RESALE OF CRESTAR COMMON STOCK
Shares of Crestar Common Stock received in the Merger will be freely
transferable by the holders thereof, except for shares held by those holders who
may be deemed to be "affiliates" (generally including certain directors,
executive officers and 10% or greater shareholders) of Independent or Crestar
under applicable federal securities laws. See "Resale of Crestar Common Stock."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger is intended to be a tax-free "reorganization" as defined in
Section 368(a) of the Code, but the receipt of cash by an Independent
shareholder for any shares of Independent Common Stock or in lieu of a
fractional share of Crestar Common Stock will be a taxable transaction. A
condition to consummation of the Merger is the receipt by Crestar and
Independent of an opinion from Hunton & Williams, counsel to Crestar, as to the
qualification of the Merger as a tax-free reorganization and certain other
federal income tax consequences of the Merger. See "The Merger -- Certain
Federal Income Tax Consequences."
MARKET PRICES PRIOR TO ANNOUNCEMENT OF THE MERGER
The following is information regarding the last reported sale price per
share of Crestar Common Stock and Independent Common Stock prior to the public
announcement of the proposed Merger on August 29, 1994. The historical price of
Crestar Common Stock is based on the reported last sale price on August 26,
1994, the last trading day preceding the announcement of the proposed Merger, as
reported on the NYSE. The historical price for Independent Common Stock, which
is not widely or actively traded, is based on sale prices known to Independent's
management over the last several years. The most recent sales known to
Independent's management prior to August 29, 1994 occurred on March 7, 1994 at
$12.00 per share for 1,142 shares, which management believes may not be
representative of prices that can be obtained for Independent Stock, and on
March 17, 1994 at $10.50 per share for 15 shares.
<TABLE>
<CAPTION>
EQUIVALENT
HISTORICAL PRO FORMA
CRESTAR INDEPENDENT(A) INDEPENDENT(B)
<S> <C> <C> <C>
Common Stock................................................ $ 48.25 $10.50 $12.25
</TABLE>

(a) There is no established public market for Independent Common Stock.
(b) The amount of the equivalent price for Independent Common Stock is the
product of multiplying an assumed Exchange Ratio of .2539 shares of Crestar
Common Stock (the result of dividing $12.25 by the last sale price of
Crestar Common Stock on August 26, 1994 of $48.25) by $48.25 per share.
Based on the reported last sale price of Crestar Common Stock on October 31,
1994, the Exchange Rate would be .2970 and the equivalent price for
Independent Common Stock would be $12.25.
COMPARATIVE PER SHARE DATA
The following table presents historical and pro forma per share data for
Crestar, and historical and equivalent pro forma per share data for Independent.
The pro forma combined amounts give effect to an assumed Exchange Ratio of .2970
shares of Crestar Common Stock for each share of Independent Common Stock (based
on the last sale price of Crestar Common Stock reported by the NYSE on October
31, 1994 of $41.25). The equivalent pro forma Independent share amounts allow
comparison of historical information about one share of Independent Common Stock
to the corresponding data about what
5

<PAGE>
one share of Independent Common Stock will equate to in the combined corporation
and are computed by multiplying the pro forma combined amounts by an assumed
Exchange Ratio of .2970. As discussed in "The Merger -- Determination of
Exchange Ratio and Exchange for Crestar Common Stock," the final Exchange Ratio
will be determined based on the Average Closing Price for Crestar Common Stock
during a 10-day period prior to the Effective Time of the Merger, subject to
adjustment as set forth in the Agreement.
The per share data included in the following table should be read in
conjunction with the consolidated financial statements of Crestar incorporated
by reference herein and the financial statements of Independent included herein
and the notes accompanying all such financial statements. The data presented
below are not necessarily indicative of the results of operations which would
have been obtained if the Merger had been consummated in the past or which may
be obtainable in the future.
6

<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1994 1993
<S> <C> <C>
Book Value Per Share at Period End:
Crestar historical........................................................................ $29.29 $28.32
Independent historical.................................................................... 5.40 5.70
Pro forma combined per Crestar
common share(1)........................................................................ 29.20 28.25
Equivalent pro forma per Independent
common share........................................................................... 8.67 8.39
Cash Dividends Declared Per Share:
Crestar historical........................................................................ $ 0.73 $ 1.14
Independent historical.................................................................... 0.05 --
Pro forma combined per Crestar
common share(2)........................................................................ 0.72 1.12
Equivalent pro forma per Independent
common share........................................................................... 0.21 0.33
Net Income Per Share:
Crestar historical........................................................................ $ 2.19 $ 3.68
Independent historical.................................................................... 0.25 0.39
Pro forma combined per Crestar
common share(3)........................................................................ 2.18 3.66
Equivalent pro forma per Independent
common share........................................................................... 0.65 1.09
</TABLE>

(1) Pro forma combined book value per Crestar common share represents combined
common shareholders' equity amounts divided by pro forma combined period-end
common shares outstanding.
(2) Pro forma combined dividends per Crestar common share represent combined
common dividends declared, divided by pro forma combined average common
shares outstanding.
(3) Pro forma combined net income per Crestar common share represents combined
net income available to common shareholders, divided by pro forma combined
average common shares outstanding.
7

<PAGE>
SELECTED FINANCIAL DATA
CRESTAR FINANCIAL CORPORATION
The following Crestar consolidated financial data is qualified in its
entirety by the information included in the documents incorporated in this Proxy
Statement/Prospectus by reference. Interim financial results, in the opinion of
Crestar management, reflect all adjustments necessary for a fair presentation of
the 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. See
"Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1994 1993 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
EARNINGS: (1)
Net interest income.............................. $ 285.6 $ 253.4 $ 527.0 $ 482.1 $ 421.1 $ 414.2
Provision for loan losses........................ 18.9 21.5 48.8 99.2 209.5 131.1
Net interest income after provision for loan
losses......................................... 266.7 231.9 478.2 382.9 211.6 283.1
Noninterest income............................... 131.6 123.2 248.3 218.4 233.8 166.8
Noninterest expense.............................. 274.7 263.6 523.0 501.8 405.6 378.8
Income before income taxes....................... 123.6 91.5 203.5 99.5 39.8 71.1
Income tax expense............................... 40.5 26.9 63.0 19.7 6.1 9.9
Net income....................................... $ 83.1 $ 64.6 $ 140.5 $ 79.8 $ 33.8 $ 61.1
Net income applicable
to common shares............................... $ 83.1 $ 63.4 $ 138.3 $ 77.3 $ 31.2 $ 58.5
PER COMMON SHARE DATA:
Net income (primary)............................. $ 2.19 $ 1.71 $ 3.68 $ 2.32 $ 0.98 $ 1.87
Dividends declared (2)........................... 0.73 0.53 1.14 0.80 0.86 1.32
Book value....................................... 29.29 27.04 28.32 25.24 23.23 23.15
Average primary shares (thousands)............... 37,901 37,061 37,587 33,286 31,921 31,218
SELECTED PERIOD-END BALANCES:
Total assets..................................... $14,325.2 $13,242.2 $13,286.9 $12,674.7 $11,828.3 $11,881.2
Loans (net of unearned income)................... 8,588.8 7,222.8 7,287.1 6,581.7 7,065.8 7,680.2
Allowance for loan losses........................ 226.7 213.0 211.0 205.0 210.0 149.4
Nonperforming assets (3)......................... 102.4 162.8 96.8 220.8 350.0 237.2
Total deposits................................... 11,396.5 10,049.5 10,165.8 9,581.5 8,889.6 8,506.1
Long-term debt................................... 222.4 260.8 191.2 210.4 161.9 168.4
Common shareholders' equity...................... 1,104.7 1,021.2 1,062.5 913.9 749.9 726.3
Total shareholders' equity....................... 1,104.7 1,066.2 1,062.5 958.9 794.9 771.3
AVERAGE BALANCES:
Total assets..................................... $13,487.9 $12,265.4 $12,585.4 $11,920.4 $11,440.7 $11,673.7
Loans (net of unearned income)................... 7,908.7 6,599.6 6,836.5 6,725.3 7,275.3 7,767.2
Total deposits................................... 10,765.2 9,404.6 9,682.8 9,540.6 8,596.9 8,296.8
Long-term debt................................... 211.8 223.7 215.4 185.9 162.8 170.1
Common shareholders' equity...................... 1,085.4 948.8 994.8 794.6 744.1 731.7
Total shareholders' equity....................... 1,085.4 993.8 1,038.7 839.6 789.1 776.7
RATIOS:
Return on average assets......................... 1.23% 1.05% 1.12% 0.67% 0.30% 0.52%
Return on average shareholders' equity........... 15.31 13.00 13.53 9.50 4.28 7.87
Return on average common shareholders' equity.... 15.31 13.36 13.90 9.73 4.19 7.99
Net interest margin (4).......................... 4.77 4.71 4.78 4.67 4.29 4.22
Nonperforming assets to loans and foreclosed
properties at period end....................... 1.19 2.24 1.32 3.32 4.90 3.08
Net charge-offs to average loans................. 0.48 1.08 0.95 1.69 2.07 0.99
Allowance for loan losses to:
Loans at period end............................ 2.64 2.95 2.89 3.11 2.97 1.94
Nonperforming loans at period end.............. 293 181 264 144 78 68
Nonperforming assets at period end............. 221 131 218 93 60 63
Total shareholders' equity to total assets at
period end..................................... 7.71 8.05 8.00 7.57 6.72 6.49
CAPITAL RATIOS AT PERIOD END:
Tier 1 risk-adjusted capital................... 9.3 10.5 10.5 10.4 7.9 7.5
Total risk-adjusted capital.................... 12.0 13.6 13.5 13.7 10.6 10.1
Tier 1 leverage................................ 7.5 8.3 7.9 7.7 6.7 6.2
<CAPTION>

1989
<S> <C>

EARNINGS: (1)
Net interest income.............................. $ 380.2
Provision for loan losses........................ 44.8
Net interest income after provision for loan
losses......................................... 335.3
Noninterest income............................... 148.4
Noninterest expense.............................. 362.8
Income before income taxes....................... 120.9
Income tax expense............................... 17.1
Net income....................................... $ 103.8
Net income applicable
to common shares............................... $ 101.0
PER COMMON SHARE DATA:
Net income (primary)............................. $ 3.28
Dividends declared (2)........................... 1.20
Book value....................................... 22.73
Average primary shares (thousands)............... 30,739
SELECTED PERIOD-END BALANCES:
Total assets..................................... $11,360.8
Loans (net of unearned income)................... 7,769.3
Allowance for loan losses........................ 93.2
Nonperforming assets (3)......................... 75.1
Total deposits................................... 8,467.3
Long-term debt................................... 170.1
Common shareholders' equity...................... 705.3
Total shareholders' equity....................... 750.3
AVERAGE BALANCES:
Total assets..................................... $10,659.4
Loans (net of unearned income)................... 7,682.1
Total deposits................................... 8,143.6
Long-term debt................................... 175.1
Common shareholders' equity...................... 670.5
Total shareholders' equity....................... 719.7
RATIOS:
Return on average assets......................... 0.97%
Return on average shareholders' equity........... 14.43
Return on average common shareholders' equity.... 15.06
Net interest margin (4).......................... 4.36
Nonperforming assets to loans and foreclosed
properties at period end....................... 0.97
Net charge-offs to average loans................. 0.55
Allowance for loan losses to:
Loans at period end............................ 1.20
Nonperforming loans at period end.............. 137
Nonperforming assets at period end............. 124
Total shareholders' equity to total assets at
period end..................................... 6.60
CAPITAL RATIOS AT PERIOD END:
Tier 1 risk-adjusted capital................... 7.3
Total risk-adjusted capital.................... 9.6
Tier 1 leverage................................ 6.8
</TABLE>

(1) Amounts may not add due to rounding.
(2) In April 1991, Crestar 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) Nonperforming assets include nonaccrual loans, restructured loans and
foreclosed properties.
(4) Net interest margin is calculated on a taxable equivalent basis, using a tax
rate of 35% for 1994 and 1993 and 34% for 1992, 1991, 1990, and 1989.
8

<PAGE>
INDEPENDENT BANK
The following Independent financial data is qualified in its entirety by
the information included in this Proxy Statement/Prospectus. Interim financial
results, in the opinion of Independent management, reflect all adjustments
necessary for a fair presentation of the results of operations. 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>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1994 1993 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Net interest income................ $ 2,129,005 $ 2,209,668 $ 4,473,502 $ 4,329,858 $ 3,784,755 $ 4,089,062
Provision for loan losses.......... 155,000 540,000 740,000 930,000 1,100,000 199,000
Net interest income after provision
for loan losses.................. 1,974,005 1,669,668 3,733,502 3,399,858 2,684,755 3,890,062
Other income....................... 622,896 774,509 1,408,173 1,501,300 989,667 670,472
Other expenses..................... 2,201,691 2,045,788 4,527,937 4,151,625 4,196,493 3,779,321
Income (loss) before income
taxes............................ 395,210 398,389 613,738 749,533 (533,071) 781,213
Income tax expense (benefit)....... 140,900 145,029 213,473 252,993 (199,221) 263,101
Net income (loss).................. $ 254,310 $ 253,360 $ 400,265 $ 496,540 $ (322,850) $ 518,112
PER COMMON SHARE DATA (1):
Net income (loss).................. $ 0.25 $ 0.25 $ 0.39 $ 0.49 $ (0.32) $ 0.51
Dividends declared................. 0.05 -- -- -- -- 0.23
Book value......................... 5.40 5.56 5.70 5.31 4.82 5.14
Average shares outstanding......... 1,020,000 1,020,000 1,020,000 1,020,000 1,020,000 1,020,000
SELECTED PERIOD-END BALANCES:
Total assets....................... $92,610,617 $90,904,059 $90,952,986 $84,391,326 $91,417,985 $80,785,149
Loans (net of unearned income)..... 52,919,639 56,477,816 53,412,596 58,526,640 64,073,909 63,215,729
Allowance for loan losses.......... 915,354 950,669 917,815 903,577 966,607 512,514
Nonperforming assets (2)........... 5,230,000 6,670,000 5,596,000 6,962,000 5,329,000 2,554,000
Total deposits..................... 85,423,439 85,147,576 85,029,323 78,899,476 86,295,615 74,962,025
Total borrowings................... 1,491,593 -- -- -- -- --
Total shareholders' equity......... 5,507,536 5,669,880 5,816,785 5,416,520 4,919,980 5,242,830
AVERAGE BALANCES:
Total assets....................... $88,400,753 $83,363,590 $85,829,168 $89,387,000 $82,772,000 $75,165,000
Loans (net of unearned income)..... 53,143,174 58,118,423 56,951,547 62,840,000 64,367,000 60,924,000
Total deposits..................... 80,837,897 77,441,867 79,914,268 84,161,000 77,031,000 69,491,000
Total shareholders' equity......... 5,671,798 5,618,595 5,712,392 5,157,000 5,451,000 5,268,000
RATIOS:
Return on average assets........... 0.58% 0.61% 0.47% 0.56% n/m 0.69%
Return on average shareholders'
equity........................... 8.97 9.02 7.01 9.63 n/m 10.02
Net interest margin (3)............ 5.42 6.09 5.91 5.44 5.25 5.45
Nonperforming assets to loans and
foreclosed properties at period
end.............................. 9.50 11.04 9.95 11.22 7.96 6.21
Net (recoveries) charge-offs to
average loans.................... 0.59 1.70 1.27 1.58 1.01 0.32
Allowance for loan losses to:
Loans at period end.............. 1.73 1.68 1.72 1.54 1.51 0.81
Nonperforming loans at period
end.............................. 30 35 34 26 39 35
Nonperforming assets at period
end.............................. 17 14 16 13 18 12
Total shareholders' equity to total
assets at period end............. 5.95 6.24 6.40 6.42 5.38 6.50
CAPITAL RATIOS AT PERIOD END:
Tier 1 Risk-Adjusted Capital..... 7.6 8.8 7.4 8.6 7.1 6.8
Total Risk-Adjusted Capital...... 8.7 10.0 8.6 9.9 8.4 8.7
Tier 1 Leverage.................... 6.7 6.6 6.5 6.2 5.7 6.8
<CAPTION>

1989
<S> <C>
EARNINGS:
Net interest income................ $ 3,796,452
Provision for loan losses.......... 120,000
Net interest income after provision
for loan losses.................. 3,676,452
Other income....................... 554,504
Other expenses..................... 3,473,081
Income (loss) before income
taxes............................ 757,875
Income tax expense (benefit)....... 244,898
Net income (loss).................. $ 512,977
PER COMMON SHARE DATA (1):
Net income (loss).................. $ 0.50
Dividends declared................. 0.22
Book value......................... 4.86
Average shares outstanding......... 1,020,000
SELECTED PERIOD-END BALANCES:
Total assets....................... $72,260,379
Loans (net of unearned income)..... 55,605,545
Allowance for loan losses.......... 509,126
Nonperforming assets (2)........... 2,424,000
Total deposits..................... 66,716,391
Total borrowings................... --
Total shareholders' equity......... 4,954,718
AVERAGE BALANCES:
Total assets....................... $68,149,000
Loans (net of unearned income)..... 53,253,000
Total deposits..................... 62,578,000
Total shareholders' equity......... 4,930,000
RATIOS:
Return on average assets........... 0.75%
Return on average shareholders'
equity........................... 10.52
Net interest margin (3)............ 5.62
Nonperforming assets to loans and
foreclosed properties at period
end.............................. 6.16
Net (recoveries) charge-offs to
average loans.................... 0.14
Allowance for loan losses to:
Loans at period end.............. 0.92
Nonperforming loans at period
end.............................. 41
Nonperforming assets at period
end.............................. 14
Total shareholders' equity to total
assets at period end............. 6.86
CAPITAL RATIOS AT PERIOD END:
Tier 1 Risk-Adjusted Capital..... N/A
Total Risk-Adjusted Capital...... N/A
Tier 1 Leverage.................... N/A
</TABLE>

(1) Average shares outstanding and per common share data have been retroactively
adjusted to reflect a two percent stock dividend which was effective
February 21, 1992.
(2) Nonperforming assets include nonaccrual loans, restructured loans and
foreclosed properties.
(3) Net interest margin is calculated on a taxable equivalent basis, using a tax
rate of 35% for 1994 and 1993 and 34% for 1992, 1991, 1990, and 1989.
N/M -- Not meaningful.
9

<PAGE>
GENERAL INFORMATION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Independent Board of Directors, to be voted at
the Independent Shareholder Meeting to be held at the Holiday Inn, 10800 Vandor
Lane, Manassas, Virginia, on December 14, 1994, at 10:00 a.m. and at any
adjournment thereof. At the Independent Shareholder Meeting, shareholders will
consider and vote upon the Agreement and the related Plan of Merger. Pursuant to
the Agreement, Independent will merge with and into Crestar Bank, and Crestar
Bank will succeed to the business of Independent. Only shareholders of record of
Independent at the close of business on November 7, 1994 are entitled to notice
of and to vote at the Independent Shareholder Meeting. This Proxy
Statement/Prospectus is being mailed to all such holders of record of
Independent Common Stock on or about November 10, 1994.
The affirmative vote of the holders of more than two-thirds of the
outstanding shares of Independent Common Stock entitled to vote is required for
approval of the Merger.
The proxies solicited hereby, if properly signed and returned and not
revoked prior to their use, will be voted in accordance with the instructions
given thereon by the shareholders. If no instructions are so specified, the
proxies will be voted for the proposed Merger. Any shareholder giving a proxy
has the power to revoke it at any time before it is exercised by (i) filing
written notice of revocation with the Secretary of Independent (Stanley M. Keys,
Independent Bank, 8751 Sudley Road, Manassas, Virginia 22110); (ii) submitting a
duly executed proxy bearing a later date; or (iii) appearing at the Independent
Shareholder Meeting and notifying the Secretary of his or her intention to vote
in person. Proxies solicited by this Proxy Statement/Prospectus may be exercised
only at the Independent Shareholder Meeting and any adjournment of the
Independent Shareholder Meeting and will not be used for any other meeting.
The accompanying proxy is being solicited by the Independent Board of
Directors. The cost of such solicitation will be borne by Independent. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone or telegram by directors, officers and employees of
Independent without additional compensation.
The Independent Board of Directors has no information that other matters
will be brought before the meeting. If, however, other matters properly are
presented and legally can be considered, the accompanying proxy will be voted in
accordance with the recommendations of the Independent Board of Directors with
respect to such matters.
As of November 7, 1994, the directors and executive officers of
Independent, as a group, beneficially owned a total of 356,124 shares
(representing 34.9% of the outstanding shares of Independent Common Stock), and
the directors of Crestar owned no Independent Common Stock. Certain directors of
Independent who beneficially own, as a group, 352,044 shares (representing
approximately 34.5% of the outstanding shares of Independent Common Stock), have
agreed to vote in favor of the Merger. See "Security Ownership of Certain
Beneficial Owners and Management of Independent Bank."
For the reasons described below, the Independent Board has adopted the
Agreement, believes the Merger is in the best interest of Independent and its
shareholders and recommends that shareholders of Independent vote FOR approval
of the Agreement. In making its recommendation, the Independent Board
considered, among other things, the opinion of Baxter Fentriss that the terms of
the Merger are fair to Independent shareholders from a financial point of view.
See "The Merger -- Background of the Merger," " -- Reasons and Basis for the
Merger," and " -- Opinion of Financial Advisor."
The address of Crestar is 919 East Main Street, Richmond, Virginia 23219
and its telephone number is (804) 782-5000. The address of Independent is 8751
Sudley Road, Manassas, Virginia 22110 and its telephone number is (703)
369-2400.
THE MERGER
The detailed terms of the Merger are contained in the Agreement and Plan of
Reorganization, attached as Annex I to this Proxy Statement/Prospectus. The
following discussion describes the more important aspects of the Merger and the
terms of the Agreement. This description is not complete and is qualified by
reference to the Agreement which is incorporated by reference herein.
BACKGROUND OF THE MERGER
In August 1992, as previously reported to its shareholders, Independent,
without admitting or denying any of the allegations, consented to the issuance
by the Federal Deposit Insurance Corporation and the Virginia Commissioner of
Financial Institutions of a cease and desist order with respect to, among other
things, the adequacy of the supervision and operation of the Bank, certain of
its loan practices, its allowance for loan losses, and its capital. Based on the
improved performance of the Bank, the effectiveness of the order expired in
December 1993. During 1992 and 1993, Independent modified its operations and
practices with the objective, among others, to assure that its capital continued
to satisfy bank regulatory requirements. Independent also considered several
alternatives to raise additional capital.
10

<PAGE>
In 1994, Independent engaged Baxter Fentriss and Company to assist it in
evaluating available alternatives for obtaining additional capital to support
growth of the Bank and to continue to satisfy bank regulatory requirements as to
capital adequacy associated with such growth. Baxter Fentriss was directed to
perform a valuation of Independent, as well as to solicit possible merger or
other business combination transactions. In connection with this process,
Independent received conditional bids and letters of intent from approximately
five financial institutions (including one from Crestar) with regard to
potential business combinations. With the concurrence of Baxter Fentriss,
Independent selected Crestar's bid as the most attractive based on the Price Per
Share offered and related terms. See "Opinion of Financial Advisor" below.
REASONS AND BASIS FOR THE MERGER
The Independent Board has concluded that the Merger is in the best
interests of Independent shareholders and has authorized consummation of the
Merger, subject to the approval of shareholders and certain other conditions set
forth in the Agreement.
If the Merger is consummated, Independent shareholders who exchange
Independent shares for Crestar shares will have an equity interest in a larger
and more diversified enterprise. Crestar has substantially more outstanding
shares held by more shareholders than does Independent, and there is an
established public trading market for Crestar Common Stock on the New York Stock
Exchange.
The Independent Board has received the opinion of Baxter Fentriss that the
terms of the Merger are fair to the shareholders of Independent from a financial
point of view.
In the opinion of the Boards of Directors of Crestar and Independent, the
Merger will permit greater flexibility in responding to the expanding financial
needs of Independent's customers and in meeting the increasing competition for
furnishing of financial services. As a part of Crestar, Independent customers
will be offered some services not presently offered by Independent.
The Merger also will augment Crestar's ability to meet the credit and other
financial needs of consumers and businesses in Manassas, Virginia and other
areas served by Independent. The Merger reflects Crestar's desire to continue
expanding within the markets it serves.
The Merger will make the considerable commercial lending resources and
expertise of Crestar directly available to commercial customers of Independent.
Crestar Bank's higher legal lending limit of approximately $155 million (as of
June 30, 1994) will be applicable to commercial customers of Independent.
Equipment financing and inventory and accounts receivable financing are examples
of specialized services that will be available. Other commercial services will
include lockbox, letters of credit, automated clearing houses, cash management
consultation, money market loans and electronic cash handling for small
businesses. Crestar's expertise in trust services, including personal trust,
investment advisory, corporate trust and employee benefits services, also will
be available to Independent's customers.
The services of Crestar Bank's subsidiaries, Crestar Mortgage Corporation
and Capitoline Investment Services Incorporated, one of Virginia's largest
investment advisory firms, and Crestar's subsidiaries, Crestar Securities
Corporation and Crestar Insurance Agency, Inc., also will be available to
Independent customers. The Merger will give Independent customers access to
Crestar's banking system with its 332 offices and 272 automated teller machines
(as of June 30, 1994).
OPINION OF FINANCIAL ADVISOR
Baxter Fentriss has acted as financial advisor to Independent Bank in
connection with the Merger. Baxter Fentriss previously assisted Independent in
identifying prospective acquirors. In addition Baxter Fentriss discussed with
the management of Independent and Crestar their respective businesses and
outlook. Baxter Fentriss was involved in the negotiations with Crestar and
initiated merger discussions at the request of Independent. On August 26, 1994
Baxter Fentriss delivered to Independent its oral opinion that as of such date,
and on the basis of matters referred to herein, the Exchange Ratio is fair, from
a financial point of view, to the holders of Independent Common Stock. Baxter
Fentriss has issued a written opinion to that effect dated as the date of this
Proxy Statement/Prospectus. In rendering its opinion Baxter Fentriss consulted
with the management of Independent and Crestar; reviewed the Agreement and
certain publicly-available information on the parties; and reviewed certain
additional materials made available by the management of Crestar and
Independent. No limitations were imposed by Independent's Board of Directors on
Baxter Fentriss with respect to the investigation made or procedures followed by
it in rendering its opinion.
11

<PAGE>
The full text of Baxter Fentriss' opinion as of the date hereof, which sets
forth the assumptions made, matters considered and limitations of the review
undertaken, is attached as Annex II to this Proxy Statement/Prospectus and is
incorporated herein by reference, and should be read in its entirety in
connection with this Proxy Statement/Prospectus. The summary of the opinion of
Baxter Fentriss set forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion.
Baxter Fentriss' opinion is directed to Independent's Board of Directors
only, and is directed only to the fairness, from a financial point of view, of
the terms of the Merger. It does not address Independent's underlying business
decision to effect the proposed Merger, nor does it constitute a recommendation
to any Independent shareholder as to how such shareholder should vote with
respect to the Merger at the Independent Shareholder Meeting or as to any other
matter.
Baxter Fentriss' opinion was one of many factors taken into consideration
by Independent's Board of Directors in making its determination to approve the
Agreement, and the receipt of Baxter Fentriss' written opinion is a condition
precedent to Independent's consummating the Merger. The opinion of Baxter
Fentriss does not address the relative merits of the Merger as compared to any
alternative business strategies that might exist for Independent or the effect
of any other business combination in which Independent might engage.
Baxter Fentriss, as part of its investment banking business, is continually
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. Baxter Fentriss is an advisor to firms in the financial
services industry on mergers and acquisitions. Independent selected Baxter
Fentriss as its financial advisor because Baxter Fentriss is an investment
banking firm focusing on transactions in the Southeast, and because of the
firm's extensive experience and expertise in transactions similar to the Merger.
Baxter Fentriss is not affiliated with Crestar or Independent.
In connection with rendering its opinion to Independent's Board of
Directors, Baxter Fentriss performed a variety of financial analyses. In
conducting its analyses and arriving at its opinion as expressed therein, Baxter
Fentriss considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial condition and results of operations of Crestar
and Independent including interest income, interest expense, interest
sensitivity, noninterest income, noninterest expense, earnings, book value,
returns on assets and equity, capitalization, the amount and type of
non-performing assets, the impact of holding certain non-earning real estate
assets, the reserve for loan losses and possible tax consequences resulting from
the transaction; (ii) the business prospects of Crestar and Independent; (iii)
the economies of Crestar's and Independent's respective market areas; (iv) the
historical and current market for Crestar Common Stock and for the equity
securities of certain other banking companies that it believed to be comparable
to Crestar; and (v) the nature and terms of certain other merger transactions
that it believed to be relevant. Baxter Fentriss also considered its assessment
of general economic, market, financial and regulatory conditions and trends, as
well as its knowledge of the financial institutions industry, its experience in
connection with similar transactions, its knowledge of securities valuation
generally, and its knowledge of merger transactions in Virginia and throughout
the Southeastern United States.
In connection with rendering its opinion, Baxter Fentriss reviewed: (i) the
Agreement; (ii) drafts of this Proxy Statement/Prospectus; (iii) the Annual
Reports to shareholders, including the audited financial statements of
Independent and Crestar, and the Annual Report of Crestar, for the year ended
December 31, 1993; (iv) pro forma combined unaudited condensed balance sheets as
of June 30, 1994, and pro forma combined statements of income for the year ended
December 31, 1993; and (v) certain additional financial and operating
information with respect to the business, operations and prospects of Crestar
and Independent as it deemed appropriate. Baxter Fentriss also (a) held
discussions with members of the senior management of Crestar and Independent
regarding the historical and current business operation, financial condition and
future prospects of their respective companies; (b) reviewed the historical
market prices and trading activity for the common stock of Crestar and compared
them with those of certain publicly traded companies that it deemed to be
relevant; (c) compared the results of operations of Crestar and Independent with
those of certain banking companies that it deemed to be relevant; (d) analyzed
the pro forma financial impact of the Merger on Crestar; (e) analyzed the pro
forma financial impact of the Merger on Independent; and (f) conducted such
other studies, analyses, inquiries and examinations as Baxter Fentriss deemed
appropriate.
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The following is a summary of selected analyses performed by Baxter
Fentriss in connection with its opinion.
1. STOCK PRICE HISTORY. Baxter Fentriss studied the history of the trading
prices and volume for Independent Common Stock and compared that to publicly
traded banks in Virginia and to the price offered by Crestar.
2. COMPARATIVE ANALYSIS. Baxter Fentriss compared the "earnings multiple",
"price to book value multiple", and "price to assets multiple" implicit in the
Price Per Share after considering Independent's non-performing assets and other
variables with other merger transactions in Virginia of which Baxter Fentriss
was aware and which it considered comparable. The comparative multiples included
both bank and thrift sales during the last three years. To Baxter Fentriss'
knowledge, the proposed price to be paid by Crestar to Independent's
shareholders represented a price significantly above the average multiples paid
in such transactions over that period and one of the higher prices paid for
banks and thrifts in Virginia during such time period.
3. FINANCIAL IMPLICATIONS TO INDEPENDENT SHAREHOLDERS. Baxter Fentriss
evaluated the earnings, book value, and dividends of Crestar Common Stock and
considered the pro forma premium of such earnings, book value, and dividends
over those of the Independent Common Stock and which would have been received by
the shareholders of Independent if they held Crestar shares. Based on this
analysis, Baxter Fentriss concluded the transaction should have a positive
long-term impact on the Independent shareholders who receive Crestar shares.
4. NET PRESENT VALUE ANALYSIS. Baxter Fentriss performed a discounted cash
flow analysis to determine hypothetical present values for a share of
Independent Common Stock as a five and 10 year investment. Under this analysis,
Baxter Fentriss considered various scenarios for the performance of
Independent's stock using (i) a range from 0% to 10% in the growth of
Independent's earnings and dividends and (ii) a range from six times to 12 times
earnings as the terminal value for Independent's stock. A range of discount
rates from 10% to 15% were applied to these alternative growth and terminal
value scenarios. These ranges of discount rates, growth alternatives, and
terminal values were chosen based upon what Baxter Fentriss, in its judgment,
considered to be appropriate taking into account, among other things,
Independent's past and current performance, the general level of inflation,
rates of return for fixed income and equity securities in the marketplace
generally and for companies with similar risk profiles. In all of the scenarios
considered, the present value of a share of Independent Common Stock was
calculated at less than the $12.25 value of the Crestar offer. Thus, Baxter
Fentriss' discounted cash flow analysis indicated that Independent shareholders
would be in a better financial position by receiving the Crestar Common Stock
offered in the Merger transaction rather than continuing to hold Independent
Common Stock.
Using publicly available information on Crestar and applying the capital
guidelines of banking regulators, Baxter Fentriss' analysis indicated that the
Merger would not seriously dilute the capital and earnings capacity of Crestar
and would, therefore, likely not be opposed by the banking regulatory agencies
from a capital perspective. Furthermore, Baxter Fentriss considered the likely
market overlap and the Federal Reserve guidelines with regard to market
concentration and did not believe there to be an issue with regard to possible
antitrust concerns.
Baxter Fentriss has relied, without any independent verification, upon the
accuracy and completeness of all financial and other information reviewed.
Baxter Fentriss has assumed that all estimates, including those as to possible
economies of scale, were reasonably prepared by management, and reflect their
best current judgments. Baxter Fentriss did not make an independent appraisal of
the assets or liabilities of either Independent or Crestar, and has not been
furnished such an appraisal.
Independent agreed to pay Baxter Fentriss an amount in cash not to exceed
$160,000 (equal to approximately 1.25% of the aggregate consideration to be
received by Independent shareholders in the Merger) plus reasonable
out-of-pocket expenses for its services. Approximately $80,000 of this amount
was due in connection with execution of the Agreement and has been paid. The
balance is due if and when the Merger is consummated. Independent has agreed to
indemnify Baxter Fentriss against certain liabilities, including certain
liabilities under federal securities laws.
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective at the time the Plan of Merger filed with
the SCC is made effective (the "Effective Time of the Merger"). The Effective
Time of the Merger is expected to occur in January 1995. Either Independent or
Crestar may terminate the Agreement if the Merger has not been consummated by
March 31, 1995.
Until the Effective Time of the Merger occurs, Independent shareholders
will retain their rights as shareholders to vote on matters submitted to them by
the Independent Board.
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DETERMINATION OF EXCHANGE RATIO AND EXCHANGE FOR CRESTAR COMMON STOCK
Crestar valued Independent Common Stock for purposes of the exchange at
$12.25 per share. The valuation of Independent Common Stock was based upon the
potential value of Independent Common Stock, the nature of Independent's banking
businesses, and Independent's deposit base, market share and market franchise in
and around the Prince William County, Virginia area. Each share of Independent
Common Stock (other than shares held of record by Crestar and shares to be
exchanged for cash) shall be converted into the number of shares of Crestar
Common Stock determined by dividing $12.25 (the "Price Per Share") by the
Average Closing Price (the result of the quotient determined by dividing the
Price Per Share by the Average Closing Price being called the Exchange Ratio),
subject to adjustment as provided in the Agreement, but in no event shall the
Exchange Ratio be less than .2269 shares or greater than .3063 shares of Crestar
Common Stock. The Exchange Ratio at the Effective Time of the Merger shall be
adjusted to reflect any consolidation, split-up, other subdivisions or
combinations of Crestar Common Stock, any dividend payable in Crestar Common
Stock, or any capital reorganization involving the reclassification of Crestar
Common Stock subsequent to the date of the Agreement. Based on the $41.25
closing price of Crestar Common Stock on the NYSE on October 31, 1994, the
Exchange Ratio would have been .2970 shares of Crestar Common Stock per share of
Independent Common Stock. Based on the 1,020,000 shares of Independent Common
Stock outstanding as of the Record Date, and assuming that no cash is to be paid
to Independent shareholders in connection with the Merger, such Exchange Ratio
would have resulted in the issuance of approximately 302,940 shares of Crestar
Common Stock. Such number of shares will vary to the extent that (i) shares of
Independent Common Stock are exchanged for cash and (ii) the components of the
Exchange Ratio calculation change prior to the Effective Time of the Merger.
Following the Effective Time of the Merger, former shareholders of
Independent will be mailed a Letter of Transmittal which will set forth the
procedures that should be followed for exchange of Independent Common Stock for
Crestar Common Stock.
Shareholders of Independent, upon surrender of their certificates for
cancellation, will be entitled to receive certificates representing the number
of whole shares of Crestar Common Stock for which such shares have been
submitted for exchange and cash in lieu of any fractional share interest on the
basis of the Exchange Ratio.
CASH ELECTION; ELECTION PROCEDURES
Holders of shares of Independent Common Stock will be given the option of
exchanging their shares for the Price Per Share in cash (subject to all
applicable withholding taxes), provided that the number of shares that may be
exchanged for cash shall not exceed 40% of the outstanding shares of Independent
Common Stock immediately prior to the Effective Time of the Merger. The cash
election must be made prior to or at the time of the voting at the Independent
Shareholder Meeting, and, once such vote has been taken, cash elections shall be
irrevocable. If the aggregate number of shares for which a cash election is made
exceeds 40% of the outstanding shares of Independent Common Stock, Crestar first
will pay cash for shares submitted for cash exchange by each holder of 100 or
fewer Independent shares (if such holder has submitted all his shares for cash
exchange) and then will pay cash for shares submitted for cash pro rata. Shares
not exchanged for cash after proration will be exchanged for Crestar Common
Stock at the Exchange Ratio.
An election to receive cash will be properly made only if Crestar Bank,
acting in the capacity of exchange agent, has received a properly completed cash
option election form in accordance with the procedures and within the time
period set forth in the cash option election form. An election form will be
considered to be completed properly only if accompanied by certificates
representing all shares of Independent Common Stock covered thereby.
IF AN INDEPENDENT SHAREHOLDER ELECTS TO SURRENDER SHARES FOR CASH, HE/SHE
MUST FILE THE CASH OPTION ELECTION FORM ACCOMPANYING THIS PROXY
STATEMENT/PROSPECTUS PRIOR TO OR AT THE INDEPENDENT SHAREHOLDER MEETING. ANY
INDEPENDENT SHAREHOLDER WHO DOES NOT COMPLETE AND RETURN A CASH OPTION ELECTION
FORM PRIOR TO OR AT THE INDEPENDENT SHAREHOLDER MEETING CAN ONLY RECEIVE CRESTAR
COMMON STOCK (AND CASH FOR FRACTIONAL SHARES) IN THE MERGER. ONCE THE VOTE ON
THE MERGER HAS BEEN TAKEN AT THE INDEPENDENT SHAREHOLDER MEETING, THE CASH
ELECTION IS IRREVOCABLE. At the direction of Independent and subject to an
escrow agreement, Crestar Bank will hold the certificates representing
Independent shares for which a cash election has been made in safekeeping
pending the Effective Time of the Merger, at which time they will be exchanged
for cash, or in the event of proration, cash and Crestar Common Stock. If the
Merger is not consummated, or if the Agreement is terminated, Crestar Bank
promptly will return the certificates.
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BUSINESS OF INDEPENDENT PENDING THE MERGER
Independent has agreed that until the Effective Time of the Merger it will
operate its business substantially as presently operated and only in the
ordinary course. In this connection, Independent has agreed that it will not,
without the prior written consent of Crestar, (i) make any change in the
salaries, bonuses or title of any officer; (ii) make any change in the title,
salaries or bonuses of any other employee, other than those permitted by current
employment policies in the ordinary course of business, any of which changes
shall be reported promptly to Crestar; (iii) enter into any bonus, incentive
compensation, deferred compensation, profit sharing, thrift, retirement,
pension, group insurance or other benefit plan or any employment or consulting
agreement or increase benefits under existing plans; (iv) create or otherwise
become liable with respect to any indebtedness for money borrowed or purchase
money indebtedness except in the ordinary course of business; (v) amend its
Articles of Incorporation or Bylaws; (vi) issue or contract to issue any shares
of Independent capital stock; (vii) purchase any shares of Independent capital
stock; (viii) enter into or assume any material contract or obligation, except
in the ordinary course of business; (ix) waive, release, compromise or assign
any right or claim of substantial value; (x) propose or take any other action
which would make any representation or warranty of Independent in the Agreement
untrue; (xi) introduce any new products or services or change the rate of
interest on any deposit instrument to above-market interest rates; (xii) make
any change in policies respecting extensions of credit or loan charge-offs;
(xiii) change reserve requirement policies; (xiv) change securities portfolio
policies; (xv) acquire a policy or enter into any new agreement, amendment or
endorsement or make any changes relating to insurance coverage, including
coverage for its directors and officers, which would result in an additional
payment obligation of $50,000 or more; (xvi) propose or take any action with
respect to the closing of any branches; or (xvii) make any change in any tax
election or accounting method or system or internal accounting controls, except
as may be appropriate to conform to any change in regulatory accounting
requirements or generally accepted accounting principles.
At the request of Crestar and upon receipt by Independent of written
confirmation from Crestar and Crestar Bank that (i) all regulatory approvals
have been obtained, (ii) they have no knowledge of any circumstances allowing
them to terminate the Agreement, and (iii) there are no conditions to the
obligations of Crestar and Crestar Bank under the Agreement which they believe
will not be fulfilled so as to permit them to consummate the Merger and the
other transactions contemplated by the Agreement, on the day prior to the
Effective Time of the Merger, Independent shall establish such additional
accruals, reserves and charge-offs, through appropriate entries in its
accounting books and records, as may be necessary to conform Independent's
accounting and credit loss reserve practices and methods to those of Crestar
Bank (as such practices and methods are to be applied from and after the
Effective Time of the Merger) and to Crestar Bank's plans with respect to the
conduct of the business of Independent following the Merger, as well as for the
anticipated recapture of the bad debt reserves established by Independent for
federal income tax purposes (and state income tax purposes, if applicable) prior
thereto and the costs and expenses relating to the consummation by Independent
of the Merger. Any such accruals, reserves and charge-offs shall not be deemed
to cause any representation and warranty of Independent in the Agreement to be
untrue and inaccurate as of the Effective Time of the Merger.
Under the Agreement, Independent is permitted to pay cash dividends not in
excess of $0.05 per share per quarter, provided that Independent's earnings, in
the reasonable judgment of Independent management after consultation with
Crestar, are sufficient to support any such dividend. If Independent's Board of
Directors declares a dividend, the record date for such dividend shall be the
same as the record date for the same quarter as the regular Crestar Common Stock
dividend for such quarter. As previously reported to shareholders, on October
19, 1994, Independent's Board declared a cash dividend of $0.10 per share,
payable on November 21, 1994 to Independent's shareholders of record as of
November 7, 1994.
In addition, unless and until the Agreement is terminated, Independent has
agreed not to solicit directly or indirectly any acquisition proposal from any
other person or entity. Independent has agreed not to negotiate with respect to
any such proposal, to provide information to any party making such a proposal or
to enter into any agreement with respect to any such proposal except in
compliance with its legal obligations or the fiduciary obligation of its Board
of Directors.
Crestar and Independent may waive any condition to their obligations to
consummate the Merger except requisite approvals of Crestar and Independent
shareholders and regulatory approval.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is conditioned upon the approval of the holders
of more than two-thirds of the outstanding Independent Common Stock entitled to
vote at the Independent Shareholder Meeting. The Merger must be approved by the
Federal Reserve Board and the SCC, which approvals are expected to be received.
The obligations of Independent, Crestar
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Bank and Crestar to consummate the Merger are further conditioned upon (i) the
accuracy of the representations and warranties of the parties contained in the
Agreement, including without limitation the representation and warranty of
Independent that there has been no material adverse change in the condition
(financial or otherwise) of Independent from May 31, 1994 with respect to
Independent's investment securities portfolio, or from December 31, 1993 with
respect to Independent's other assets (exclusive of actions taken by Independent
at Crestar's request); (ii) the performance of all covenants and agreements
contained in the Agreement, including without limitation the establishment of
the accruals, reserves and charge-offs referred to under " -- Business of
Independent Pending the Merger" above; (iii) the receipt of an opinion of Hunton
& Williams, counsel to Crestar and Crestar Bank, with respect to certain of the
tax consequences of the Merger described herein under " -- Certain Federal
Income Tax Consequences;" (iv) the receipt of opinions of counsel with respect
to certain legal matters; (v) the shares of Crestar Common Stock to be issued in
the Merger shall have been duly registered under the 1933 Act and applicable
state securities laws, and such registration shall not be subject to a stop
order or any threatened stop order by the SEC or any applicable state securities
authority; (vi) in the case of Independent, the opinion of Baxter Fentriss with
respect to fairness to Independent shareholders from a financial point of view
shall not have been rescinded or modified in any way from the date it was issued
to the Effective Time of the Merger; and (vii) the shares of Crestar Common
Stock to be issued in the Merger shall have been approved for listing on the
NYSE.
Crestar, Crestar Bank and Independent each may waive any condition to its
obligations to consummate the Merger except requisite approvals of Independent
shareholders and regulatory authorities.
TERMINATION
The Agreement shall be terminated, and the Merger abandoned, if the
shareholders of Independent shall not have approved the Merger. Notwithstanding
such approval by such shareholders, the Agreement also may be terminated at any
time prior to the Effective Time of the Merger, by: (i) the mutual consent of
Crestar, Crestar Bank and Independent, as expressed by their respective Boards
of Directors; (ii) either Crestar or Crestar Bank on the one hand or Independent
on the other hand, as expressed by their respective Boards of Directors, after
March 31, 1995; (iii) by Crestar and Crestar Bank in writing authorized by its
respective Board of Directors if Independent has, or by Independent in writing
authorized by its Board of Directors if Crestar or Crestar Bank has, in any
material respect, breached (A) any covenant or agreement contained in the
Agreement, or (B) any representation or warranty contained in the Agreement, in
any case if such breach has not been cured by the earlier of 30 days after the
date on which written notice of such breach is given to the party committing
such breach or the Closing Date; (iv) either Crestar or Crestar Bank on the one
hand or Independent on the other hand, as expressed by their respective Boards
of Directors, in the event that any of the conditions precedent to the
obligations of such parties to consummate the Merger have not been satisfied or
fulfilled or waived by the party entitled to so waive on or before the Closing
Date (as defined in the Agreement), provided that no party shall be entitled to
terminate the Agreement if the condition precedent or conditions precedent which
provide the basis for termination can reasonably be and are satisfied within a
reasonable period of time, in which case, the Closing Date shall be
appropriately postponed but not beyond March 31, 1995; (v) (A) Crestar and
Crestar Bank, or by Independent, if the Boards of Directors of Crestar and
Crestar Bank, or the Board of Directors of Independent shall have determined in
their sole discretion, exercised in good faith, that the Merger has become
inadvisable or impracticable by reason of the threat or the institution of any
litigation, proceeding or investigation to restrain or prohibit the consummation
of the transactions contemplated by the Agreement or to obtain other relief in
connection with the Agreement or (B) Crestar and Crestar Bank, if the Boards of
Directors of Crestar and Crestar Bank shall have determined in their sole
discretion, exercised in good faith, that the Merger has been deemed inadvisable
or impractical by reason of commencement of a competing offer for Independent
Common Stock which is significantly better than Crestar's offer and which
Crestar certifies to Independent, in writing, it is unwilling to meet; (vi)
Crestar, Crestar Bank, or Independent, if the Federal Reserve Board or the SCC
deny approval of the Merger and the time period for all appeals or requests for
reconsideration has run; or (vii) Crestar, following Crestar's due diligence
audit of Independent, which audit shall be conducted reasonably, if such due
diligence audit reveals that (i) Independent has unrecorded or unfunded
liabilities or employee benefit plans not previously disclosed, unrecognized
depreciation, material legal proceedings (pending or threatened) not previously
disclosed, material liability arising from non-compliance with existing law, or
that (ii) there are potential losses in the loan portfolio since December 31,
1993 and the securities portfolio since May 31, 1994 of Independent for which
additional reserves are required in accordance with generally accepted
accounting principles as consistently applied by Independent, with the aggregate
result of (i) and (ii) causing a reduction of Independent's shareholders' equity
in excess of $650,000 from that as reflected in the Independent Financial
Statements at December 31, 1993.
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ACCOUNTING TREATMENT
The Merger is to be accounted for as a purchase in accordance with
generally accepted accounting principles as outlined in Accounting Principles
Board Opinion No. 16.
OPERATIONS AFTER THE MERGER
After the consummation of the Merger, Crestar Bank will continue generally
to conduct the business presently conducted by Independent, with the additional
services discussed above.
Prior to the Effective Time of the Merger, members of Independent's senior
management group will be interviewed by Crestar with the goal of determining if
there are mutually beneficial employment opportunities available within Crestar.
Crestar Bank will undertake to continue employment of all Independent
branch personnel who meet Crestar's employment qualification requirements,
either at existing Independent offices or at Crestar or Crestar Bank offices.
Independent non-branch personnel not offered employment will be interviewed
prior to the Effective Time of the Merger for open positions within Crestar Bank
or an affiliate of Crestar. Except as provided in the Agreement, any employee
who is terminated or whose position is eliminated by Crestar within six months
after the Effective Time of the Merger, and not offered a comparable job with
Crestar or its affiliates will be paid severance pay equal to one week's base
pay for each year of service with Independent up to 20 years and two weeks of
base pay for each year of service with Independent over 20 years, but in no case
less than four weeks' base pay.
All persons who are employees of Independent immediately before the
Effective Time of the Merger and who are employed by Crestar Bank or another
Crestar subsidiary immediately following the Effective Time of the Merger
("Transferred Employees") will be covered by Crestar's employee benefit plans as
to which they are eligible based on their length of service, compensation, job
classification, and position, including, where applicable, the incentive
compensation plan. For additional information, see " -- Effect on Independent
Employee Benefits Plans" below.
INTEREST OF CERTAIN PERSONS IN THE MERGER
Certain members of Independent's management may be deemed to have interests
in the Merger in addition to their interests as shareholders of Independent
generally. In each case, the Board of Directors of Independent considered those
potential interests of which it was aware in approving the Agreement and the
transactions contemplated thereby.
After the Effective Time of the Merger, Crestar acknowledges its obligation
to provide and agrees to provide, indemnification to the directors, employees
and officers of Independent following the Effective Time of the Merger to the
same extent as if Independent were maintaining its separate existence after such
time. Such indemnification shall continue for a period of not less than five
years to the extent permitted under the VSCA and the Articles of Incorporation
and Bylaws of Crestar, provided that all rights to indemnification in respect of
any claim asserted or made within such period shall continue until the final
disposition of such claim. Crestar will provide officers and directors liability
insurance coverage to all Independent directors and officers, whether or not
they become part of the Crestar organization after the Effective Time of the
Merger to the same extent it is provided to Crestar's officers and directors,
provided that coverage will not extend to acts as to which notice has been given
prior to the Effective Time of the Merger.
Crestar has agreed to accept the terms of a proposed separation arrangement
that Gary English, President of Independent, had negotiated with Independent in
1983. The arrangement contemplates that in the event of the merger or sale of
Independent Mr. English either will (i) continue in his position or another
position if that be mutually agreeable between him and the Board of Directors of
the purchasing entity; or (ii) receive a separation payment equal to twice his
basic annual compensation immediately prior to the merger, which payment he may
elect to receive in no more than eight installments to extend over a period of
no more than 24 months. It is not known at this time whether Mr. English will
obtain a position with Crestar or receive the separation payment.
Prior to the Closing Date, Crestar has agreed that it will offer Paul M.
Harbolick, Jr., Independent's Chief Financial Officer either a one-year position
within the Crestar organization at his current annual salary or severance in the
amount equal to his current annual salary.
Certain directors of Independent are partners in Independent Associates,
("Associates"), a Virginia general partnership with nine partners. Associates
owns and leases to Independent a bank building and drive-through facility (the
"Property") located in Woodbridge, Virginia. The lease (the "Lease"), which
commenced in 1989, expires April 30, 2014. Under the Lease, Independent
currently pays monthly rent of $18,000 to Associates, subject to escalation
annually based upon changes in the Consumer Price Index (the "CPI") for
Washington, D.C. Independent has the option to purchase the Property at any time
during the remaining term at the fair market value at the time of purchase. Such
value is to be established by agreement of the parties or, alternatively,
through an appraisal procedure conducted by licensed, qualified appraisers
selected by the
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parties. In certain circumstances, the expenses of such appraisals are to be
shared equally by Independent and Associates, and in certain circumstances, each
party bears the expenses of the appraiser it selects. In August 1994, Crestar
Bank and Associates executed an Agreement to Amend Lease, which provides that
Crestar Bank would continue to lease the Property subject to the terms of a
Second Addendum to Lease (the "Second Addendum"). The effective date of the
Second Addendum would be the date of consummation of the Merger. The Second
Addendum would, among other things, shorten the lease term by five years, and
require that Crestar Bank pay rent at rates provided in the Lease for the first
five years following the effective date of the Second Addendum; thereafter the
rent would be established at the fair market value rental, subject to annual
escalation based upon changes in the CPI, as determined by Associates and
Crestar Bank. If Crestar Bank and Associates are unable to agree on the fair
market value rental, the rental would be determined by a procedure involving the
averaging of fair market rental value determinations obtained from qualified
real estate brokers appointed by the parties. Crestar Bank would not have any
right to purchase the Property, although Crestar Bank would have a first refusal
right to purchase the Property under certain circumstances. Messrs. Barnes,
English, Morgan, Peters, Scott, Shea, and Dr. Stephens and Ms. Matts are
partners in Associates, and each has a one-ninth interest therein.
Other than as set forth above, no director or executive officer of
Independent, Crestar or Crestar Bank has any direct or indirect material
interest in the Merger, except in the case of directors and executive officers
of Independent insofar as ownership of Independent Common Stock might be deemed
such an interest.
EFFECT ON INDEPENDENT EMPLOYEE BENEFITS PLANS
Immediately following the Merger, all participants who then have accounts
in the Independent Profit Sharing and Trust Plan (the "Profit Sharing Plan")
shall be fully vested in their account balances. Crestar, at its election, may
continue the Profit Sharing Plan for the benefit of Transferred Employees, may
merge the Profit Sharing Plan into the Crestar Employees Thrift and Profit
Sharing Plan (the "Crestar Thrift Plan") or the Crestar Merger Plan for
Transferred Employees, or may cease additional benefit accruals under and
contributions to the Profit Sharing Plan and continue to hold the assets of such
Plan until they are distributable in accordance with its terms. In the event of
a merger of the Profit Sharing Plan with the Crestar Thrift Plan or the Crestar
Merger Plan for Transferred Employees or a cessation of accruals and
contributions under the Profit Sharing Plan, the Crestar Thrift Plan or the
Crestar Merger Plan for Transferred Employees, as the case may be, will
recognize for purposes of eligibility to participate, early retirement, and
eligibility for vesting, all Transferred Employees' service with Independent,
subject to applicable break-in-service rules.
The Retirement Plan for Employees of Crestar Financial Corporation and
Affiliated Corporations will recognize for purposes of eligibility to
participate and vesting, but not for benefit accrual purposes all Transferred
Employees' service with Independent, subject to applicable break-in-service
rules.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Crestar and Independent have received an opinion of Hunton & Williams,
counsel to Crestar, to the effect that for federal income tax purposes, the
Merger will be a reorganization under Section 368(a) of the Code and,
consequently, (i) none of Crestar, Crestar Bank, or Independent will recognize
any taxable gain or loss upon consummation of the Merger (but income may be
recognized as a result of (a) the termination of the bad-debt reserve maintained
by Independent for federal income tax purposes and (b) other possible changes in
tax accounting methods), and (ii) the Merger will result in the tax consequences
summarized below for Independent shareholders who receive Crestar Common Stock
in exchange for Independent Common Stock pursuant to the Merger. Receipt of
substantially the same opinion of Hunton & Williams as of the Closing Date is a
condition to consummation of the Merger. The opinion of Hunton & Williams is
based on, and the opinion to be given as of the Closing Date will be based on,
certain customary assumptions and representations regarding, among other things,
the lack of previous dealings between Independent and Crestar, the existing and
future ownership of Independent stock and Crestar stock, and the future business
plans for Crestar.
As described below, the federal income tax consequences to an Independent
shareholder will depend on whether the shareholder exchanges shares of
Independent Common Stock for Crestar Common Stock, cash, or a combination of
Crestar Common Stock and cash and, if the shareholder exchanges any shares of
Independent Common Stock for cash, on whether certain related shareholders
receive Crestar Common Stock or cash. The following summary does not discuss all
potentially relevant federal income tax matters, consequences to any
shareholders subject to special tax treatment (for example, tax-exempt
organizations and foreign persons), or consequences to shareholders who acquired
their Independent Common Stock through the exercise of employee stock options or
otherwise as compensation.
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EXCHANGE OF INDEPENDENT COMMON STOCK FOR CRESTAR COMMON STOCK
An Independent shareholder who receives solely Crestar Common Stock in
exchange for all his shares of Independent Common Stock will not recognize any
gain or loss on the exchange. If a shareholder receives Crestar Common Stock and
cash in lieu of a fractional share of Crestar Common Stock, the shareholder will
recognize taxable gain or loss solely with respect to such fractional share as
if the fractional share had been received and then redeemed for the cash. A
shareholder who exchanges all his shares of Independent Common Stock for Crestar
Common Stock will have a tax basis in the shares of Crestar Common Stock
(including any fractional share interest) equal to his tax basis in the shares
of Independent Common Stock exchanged therefor. A shareholder's holding period
for shares of Crestar Common Stock (including any fractional share interest)
received in the Merger will include his holding period for the shares of
Independent Common Stock exchanged therefor if they are held as a capital asset
at the Effective Time of the Merger.
EXCHANGE OF INDEPENDENT COMMON STOCK FOR CASH AND CRESTAR COMMON STOCK
An Independent shareholder who receives cash for some shares of Independent
Common Stock and exchanges other shares of Independent Common Stock for shares
of Crestar Common Stock (including any fractional share interest) will recognize
any gain realized up to the amount of cash received (excluding cash paid in lieu
of a fractional share of Crestar Common Stock) but will not recognize any loss.
If the shareholder holds his Independent Common Stock as a capital asset at the
Effective Time of the Merger, the amount of gain recognized generally will be
treated as capital gain unless the receipt of cash is treated as having the
effect of a dividend. If the recognized gain is treated as a dividend, it will
be taxed as ordinary income.
A shareholder's receipt of cash will not be treated as a dividend if (after
taking into account the constructive ownership rules of Section 318 of the Code
summarized below) the requirements for a stock redemption to be treated as a
sale of stock under Section 302 of the Code are satisfied. Under a Supreme Court
decision (CLARK V. COMMISSIONER), to determine whether those requirements are
satisfied, a shareholder should be treated as receiving shares of Crestar Common
Stock in the Merger (instead of the cash actually received) and then receiving
cash from Crestar in a hypothetical redemption of those shares. That
hypothetical redemption will satisfy the requirements under Section 302 if it
(i) is "not essentially equivalent to a dividend" within the meaning of Section
302(b)(1) of the Code or (ii) has the effect of a "substantially
disproportionate" redemption of Crestar Common Stock within the meaning of
Section 302(b)(2) of the Code. Whether the hypothetical redemption of shares of
Crestar Common Stock will be essentially equivalent to a dividend depends on the
individual shareholder's circumstances; to avoid dividend treatment in any case,
the hypothetical redemption must result in a "meaningful reduction" in the
percentage of Crestar Common Stock actually and constructively owned by the
shareholder (including any Crestar Common Stock deemed received in the Merger).
The Internal Revenue Service has indicated in a published ruling that any
reduction in percentage ownership of a publicly-held corporation by a small
minority shareholder who exercises no control over corporate affairs constitutes
a meaningful reduction. The hypothetical redemption of shares of Crestar Common
Stock will be substantially disproportionate if the percentage of Crestar Common
Stock actually and constructively owned by the shareholder after that redemption
is less than 80% of the percentage of Crestar Common Stock actually and
constructively owned by the shareholder (including Crestar Common Stock deemed
received in the Merger) immediately before the hypothetical redemption.
A shareholder's tax basis in the shares of Crestar Common Stock (including
any fractional share interest) received will equal his tax basis in his shares
of Independent Common Stock exchanged therefor, reduced by the amount of cash
received (excluding cash paid in lieu of a fractional share of Crestar Common
Stock) and increased by the amount of gain recognized (including any gain
treated as a dividend). A shareholder's holding period for shares of Crestar
Common Stock (including any fractional share interest) received in the Merger
will include his holding period for the shares of Independent Common Stock
exchanged therefor if they are held as a capital asset at the Effective Time of
the Merger. If a shareholder receives cash in lieu of a fractional share of
Crestar Common Stock, the shareholder will recognize gain or loss as if the
fractional share had been received and then redeemed for the cash.
EXCHANGE OF INDEPENDENT COMMON STOCK FOR CASH
Any shareholder who exchanges all of his shares of Independent Common Stock
for cash should consult his tax advisor to determine whether the exchange is to
be taxed as a sale of stock or whether the cash received is to be taxed as a
dividend. In addition, any shareholder who makes an election to receive cash for
all his shares should be aware that he may, in fact, receive some Crestar Common
Stock under the proration provisions of the Agreement. Such a holder should
therefore be familiar with the rules, described above, that apply to a holder
who receives cash and some Crestar Common Stock.
The criteria for determining the tax treatment of exchanging all of a
shareholder's shares of Independent Common Stock for cash are not certain. The
Supreme Court's decision in the CLARK case suggests that an Independent
shareholder who
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receives solely cash for all his shares of Independent Common Stock should be
treated as receiving shares of Crestar Common Stock in the Merger, rather than
the cash actually received, and then receiving cash from Crestar in a
hypothetical redemption of those shares. The treatment of the cash received in
that hypothetical redemption then would depend first on whether the shareholder
is treated as owning any shares of Crestar Common Stock (taking into account the
constructive ownership rules of Section 318 of the Code). If a shareholder
receiving solely cash in the Merger does not actually or constructively own any
shares of Crestar Common Stock, the shareholder should recognize gain or loss
equal to the difference between the amount of cash received and his tax basis in
his shares of Independent Common Stock surrendered in the Merger. Such gain or
loss will be capital gain or loss if the shares of Independent Common Stock are
held as a capital asset at the Effective Time of the Merger. If the shareholder
actually or constructively owns shares of Crestar Common Stock, the cash
received in a hypothetical redemption should result in the recognition of gain
or loss as described above unless the redemption is treated as a dividend
distribution. The redemption should not be treated as a dividend distribution if
it meets the requirements to be (i) not essentially equivalent to a dividend
within the meaning of Section 302(b)(1) of the Code or (ii) a substantially
disproportionate redemption of Crestar Common Stock within the meaning of
Section 302(b)(2) of the Code. See the discussion above under "Exchange of
Independent Common Stock for Cash and Crestar Common Stock" for a summary of
those requirements.
Despite the CLARK decision, the Internal Revenue Service might assert that
the receipt of solely cash in the Merger is to be treated as a distribution in
redemption of the shareholder's Independent Common Stock before, and separate
from, the Merger. The Internal Revenue Service apparently has taken such a
position in private letter rulings, which are not legal precedent, issued after
the CLARK decision. Under that position, if an Independent shareholder receiving
solely cash does not constructively own (within the meaning of Section 318 of
the Code) shares of Independent Common Stock held by another shareholder who
exchanges such shares for Crestar Common Stock, the shareholder receiving solely
cash generally will recognize gain or loss equal to the difference between the
amount of cash received and his tax basis in his shares of Independent Common
Stock. Such gain or loss will be capital gain or loss if the shares of
Independent Common Stock are held as a capital asset at the Effective Time of
the Merger. If the Independent shareholder does constructively own shares of
Independent Common Stock exchanged for Crestar Common Stock, the cash received
in a hypothetical redemption of the Independent Common Stock generally will be
taxable as a dividend unless the redemption meets the requirements to be (i) not
essentially equivalent to a dividend within the meaning of Section 302(b)(1) of
the Code or (ii) a substantially disproportionate redemption of Independent
Common Stock within the meaning of Section 302(b)(2) of the Code. Those
requirements would be applied to the shareholder's actual and constructive
ownership of Independent Common Stock, in contrast to the approach discussed
above where they are applied to the shareholder's actual and constructive
ownership of Crestar Common Stock.
SECTION 318 OF THE CODE
Under Section 318(a) of the Code, a shareholder is treated as owning (i)
stock that the shareholder has an option or other right to acquire, (ii) stock
owned by the shareholder's spouse, children, grandchildren, and parents, and
(iii) stock owned by certain trusts of which the shareholder is a beneficiary,
any estate of which the shareholder is a beneficiary, any partnership or "S
corporation" in which the shareholder is a partner or shareholder, and any non-S
corporation of which the shareholder owns at least 50% in value of the stock. A
shareholder that is a partnership or S corporation, estate, trust, or non-S
corporation is treated as owning stock owned (as the case may be) by partners or
S corporation shareholders, by estate beneficiaries, by certain trust
beneficiaries, and by 50% shareholders of a non-S corporate shareholder. Stock
constructively owned by a person generally is treated as being owned by that
person for the purpose of attributing ownership to another person. In certain
cases, a shareholder who will actually own no Crestar Common Stock may be able
to avoid application of the family attribution rules of Section 318 of the Code
by filing a timely waiver agreement with the Internal Revenue Service pursuant
to Section 302(c)(2) of the Code and applicable regulations.
THE PRECEDING DISCUSSION SUMMARIZES FOR GENERAL INFORMATION THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO INDEPENDENT SHAREHOLDERS. THE
TAX CONSEQUENCES TO ANY PARTICULAR SHAREHOLDER MAY DEPEND ON THE SHAREHOLDER'S
CIRCUMSTANCES. INDEPENDENT SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH REGARD TO FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES.
NO DISSENTERS' RIGHTS OF APPRAISAL
Independent's shareholders are not entitled to dissenters' rights because
of Virginia Code Section 6.1-43, which denies dissenters' rights in the merger
of Virginia banks.
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BUSINESS OF CRESTAR
Crestar is the holding company for Crestar Bank, Crestar Bank N.A. of
Washington, D.C. and Crestar Bank MD of Maryland. At June 30, 1994, Crestar had
approximately $14.3 billion in total assets, $11.4 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 332 banking offices and 272
automated teller machines (as of June 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
offered by Capitoline Investment Services Incorporated, both of which are
subsidiaries of Crestar Bank. These various Crestar subsidiaries provide banking
and non-banking services throughout Virginia, Maryland and Washington, D.C., as
well as certain non-banking services to customers in other states.
The executive offices of Crestar 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.
RECENT DEVELOPMENTS
ACQUISITIONS COMPLETED 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. Upon
acquisition, the Woodbridge branch was closed and its deposits assumed by an
existing Crestar Bank branch in 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 made cash payments of approximately $3 million in the transaction.
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.
On March 18, 1994, Crestar acquired Providence Savings and Loan
Association, F.A. ("Providence") 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 in 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 $42 million in 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 in cash in the
transaction.
On January 11, 1994, Crestar Mortgage Corporation acquired the stock of
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's operations over the
next five years.
PENDING ACQUISITIONS. On September 20, 1994, Crestar entered into a letter
agreement with TideMark Bancorp Inc. ("TideMark") of Newport News, Virginia,
providing for the acquisition of TideMark and its subsidiary TideMark Bank,
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F.S.B. ("TideMark Bank") in which Tidemark shareholders will receive Crestar
Common Stock or cash. TideMark Bank has nine branches in Hampton Roads, with
approximately $230 million in deposits, and one branch in Kilmarnock, Virginia,
which TideMark has agreed to sell to the Bank of Lancaster. TideMark had
previously entered into an agreement to acquire eight branches, with
approximately $70 million in deposits, from Bay Savings, a division of FirstFed
Michigan Corp., which acquisition is expected to be completed by December 31,
1994. Crestar's acquisition of TideMark, which is expected to be completed
during the first quarter of 1995, will initially bring to Crestar approximately
$300 million in deposits. The acquisition of TideMark is subject to negotiation
of a definitive agreement and receipt of regulatory and shareholder approvals.
On September 1, 1994, Crestar and Crestar Bank entered into an agreement
and plan of reorganization with Jefferson Savings and Loan Association, F.A.
("Jefferson"), headquartered in Warrenton, Virginia, providing for the merger of
Jefferson into Crestar Bank in which Jefferson shareholders will receive Crestar
Common Stock or cash. At June 30, 1994, Jefferson had total consolidated assets
of $298 million and total deposits of $269 million. The acquisition of
Jefferson, which is subject to the receipt of regulatory and shareholder
approvals, 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 Proxy Statement/Prospectus, Crestar has
no present agreements or understandings to acquire or merge with any other
businesses other than as described in "Business of Crestar -- Recent
Developments."
BUSINESS OF INDEPENDENT
Independent Bank is headquartered in Manassas, Virginia. It was organized
in 1976 under the laws of Virginia and it began business in July 1978.
Independent offers general banking services. These services include
accepting demand, savings and time accounts; accepting certificates of deposit;
and granting and collecting installment loans, time and demand loans, consumer
loans, commercial loans, real estate loans and lines of credit. Independent
offers safe deposit boxes and drive-up teller facilities.
Independent is a state chartered bank with deposits insured by the FDIC. It
has four banking offices located in Prince William County, Virginia. As of
August 31, 1994, Independent had 57 full-time employees and 16 part-time
employees.
The banking business in the area served by Independent is highly
competitive with respect to both loans and deposits. Independent competes for
deposits principally with other commercial banks, savings and loan associations
and credit unions. In Prince William County, there are approximately 63
commercial banking offices, including seven Crestar Bank branches, offering
services ranging from deposits and real estate loans to full service banking. As
of June 30, 1993, Independent's share of total deposits in the Prince William
County, Virginia area was approximately 6.1%.
INDEPENDENT MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is intended to aid the reader in
understanding and evaluating the significant factors that influenced the
financial condition and results of operations of Independent for the periods
discussed below. This discussion and analysis should be read in conjunction with
Independent's financial statements, their related footnotes and the statistical
information included elsewhere in this Proxy Statement/Prospectus. Tables
referred to in this discussion follow immediately thereafter.
In 1992, Independent consented to the issuance by the FDIC and the Virginia
Commissioner of Financial Institutions of a cease and desist order relating to
certain aspects of the Bank's operations. See "Background of the Merger."
Thereafter, as part of its program to comply with the order and to maintain its
capital at a level deemed adequate for bank regulatory purposes, Independent
sought to alter the mix of its assets, to control its growth, to decrease the
size of its loan portfolio, and to reduce the level of problem and
non-performing loans. Certain effects of this program on the Bank's financial
condition and results of operations, including on its asset mix, deposit base,
earnings, including its provision and allowance for loan losses, and other
matters, are more fully discussed herein.
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COMPARISON OF FINANCIAL CONDITION AND OPERATING RESULTS FOR THE SIX MONTHS ENDED
JUNE 30, 1994 AND 1993
EARNINGS OVERVIEW
Independent had net income of $254,310 for the first six months of 1994
compared with $253,360 for the same period in 1993. Table 1 outlines the
earnings for each of the periods referenced. A shift in the earning asset mix
from loans to investment securities had a major effect on the decline in net
interest income. As the credit quality of the loan portfolio improved, the Bank
significantly decreased the provision for loan losses. The decreased expense was
offset by the securities gains taken in 1993 and not available in 1994 and the
higher operating costs in 1994.
Independent's return on average assets was .58% in 1994 compared with .61%
in 1993. The return on average equity was 8.97% in 1994 and 9.02% in 1993. The
earnings per share were the same in 1994 and 1993 at $.25.
NET INTEREST INCOME
Net interest income as of June 30, 1994 declined by $81,000 from the 1993
level of $2,200,000. The full impact of Independent's planned strategy to shift
the earnings asset mix from loans to investments was fully felt in 1994.
Independent's average loan to deposit ratio was 65.7% in 1994 and 75.0% in 1993.
The decrease in the amount of assets invested in loans was replaced with lower
yielding investment securities which had an adverse impact on interest income.
Independent's overall cost of funds increased by $18,000 in 1994. This
increase is attributed to the shift of a key deposit product from a noninterest
bearing to an interest bearing status in late 1993. Traditionally, the first
half of the year is Independent's weakest deposit generation time frame. In
1994, Independent's deposit growth was slower than usual. The slower deposit
growth coupled with investment portfolio activity required Independent to use
higher cost purchased funds to a greater extent in 1994.
The net interest margin, which is defined as net interest income divided by
earning assets, represents the Bank's net yield on its portfolio of earning
assets. The net interest margin was 5.42% in 1994 compared with 6.09% in 1993.
The decline in the margin is directly related to the shift in the earning asset
mix. The reduced income from loans was only partially offset by the increase in
interest income from investments. Independent's reliance on interest bearing
liabilities increased in 1994 as a key product changed to an interest bearing
status and core deposit growth was slow.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses as of June 30, 1994 was $915,354 or 1.73% of
loans net of the unearned discount. This compares with the June 30, 1993 level
of $950,669 or 1.68% of loans net of the unearned discount. The 1994 provision
for loan losses reflects management's ongoing review of the loan portfolio,
general economic conditions, and specific client composition within the loan
portfolio.
The net charge-offs were $158,000 in 1994 compared to $493,000 in 1993. The
significant improvement in net charge-offs reflect the improving credit quality
of Independent's loan portfolio. The net charge-offs declined from 1.70% of
average loans in 1993 to .59% of average loans in 1994. Table 5 reflects the
improved level of non-performing assets. The level of non-performing assets
declined to $5,200,000 or 22.4% below the 1993 level of $6,700,000. The coverage
of the non-performing assets by the allowance for loan losses increased to
17.50% from the 1993 level of 14.26%.
NONINTEREST INCOME
Independent's noninterest income declined from a 1993 level of $774,000 to
$623,000. A key aspect of the decline was the investment security activity. In
1993, several investment securities were sold as part of the portfolio
realignment program. Those sales yielded gains of $67,000. In 1994 Independent
sold several securities at loss of $20,000 or a net decrease of $87,000 from the
1993 level. Additionally, the fees on deposit accounts were down by $36,000 in
the first half of 1994. The decline is attributed to weaker core deposits in
1994 and fewer overdraft and return charges compared with 1993.
NONINTEREST EXPENSE
Salaries and benefits increased $52,000 or 5.3% over the 1993 level of
$985,000. The increase is related to filling several key positions in July 1993.
The full impact of these positions were felt in 1994. Additionally,
Independent's contribution to health insurance coverage costs for employees
increased in 1994.
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The occupancy expense increase reflects the annual increase in the rent for
the Woodbridge office. Partially offsetting this increase, the depreciation
expense for furniture, equipment and leasehold improvements was significantly
reduced in 1994. Many of those items were fully depreciated as of the beginning
of 1994.
The miscellaneous expenses increased by $148,000 in 1994. The increase is
directly related to a change in accounting procedures for certain expense items.
These items were accrued on a monthly basis in 1994, rather than recognized in a
single lump sum as was the case in 1993. Excluding the accruals the core
expenses are stable year to year.
INCOME TAXES
Independent recorded an income tax expense of $141,000 in 1994 compared to
$145,000 in 1993. The tax expense is approximately 36% of pretax income in both
periods.
FINANCIAL CONDITION
Total assets were $92,600,000 as of June 30, 1994 or $1,700,000 greater
than the 1993 level. The change in Independent's processing of Treasury, Tax and
Loan (TT&L) payments accounted for $1,300,000 of the increase. Independent now
uses the TT&L program as a source of funding. Additionally, Independent started
a program of offering repurchase agreements to customers in 1994. The customer
participation in the program amounted to $200,000 in 1994.
The composition of the balance sheet changed dramatically in 1994.
Independent's total security portfolio grew to $26,200,000 in 1994 or a 95.8%
increase over the 1993 level of $13,400,000. The loan portfolio declined to
$52,900,000 in 1994 from $56,500,000 in 1993. Independent's average loan to
deposit ratio decreased from 75.0% in 1993 to 65.7% in 1994.
Total deposits remained stable from year to year. Total deposits in 1994
were $85,400,000 compared with $85,100,000 in 1993.
CAPITAL RESOURCES AND ADEQUACY
Total stockholders' equity was $5,500,000 in 1994 as compared to $5,700,000
in 1993. The equity was significantly impacted by the implementation of SFAS 115
in January 1994. The new accounting standard required the bank to decrease the
equity by $513,000 as of June 30, 1994. This reflects the market value changes
in the available for sale portion of the investment securities portfolio.
The bank regulatory agencies do not take into account the effects of SFAS
115 in calculating the various capital ratios. Independent's Tier 1 leverage
ratio was 6.69% as of June 30, 1994 as compared to 6.64% in 1993.
LIQUIDITY AND INTEREST SENSITIVITY
Bank liquidity is the ability to meet potential cash requirements to
provide funds for customers' demands for loans and deposit withdrawals in a cost
effective manner. Independent meets the liquidity demands with a variety of
tools. Independent maintains cash reserves with the Federal Reserve Bank and
several correspondent banks. Additional sources of liquidity include the
investment portfolio, cash flows from loan and investment prepayments and
maturities, short term borrowings under existing credit facilities, marketing of
core deposit products and the discount window of the Federal Reserve Bank.
Independent's liquidity position is actively managed on a daily basis and
monitored by the Asset/Liability Management Committee ("ALCO") and reviewed
periodically with the Board of Directors. The overall objective of ALCO is to
prudently manage the risks of interest rates, liquidity, capital, market and
customer opportunities while maximizing net interest income.
An important element of both earnings performance and the maintenance of
sufficient liquidity management is the interest sensitivity gap (the "Gap"). The
Gap is the difference between interest sensitive assets and interest sensitive
liabilities in a specific time interval. The Gap can be managed by repricing
assets or liabilities, by selling loans or securities, by replacing an asset or
liability at maturity, or by adjusting the interest rate during the life of the
asset or liability.
Independent evaluates the interest sensitivity risk and then formulates
guidelines related to the risk. The ALCO actively monitors the Gap and develops
the appropriate strategy to minimize interest rate risk consistent with
liquidity and other objectives. The strategies vary based upon the economic
outlook, interest rate forecasts, the local and national economy and other
financial and business risk factors.
Table 11 reflects the Gap position of the Bank as of June 30, 1994.
Management believes the Gap position is appropriate under the circumstances.
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NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement Number 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115) in
1993. SFAS 115 requires organizations to account for, at fair value, marketable
equity securities and most marketable debt securities, except those which the
organization has intent and ability to hold to maturity. The effect of
unrealized gains and losses will be excluded from earnings and reported as a
separate component of stockholders' equity net of tax. Independent classified
approximately $20 million of the investment portfolio as "Available for Sale"
upon adoption of SFAS 115 on January 1, 1994.
Approximately $22,000,000 of the June 30, 1994 investment portfolio was
classified as "Available for Sale." The net effect of SFAS 115 was to decrease
stockholders' equity by $513,000 as of June 30, 1994.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements of Independent and related data presented herein
have been prepared in accordance with generally accepted accounting principles
which require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in the relative
purchasing power of money over time due to inflation.
Unlike most industrial companies, almost all of the assets and liabilities
of a financial institution are monetary in nature. As a result, interest rates
have a more significant impact on a financial institution's performance than
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or the same magnitude as the price of goods and services,
since such prices are affected by inflation. The discussion on liquidity and
interest sensitivity provide additional comments on Independent's approach to
managing risk.
COMPARISON OF FINANCIAL CONDITION AND OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 1993 AND 1992
EARNINGS OVERVIEW
Independent had net income of $400,265 in 1993, a 19.4% decline from its
1992 net income of $496,540. The decline reflects a shift in asset mix from
loans to lower yielding investments that occurred in 1993, lower investment
security gains and higher costs related to other real estate owned by
Independent. An improvement in the quality of Independent's loan portfolio
resulted in a smaller provision for loan losses in 1993. The effects of the
various noninterest expense control measures implemented by Independent in 1992
were felt in 1993. The reasons and effects of these actions are discussed in
more detail in the following analysis.
Independent achieved a return on average assets of .47% in 1993 compared
with .56% in 1992. The return on average equity was 7.01% in 1993 and 9.63% in
1992. Independent's earnings per share in 1993 were $.39 compared with $.49 in
1992.
NET INTEREST INCOME
The fundamental source of Independent's earnings, net interest income, is
defined as the difference between income on interest earning assets and the cost
of funds supporting those assets. The level of net interest income is
significantly affected by the shifting of the volume and mix of these assets and
liabilities as well as changes in the overall interest rate environment. Table
13 reflects the various components of net interest income.
Independent's net interest income for 1993 increased by $143,644 or 3.3%
over the 1992 level. In 1992, Independent sought to more carefully manage growth
in asset composition and size, which materially affected the size and
composition of its deposit base. Management worked with customers to shift
higher costing deposits to alternative products outside of Independent's deposit
base. Additionally, Independent aggressively lowered the rates paid on deposit
products as the overall interest rate environment changed. These changes had the
impact of lowering Independent's interest expense by $762,683 in 1993. In
concert with these changes, Independent maintained higher interest rates on loan
products, which had the effect of reducing the size of its loan portfolio.
Independent shifted the excess funds to the investment portfolio in an
aggressive fashion in 1993. The net effect of this shift in earning assets was
to decrease interest income at a slower pace than the decline in interest
expense.
The net interest margin, which is defined as net interest income divided by
earning assets, represents Independent's net yield on its portfolio of earning
assets. In 1993, the margin increased to 5.91%, an improvement over a net
interest margin of 5.44% in 1992. The improvement resulted primarily from the
shift from higher costing deposits as well as a reduced level of
25

<PAGE>
federal funds sold. Additionally, the 1992 net interest margin was adversely
impacted by several larger loans that entered a nonaccrual status in 1992, while
the nonaccrual loan balance decreased during 1993.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions charged to income
and reduced by net loan charge-offs. Both the amount of the provision and the
level of the allowance for loan losses are affected by many factors, including
general economic conditions, the local Prince William County, Virginia economy,
actual and prospective credit losses, loan performance measures, historical
trends, the real estate industry and other factors both internal and external to
Independent and its borrowers. Management performs a quarterly analysis of the
credit quality of the loan portfolio. This analysis includes a loan by loan
review of significant credits, and applies a general statistical analysis to the
portfolio of smaller consumer oriented loans. The allowance for loan losses is
determined in light of the above factors with considerable attention to
historical trends and anticipated losses on known and projected problem credits.
A credit committee of Independent's Board of Directors reviews and approves the
allowance based upon the above criteria on a quarterly basis. Tables 15 and 16
reflect the credit information reflected below.
The allowance for loan losses as of December 31, 1993 was $917,815 or 1.72%
of loans net of the unearned discount. This is an increase of $14,238 over the
December 31, 1992 allowance level of $903,577 which was 1.54% of loans net of
the unearned discount. The increased allowance was consistent with Independent's
evaluation of the condition of the loan portfolio. The 1993 provision for loan
losses of $740,000 covered net charge-offs plus enhanced the allowance for
projected credit concerns.
The credit quality of Independent's loan portfolio improved after year end
1992. Independent experienced a reduction in net charge-offs of $267,268 in
1993, as compared to 1992. The actual net charge-offs in 1993 were $725,762 or
1.27% of average loans, as compared to $993,030 or 1.58% of average loans in
1992. The efforts of management and the Board of Directors were successful in
reducing the level of non-performing assets by $1,400,000. Total non-performing
assets were $5,600,000 at December 31, 1993, compared to $7,000,000 at December
31, 1992. In 1993, Independent converted a parcel of real estate which it had
acquired through foreclosure from "other real estate owned" to "bank premises."
The property, which is carried at a value of approximately $475,000, was
intended to be available as an additional branch site.
NONINTEREST INCOME
Independent's service fees grew to $1,340,000 in 1993, or 6.7% higher than
the 1992 level of $1,260,000. Table 17 reflects the details of the noninterest
income. Independent's policy to charge for services such as overdrafts, returned
items and foreign ATM charges account for the bulk of its noninterest income.
Additionally, Independent reversed its policies and procedures surrounding these
service charges. The revision contributed to the growth in noninterest income.
Independent implemented a service charge structure for commercial accounts in
mid 1992. The new service charge was a key contributor to the fee income
increase in 1993.
Independent has had a long standing policy not to actively trade investment
securities. Management and the Board of Directors determined to shift the
composition of the investment portfolio to enhance the bank's liquidity and to
accommodate the overall strategy of modifying the relative mix in the investment
of the Bank's funds in investment securities and loans. The investment portfolio
realignment in 1992 yielded gains from sales of securities of $245,717 compared
to the 1993 gains of $68,163.
NONINTEREST EXPENSES
Information as to the noninterest expenses is identified in Table 17. The
largest component of the noninterest expenses relates to human resources.
Independent maintains two full service offices as well as two remote drive-in
facilities. The goal of the branch and lending personnel is to provide a high
level of customer service. Independent took several steps in 1992 to control the
growth of this category of expense. Independent implemented a salary and wage
freeze, shared benefits expense, and tightly controlled approval process for
replacement personnel. The effects of these measures in 1993 were to reduce
total personnel expenses by $22,000 or 1.2% in 1993.
Independent's occupancy expense increased to $422,000 or by 9.1% in 1993.
The increase of $35,000 is largely attributed to the annual rent adjustment on
the Woodbridge office. The expense of furniture and equipment increased by
$8,000 in 1993 or 2% over the 1992 level of $391,000. The increase reflects the
1993 purchase of a computer network to promptly process customer deposit
products in full compliance with the new federal regulations governing deposit
products.
26

<PAGE>
The other operating expenses of Independent amounted to $1,340,000 in 1993,
compared to $1,300,000 in 1992. The slight increase reflects the full effect of
higher FDIC insurance premiums and consultants used in 1993.
Independent experienced a significant increase in other real estate
expenses in 1993. The expenses amounted to $416,000 in 1993 as compared to
$106,000 in 1992. The increased expenses of $310,000 are directly related to the
disposition of several real estate properties owned by Independent. The expenses
of the sale and writedowns to a lower value, in recognition of the deterioration
of the local real estate market and related factors during 1993, were consistent
with management's evaluation of the properties.
INCOME TAXES
Independent's effective tax rate in 1993 was 34.8%, and 33.8% in 1992.
FINANCIAL CONDITION
Total assets were $90,950,000 at December 31, 1993. This was 7.8% or
$6,600,000 greater than the 1992 level. The growth is attributed to
Independent's expansion of stable low cost core deposits. Total deposits
increased to $85,000,000 which was $6,100,000 or 7.8% greater than the December
31, 1992 level.
Management redirected the Bank's assets towards investment securities in
1993. The mix of the portfolio is outlined in Table 19. The strategy effectively
mixed adjustable rate investment products with traditional treasury and agency
investments. The investment portfolio grew to $25,300,000 in 1993 or $11,700,000
larger than the 1992 portfolio. Additionally, Independent took steps to reduce
the federal funds sold position during the year.
Independent materially redefined its loan portfolio in 1993 as reflected in
Table 18. Management focused on solving credit issues and took steps to reduce
the size of the loan portfolio. Independent maintained higher rates compared to
many competitor financial institutions on loan products in 1993 which enhanced
net interest income and contributed to a decline in loans outstanding.
Independent's loan to deposit ratio fell to 62.8% from the 1992 level of 74.2%.
Additionally, Independent took steps to reduce the concentration of real estate
related credits.
Independent focused energies on core deposit growth in 1993. Total deposits
grew to $85,000,000 in 1993. This was $6,100,000 or 7.8% greater than the 1992
level of $78,900,000. The deposit mix reflected in Table 20 reflects the shift
towards lower cost stable products such as interest checking and savings
accounts. Independent priced certificates to reduce the reliance on the
certificate of deposit portfolio. Additionally, Independent absorbed the shift
of a key deposit product from a noninterest to an interest bearing status in
1993.
CAPITAL RESOURCES AND ADEQUACY
Total stockholders' equity was $5,800,000 on December 31, 1993 or 7.4% over
the December 31, 1992 level of $5,400,000. The increase is directly attributable
to the 1993 earnings of $400,265.
In 1992, Independent consented to the issuance of a cease and desist order
by the Federal Deposit Insurance Corporation. The order specifically required
Independent to maintain adequate capital. Adequate capital was defined to be at
least a 6% Tier 1 leverage ratio. The ratio compares period end stockholders'
equity to quarterly average assets. The Tier 1 leverage ratio was 6.50% and
6.24% for December 31, 1993 and 1992, respectively. Independent actively
monitors the capital position and employs various asset/liability management
strategies to ensure a Tier 1 leverage ratio in excess of 6%. Additionally,
Independent monitors risk based capital ratios. Table 21 reflects the risk
adjusted capital ratios for Independent at December 31, 1993 and 1992.
INTEREST SENSITIVITY
Table 22 reflects the Gap position of the Bank as of December 31, 1993.
Management believes the Gap position was appropriate under the circumstances at
December 31, 1993.
NEW ACCOUNTING STANDARDS
In 1992, the Financial Accounting Standards Board issued Statement Number
109, "Accounting for Income Taxes" (SFAS 109) which was effective for years
beginning after December 15, 1992. The accounting standard changed the
accounting for income taxes to the asset and liability method. The Bank adopted
SFAS 109 during the year ended December 31, 1992. The change in accounting
method had no material effect on the financial statements.
27

<PAGE>
In 1993, the Financial Accounting Standards Board issued Statement Number
114, "Accounting by Creditors for the Impairment of a Loan" (SFAS 114). SFAS 114
requires impaired loans to be measured based on the present value of expected
future cash flow discounted at the loan's effective interest rate, or at the
loan's market price or the fair value of a collateral dependent loan. This
statement is effective for fiscal years beginning after December 15, 1994. The
organization has planned to adopt this accounting standard in 1995. The effects
of this accounting standard have not yet been determined.
COMPARISON OF FINANCIAL CONDITION AND OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 1992 AND 1991
EARNINGS OVERVIEW
Independent reported net income of $496,540 in 1992 a significant
improvement from the 1991 net loss of $322,850. The improved earnings are
attributed to a stronger level of net interest income, lower provisions for loan
losses, increased noninterest income, increased security gains and decreased
noninterest expense.
The Bank's return on average assets was .56% and the return on average
equity was 9.63% in 1992. The 1991 ratios are not meaningful because of the net
loss. The earnings per share were $.49 in 1992 compared with a loss of ($.32) in
1991.
NET INTEREST INCOME
Independent's net interest income increased by $545,103 in 1992 or 14.4%
over the 1991 level. The declining interest rate environment had a substantial
impact on interest income from loans. Many of the bank's loans were tied to the
Independent Base Rate which fluctuates with market conditions. The Bank's
interest expense was decreased substantially, because of the drop in interest
rates. Independent's ability to lower rates on deposits at a faster pace than
the decline in loan rates allowed for the substantial improvement in net
interest income.
The net interest margin rose to 5.44% in 1992 from 5.25% in 1991. In
addition to the interest rate variance referenced earlier, the bank was able to
attract approximately $5,439,000 in additional demand deposits in 1992.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses as of December 31, 1992 was $903,577 or 1.54%
of loans net of the unearned discount. This is a decrease of $63,030 from the
December 31, 1991 level of $966,607 or 1.51% of loans net of the unearned
discount.
The net charge-offs were $993,030 or 1.58% of average loans in 1992
compared with $645,907 or 1.01% of average loans in 1991. The increased level of
net charge-offs is directly related to the economic conditions of Prince William
County. Many commercial and real estate loans were adversely impacted by the
weak economy.
The non-performing assets grew to $6,962,000 as of December 31, 1992 from
the 1991 level of $5,329,000. The ratio of non-performing assets to total assets
grew to 8.25% in 1992.
NONINTEREST INCOME
Independent's noninterest income increased by $511,663 to $1,501,300 in
1992. The bulk of the increase is attributed to securities gains of $245,717 in
1992. Additionally, the bank was more aggressive in pricing and collection
efforts for service charges on deposit accounts. These efforts generated an
increase of $140,000 over the 1991 level.
NONINTEREST EXPENSE
The noninterest expense was $4,151,625 in 1992. This was 1.1% or $44,868
lower than the 1991 level of $4,196,493. The salary and benefits costs were
$1,970,720 in 1992. This was $75,804 or 3.7% lower than the 1991 expense of
$2,046,524.
The occupancy and equipment expense was stable from year to year. The 1992
expense amounted to $778,065 compared to $783,104 in 1991.
The increased FDIC assessment fees were the major reason for the increased
other operating expense. The rate charged on each deposit dollar was
substantially increased in 1992. This change resulted in an increased expense of
$37,000 in 1992 over the 1991 level.
28

<PAGE>
FINANCIAL CONDITION
Total assets were $84,391,000 at December 31, 1992. This was a $7,027,000
or a 7.7% decrease from the 1991 level of $91,418,000. The decline in the bank's
loan portfolio accounts for $5,547,000 of the change. Management's efforts to
position the Bank at approximately $85,000,000 was accomplished by December 31,
1992.
Deposits decreased by $7,397,000 to $78,899,000 in 1992. This was 8.6%
below the December 31, 1991 level of $86,296,000.
CAPITAL RESOURCES AND ADEQUACY
Total stockholders' equity was $5,416,520 on December 31, 1992 or $496,520
greater than the 1991 level $4,919,980. The increase reflects the full earnings
of the Bank in 1992. The Bank declared a 2% stock dividend in 1992. The Tier 1
leverage was 6.24% in 1992 and 5.66% in 1991.
29

<PAGE>
The following tables are intended to aid the reader in reviewing the
preceding discussion.
INDEPENDENT BANK
TABLE 1
SELECTED FINANCIAL INFORMATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Results of Operations
For the six months ended June 30 1994 1993
<S> <C> <C>
Interest income......................................................... $ 2,927 $ 2,990
Interest expense........................................................ 798 780
Net interest income..................................................... 2,129 2,210
Provision for loan losses............................................... 155 540
Noninterest income...................................................... 623 774
Noninterest expense..................................................... 2,202 2,046
Income before taxes..................................................... 395 398
Income tax expense...................................................... 141 145
Net Income.............................................................. $ 254 $ 253
Earnings per share...................................................... $ 0.25 $ 0.25
Financial Condition (at June 30)
Total assets............................................................ $92,611 $90,904
Total loans, net of unearned discount................................... 52,920 56,478
Total deposits.......................................................... 85,423 85,148
Total stockholders' equity*............................................. 5,508 5,700
Selected Ratios (for the six months ended June 30)
Return on average assets................................................ 0.58% 0.61%
Return on average equity................................................ 8.97% 9.02%
Net interest margin..................................................... 5.42% 6.09%
Tier 1 leverage ratio (at June 30)...................................... 6.69% 6.64%
</TABLE>

* Stockholders' equity at June 30, 1994 includes unrealized losses on securities
available for sale, net of tax effect, of $513 thousand.
30

<PAGE>
INDEPENDENT BANK
TABLE 2
AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1994 1993
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
Commercial loans.................................................. $ 5,582 $ 221 7.98% $ 5,794 $ 216 7.52%
Real estate mortgage loans........................................ 29,713 1,265 8.59% 33,010 1,430 8.74%
Real estate construction loans.................................... 2,009 130 13.05% 1,640 96 11.80%
Consumer loans.................................................... 9,015 410 9.17% 9,394 476 10.22%
Other loans, net.................................................. 6,812 337 9.98% 8,281 386 9.40%
Total loans.................................................. 53,131 2,363 8.97% 58,119 2,604 9.04%
Treasury securities............................................... 7,171 160 4.50% 3,811 93 4.92%
Federal agency securities......................................... 18,302 394 4.33% 8,410 249 5.97%
Municipal & other securities...................................... 33 N/M 0.00% 93 3 6.51%
Total investments............................................ 25,506 554 4.37% 12,314 345 5.65%
Money market investments.......................................... 550 10 3.67% 2,921 41 2.83%
Total earning assets......................................... 79,187 2,927 7.45% 73,354 2,990 8.22%
Interest checking deposits........................................ 13,013 141 2.19% 9,172 121 2.66%
Money market deposit accounts..................................... 13,876 189 2.75% 15,544 216 2.80%
Savings accounts.................................................. 13,755 198 2.90% 11,912 177 3.00%
Certificates of deposit........................................... 11,127 204 3.70% 12,075 231 3.86%
Certificates of deposit > $100,000................................ 2,080 39 3.78% 1,510 31 4.14%
Short term borrowings............................................. 1,666 27 3.27% 241 4 3.35%
Total interest bearing liabilities........................... 55,517 798 2.90% 50,454 780 3.12%
Other sources, net................................................ 23,670 -- 0.00% 22,900 -- 0.00%
Total sources of funds....................................... $79,187 798 2.03% $73,354 780 2.14%
Net Interest Margin............................................... $2,129 5.42% $2,210 6.09%
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 3
RATE/VOLUME ANALYSIS: CHANGE IN INTEREST INCOME AND INTEREST EXPENSE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30:
1994 VS. 1993
CHANGE DUE TO
AVERAGE INTEREST INCREASE/
VOLUME RATE (DECREASE)
<S> <C> <C> <C>
Commercial loans............................................................................... ($8) $13 $5
Real estate mortgage loans..................................................................... (143) (22) (165)
Real estate construction loans................................................................. 22 12 34
Consumer loans................................................................................. (19) (47) (66)
Other loans, net............................................................................... (68) 19 (49)
Total loans............................................................................... (217) (24) (241)
Treasury securities............................................................................ 82 (15) 67
Federal agency securities...................................................................... 293 (149) 144
Municipal & other securities................................................................... (2) (1) )(3
Total investments......................................................................... 373 (165) 208
Money market investments....................................................................... (33) 2 (31)
Total earning assets...................................................................... 238 (302) (64)
Interest checking deposits..................................................................... 51 (31) 20
Money market deposit accounts.................................................................. (23) (4) (27)
Savings accounts............................................................................... 27 (6) 21
Certificates of deposit........................................................................ (18) (9) (27)
Certificates of deposit > $100,000............................................................. 12 (4) 8
Short term borrowings 24 (1) 23
Total interest bearing liabilities........................................................ 78 (60) 18
Other sources, net............................................................................. 0 0 0
Total sources of funds.................................................................... 78 (60) 18
Net interest income............................................................................ $159 ($241) ($82)
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 4
ALLOWANCE FOR LOAN LOSSES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Allowance for Loan Losses -- Activity for the six month period ended
June 30: 1994 1993
<S> <C> <C>
Beginning balance, January 1............................................ $ 918 $ 904
Loans charged off:
Commercial............................................................ 14 109
Real Estate........................................................... 107 280
Consumer & other...................................................... 89 169
Total loans charged off............................................ 210 558
Recoveries:
Commercial............................................................ 4 8
Real Estate........................................................... 6 2
Consumer & other...................................................... 42 55
Total recoveries................................................... 52 65
Net charge-offs......................................................... 158 493
Provision for loan losses............................................... 155 540
Ending Balance, June 30................................................. $ 915 $ 951
Loans, net of unearned income:
Total as of June 30................................................... $52,920 $56,478
Average during the six month period................................... 53,131 58,119
Selected Ratios:
Net charge-offs to average loans........................................ 0.59% 1.70%
Allowance to period end loans........................................... 1.73% 1.68%
Allocation of the Allowance for Loan Losses (At June 30):
Commercial............................................................ $ 63 $ 134
Real Estate........................................................... 725 490
Consumer & other........................................................ 70 80
Unallocated........................................................... 57 247
Total allowance.................................................... $ 915 $ 951
</TABLE>

INDEPENDENT BANK
TABLE 5
NONPERFORMING ASSETS AND PAST DUE LOANS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
Nonperforming Assets and Past Due Loans 1994 1993
<S> <C> <C>
Nonaccrual loans
Real estate........................................................... $2,972 $2,501
Commercial............................................................ 94 144
Consumer.............................................................. 22 74
Total nonperforming loans.......................................... 3,088 2,719
Other real estate owned................................................. 2,142 3,951
Total nonperforming assets......................................... $5,230 $6,670
Loans past due for 90 days or more
Real estate........................................................... $ 31 $ 98
Commercial............................................................ 75 --
Consumer.............................................................. 20 49
Total past due loans............................................... $ 126 $ 147
Nonperforming assets to:
Loans & OREO.......................................................... 9.50% 11.04%
Total Assets.......................................................... 5.65% 7.34%
Allowance for loan losses to:
Nonperforming assets.................................................. 17.50% 14.26%
Nonperforming loans................................................... 29.63% 34.98%
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 6
NONINTEREST INCOME AND NONINTEREST EXPENSE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Noninterest Income 1994 1993
<S> <C> <C>
Service charges on deposit accounts..................................... $ 437 $ 481
Automated teller machine fees........................................... 60 52
Merchant discount fees.................................................. 37 27
Miscellaneous........................................................... 109 147
Gains (losses) on sale of investment securities......................... (20) 67
Noninterest income................................................. $ 623 $ 774
<CAPTION>
SIX MONTHS ENDED
Noninterest Expense 1994 1993
<S> <C> <C>
Salaries and benefits................................................... $1,037 $ 985
Occupancy expense....................................................... 215 203
Equipment expense....................................................... 189 196
FDIC assessments........................................................ 117 116
Postage................................................................. 67 72
Printing................................................................ 51 64
Other real estate expense............................................... 25 57
Miscellaneous........................................................... 501 353
Total noninterest expense.......................................... $2,202 $2,046
</TABLE>

INDEPENDENT BANK
TABLE 7
LOAN PORTFOLIO ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE JUNE
30, % OF TOTAL 30,
Loan Portfolio Analysis 1994 PORTFOLIO 1993
<S> <C> <C> <C>
Commercial......................................................................... $10,409 19.7 % $10,568
Real estate -- mortgage............................................................ 34,318 64.8 % 37,853
Real estate -- construction........................................................ 2,070 3.9 % 2,298
Consumer........................................................................... 5,486 10.4 % 5,355
Other.............................................................................. 788 1.5 % 608
Unearned discount & deferred fees.................................................. (151) -0.3 % (204)
Total loans, net.............................................................. $52,920 100.0 % $56,478
<CAPTION>
% OF TOTAL
Loan Portfolio Analysis PORTFOLIO
<S> <C>
Commercial......................................................................... 18.7 %
Real estate -- mortgage............................................................ 67.0 %
Real estate -- construction........................................................ 4.1 %
Consumer........................................................................... 9.5 %
Other.............................................................................. 1.1 %
Unearned discount & deferred fees.................................................. -0.4 %
Total loans, net.............................................................. 100.0 %
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 8
ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Investment Securities PAR COST MARKET AVERAGE
At June 30, 1994 VALUE BASIS VALUE YIELD
<S> <C> <C> <C> <C>
U.S. Treasury
Within one year.................................................................. $ 500 $ 499 $ 502 5.72%
One to five years................................................................ 6,500 6,607 6,431 4.39%
Total U.S. Treasury........................................................... 7,000 7,106 6,933 4.48%
Federal Agencies
Within one year.................................................................. -- -- -- --
One to five years................................................................ 2,909 2,989 2,864 4.57%
Five to ten years................................................................ 1,443 1,458 1,463 4.44%
Ten years +...................................................................... 15,095 15,356 14,799 4.79%
Total Agencies................................................................ 19,447 19,803 19,126 4.73%
Municipal & Other
Within one year.................................................................. 50 50 50 4.75%
Ten years +...................................................................... 22 22 22 0.00%
Municipal & Other.................................................................. 72 72 72 4.75%
Total investment securities................................................... $26,519 $26,981 $26,131 4.67%
</TABLE>

Note: Investment securities classified as "Securities Available for Sale" as of
June 30, 1994 had a cost basis of $22,043 and a market value of $21,241.
INDEPENDENT BANK
TABLE 9
DEPOSIT PORTFOLIO ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1994 1993
AVERAGE AVERAGE
Deposit Portfolio Analysis BALANCE RATE BALANCE RATE
<S> <C> <C> <C> <C>
Noninterest bearing deposits....................................................... $26,988 -- $27,229 --
Interest bearing deposits
Interest checking................................................................ 13,013 2.19% 9,172 2.66%
Money market accounts............................................................ 13,876 2.75% 15,544 2.80%
Savings accounts................................................................. 13,755 2.90% 11,912 3.00%
Time deposits.................................................................... 13,207 3.70% 13,585 3.88%
Total time deposits........................................................... 53,851 2.90% 50,213 3.12%
Total deposits................................................................ $80,839 1.92% $77,442 2.02%
</TABLE>

<TABLE>
<CAPTION>
JUNE % OF JUNE % OF
30, TOTAL 30, TOTAL
Deposit Portfolio Analysis 1994 PORTFOLIO 1993 PORTFOLIO
<S> <C> <C> <C> <C>
Noninterest bearing deposits....................................................... $28,853 33.8% $34,881 41.0%
Interest bearing deposits
Interest checking................................................................ 14,777 17.3% 9,353 11.0%
Money market accounts............................................................ 13,625 16.0% 14,802 17.4%
Savings accounts................................................................. 14,363 16.8% 12,952 15.2%
Time deposits.................................................................... 13,805 16.2% 13,160 15.4%
Total time deposits........................................................... 56,570 66.2% 50,267 59.0%
Total deposits................................................................ $85,423 100.0% $85,148 100.0%
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 10
CAPITAL ADEQUACY
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE JUNE
30, 30,
Capital Adequacy 1994 1993
<S> <C> <C>
Tier 1 Capital.......................................................... $ 6,020 $ 5,670
Tier 2 Capital.......................................................... 915 812
Total risk-adjusted capital........................................ $ 6,935 $ 6,482
Risk-adjusted assets.................................................... $79,715 $64,791
Second quarter average assets........................................... 90,026 85,413
Capital Ratios (at June 30):
Tier 1.................................................................. 7.55% 8.75%
Total.............................................................. 8.70% 10.00%
Tier 1 leverage......................................................... 6.69% 6.64%
</TABLE>

INDEPENDENT BANK
TABLE 11
INTEREST RATE SENSITIVITY ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MATURITY/RATE SENSITIVITY
TOTAL
WITHIN
Interest Rate Gap Analysis WITHIN 4-6 7-12 12 OVER 12 GRAND
At June 30, 1994 3 MONTHS MONTHS MONTHS MONTHS MONTHS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans................................................... $ 17,966 $ 3,046 $ 10,403 $ 31,415 $21,505 $52,920
Investment securities................................. 5,694 1,483 2,286 9,463 16,716 26,179
Money market investments.............................. 4,350 -- -- 4,350 -- 4,350
Total earning assets............................... 28,010 4,529 12,689 45,228 38,221 83,449
Interest bearing liabilities
Interest checking..................................... 14,776 -- -- 14,776 -- 14,776
Money market accounts................................. 13,625 -- -- 13,625 -- 13,625
Savings accounts...................................... 14,363 -- -- 14,363 -- 14,363
Certificates of deposit............................... 4,342 2,152 2,946 9,440 1,967 11,407
Certificates of deposit > $100,000.................... 792 603 700 2,095 304 2,399
Short-term borrowings 1,492 -- -- 1,492 -- 1,492
Total interest bearing liabilities................. 49,390 2,755 3,646 55,791 2,271 58,062
Noninterest bearing liabilities, net.................... -- -- -- -- 25,387 25,387
Total liabilities.................................. 49,390 2,755 3,646 55,791 27,658 83,449
Interest rate gap....................................... (21,380) 1,774 9,043 (10,563) 10,563 --
Cumulative interest rate gap............................ ($21,380) ($19,606) ($10,563) ($10,563) -- --
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 12
SELECTED FINANCIAL INFORMATION
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Results of Operations (for the year) 1993 1992 1991
<S> <C> <C> <C>
Interest income.............................................................................. $ 6,032 $ 6,651 $ 7,334
Interest expense............................................................................. 1,558 2,321 3,549
Net interest income..................................................................... 4,474 4,330 3,785
Provision for loan losses.................................................................... 740 930 1,100
Noninterest income........................................................................... 1,408 1,501 990
Noninterest expense.......................................................................... 4,528 4,152 4,197
Income (loss) before taxes................................................................... 614 749 (522)
Income tax expense (credit).................................................................. 214 253 (199)
Net Income (Loss)....................................................................... $ 400 $ 496 ($ 323)
Earnings (loss) per share.................................................................... $ 0.39 $ 0.49 ($ 0.32)
Financial Condition (at December 31)
Total assets................................................................................. $90,953 $84,391 $91,418
Total loans, net of unearned discount........................................................ 53,413 58,527 64,074
Total deposits............................................................................... 85,029 78,899 86,296
Total stockholders' equity................................................................... 5,817 5,417 4,920
Selected Ratios (for the year)
Return on average assets..................................................................... 0.47% 0.56% N/M
Return on average equity..................................................................... 7.01% 9.63% N/M
Net interest margin.......................................................................... 5.91% 5.44% 5.25%
Tier 1 leverage ratio (at year end).......................................................... 6.50% 6.24% 5.66%
</TABLE>

N/M -- Not meaningful
INDEPENDENT BANK
TABLE 13
AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans.......................... $5,751 $ 463 8.05 % $6,521 $ 497 7.62 % $7,101 $ 726
Real estate mortgage loans................ 32,050 2,797 8.73 % 35,552 3,241 9.12 % 33,631 3,503
Real estate construction loans............ 1,936 236 12.20 % 1,741 242 13.90 % 2,837 374
Consumer loans............................ 9,374 927 9.88 % 10,364 1,085 10.47 % 10,664 1,175
Other loans, net.......................... 7,841 751 9.58 % 8,648 854 9.88 % 9,008 1,069
Total loans........................... 56,952 5,174 9.08 % 62,826 5,919 9.42 % 63,241 6,847
Treasury securities....................... 3,993 189 4.73 % 7,029 335 4.77 % 2,702 159
Federal agency securities................. 11,093 558 5.03 % 2,149 124 5.77 %
Municipal & other securities.............. 52 3 5.77 % 126 8 6.35 % 303 18
Total investments..................... 15,138 750 4.95 % 9,304 467 5.02 % 3,005 177
Money market investments.................. 3,612 108 2.99 % 7,417 265 3.57 % 5,774 310
Total earning assets.................. 75,702 6,032 7.97 % 79,547 6,651 8.36 % 72,020 7,334
Interest checking deposits................ 10,461 258 2.47 % 8,429 279 3.31 % 7,048 401
Money market deposit accounts............. 14,920 409 2.74 % 21,285 756 3.55 % 16,468 970
Savings accounts.......................... 12,617 374 2.97 % 9,449 338 3.58 % 4,877 265
Certificates of deposit................... 11,657 441 3.79 % 15,453 815 5.27 % 20,614 1,477
Certificates of deposit > $100,000........ 1,782 71 4.00 % 2,271 132 5.81 % 5,811 436
Short term borrowings..................... 122 4 3.36 % 19 1 5.26 % -- --
Total interest bearing liabilities.... 51,559 1,558 3.02 % 56,906 2,321 4.08 % 54,818 3,549
Other sources, net........................ 24,143 -- -- 22,641 -- -- 17,202 --
Total sources of funds................ $75,702 1,558 2.06 % $79,547 2,321 2.92 % $72,020 3,549
Net Interest Margin................... $4,474 5.91 % $4,330 5.44 % $3,785
<CAPTION>
YIELD/
RATE
<S> <C>
Commercial loans.......................... 10.22 %
Real estate mortgage loans................ 10.42 %
Real estate construction loans............ 13.18 %
Consumer loans............................ 11.02 %
Other loans, net.......................... 11.87 %
Total loans........................... 10.83 %
Treasury securities....................... 5.88 %
Federal agency securities................. --
Municipal & other securities.............. 5.94 %
Total investments..................... 5.89 %
Money market investments.................. 5.37 %
Total earning assets.................. 10.18 %
Interest checking deposits................ 5.69 %
Money market deposit accounts............. 5.89 %
Savings accounts.......................... 5.43 %
Certificates of deposit................... 7.17 %
Certificates of deposit > $100,000........ 7.50 %
Short term borrowings..................... --
Total interest bearing liabilities.... 6.47 %
Other sources, net........................ --
Total sources of funds................ 4.93 %
Net Interest Margin................... 5.25 %
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 14
RATE/VOLUME ANALYSIS: CHANGE IN NET INTEREST INCOME
ATTRIBUTABLE TO AVERAGE VOLUME AND INTEREST RATE CHANGES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1993 VS. 1992 1992 VS. 1991
CHANGE DUE TO CHANGE DUE TO
TOTAL
AVERAGE INCOME/ INCREASE/ AVERAGE INCOME/
VOLUME RATE (DECREASE) VOLUME RATE
<S> <C> <C> <C> <C> <C>
Commercial loans............................................. ($ 59 ) $ 25 ($ 34) ($ 59 ) ($ 170)
Real estate mortgage loans................................... (319 ) (125 ) (444) 200 (462)
Real estate construction loans............................... 27 (33 ) (6) (144 ) 12
Consumer loans............................................... (104 ) (55 ) (158) (33 ) (57)
Other loans, net............................................. (79 ) (23 ) (102) (43 ) (172)
Total loans................................................ (533 ) (211 ) (745) (79 ) (849)
Treasury securities.......................................... (145 ) (1 ) (146) 255 (79)
Federal agency securities.................................... 516 (82 ) 434 124 --
Municipal & other securities................................. (5 ) (0 ) (5) (11 ) 1
Total investments.......................................... 367 (84 ) 283 368 (78)
Money market investments..................................... (136 ) (21 ) (157) 88 (133)
Total earning assets....................................... (302 ) (317 ) (619) 377 (1,060)
Interest checking deposits................................... 67 (88 ) (21) 79 (201)
Money market deposit accounts................................ (226 ) (121 ) (347) 284 (498)
Savings accounts............................................. 113 (77 ) 36 248 (175)
Certificates of deposit...................................... (200 ) (173 ) (374) (370 ) (292)
Certificates of deposit > $100,000........................... (28 ) (32 ) (61) (266 ) (38)
Short term borrowings........................................ 5 (2 ) 3 1 --
Total interest bearing liabilities......................... (269 ) (494 ) (763) (24 ) (1,204)
Other sources, net........................................... 0 0 0 0 0
Total sources of funds..................................... (269 ) (494 ) (763) (24 ) (1,204)
Net interest income........................................ ($ 33 ) $ 177 $ 144 $ 401 $ 144
<CAPTION>
TOTAL
INCREASE/
(DECREASE)
<S> <C>
Commercial loans............................................. ($ 229)
Real estate mortgage loans................................... (262)
Real estate construction loans............................... (132)
Consumer loans............................................... (90)
Other loans, net............................................. (215)
Total loans................................................ (928)
Treasury securities.......................................... 176
Federal agency securities.................................... 124
Municipal & other securities................................. (10)
Total investments.......................................... 290
Money market investments..................................... (45)
Total earning assets....................................... (683)
Interest checking deposits................................... (122)
Money market deposit accounts................................ (214)
Savings accounts............................................. 73
Certificates of deposit...................................... (662)
Certificates of deposit > $100,000........................... (304)
Short term borrowings........................................ 1
Total interest bearing liabilities......................... (1,228)
Other sources, net........................................... 0
Total sources of funds..................................... (1,228)
Net interest income........................................ $ 545
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 15
ALLOWANCE FOR LOAN LOSSES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Allowance for Loan Losses:
Beginning balance....................................................... $ 904 $ 967 $ 513
Loans charged off:
Commercial............................................................ 141 577 306
Real Estate........................................................... 338 173 109
Consumer & other...................................................... 373 457 250
Total loans charged off............................................ 852 1,207 665
Recoveries:
Commercial............................................................ 28 124 1
Real Estate........................................................... 11 25 0
Consumer & other...................................................... 87 65 18
Total recoveries................................................... 126 214 19
Net charge-offs......................................................... 726 993 646
Provision for loan losses............................................... 740 930 1,100
Ending Balance..................................................... $ 918 $ 904 $ 967
Loans, net of unearned income:
Total at year end..................................................... $53,413 $58,527 $64,074
Average during the year............................................... 56,952 62,826 63,241
Selected Ratios:
Net charge-offs to average loans........................................ 1.27% 1.58% 1.01%
Allowance to year end loans............................................. 1.72% 1.54% 1.51%
Allocation of the Allowance for Loan Losses:
Commercial............................................................ $ 86 $ 297 $ 444
Real Estate........................................................... 608 467 159
Consumer & other...................................................... 81 40 364
Unallocated........................................................... 143 -- --
Total allowance at year-end........................................ $ 918 $ 904 $ 967
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 16
NONPERFORMING ASSETS AND PAST DUE LOANS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Nonperforming Assets and Past Due Loan 1993 1992 1991
<S> <C> <C> <C>
Nonaccrual loans
Real estate........................................................... $2,672 $2,912 $2,020
Commercial............................................................ 8 347 388
Consumer.............................................................. 69 163 80
Total nonperforming loans.......................................... 2,749 3,422 2,488
Other real estate owned................................................. 2,847 3,540 2,841
Total nonperforming assets......................................... $5,596 $6,962 $5,329
Loans past due for 90 days or more
Real estate........................................................... $ 30 $ 124 $ 249
Commercial............................................................ 1..... 185
Consumer.............................................................. 52 58 56
Total past due loans............................................... $ 83 $ 182 $ 490
Nonperforming assets to:
Total loans & foreclosed properties................................... 9.95% 11.22% 7.96%
Total assets.......................................................... 6.15% 8.25% 5.83%
Allowance for loan losses to:
Nonperforming assets.................................................. 16.40% 12.98% 18.15%
Nonperforming loans................................................... 33.39% 26.42% 38.87%
</TABLE>

INDEPENDENT BANK
TABLE 17
NONINTEREST INCOME AND NONINTEREST EXPENSE
($ IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
Noninterest Income 1993 1992 1991
Service charges on deposit accounts..................................... $ 976 $ 937 $ 797
Automated teller machine fees........................................... 108 93 41
Merchant discount fees.................................................. 51 42 35
Miscellaneous........................................................... 205 183 117
Gains on sale of investment securities.................................. 68 246 --
Total noninterest income.............................................. $1,408 $1,501 $ 990
Noninterest Expense
Salaries and benefits................................................... $1,948 $1,971 $2,047
Occupancy expense....................................................... 422 387 376
Equipment expense....................................................... 399 391 407
FDIC assessments........................................................ 232 189 152
Postage................................................................. 141 147 172
Printing................................................................ 116 122 154
Other real estate expense............................................... 416 106 165
Miscellaneous........................................................... 854 839 724
Total noninterest expense............................................. $4,528 $4,152 $4,197
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 18
LOAN PORTFOLIO ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Loan Portfolio Analysis % OF TOTAL % OF TOTAL % OF TOTAL
At December 31 1993 PORTFOLIO 1992 PORTFOLIO 1991 PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Commercial.............................................. $10,552 19.8% $10,969 18.7% $11,092 17.3%
Real estate -- mortgage................................. 35,626 66.7% 40,751 69.6% 43,594 68.0%
Real estate -- construction............................. 1,459 2.7% 563 1.0% 1,814 2.8%
Consumer................................................ 5,285 9.9% 5,835 10.0% 7,294 11.4%
Other................................................... 656 1.2% 637 1.1% 657 1.0%
Unearned discount & deferred fees....................... (165) -0.3% (228) -0.4% (377) -0.5%
Total loans, net................................... $53,413 100.0% $58,527 100.0% $64,074 100.0%
</TABLE>

INDEPENDENT BANK
TABLE 19
ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Investment Securities PAR BOOK MARKET AVERAGE
At December 31, 1993 VALUE VALUE VALUE YIELD
<S> <C> <C> <C> <C>
U.S. Treasury:
Within one year.................................................................. $ 300 $ 312 $ 312 3.51 %
One to five years................................................................ 7,000 7,166 7,170 4.33 %
Total U.S. Treasury........................................................... 7,300 7,478 7,482 4.30 %
Federal Agencies:
Within one year.................................................................. -- -- -- --
One to five years................................................................ 2,800 2,902 2,876 5.46 %
Five to ten years................................................................ 1,890 1,961 1,941 5.83 %
Ten years +...................................................................... 12,696 12,989 12,911 5.92 %
Total Federal agencies........................................................ 17,386 17,852 17,728 5.83 %
Municipal & other:
Ten years +...................................................................... 11 11 11 0.00 %
Total municipal & other....................................................... 11 11 11 0.00 %
Total investment securities................................................... $24,697 $25,341 $25,221 5.38 %
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 20
DEPOSIT PORTFOLIO ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
Deposit Portfolio Analysis AVERAGE AVERAGE AVERAGE
For the year ended December 31 BALANCE RATE BALANCE RATE BALANCE RATE
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing deposits........................................... $28,477 -- $27,272 -- $22,213 --
Interest bearing deposits
Interest checking.................................................... 10,461 2.48% 8,429 3.31% 7,048 5.69%
Money market accounts................................................ 14,920 2.74% 21,285 3.55% 16,468 5.89%
Savings accounts..................................................... 12,617 2.97% 9,449 3.58% 4,877 5.43%
Time deposits........................................................ 13,439 3.81% 17,725 5.34% 26,425 7.24%
Total time deposits............................................... 51,437 3.02% 56,888 4.08% 54,818 6.47%
Total deposits.................................................... $79,914 1.95% $84,160 2.76% $77,031 4.61%
</TABLE>

<TABLE>
<CAPTION>
Deposit Portfolio Analysis % OF TOTAL % OF TOTAL % OF TOTAL
(as of December 31,) 1993 PORTFOLIO 1992 PORTFOLIO 1991 PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing deposits.................. $28,190 33.2% $28,345 35.9% $29,314 34.0%
Interest bearing deposits
Interest checking........................... 15,819 18.6% 9,224 11.7% 7,579 8.8%
Money market accounts....................... 14,499 17.1% 15,923 20.2% 22,117 25.6%
Savings accounts............................ 13,271 15.5% 11,208 14.2% 5,327 6.2%
Time deposits............................... 13,250 15.6% 14,199 18.0% 21,959 25.4%
Total time deposits...................... 56,839 66.8% 50,554 64.1% 56,982 66.0%
Total deposits........................... $85,029 100.0% $78,899 100.0% $86,296 100.0%
</TABLE>

INDEPENDENT BANK
TABLE 21
CAPITAL ADEQUACY
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Capital Adequacy at December 31 1993 1992 1991
<S> <C> <C> <C>
Tier 1 Capital.......................................................... $ 5,817 $ 5,417 $ 4,920
Tier 2 Capital.......................................................... 918 785 965
Total risk-adjusted capital........................................ $ 6,735 $ 6,202 $ 5,885
Risk-adjusted assets.................................................... $78,647 $62,715 $69,697
Fourth quarter average assets........................................... 89,503 86,878 86,973
Capital Ratios (at year end):
Tier 1 capital ratio.................................................... 7.40% 8.64% 7.06%
Total capital ratio..................................................... 8.56% 9.89% 8.44%
Tier 1 leverage ratio................................................... 6.50% 6.24% 5.66%
</TABLE>

<PAGE>
INDEPENDENT BANK
TABLE 22
INTEREST RATE SENSITIVITY ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MATURITY/RATE SENSITIVITY
TOTAL
Interest Rate Gap Analysis WITHIN WITHIN OVER 12 GRAND
At December 31, 1993 3 MONTHS 4-6 MONTHS 7-12 MONTHS 12 MONTHS MONTHS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans............................................. $ 19,470 $ 3,362 $ 6,581 $ 29,413 $24,000 $53,413
Investment securities............................. 1,518 785 6,809 9,112 16,229 25,341
Money market investments.......................... 2,500 2,500 2,500
Total earning assets........................... 23,488 4,147 13,390 41,025 40,229 81,254
Interest bearing liabilities
Interest checking................................. 15,819 15,819 15,819
Money market accounts............................. 14,499 14,499 14,499
Savings accounts.................................. 13,271 13,271 13,271
Certificates of deposit 4,036 2,249 2,247 8,532 2,605 11,137
Certificates of deposit > $100,000................ 200 503 709 1,412 701 2,113
Total interest bearing liabilities.................. 47,825 2,752 2,956 53,533 3,306 56,839
Noninterest bearing liabilities, net................ 24,415 24,415
Total liabilities.............................. 47,825 2,752 2,956 53,533 27,721 81,254
Interest rate gap................................... (24,337) 1,395 10,434 (12,508) 12,508 --
Cumulative interest rate gap........................ ($ 24,337) ($ 22,942 ) ($ 12,508) ($ 12,508) -- --
</TABLE>

<PAGE>
MARKET FOR AND DIVIDENDS PAID
ON INDEPENDENT COMMON STOCK
There is only very limited and sporadic trading of Independent Common Stock.
Independent Common Stock is not listed for trading on any registered exchange or
quoted on NASDAQ, although bids for Independent Common Stock are reported in the
"pink sheets." Accordingly, there is no established public trading market for
shares of Independent Common Stock.
Independent cannot accurately determine the sales price of the shares of its
stock. Occasionally, Independent is provided with sales price information by the
parties involved in a sale of Independent Common Stock. Based upon sales prices
provided to Independent, the range of high and low sales prices during 1992,
1993 and 1994 are set forth in the following table:
<TABLE>
<CAPTION>
CASH
DIVIDEND
HIGH LOW PER SHARE
<S> <C> <C> <C>
1994
1st Quarter...................................... $12.00 $10.50 $ .05
2nd Quarter...................................... -- -- --
3rd Quarter*..................................... -- -- --
4th Quarter (through November 1)................. -- -- --
1993
1st Quarter...................................... 10.50 10.50 --
2nd Quarter...................................... 10.50 10.50 --
3rd Quarter...................................... 10.50 10.50 --
4th Quarter...................................... 10.50 10.50 --
1992
1st Quarter...................................... 10.50 10.50 --
2nd Quarter...................................... 10.50 10.50 --
3rd Quarter...................................... 10.50 10.50 --
4th Quarter...................................... 10.50 10.50 --
</TABLE>

As of the Record Date, there were approximately 380 holders of the 1,020,000
outstanding shares of Independent Common Stock.
* On October 19, 1994, Independent's Board declared a dividend of $0.10 per
share, payable on November 21, 1994 to Independent shareholders of record as
of November 7, 1994.
44

<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF INDEPENDENT BANK
The following table sets forth certain information regarding the beneficial
ownership of Independent Common Stock as of November 7, 1994 by each of
Independent's directors and by all directors and executive officers of
Independent as a group (10 persons). To the knowledge of Independent, except as
set forth below, no other person or group of persons owns 5% or more of
Independent Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP PERCENT OF
NAME OF SHARES CLASS OWNED (1)
<S> <C> <C>
RICHARD C. BARNES(2)............................... 48,978 4.8%
Director
GARY R. ENGLISH(2)(3).............................. 18,055 1.8%
Director, President,
Chief Executive Officer
CRAIG J. GEHRING................................... 10,914 1.1%
Director
DOROTHY S. MATTS(2)................................ 60,953 6.0%
Director
LARRY C. MORGAN(2)................................. 66,565 6.5%
Director
EUGENE F. PETERS(2)(3)............................. 88,190 8.6%
Director
JOHN C. SCOTT(2)(4)................................ 47,409 4.6%
Director
ROBERT E. SHEA(2).................................. 17,779 1.7%
Director
MARIAN B. STEPHENS(2)(5)........................... 3,907 0.4%
Director
All directors and executive officers
as a group (10 persons, including
those named above)............................... 356,124 34.9%
</TABLE>

(1) Based on 1,020,000 shares of Independent Common Stock outstanding as of the
Record Date.
(2) A partner owning a one-ninth interest in Independent Associates, a Virginia
general partnership. Independent Associates is the record owner of 3,955
shares of Independent Common Stock. One-ninth of these shares (or 439 shares
per each designated person) are included in the above share ownership
figures for each designated person and eight-ninths of these shares are
included in the above share ownership figures for all directors and
executive officers as a group.
(3) This figure includes 7,238 shares of Independent Common Stock owned of
record by the Independent Bank Profit Sharing Plan and Trust. Messrs.
English and Peters are two of the trustees of this Plan, and each disclaims
beneficial ownership of such shares.
(4) This figure does not include: 7,088 shares owned of record by Mr. Scott's
wife; or 816 shares owned by each of Mr. Scott's two adult children. Mr.
Scott disclaims beneficial ownership of all such shares.
(5) This figure does not include: 18,990 shares owned of record by Dr. Stephens'
husband. Dr. Stephens disclaims beneficial ownership of all such shares.
45

<PAGE>
SUPERVISION AND REGULATION OF CRESTAR
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 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 one
year from enactment of such legislation and thereafter, bank holding companies
from any state will be able to acquire banks and bank holding companies located
in any other state. Banks also will be able to branch across state lines
effective June 1, 1997, provided certain conditions are met, including that
applicable state law must expressly permit such interstate branching.
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 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
federal law, 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.
The Federal Deposit Insurance Act ("FDIA") also provides that amounts
received from the liquidation or other resolution of any insured depository
institution by any receiver must be distributed (after payment of secured
claims) to pay the deposit liabilities of the institution prior to payment of
any other general or unsecured senior liability, subordinated liability, general
creditor or stockholder. This provision would give depositors a preference over
general and subordinated creditors and stockholders in the event a receiver is
appointed to distribute the assets of any of the Bank Subsidiaries.
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.
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of the Currency
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
46

<PAGE>
"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. The Tier 1 and total capital to
risk-weighted asset ratios of Crestar as of June 30, 1994 were 9.3% and 12.0%,
respectively, exceeding the minimums required.
In addition, each of the federal regulatory agencies has established a
minimum 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 leverage ratio
of Crestar as of June 30, 1994, was 7.5%. 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 weighed 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.
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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.
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.
As a result of a Presidential initiative, each of the federal banking
agencies, including the FDIC, has issued a notice of proposed rulemaking that
would replace the current CRA assessment system with a new evaluation system
that would rate institutions based on their actual performance (rather than
efforts) in meeting community credit needs. Crestar is currently studying the
proposal (which is expected to be substantially revised) and determining whether
the regulation, if enacted, would require changes to the CRA action plans of its
Bank Subsidiaries.
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. 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, 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 June 30, 1994, approximately 31% 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.
Current federal law also requires each of the federal banking agencies to
develop regulations addressing certain safety and soundness standards for
insured depository institutions and depository institution holding companies,
including operational and managerial standards, asset quality, earnings and
stock valuation standards, as well as compensation standards (but
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not dollar levels of compensation). Each of the federal banking agencies have
issued a joint notice of proposed rulemaking, which requested comment on the
implementation of these standards. The proposed rule sets forth general
operational and managerial standards in the areas of internal controls,
information systems and internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth and compensation, fees and
benefits. The proposal contemplates that each federal agency would determine
compliance with these standards through the examination process, and if
necessary to correct weaknesses, require an institution to file a written safety
and soundness compliance plan. Crestar has not yet determined the effect that
the proposed rule would have on their respective operations and the operations
of their depository institution subsidiaries if it is enacted substantially as
proposed.
DESCRIPTION OF CRESTAR CAPITAL STOCK
The capital stock of Crestar consists of 100,000,000 authorized shares of
Common Stock and 2,000,000 authorized shares of Preferred Stock. The shares of
Preferred Stock are issuable in series, with relative rights, preferences and
limitations of each series fixed by Crestar's Board of Directors. The following
summary does not purport to be complete and is subject in all respects to
applicable Virginia law, Crestar's Restated Articles of Incorporation and
Bylaws, and the Rights Agreement dated June 23, 1989 (described below) (the
"Rights Agreement").
COMMON STOCK
Crestar had 37,717,023 shares of Common Stock outstanding at June 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 Crestar's Board of Directors 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
non-assessable. Holders of Common Stock have no preemptive or conversion rights
and are not subject to further calls or assessments by Crestar.
In the event of the voluntary or involuntary dissolution, liquidation or
winding up of Crestar, 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 Crestar 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.
PREFERRED STOCK
Crestar's Board of Directors is authorized to designate with respect to
each new series of Preferred Stock the number of shares in each series, the
dividend rates and dates of payment, voluntary and involuntary liquidation
preferences, redemption prices, whether or not dividends shall be cumulative
and, if cumulative, the date or dates from which the same shall be cumulative,
the sinking fund provisions, if any, for redemption or purchase of shares, the
rights, if any, and the terms and conditions on which shares can be converted
into or exchanged for, or the rights to purchase, shares of any other class or
series, and the voting rights, if any. Any Preferred Stock issued will rank
prior to the Common Stock as to dividends and as to distributions in the event
of liquidation, dissolution or winding up of Crestar. The ability of Crestar's
Board of Directors to issue 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 Crestar.
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"), none of the shares
of which are currently outstanding. The Series C Preferred Stock was created in
connection with Crestar's shareholder rights plan which is described below.
RIGHTS
In 1989, pursuant to the Rights Agreement, Crestar 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
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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 Crestar, 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 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
Crestar 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 Crestar 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 ("VSCA") contains provisions governing
"Affiliated Mergers." 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 Mergers 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 Merger 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 Crestar'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 Mergers 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
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can adopt an amendment to its articles of incorporation or bylaws providing that
the Affiliated Mergers provisions shall not apply to the corporation. Crestar
has not "opted out" of the Affiliated Mergers 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 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.
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time of the Merger, Independent shareholders (except any
Independent shareholder properly electing the cash option) automatically will
become shareholders of Crestar, and their rights as shareholders will be
determined by Crestar's Articles of Incorporation and Bylaws. The following is a
summary of the material differences in the rights of shareholders of Crestar and
Independent.
CAPITALIZATION
INDEPENDENT. Independent's Articles authorize the issuance of up to
5,000,000 shares of Independent Common Stock, par value $1.00 per share, of
which 1,020,000 shares were issued and outstanding as of the Record Date, and no
shares of preferred stock.
CRESTAR. Crestar's authorized capital is set forth under "Description of
Crestar Capital Stock."
AMENDMENT OF ARTICLES OR BYLAWS
INDEPENDENT. Unless a greater vote is required by law, Independent's
Articles may be amended by the stockholders if the amendment is adopted by a
vote of the holders of more than two-thirds of the votes entitled to be cast on
the amendment.
Independent's Bylaws provide that the Board of Directors may, by a majority
vote, amend its Bylaws.
CRESTAR. As permitted by the VSCA, Crestar's Articles provide that, unless
a greater vote is required by law, by the Articles of Crestar or by a resolution
of the Board of Directors, Crestar's Articles may be amended if the amendment is
adopted by the Board of Directors and approved by a vote of the holders of a
majority of the votes entitled to be cast on the amendment by each voting group
entitled to vote thereon. The Article providing for a classified Board of
Directors and establishing criteria for removing Directors requires the
approving vote of a majority of "Disinterested Directors" and the holders of at
least two-thirds of the votes entitled to be cast on the amendment.
Crestar's Bylaws generally provide that the Board of Directors may, by a
majority vote, amend its Bylaws.
REQUIRED SHAREHOLDER VOTE FOR CERTAIN ACTIONS
INDEPENDENT. The VSCA generally requires the approval of a majority of a
corporation's Board of Directors and the holders of more than two-thirds of all
the votes entitled to be cast thereon by each voting group entitled to vote on
any plan of merger or consolidation, plan of share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business. The VSCA also specifies additional voting requirements for Affiliated
Mergers and transactions that would cause an acquiring person's voting power to
meet or exceed specified thresholds.
CRESTAR. The VSCA generally requires the approval of a majority of a
corporation's Board of Directors and the holders of more than two-thirds of all
the votes entitled to be cast thereon by each voting group entitled to vote on
any plan of merger or consolidation, plan of share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business. The VSCA also specifies additional voting requirements for Affiliated
Mergers and transactions that would cause an acquiring person's voting power to
meet or exceed specified thresholds, as discussed under "Description of Crestar
Capital Stock -- Virginia Stock Corporation Act."
None of the additional voting requirements contained in the Independent
Articles of Incorporation or the VSCA are applicable to the Merger.
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DIRECTOR NOMINATIONS
INDEPENDENT. The Bylaws of Independent do not contain any provision with
respect to any nomination for director made by a shareholder.
CRESTAR. The Bylaws of Crestar provide that any nomination for director
made by a shareholder must be made in writing to the Secretary of Crestar not
less than 15 days prior to the meeting of shareholders at which directors are to
be elected. If mailed, such notice shall be sent by certified mail, return
receipt requested, and shall be deemed to have been given when received by the
Secretary of Crestar. A shareholder's nomination for director shall set forth
(a) the name and business address of the shareholder's nominee, (b) the fact
that the nominee has consented to his name being placed in nomination, (c) the
name and address, as they appear on Crestar's books, of the shareholder making
the nomination, (d) the class and number of shares of Crestar's stock
beneficially owned by the shareholder, and (e) any material interest of the
shareholder in the proposed nomination.
DIRECTORS AND CLASSES OF DIRECTORS; VACANCIES AND REMOVAL OF DIRECTORS
INDEPENDENT. Independent's Bylaws provide that the number of Directors
shall be composed of not less than seven and no more than fifteen members, who
shall all be stockholders of record at the time of their election, and the
majority of such Directors shall be residents of Virginia and a citizen of the
United States. The term of office of each Director shall be one year, or until
his successor is elected. The President of the Company shall ex officio be a
member of the Board of Directors.
The Bylaws of Independent provide that the Board of Directors may fill all
vacancies in their own body, pursuant to Section 6-38 and 6-40 of the Code of
Virginia of 1950, as amended, to hold office until the next annual election and
until their successors are elected and qualified. The stockholders shall elect
the Board of Directors at the annual meeting for the ensuing year. The persons
receiving a plurality of votes cast shall constitute the Board of Directors for
the ensuing year.
CRESTAR. Crestar's Articles provide that the number of Directors shall be
set forth in the Bylaws, but the number of directors set forth in the Bylaws may
not be increased by more than four during any 12-month period except by the
affirmative vote of more than two-thirds of the votes entitled to be cast. The
Bylaws provide for a Board of Directors consisting of not less than five nor
more than 26 members, with the number to be fixed by the Board. The Board
currently has fixed the number of directors at 18. Crestar's Board of Directors
is divided into three classes, each as nearly equal in number as possible, with
one class being elected annually.
The Articles of Incorporation of Crestar provide that any vacancy occurring
on the Board of Directors, including a vacancy resulting from an increase in the
number of Directors, may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors. If at
the time any such vacancy is filled, any person, or any associate or affiliate
of such person (as those terms are defined in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act, or any successor rule or regulation) is
directly or indirectly the beneficial owner of 10% (or more) of outstanding
voting shares, the vacancy shall be filled by the affirmative vote of a majority
of the remaining directors in the class of directors in which the vacancy has
occurred. Directors so chosen shall hold office for a term expiring at the next
following annual meeting of shareholders at which directors are elected. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Subject to the rights of the holders of preferred stock then outstanding,
any director may be removed, with cause, only by the affirmative vote of the
holders of at least two-thirds of outstanding voting shares.
ANTI-TAKEOVER PROVISIONS
For a description of certain provisions of the VSCA, applicable to both
Crestar and Independent, which may be deemed to have an anti-takeover effect,
see "Description of Crestar Capital Stock -- Virginia Stock Corporation Act."
PREEMPTIVE RIGHTS
INDEPENDENT. Under Virginia law, common stockholders have the preemptive
right to acquire proportional amounts of a corporation's unissued common stock
in certain circumstances, unless preemptive rights are limited or denied in the
articles of incorporation. The articles of incorporation of Independent do not
limit or deny such rights.
CRESTAR. The shareholders of Crestar do not have preemptive rights. Thus,
if additional shares of Crestar Common Stock are issued, holders of such stock,
to the extent they do not participate in such additional issuance of shares,
would own proportionately smaller interests in a larger amount of outstanding
capital stock.
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ASSESSMENT
All shares of Crestar Common Stock presently issued are, and those to be
issued pursuant to the Agreement will be, fully paid and nonassessable. All
outstanding shares of Independent Common Stock are deemed to be fully paid and
nonassessable.
CONVERSION; REDEMPTION; SINKING FUND
Neither Crestar Common Stock nor Independent Common Stock is convertible,
redeemable or entitled to any sinking fund.
LIQUIDATION RIGHTS
INDEPENDENT. The VSCA generally provides that a corporation's board of
directors may propose dissolution for submission to shareholders and that to be
authorized dissolution must be approved by the holders of more than two-thirds
of all votes entitled to be cast on the proposal, unless the articles of
incorporation of the corporation require a greater or lesser vote. There are no
provisions in the Articles of Incorporation of Independent which would modify
the statutory requirements for dissolution under the VSCA.
CRESTAR. The VSCA generally provides that a corporation's board of
directors may propose dissolution for submission to shareholders and that to be
authorized dissolution must be approved by the holders of more than two-thirds
of all votes entitled to be cast on the proposal, unless the articles of
incorporation of the corporation require a greater or lesser vote. There are no
provisions in the Articles of Incorporation of Crestar which would modify the
statutory requirements for dissolution under the VSCA.
DIVIDENDS AND OTHER DISTRIBUTIONS
INDEPENDENT. The VSCA generally provides that a corporation may make
distributions to its shareholders unless, after giving effect to the
distribution, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise, which in the case of Independent
they do not) the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
CRESTAR. The VSCA generally provides that a corporation may make
distributions to its shareholders unless, after giving effect to the
distribution, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise, which in the case of Independent and
Crestar they do not) the amount that would be needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
In addition to the limitations set forth in the VSCA, there are various
regulatory requirements which are applicable to distributions by bank holding
companies such as Crestar. For a description of the regulatory limitations on
distributions by Crestar, see "Supervision and Regulation -- Limits on Dividends
and Other Payments."
SPECIAL MEETINGS OF SHAREHOLDERS
INDEPENDENT. The Bylaws of Independent provide that special meetings of
shareholders for any purpose or purposes may be called by a majority of the
Board of Directors.
CRESTAR. The Bylaws of Crestar provide that special meetings of the
shareholders for any purpose or purposes may be called at any time by the
Chairman of the Board of Directors, by the President, or by a majority of the
Board of Directors.
INDEMNIFICATION
INDEPENDENT. The Articles of Incorporation of Independent do not contain
any provision with respect to indemnification. The VSCA, however, provides that
a corporation shall indemnify a director who entirely prevails in the defense of
any proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with the
proceeding.
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CRESTAR. The Articles of Incorporation of Crestar provide that to the full
extent permitted by the VSCA and any other applicable law, Crestar shall
indemnify a director or officer of Crestar who is or was a party to any
proceeding by reason of the fact that he is or was such a director or officer or
is or was serving at the request of the corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The Board of Directors is
empowered, by majority vote of a quorum of disinterested directors, to contract
in advance to indemnify any director or officer.
SHAREHOLDER PROPOSALS
INDEPENDENT. The Bylaws of Independent provide that at any special meeting
of shareholders of Independent, only that business that is specified in the
notice of the meeting, which shall be given by the Secretary not less than ten
days before the holding of such meeting, shall be transacted at such special
meeting, except upon unanimous consent of all stockholders present.
CRESTAR. The Bylaws of Crestar provide that at any meeting of shareholders
of Crestar, only that business that is properly brought before the meeting may
be presented to and acted upon by the shareholders. To be properly brought
before the meeting, business must be brought (a) by or at the direction of the
Board of Directors or (b) by a shareholder who has given written notice of
business he expects to bring before the meeting to the Secretary of Crestar not
less than 15 days prior to the meeting. If mailed, such notice shall be sent by
certified mail, return receipt requested, and shall be deemed to have been given
when received by the Secretary of Crestar. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the meeting (a) a brief description of the business to be brought before
the meeting and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on Crestar's books, of the shareholder
proposing such business, (c) the class and number of shares of Crestar's stock
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. No business shall be conducted at a meeting of
shareholders except in accordance with the procedures set forth in Crestar's
Bylaws.
SHAREHOLDER INSPECTION RIGHTS; SHAREHOLDER LISTS
INDEPENDENT AND CRESTAR. The Articles of Incorporation and Bylaws of
Crestar and Independent do not contain any provisions which govern shareholder
inspection rights or shareholder lists. Under the VSCA, the shareholder of a
Virginia corporation is entitled to inspect and copy certain books and records
of the corporation, including a list of shareholders, if (i) the shareholder has
been a shareholder of record for at least six months immediately preceding his
or her written demand or is the holder of at least 5% of the corporation's
outstanding shares, (ii) the shareholder's demand is made in good faith and for
a proper purpose, (iii) the shareholder describes with reasonable particularity
the purpose of the request and the records desired to be inspected and (iv) the
records are directly connected with the stated purpose. The VSCA also provides
that a corporation shall make available for inspection by any shareholder during
usual business hours, at least 10 days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting.
SHAREHOLDER RIGHTS PLAN
INDEPENDENT. Independent does not have a shareholders' rights plan.
CRESTAR. For a description of a shareholder rights agreement which has been
adopted by Crestar, see "Description of Crestar Capital Stock -- Rights." Each
Independent shareholder who elects to receive shares of Crestar Common Stock in
exchange for Independent Common Stock will receive one Right for each share of
Crestar Common Stock received.
RESALE OF CRESTAR COMMON STOCK
The Crestar Common Stock has been registered under the 1933 Act, thereby
allowing such shares to be traded freely and without restriction by those
holders of Independent Common Stock who receive such shares following
consummation of the Merger and who are not deemed to be "affiliates" (as defined
under the 1933 Act, but generally including certain directors, executive
officers and 10% or greater shareholders) of Independent or Crestar. The
Agreement provides that each holder of Independent Common Stock who is deemed by
Independent to be an affiliate of it will enter into an agreement with Crestar
prior to the Effective Time of the Merger providing, among other things, that
such affiliate will not transfer any Crestar Common Stock received by such
holder in the Merger except in compliance with the 1933 Act. This Proxy
Statement/Prospectus does not cover any resales of Crestar Common Stock received
by affiliates of Independent.
54

<PAGE>
EXPERTS
The consolidated financial statements of Crestar Financial Corporation and
Subsidiaries incorporated in this Proxy Statement/Prospectus by reference to
Crestar's Annual Report on Form 10-K for the year ended December 31, 1993 and
Crestar's Current Report on Form 8-K dated March 10, 1994 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 financial statements of Independent as of December 31, 1993 and 1992,
and for each of the three years in the period ended December 31, 1993, included
in this Proxy Statement/Prospectus have been audited by Homes, Lowry, Horn &
Johnson Ltd., independent auditors, as stated in their report appearing herein,
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
LEGAL OPINION
The legality of the Crestar Common Stock to be issued in the Merger will be
passed on for Crestar by Hunton & Williams, Richmond, Virginia. Gordon F.
Rainey, Jr., a partner in Hunton & Williams, is a director of Crestar.
A condition to consummation of the Merger is the delivery by Hunton &
Williams, counsel for Crestar, of an opinion to Crestar concerning certain
federal income tax consequences of the Merger. See "The Merger -- Certain
Federal Income Tax Consequences."
55

<PAGE>
INDEX TO FINANCIAL STATEMENTS OF INDEPENDENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................................... F-2
Balance Sheets as of December 31, 1993 and 1992........................................................................ F-3
Statements of Income for the Years Ended December 31, 1993 and 1992.................................................... F-4
Statements of Stockholders' Equity for the Years Ended December 31, 1993 and 1992...................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1993 and 1992................................................ F-6
Notes to Financial Statements.......................................................................................... F-7
Independent Auditors' Report........................................................................................... F-15
Balance Sheets as of December 31, 1992 and 1991........................................................................ F-16
Statements of Income for the Years Ended December 31, 1992 and 1991.................................................... F-17
Statements of Stockholders Equity for the Years Ended December 31, 1992 and 1991....................................... F-18
Statements of Cash Flows for the Years Ended 1992 and 1991............................................................. F-19
Notes to Financial Statements.......................................................................................... F-20
Balance Sheets as of June 30, 1994 and 1993 (unaudited)................................................................ F-27
Statements of Income for the Six Months Ended June 30, 1994 and 1993 (unaudited)....................................... F-28
Statements of Stockholders Equity for the Six Months Ended June 30, 1994 and 1993 (unaudited).......................... F-29
Statements of Cash Flows for the Six Months Ended June 30, 1994 and 1993 (unaudited)................................... F-30
Notes to Financial Statements (unaudited).............................................................................. F-31
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Independent Bank
Manassas, VA
We have audited the accompanying balance sheets of Independent Bank as of
December 31, 1993 and 1992, and the related statements of income, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Independent Bank as of December
31, 1993 and 1992, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
HOMES, LOWRY, HORN & JOHNSON, LTD.
January 17, 1994
F-2

<PAGE>
INDEPENDENT BANK
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
ASSETS
Cash and due from banks........................................................................ $ 4,952,469 $ 5,500,097
Federal funds sold............................................................................. 2,500,000 1,700,000
Total cash and cash equivalents........................................................... $ 7,452,469 $ 7,200,097
Investment securities (approximate market value 1993 $25,221,448;
1992 $13,526,273) (Note 2)................................................................... 25,341,323 13,631,572
Loans, net of unearned discounts and deferred fees............................................. 53,412,596 58,526,640
Less: Allowance for loan losses................................................................ (917,815) (903,577)
Loans, net (Notes 3, 4, and 10)......................................................... 52,494,781 57,623,063
Other real estate (Note 5)..................................................................... 2,847,319 3,539,993
Bank premises and equipment, net (Note 6)...................................................... 1,896,087 1,522,487
Accrued income receivable...................................................................... 424,563 476,467
Prepaid expenses and other assets.............................................................. 401,142 271,987
Deferred income tax charges (Note 8)........................................................... 95,302 125,660
Total assets............................................................................ $90,952,986 $84,391,326
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits (Notes 7 and 10):
Demand.................................................................................... $28,189,933 $28,344,591
NOW....................................................................................... 9,015,044 9,224,395
Interest-bearing transaction accounts..................................................... 6,803,863 --
Savings and money market.................................................................. 31,848,211 31,206,034
Time...................................................................................... 9,172,272 10,124,456
Total deposits.......................................................................... $85,029,323 $78,899,476
Accrued expenses and other liabilities....................................................... 106,878 75,330
$85,136,201 $78,974,806
COMMITMENTS AND CONTINGENCIES (Notes 9, 14, and 15)
STOCKHOLDERS' EQUITY
Common stock, par value $1; authorized 5,000,000 shares;
issued 1,020,000 shares (Notes 11 and 12)................................................. $ 1,020,000 $ 1,020,000
Surplus (Note 12)............................................................................ 1,972,930 1,972,930
Retained earnings............................................................................ 2,823,855 2,423,590
Total stockholders' equity.............................................................. $ 5,816,785 $ 5,416,520
Total liabilities and stockholders' equity.............................................. $90,952,986 $84,391,326
</TABLE>

See Notes to Financial Statements.
F-3

<PAGE>
INDEPENDENT BANK
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Interest income:
Interest and fees on loans...................................................................... $5,174,055 $5,919,054
Interest and federal funds sold................................................................. 107,797 265,372
Interest on investment securities............................................................... 750,282 466,747
$6,032,134 $6,651,173
Interest expense:
Interest on deposits............................................................................ 1,558,632 2,321,315
Net interest income........................................................................ $4,473,502 $4,329,858
Provisions for possible loan losses (Note 4)...................................................... 740,000 930,000
Net interest income after provision for possible loan losses............................... $3,733,502 $3,399,858
Non-interest income:
Service fees.................................................................................... $1,340,010 $1,255,583
Securities income (Note 2)...................................................................... 68,163 245,717
$1,408,173 $1,501,300
Non-interest expenses:
Salaries and employee benefits (Note 13)........................................................ $1,947,876 $1,970,720
Occupancy expenses (Note 9)..................................................................... 421,847 386,706
Equipment rentals, depreciation and maintenance................................................. 399,232 391,359
Other operating expenses........................................................................ 1,343,227 1,297,072
Other real estate expenses...................................................................... 415,755 105,768
$4,527,937 $4,151,625
Income before taxes on income................................................................... $ 613,738 $ 749,533
Income tax expense (Note 8)....................................................................... 213,473 252,993
Net income................................................................................. $ 400,265 $ 496,540
Net income per share....................................................................... $ .39 $ .49
</TABLE>

See Notes to Financial Statements.
F-4

<PAGE>
INDEPENDENT BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK SURPLUS EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance, December 31, 1991............................... $1,000,000 $1,792,930 $2,127,050 $4,919,980
2% stock dividend...................................... 20,000 180,000 (200,000) --
Net income............................................. -- -- 496,540 496,540
Balance, December 31, 1992............................... $1,020,000 $1,972,930 $2,423,590 $5,416,520
Net income............................................. -- -- 400,265 400,265
Balance, December 31, 1993............................... $1,020,000 $1,972,930 $2,823,855 $5,816,785
</TABLE>

See Notes to Financial Statements.
F-5

<PAGE>
INDEPENDENT BANK
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received........................................................................... $ 6,084,038 $ 6,684,155
Fees received............................................................................... 1,331,146 1,252,758
Interest paid............................................................................... (1,570,367) (2,411,587)
Cash paid to suppliers and employees........................................................ (4,216,455) (4,590,640)
Income taxes paid........................................................................... (157,584) (14,280)
Net cash provided by operating activities.............................................. $ 1,470,778 $ 920,406
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of investment securities.................................. $ 5,012,339 $ 18,107,188
Purchase of investment securities........................................................... (16,653,927) (27,806,849)
Net decrease in customer loans.............................................................. 4,172,541 4,708,522
Net (increase) decrease in credit card loans................................................ 224,605 (157,108)
Purchase of property and equipment.......................................................... (103,811) (24,695)
Net cash used in investing activities.................................................. $ (7,348,253) $ (5,172,942)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, savings and time deposits................................ $ 6,129,847 $ (7,396,139)
Net increase (decrease) in cash and cash equivalents........................................ $ 252,372 $(11,648,675)
Cash and cash equivalents at beginning of year.............................................. 7,200,097 18,848,772
Cash and cash equivalents at end of year.................................................... $ 7,452,469 $ 7,200,097
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income.................................................................................. $ 400,265 $ 496,540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation............................................................................. 205,211 222,770
Provision for possible loan losses....................................................... 740,000 930,000
Decrease in deferred income tax charges.................................................. 30,358 18,107
Gain on sale of investment securities.................................................... (68,163) (245,717)
Change in assets and liabilities:
Decrease in accrued income receivable.................................................. 51,904 32,982
Increase (decrease) in deferred loan fees.............................................. (8,864) 2,825
Increase (decrease) in accounts payable and accrued expenses........................... 12,875 (127,060)
Increase in income taxes payable....................................................... 18,674 --
Decrease in income taxes receivable.................................................... 6,857 220,606
Other prepaids, deferrals and accruals, net............................................ 81,661 (630,647)
Net cash provided by operating activities........................................... $ 1,470,778 $ 920,406
</TABLE>

See Notes to Financial Statements.
F-6

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS:
The accounts are maintained on the accrual basis in accordance with
generally accepted accounting principles.
PRESENTATION OF CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, highly liquid debt investments with an
original maturity date of three months or less, and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods. Cash flows
from loans, demand savings and time deposits are reported net. Treasury bills,
regardless of maturity, are shown as investments. There were no treasury bills
at December 31, 1993 or 1992.
INVESTMENT SECURITIES:
Investment securities are stated at cost adjusted for amortization of
premiums and accretion of discounts, which are recognized as adjustments to
interest income. Gains or losses on disposition are based on the net proceeds
and the adjusted carrying amount of the securities sold, using the specific
identification method.
LOANS AND LOAN FEES:
The reserve for possible loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably anticipated. The reserve
is increased by provisions charged to operating expense and reduced by net
charge-offs. The bank makes continuous credit reviews of the loan portfolio and
considers current economic conditions, historical loan loss experience, and
other factors in determining the adequacy of the reserve balance.
Unearned interest on discounted loans is amortized to income over the life
of the loans, using the sum-of-digits formula. For all other loans, interest is
accrued daily on the outstanding balances. Generally, loans are placed in
non-accrual status when they become 90 days past due, at which time previously
accrued but uncollected interest is reversed.
Loan origination costs are amortized on a straight-line basis over the
anticipated life of the loan. Loan origination fees are amortized on a
straight-line basis or the interest method, depending upon the loan
classification.
Construction loans are stated at the amount of unpaid principal, reduced by
unearned discount and fees.
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment is computed principally by
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings.................................................................. 20-35
Furniture and equipment.................................................... 3-10
Computer software.......................................................... 3- 5
Vehicles................................................................... 3- 4
</TABLE>

Improvements to leased property are amortized over the lesser of the life
of the lease or life of the improvements.
Maintenance and repairs of property and equipment are charged to operations
and major improvements are capitalized. Upon retirement, sale or other
disposition of property and equipment, the cost and accumulated depreciation are
eliminated from the accounts and gain or loss is included in operations.
OTHER REAL ESTATE:
Other real estate consists of real estate held for resale which was
acquired through foreclosure on loans secured by real estate. Other real estate
is carried at the lower of cost or appraised market value. Write-downs to market
value at the date of foreclosure are charged to the allowance for loan losses.
Subsequent declines in market value are charged to expense.
F-7

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
EARNINGS PER COMMON SHARE:
Earnings per common share were computed based on the assumption that all
stock dividends issued or declared for the periods covered were outstanding for
the entire period.
INCOME TAXES:
Deferred income taxes are provided on the difference between the financial
reporting and the income tax reporting for depreciation expense, reserve for
loan losses and cash fees.
NOTE 2. INVESTMENT SECURITIES
Investment securities are carried at amortized cost.
The amortized cost, market value, and face value maturities of the
investment securities are as follows:
<TABLE>
<CAPTION>
U.S. U.S. OTHER
TREASURY AGENCIES SECURITIES TOTAL
<S> <C> <C> <C> <C>
December 31, 1993:
Amortized cost..................................................... $7,477,641 $17,852,632 $ 11,050 $25,341,323
Gross unrealized gains............................................. 12,533 10,313 -- 22,846
Gross unrealized losses............................................ (8,003) (134,718) -- (142,721)
Market value....................................................... $7,482,171 $17,728,227 $ 11,050 $25,221,448
December 31, 1992:
Amortized cost..................................................... $5,749,326 $ 7,781,718 $ 100,528 $13,631,572
Gross unrealized gains............................................. 50,503 -- 1,217 51,720
Gross unrealized losses............................................ (25,142) (131,877) -- (157,019)
Market value....................................................... $5,774,687 $ 7,649,841 $ 101,745 $13,526,273
</TABLE>

The amortized cost and estimated market value of debt securities at
December 31, 1993, by contractual maturity, are shown below. Expected maturities
will significantly differ from contractual maturities ecause borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties:
<TABLE>
<CAPTION>
U.S. U.S. OTHER
TREASURY AGENCIES SECURITIES TOTAL
<S> <C> <C> <C> <C>
Maturity schedule (face value basis):
Within one year.................................................... $ 300,000 $ -- $ 11,050 $ 311,050
1 to 3 years....................................................... 6,500,000 -- -- 6,500,000
3 to 5 years....................................................... 500,000 2,799,896 -- 3,299,896
5 to 10 years...................................................... -- 1,889,951 -- 1,889,951
Over 10 years...................................................... -- 12,695,846 -- 12,695,846
Total face value................................................ $7,300,000 $17,385,693 $ 11,050 $24,696,743
</TABLE>

Investment securities with par values of $3,500,000 and $500,000 at
December 31, 1993 and 1992, respectively, were pledged as collateral.
Proceeds from sales and maturities of debt securities during 1993 and 1992
were $5,012,339 and $18,107,188, respectively. Gross gains of $68,374 and gross
losses of $211 were realized in 1993. Gross gains of $247,845 and gross losses
of $2,128 were realized in 1992.
F-8

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. LOANS
The composition of the net loans is as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Commercial............................................................................... $10,552,325 $10,968,693
Real estate -- mortgage.................................................................. 35,625,702 40,751,114
Real estate -- construction.............................................................. 1,458,786 563,160
Installment to individuals............................................................... 5,285,304 5,835,113
Other loans.............................................................................. 655,641 636,602
Total loans......................................................................... $53,577,758 $58,754,682
Less:
Unearned discount...................................................................... $ 151,630 $ 223,373
Deferred loan fees, net................................................................ 13,532 4,669
$ 165,162 $ 228,042
Loans, net of unearned discount and deferred fees........................................ $53,412,596 $58,526,640
Less:
Allowance for loan losses.............................................................. $ 917,815 $ 903,577
Loans, net............................................................................... $52,494,781 $57,623,063
</TABLE>

Loans on which the accrual of interest has been discontinued or reduced
amounted to $2,748,980 at December 31, 1993. Approximately 46 percent, or
$1,275,000, of the non-accrual loans related to a piece of real estate in the
local community. The bank has a first and second deed of trust on the property;
however, action by the bank has been delayed because of bankruptcy proceedings
related to the property. If interest on non-accrual loans had been accrued, such
income would have approximated $362,378 for 1993. Interest income on those
loans, which is recorded only when received, amounted to $16,145 for 1993.
NOTE 4. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Allowance for Possible Loan Losses represents management's judgment as
to the amount necessary to be transferred to the allowance to bring it to a
level considered adequate in relation to the risk of future losses in the loan
portfolio. While it is the bank's policy to write off in the current period
those loans or portions of loans on which a loss is considered probable, there
continues to exist the risk of future losses which cannot be quantified
precisely or attributed to specific loans. In assessing the adequacy of the
allowance for loan losses, management relies on its ongoing review of the loan
portfolio, general economic conditions, and specific client composition within
the loan portfolio. This review takes into consideration the judgments not only
of the responsible lending officers and senior management, but in addition, bank
regulatory agencies that review the loan portfolio as a part of the regular bank
examination process.
Changes in the Allowance for Possible Loan Losses are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Balance, beginning.......................................................................... $ 903,577 $ 966,607
Provision for possible loan losses........................................................ 740,000 930,000
Loans charged off......................................................................... $(851,552) $(1,206,762)
Recovery of amounts charged off........................................................... 125,790 213,732
Net loans charged off..................................................................... $(725,762) $ (993,030)
Balance, ending............................................................................. $ 917,815 $ 903,577
</TABLE>

F-9

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. OTHER REAL ESTATE AND NONCASH INVESTING ACTIVITY
Real estate acquired through foreclosure amounted to $2,847,319 and
$3,539,993 at December 31, 1993 and 1992. During the year ended December 31,
1993, $415,755 was charged to expense for other real estate activities,
including $121,353 for subsequent declines in market value. The bank is in the
process of foreclosing on property amounting to $85,000. This property will then
be transferred into real estate acquired through foreclosure. This $85,000 is
included in the $2,847,319.
The loans which relate to other real estate for which accrual of interest
has been discontinued totaled $3,442,022 at the date of foreclosure.
In addition, the bank transferred land acquired through foreclosure to bank
property and equipment. The land was valued at $475,000. The bank intends to use
this land for a future bank site.
NOTE 6. BANK PREMISES AND EQUIPMENT, NET
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land........................................................................................ $ 785,611 $ 310,611
Buildings................................................................................... 1,107,867 1,107,867
Leasehold improvements...................................................................... 39,151 39,151
Furniture and equipment..................................................................... 1,652,022 1,578,450
Computer software........................................................................... 151,137 120,899
Vehicles.................................................................................... 52,321 52,321
$3,788,109 $3,209,299
Less accumulated depreciation............................................................... 1,892,022 1,686,812
Bank premises and equipment, net............................................................ $1,896,087 $1,522,487
</TABLE>

NOTE 7. DEPOSITS
The composition of the deposits by their source is as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Demand deposits of individuals, partnerships and corporations............................ $42,352,746 $36,782,641
Time and savings deposits of individuals, partnerships and corporations.................. 41,026,171 41,330,490
Certified and official checks............................................................ 1,650,406 786,345
$85,029,323 $78,899,476
</TABLE>

The bank held time deposits in denominations of $100,000 or more totaling
approximately $2,113,017 and $1,431,086 at December 31, 1993 and 1992,
respectively.
NOTE 8. CORPORATE INCOME TAX EXPENSE
During the year ended December 31, 1992, the company adopted FASB Statement
No. 109, Accounting for Income Taxes.
F-10

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. CORPORATE INCOME TAX EXPENSE -- Continued
The company's total deferred tax liabilities and deferred tax assets at
December 31, 1993 and 1992, are as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Total deferred tax asset........................................................................ $187,830 $211,896
Less valuation allowance........................................................................ -- --
$187,830 $211,896
Total deferred tax liabilities.................................................................. (92,528) (86,236)
Net deferred tax asset.......................................................................... $ 95,302 $125,660
</TABLE>

A reconciliation between the amount of reported Federal income tax expense
and the amount computed by multiplying the applicable statutory Federal income
tax rate is as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Income before income taxes...................................................................... $613,737 $749,533
Applicable statutory income tax rate............................................................ 34% 34%
Computed "expected" Federal tax expense......................................................... $208,671 $254,841
Adjustments to Federal income tax resulting from:
Tax-exempt income............................................................................. (959) (2,781)
Other......................................................................................... 5,761 933
Provision for Federal income taxes.............................................................. $213,473 $252,993
</TABLE>

Income tax expense is composed of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Current................................ $183,115 $234,886
Deferred............................... 30,358 18,107
$213,473 $252,993
</TABLE>

The deferred tax provisions for 1993 and 1992 are applicable to the
following items:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Difference between the depreciation methods used for book and income tax purposes................ $ 2,768 $ 3,296
Difference between loan loss provision charged to operating expense and the bad debt deduction
taken for income tax purposes.................................................................. 22,159 (21,302)
Other............................................................................................ 5,431 36,113
$30,358 $ 18,107
</TABLE>

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. LEASE COMMITMENTS -- Continued
The total minimum future rental commitment at December 31, 1993, under the
leases mentioned above is $4,313,854, which is due as follows:
<TABLE>
<S> <C>
For the year ended December 31, 1994........................................................... $ 227,501
1995......................................................... 227,501
1996......................................................... 227,501
1997......................................................... 209,501
1998......................................................... 209,501
January 1, 1999 through April 30, 2014.......................................................... 3,212,349
$4,313,854
</TABLE>

The total minimum future rental commitment due to related parties at
December 31, 1993, under the leases mentioned above is $4,259,854.
The total rental expense included in the income statements for the years
ended December 31, 1993 and 1992, is $211,295 and $173,965, respectively.
The total rental expense paid to related parties included in the income
statements for the years ended December 31, 1993 and 1992, is $190,847 and
$155,965, respectively.
NOTE 10. TRANSACTIONS WITH DIRECTORS AND OFFICERS
The bank has banking transactions in the ordinary course of business with
directors, principal officers, and their affiliated companies (commonly referred
to as related parties), on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
others.
Aggregate loan transactions with related parties were as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Balance, beginning.......................................................................... $1,805,934 $1,788,550
New loans................................................................................. 416,832 781,265
Repayments................................................................................ (960,484) (763,881)
Balance, ending............................................................................. $1,262,282 $1,805,934
</TABLE>

Also, these related parties had deposits with the bank totaling $1,715,458
and $694,087 at December 31, 1993 and 1992, respectively.
See Note 9 for a summary of a related party lease agreement.
NOTE 11. STOCK SALES FOR THE LAST TWO YEARS
The bank's stock is not actively traded. The small amount of stock sales
which have occurred during the last two years had a price range as follows:
<TABLE>
<CAPTION>
DATED LOW PRICE HIGH PRICE
<S> <C> <C>
1/1/92-12/31/92 $ 10.50 $10.50
1/1/93-12/31/93 10.50 10.50
</TABLE>

The source of information for the prices was direct sales of stock known by
Independent Bank.
F-12

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. CAPITAL ACCOUNTS
State banking laws restrict the availability of surplus for the payment of
dividends. At December 31, 1993, $204,000 was so restricted. In addition, the
Bureau of Financial Institutions and the FDIC had restricted $1,972,930 of
surplus at December 31, 1992.
Banking regulations also require the bank to maintain certain minimum
capital levels in relation to bank assets. At December 31, 1993, regulations
require a ratio of capital to risk-weighted assets of 8.00 percent. The bank's
capital, as defined by the regulations, was 8.56 percent of risk-weighted
assets. In addition, the bank is expected to maintain a leverage ratio of at
least 6.00 percent. At December 31, 1993, the bank's leverage ratio was 6.50
percent.
On December 18, 1991, the Board of Directors declared a 2 percent stock
dividend for stockholders of record on December 31, 1991, payable February 21,
1992. This resulted in an issuance of 20,000 shares.
NOTE 13. PROFIT-SHARING PLAN
The bank has a profit-sharing plan for those employees who meet the
eligibility requirements set forth in the plan. The amount of the contribution
to the plan is at the discretion of the bank's Board of Directors. The bank
contributed $21,000 and $0 to the plan for the years ended December 31, 1993 and
1992, respectively.
NOTE 14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financial needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
position. The contract or notional amounts of those instruments reflect the
extent of involvement the bank has in particular classes of financial
instruments.
The bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
1993 1992
<S> <C> <C>
Financial instruments whose contract amounts represent credit
risk:
Commitments to extend credit................................... $ 9,823,783 $10,046,723
Standby letters of credit...................................... 502,995 508,799
$10,326,778 $10,555,522
</TABLE>

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK -- Continued
percent; the average amount collateralized is 53.2 percent. The extent of
collateral held for those commitments at December 1992, varies from 0 percent to
100 percent; the average amount collateralized was 51.0 percent.
NOTE 15. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
Most of the bank's business activity is with customers located within the
metropolitan area, principally in Manassas and Woodbridge, Virginia.
Although the portfolio is well diversified among industries, a substantial
portion of its debtors' ability to honor their contracts is dependent upon the
employment and economic trends of the regional Northern Virginia economy.
Generally, the loans are secured by assets or stock. The loans are expected to
be repaid from cash flow or proceeds from the sale of selected assets of the
borrowers. The bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the company upon
extension of credit is based on management's credit evaluation of the
counter-party. Collateral held varies but may include cash, securities, accounts
receivable, inventory, property, plant, and equipment, and income-producing
commercial properties and residential properties.
NOTE 16. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments" (SFAS 107). SFAS 107 extends existing fair value disclosure
practices for some instruments by requiring all entities to disclose the fair
value of financial instruments, both assets and liabilities recognized and not
recognized in the balance sheets, for which it is practicable to estimate fair
value, for annual periods ending after December 15, 1992, except for entities
with less than $150 million in total assets, for which the effective date is for
annual periods ending after December 15, 1995. The company plans to adopt the
provisions of SFAS No. 107 in 1995.
The Financial Accounting Standards Board has also issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 is effective for years
beginning after December 15, 1993. SFAS 115 requires entities to account for, at
fair value, marketable equity securities and most marketable debt securities,
except those which the bank has the intent and ability to hold to maturity. The
effect of adopting SFAS 115 has not been determined.
F-14

<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Independent Bank
Manassas, VA
We have audited the accompanying balance sheets of Independent Bank as of
December 31, 1992 and 1991, and the related statements of income, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Independent Bank as of
December 31, 1992 and 1991, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
HOMES, LOWRY, HORN & JOHNSON, LTD.
January 16, 1993
F-15

<PAGE>
INDEPENDENT BANK
BALANCE SHEETS
DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
ASSETS
Cash and due from banks:
Non-interest bearing deposits and cash....................................................... $ 5,401,760 $ 6,896,279
Interest bearing deposits.................................................................... 98,337 152,493
Federal funds sold............................................................................. 1,700,000 11,800,000
Total cash and cash equivalents......................................................... $ 7,200,097 $18,848,772
Investment securities (approximate market value 1992 $13,526,273; 1991 $3,705,406) (Note 2):
U.S. Government agencies and corporations.................................................... 13,531,044 3,484,284
States and political subdivisions............................................................ 100,528 201,910
Loans, net (Notes 3, 4, and 10)................................................................ 57,623,063 63,107,302
Bank premises and equipment, net (Note 5)...................................................... 1,522,487 1,723,778
Accrued income receivable...................................................................... 476,467 509,449
Prepaid expenses and other assets.............................................................. 271,987 558,192
Deferred income tax charges (Note 7)........................................................... 125,660 143,767
Other real estate (Note 15).................................................................... 3,539,993 2,840,531
Total assets............................................................................ $84,391,326 $91,417,985
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits (Notes 6, 9, and 10):
Demand.................................................................................... $28,344,591 $29,314,224
Now....................................................................................... 9,224,395 7,578,461
Savings and money market.................................................................. 31,206,034 31,820,298
Time...................................................................................... 10,124,456 17,582,632
Total deposits.......................................................................... $78,899,476 $86,295,615
Accrued expenses and other liabilities....................................................... 75,330 202,390
$78,974,806 $86,498,005
COMMITMENTS AND CONTINGENCIES (Notes 8, 16 and 17)
STOCKHOLDERS' EQUITY:
Common stock, par value $1; authorized 5,000,000 shares; issued 1,020,000 (Notes 11 and 13).. $ 1,020,000 $ 1,000,000
Surplus (Note 12)............................................................................ 1,972,930 1,792,930
Retained earnings............................................................................ 2,423,590 2,127,050
Total stockholders' equity.............................................................. $ 5,416,520 $ 4,919,980
Total liabilities and stockholders' equity.............................................. $84,391,326 $91,417,985
</TABLE>

See Notes to Financial Statements.
F-16

<PAGE>
INDEPENDENT BANK
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Interest income:
Interest and fees on loans...................................................................... $5,919,054 $6,847,316
Interest on Federal funds sold.................................................................. 265,372 308,782
Interest on investment securities:
U.S. Government agencies and corporations.................................................... 458,567 159,255
States and political subdivisions............................................................ 8,180 18,244
$6,651,173 $7,333,597
Interest expense:
Interest on deposits............................................................................ 2,321,315 3,548,842
Net interest income.......................................................................... $4,329,858 $3,784,755
Provision for possible loan losses (Note 4)....................................................... 930,000 1,100,000
Net interest income after provision for possible loan losses................................. $3,399,858 $2,684,755
Other income:
Service fees.................................................................................... 1,255,583 989,667
Securities income (Notes 2 and 7)............................................................... 245,717 --
$4,901,158 $3,674,422
Other expenses:
Salaries and employee benefits (Note 14)........................................................ $1,970,720 $2,046,524
Occupancy expenses (Note 8)..................................................................... 386,706 375,972
Equipment rentals, depreciation and maintenance................................................. 391,359 407,132
Other operating expenses........................................................................ 1,402,840 1,366,865
$4,151,625 $4,196,493
Income (loss) before taxes on income....................................................... $ 749,533 $ (522,071)
Federal income taxes (credits) (Note 7):
Current......................................................................................... $ 234,886 $ (17,463)
Deferred........................................................................................ 18,107 (181,758)
$ 252,993 $ (199,221)
Net income (loss).......................................................................... $ 496,540 $ (322,850)
Net income (loss) per share................................................................ $ .49 $ (.32)
</TABLE>

See Notes to Financial Statements.
F-17

<PAGE>
INDEPENDENT BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK SURPLUS EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance, December 31, 1990........................................... $1,000,000 $1,792,930 $2,449,900 $5,242,830
Net loss........................................................... -- -- (322,850) (322,850)
Balance, December 31, 1991........................................... $1,000,000 $1,792,930 $2,127,050 $4,919,980
2% stock dividend.................................................. 20,000 180,000 (200,000) --
Net income......................................................... -- -- 496,540 496,540
Balance, December 31, 1992........................................... $1,020,000 $1,972,930 $2,423,590 $5,416,520
</TABLE>

See Notes to Financial Statements.
F-18

<PAGE>
INDEPENDENT BANK
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received............................................................................ $ 6,684,155 $ 7,444,691
Fees received................................................................................ 1,252,758 972,378
Interest paid................................................................................ (2,411,587) (3,604,743)
Cash paid to suppliers and employees......................................................... (4,950,640) (3,988,250)
Income taxes paid............................................................................ (14,280) (190,942)
Net cash provided by operating activities............................................... $ 920,406 $ 633,134
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of investment securities................................... $ 18,107,188 $ 7,000,000
Purchase of investment securities............................................................ (27,806,849) (8,356,702)
Net (increase) decrease in customer loans.................................................... 4,708,522 (1,467,046)
Net increase in credit card loans............................................................ (157,108) (54,330)
Purchase of property and equipment........................................................... (24,695) (111,291)
Net cash used in investing activities................................................... $ (5,172,942) $(2,989,369)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, savings and time deposits................................. $ (7,396,139) $11,333,590
Dividends paid............................................................................... -- (230,000)
Net cash provided by (used in) financing activities..................................... $ (7,396,139) $11,103,590
Net increase (decrease) in cash and cash equivalents........................................... $(11,648,675) $ 8,747,355
Cash and cash equivalents at beginning of year................................................. 18,848,772 10,101,417
Cash and cash equivalents at end of year....................................................... $ 7,200,097 $18,848,772
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss)............................................................................ $ 496,540 $ (322,850)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation.............................................................................. 222,770 254,192
Provision for possible loan losses........................................................ 930,000 1,100,000
(Increase) decrease in deferred income tax charges........................................ 18,107 (181,758)
Gain on sale of investment securities..................................................... (245,717) --
Change in assets and liabilities:
(Increase) decrease in accrued income receivable........................................ 32,982 111,094
Increase (decrease) in deferred loan fees............................................... 2,825 (17,289)
Increase (decrease) in accounts payable and accrued expenses............................ (127,060) (109,913)
Decrease in income taxes payable........................................................ -- (124,709)
Decrease in income taxes receivable..................................................... 220,606 --
Other prepaids, deferrals and accruals, net............................................. (630,647) (75,633)
Net cash provided by operating activities............................................ $ 920,406 $ 633,134
</TABLE>

See Notes to Financial Statements.
F-19

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS:
The accounts are maintained on the accrual basis in accordance with
generally accepted accounting principles.
PRESENTATION OF CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, highly liquid debt investments with an
original maturity date of three months or less and Federal funds sold.
Generally, Federal funds are purchased and sold for one-day periods. Cash flows
from loans, demand savings and time deposits are reported net. Treasury bills,
regardless of maturity, are shown as investments.
INVESTMENT SECURITIES:
Investment securities are stated at cost adjusted for amortization of
premiums and accretion of discounts, which are recognized as adjustments to
interest income. Gains or losses on disposition are based on the net proceeds
and the adjusted carrying amount of the securities sold, using the specific
identification method.
LOANS AND LOAN FEES:
The reserve for possible loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably anticipated. The reserve
is increased by provisions charged to operating expense and reduced by net
charge-offs. The bank makes continuous credit reviews of the loan portfolio and
considers current economic conditions, historical loan loss experience, and
other factors in determining the adequacy of the reserve balance.
Unearned interest on discounted loans is amortized over the life of the
loans, using the sum-of-digits formula. For all other loans, interest is accrued
daily on the outstanding balances. Generally, loans are placed in non-accrual
status when they become 90 days past due, at which time previously accrued but
uncollected interest is reversed.
Loan origination costs are amortized on a straight-line basis over the
anticipated life of the loan. Loan origination fees are amortized on a
straight-line basis or the interest method, depending upon the loan
classification.
Construction loans are stated at the amount of unpaid principal, reduced by
unearned discount and fees.
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment is computed principally by
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings.................................................................. 25-35
Vehicles................................................................... 3-5
Furniture and equipment.................................................... 3-10
Computer software.......................................................... 5
</TABLE>

Improvements to leased property are amortized over the lesser of the life
of the lease or life of the improvements.
Maintenance and repairs of property and equipment are charged to operations
and major improvements are capitalized. Upon retirement, sale or other
disposition of property and equipment, the cost and accumulated depreciation are
eliminated from the accounts and gain or loss is included in operations.
OTHER REAL ESTATE:
Other real estate consists of real estate held for resale which was
acquired through foreclosure on a loan secured by real estate. Other real estate
is carried at the lower of cost or appraised market value. Write-downs to market
value at the date of foreclosure are charged to the allowance for loan losses.
Subsequent declines in market value are charged to expense.
EARNINGS PER COMMON SHARE:
Earnings per common share were computed based on the assumption that all
stock dividends issued or declared for the periods covered were outstanding for
the entire period.
F-20

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
INCOME TAXES:
Deferred income taxes are provided for differences between financial
statement reporting and income tax reporting for deprecation expense, reserve
for loan losses and cash fees.
Investment tax credits are recorded as a reduction of the provision for
income taxes.
NOTE 2. INVESTMENT SECURITIES
Investment securities are carried at amortized cost.
The amortized cost, market value and face value maturities of the
investment securities are as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT STATES AND
AGENCIES AND POLITICAL
CORPORATIONS SUBDIVISIONS TOTAL
<S> <C> <C> <C>
December 31, 1992:
Amortized cost............................................................... $ 13,531,044 $100,528 $13,631,572
Gross unrealized gains....................................................... 50,503 1,217 51,720
Gross unrealized losses...................................................... (157,019) -- (157,019)
Market value................................................................... $ 13,424,528 $101,745 $13,526,273
December 31, 1991:
Amortized cost............................................................... $ 3,484,284 $201,910 $ 3,686,194
Gross unrealized gains....................................................... 15,716 3,496 19,212
Gross unrealized losses...................................................... -- -- --
Market value................................................................... $ 3,500,000 $205,406 $ 3,705,406
</TABLE>

The amortized cost and estimated market value of debt securities at
December 31, 1992, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties:
<TABLE>
<CAPTION>
U.S. GOVERNMENT STATES AND
AGENCIES AND POLITICAL
CORPORATIONS SUBDIVISIONS TOTAL
<S> <C> <C> <C>
Maturity schedule (face value basis):
Within one year.............................................................. $ -- $100,000 $ 100,000
1 to 5 years................................................................. 7,500,000 -- 7,500,000
5 to 10 years................................................................ 1,000,000 -- 1,000,000
Over 10 years................................................................ 4,600,000 -- 4,600,000
Total face value............................................................... $ 13,100,000 $100,000 $13,200,000
</TABLE>

It is management's intention to hold these securities until maturity.
Investment securities with an amortized cost of $500,000 at December 31,
1992 and 1991, respectively, were pledged as collateral on public deposits and
for other purposes required by law.
Proceeds from sales and maturities of debt securities during 1992 and 1991,
were $18,107,188 and $7,000,000, respectively. Gross gains of $247,845 and gross
losses of $(2,128) were realized in 1992. Gross gains of $-0-and gross losses of
$-0-were realized in 1991.
F-21

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. LOANS
The composition of the net loans is as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Commercial............................................................. $10,968,693 $11,091,764
Real estate -- construction............................................ 563,160 1,814,125
Real estate -- mortgage................................................ 40,751,114 43,594,435
Installment to individuals............................................. 5,835,113 7,294,159
Other loans (including overdrafts)..................................... 636,602 656,469
$58,754,682 $64,450,952
Deduct:
Unearned discount on loans........................................... $ 223,373 $ 369,549
Allowance for possible loan losses................................... 903,577 966,607
Deferred loan fees, net.............................................. 4,669 7,494
$ 1,131,619 $ 1,343,650
Loans, net............................................................. $57,623,063 $63,107,302
</TABLE>

Loans on which the accrual of interest has been discontinued or reduced
amounted to $3,972,402 at December 31, 1992. If interest on those loans had been
accrued, such income would have approximated $321,268 for 1992. Interest income
on those loans, which is recorded only when received, amounted to $40,487 for
1992.
NOTE 4. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Allowance for Possible Loan Losses represents management's judgment as
to the amount necessary to be transferred to the allowance to bring it to a
level considered adequate in relation to the risk of future losses in the loan
portfolio. While it is the bank's policy to write off in the current period
those loans or portions of loans on which a loss is considered probable, there
continues to exist the risk of future losses which cannot be quantified
precisely or attributed to specific loans. In assessing the adequacy of the
allowance for loan losses, management relies on its ongoing review of the loan
portfolio, general economic conditions, and specific client composition within
the loan portfolio. This review takes into consideration the judgments not only
of the responsible lending officers and senior management, but in addition, bank
regulatory agencies that review the loan portfolio as a part of the regular bank
examination process.
Changes in the Allowance for Possible Loan Losses are as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Balance, beginning....................................................... $ 966,607 $ 512,514
Provision charged to operating expenses................................ 930,000 1,100,000
Recovery of amounts charged off........................................ 213,732 19,136
$ 2,110,339 $1,631,650
Amounts charged off.................................................... (1,206,762) (665,043)
Balance, ending.......................................................... $ 903,577 $ 966,607
</TABLE>

NOTE 5. BANK PREMISES AND EQUIPMENT, NET
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Land...................................................................... $ 310,611 $ 310,611
Buildings................................................................. 1,107,867 1,105,066
Leasehold improvements.................................................... 39,151 39,151
Furniture and equipment................................................... 1,578,450 1,564,941
Computer software......................................................... 120,899 120,899
Vehicles.................................................................. 52,321 52,321
$3,209,299 $3,192,989
Less accumulated depreciation............................................. 1,686,812 1,469,211
Bank premises and equipment, net.......................................... $1,522,487 $1,723,778
</TABLE>

F-22

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. DEPOSITS
The composition of the deposits by their source is as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Demand deposits of individuals, partnerships and corporations.......... $36,782,641 $34,099,848
Time and savings deposits of individuals, partnerships and
corporations......................................................... 41,330,490 49,402,931
Certified and official checks.......................................... 786,345 2,792,836
$78,899,476 $86,295,615
</TABLE>

NOTE 7. CORPORATE INCOME TAX EXPENSE
During the year ended December 31, 1992, the company adopted FASB Statement
No. 109, Accounting for Income Taxes. For the year ended December 31, 1991, the
company was accounting for income taxes under FASB Statement No. 96. This change
in accounting method had no effect on the financial statements.
The company's total deferred tax liabilities and deferred tax assets at
December 31, 1992 and 1991, are as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Total deferred tax asset...................................................... $211,896 $233,797
Less valuation allowance...................................................... -- --
$211,896 $233,797
Total deferred tax liabilities................................................ (86,236) (90,030)
Net deferred tax asset........................................................ $125,660 $143,767
</TABLE>

A reconciliation between the amount of reported Federal income tax expense
and the amount computed by multiplying the applicable statutory Federal income
tax rate is as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Income (loss) before income taxes............................................ $749,533 $(522,071)
Applicable statutory income tax rate......................................... 34% 34%
Computed "expected" Federal tax expense (refund)............................. $254,841 $(177,504)
Adjustments to Federal income tax resulting from:
Surtax exemption........................................................... (11,750) (11,750)
Tax exempt income.......................................................... (2,781) (6,203)
Other...................................................................... 12,683 (3,764)
Provision for Federal income taxes (credits)................................. $252,993 $(199,221)
</TABLE>

The deferred tax provisions for 1992 and 1991 are applicable to the
following items:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Difference between the depreciation methods used for book and income tax
purposes................................................................... $ 3,296 $ 264
Difference between loan loss provision charged to operating expense and the
bad debt deduction taken for income tax purposes........................... (21,302) (154,392)
Other........................................................................ 36,113 (27,630)
$ 18,107 $(181,758)
</TABLE>

NOTE 8. LEASE COMMITMENTS
The bank has leased office space for two branches. These leases expire in
December 1996 and April 2014, and require minimum annual rentals. The bank has
the option to renew both leases. One of the leases is with a partnership which
consists of the members of the bank's Board of Directors. Under this lease the
bank has the option to purchase the building after the
F-23

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. LEASE COMMITMENTS -- Continued
fifth year of the lease based on the average of appraised values of
independently contracted appraisals. The rent shall be adjusted yearly by the
percentage increase in the Consumer Price Index.
The total minimum future rental commitment at December 31, 1992, under the
leases mentioned above is $3,897,280, which is due as follows:
<TABLE>
<S> <C>
For the year ended December 31, 1993........................................................... $ 197,310
1994......................................................... 197,310
1995......................................................... 197,310
1996......................................................... 197,310
1997......................................................... 179,310
January 1, 1998 through April 30, 2014.......................................................... 2,928,730
$3,897,280
</TABLE>

The total minimum future rental commitment due to related parties at
December 31, 1992, under the leases mentioned above is $3,825,280.
The total rental expense included in the income statements for the years
ended December 31, 1992 and 1991, is $173,965 and $172,165, respectively.
The total rental expense paid to related parties included in the income
statements for the years ended December 31, 1992 and 1991, is $155,965 and
$154,165, respectively.
NOTE 9. TIME DEPOSITS IN DENOMINATIONS OF $100,000 OR MORE
The bank held time deposits in denominations of $100,000 or more totaling
approximately $1,431,086 and $3,633,157 at December 31, 1992 and 1991,
respectively.
NOTE 10. TRANSACTIONS WITH DIRECTORS AND OFFICERS
The bank has banking transactions in the ordinary course of business with
directors, principal officers, and their affiliated companies (commonly referred
to as related parties), on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
others.
Aggregate loan transactions with related parties were as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Balance, beginning........................................................ $1,788,550 $2,136,617
New loans............................................................... 781,265 293,045
Repayments.............................................................. (763,881) (641,112)
Balance, ending........................................................... $1,805,934 $1,788,550
</TABLE>

Also, these persons and firms had deposits with the bank totaling $694,087
and $2,083,243 at December 31, 1992 and 1991, respectively.
See Note 8 for a summary of a related party lease agreement.
NOTE 11. STOCK SALES FOR THE LAST TWO YEARS
The bank's stock is not actively traded. Sales which have occurred during
the last two years had a price range as follows:
F-24

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. STOCK SALES FOR THE LAST TWO YEARS -- Continued
<TABLE>
<CAPTION>
DATED LOW PRICE HIGH PRICE
<S> <C> <C>
1/1/91- 3/31/91 $ 10.50 $10.50
4/1/91- 6/30/91 10.50 10.50
7/1/91- 9/30/91 10.00 10.50
10/1/91-12/31/91 10.50 10.50
1/1/92- 3/31/92 10.50 10.50
4/1/92- 6/30/92 10.50 10.50
7/1/92- 9/30/92 10.50 10.50
10/1/92-12/31/92 10.50 10.50
</TABLE>

The source of information for the prices was the direct sales of stock
known by Independent Bank.
NOTE 12. CAPITAL ACCOUNTS
Both the Bureau of Financial Institutions and the FDIC have restricted the
availability of surplus for the payment of dividends. At December 31, 1992 and
1991, $1,972,930 and $200,000, respectively, was so restricted.
Banking regulations also require the bank to maintain certain minimum
capital levels in relation to bank assets. At December 31, 1992, regulations
required a ratio of capital to risk-weighted assets of 8.00 percent. The bank's
capital, as defined by the regulations, was 9.89 percent of risk-weighted
assets. In addition, banks are expected to maintain a leverage ratio of at least
6.00 percent. At December 31, 1992, the bank's leverage ratio was 6.24 percent.
NOTE 13. CASH AND STOCK DIVIDENDS
On December 18, 1991, the Board of Directors declared a 2 percent stock
dividend for stockholders of record on December 31, 1991, payable February 21,
1992. This resulted in an issuance of 20,000 shares.
See Note 12 for restrictions on dividends.
NOTE 14. PROFIT-SHARING PLANS
The bank has a profit-sharing plan for those employees who meet the
eligibility requirements set forth in the plan. The amount of the contribution
to the plan is at the discretion of the bank's Board of Directors. The bank
contributed $-0-to the plan for the years ended December 31, 1992 and 1991,
respectively.
NOTE 15. OTHER REAL ESTATE
Real estate acquired through foreclosure amounted to $3,539,993 and
$2,840,531 at December 31, 1992 and 1991, respectively. During the year ended
December 31, 1992, $105,768 was charged to operating expense for subsequent
declines in market value. The bank is in the process of obtaining a deed in lieu
of foreclosure on property amounting to $550,000. This property will then be
transferred into real estate acquired through foreclosure. This $550,000 is
included in the $3,539,993.
The loans for which accrual of interest has been discontinued totaled
$1,964,532 at the date of foreclosure.
NOTE 16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
position. The contract or notional amounts of those instruments reflect the
extent of involvement the bank has in particular classes of financial
instruments.
F-25

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK -- Continued
The bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
1992 1991
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit............................................ $10,046,723 $10,474,568
Standby letters of credit............................................... 508,799 966,284
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of conditions established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the bank upon extension of credit is based on management's
credit evaluation of the counter-party. Collateral held varies but may include
cash, securities, accounts receivable, inventory, property, plant, and
equipment, income-producing commercial properties and residential properties.
Standby letters of credit are conditional commitments issued by the bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The bank requires collateral
supporting this type of commitment on the same basis as other commitments to
extend credit. The extent of collateral held for those commitments at December
1992, varies from -0-percent to 100 percent; the average amount collateralized
is 21.67 percent. The extent of collateral held for those commitments at
December 1991, varies from -0-percent to 100 percent; the average amount
collateralized is 12.83 percent.
NOTE 17. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
Most of the bank's business activity is with customers located within the
local Northern Virginia metropolitan area, principally in Manassas and
Woodbridge, Virginia.
Although the portfolio is well diversified among industries, a substantial
portion of its debtors' ability to honor their contracts is dependent upon the
employment and economic trends of the regional Northern Virginia economy.
Generally, the loans are secured by assets or stock. The loans are expected to
be repaid from cash flow or proceeds from the sale of selected assets of the
borrowers. The bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the bank upon
extension of credit is based on management's credit evaluation of the
counter-party. Collateral held varies but may include cash, securities, accounts
receivable, inventory, property, plant and equipment, income-producing
commercial properties and residential properties.
F-26

<PAGE>
INDEPENDENT BANK
BALANCE SHEETS
JUNE 30, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
Cash and due from banks........................................................................ $ 5,067,616 $ 6,351,794
Federal funds sold............................................................................. 4,350,000 9,400,000
Total cash and cash equivalents......................................................... $ 9,417,616 $15,751,794
Investment securities (Note 2)................................................................. 4,938,028 13,368,426
Securities available for sale (Note 2)......................................................... 21,240,645 --
Loans, net of unearned discounts and deferred fees............................................. 52,919,639 56,477,816
Less: Allowance for loan losses................................................................ (915,354) (950,669)
Loans, net (Notes 3 and 4)..................................................................... $52,004,285 $55,527,147
Other real estate (Note 5)..................................................................... 2,141,705 3,951,386
Bank premises and equipment, net (Note 6)...................................................... 1,835,256 1,372,097
Accrued income receivable...................................................................... 425,274 404,672
Prepaid expenses and other assets.............................................................. 514,813 402,877
Deferred income tax charges (Note 8)........................................................... 92,995 125,660
Total assets............................................................................ $92,610,617 $90,904,059
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits (Note 7):
Demand.................................................................................... $28,853,306 $34,880,775
NOW....................................................................................... 10,076,535 9,352,824
Interest-bearing transaction accounts..................................................... 4,700,162 --
Savings and money market.................................................................. 32,172,503 31,662,199
Time...................................................................................... 9,620,933 9,251,778
Total deposits.......................................................................... $85,423,439 $85,147,576
Short-term borrowings........................................................................ 1,491,593 --
Accrued expenses and other liabilities....................................................... 188,049 86,603
Total liabilities....................................................................... $87,103,081 $85,234,179
COMMITMENTS AND CONTINGENCIES (Notes 9, 10, and 11)
STOCKHOLDERS' EQUITY
Common stock, par value $1; authorized 5,000,000 shares; issued 1,020,000 shares............. $ 1,020,000 $ 1,020,000
Surplus...................................................................................... 1,972,930 1,972,930
Retained earnings............................................................................ 3,027,164 2,676,950
Total stockholders' equity before unrealized losses..................................... $ 6,020,094 $ 5,669,880
Unrealized losses on securities available for sale...................................... (512,558) --
Total stockholders' equity.............................................................. $ 5,507,536 $ 5,669,880
Total liabilities and stockholders' equity.............................................. $92,610,617 $90,904,059
</TABLE>

See accompanying notes to financial statements.
F-27

<PAGE>
INDEPENDENT BANK
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Interest income:
Interest and fees on loans...................................................................... $2,363,037 $2,603,721
Interest and federal funds sold................................................................. 10,100 41,089
Interest on investment securities............................................................... 553,756 345,076
$2,926,893 $2,989,886
Interest expense:
Interest on deposits............................................................................ 797,888 780,218
Net interest income........................................................................ $2,129,005 $2,209,668
Provisions for possible loan losses (Note 4)...................................................... 155,000 540,000
Net interest income after provision for possible loan losses............................... $1,974,005 $1,669,668
Non-interest income:
Service fees.................................................................................... $ 642,849 $ 707,984
Securities income............................................................................... (19,953) 66,525
$ 622,896 $ 774,509
Non-interest expenses:
Salaries and employee benefits.................................................................. $1,037,303 $ 985,279
Occupancy expenses (Note 9)....................................................................... 215,212 202,510
Equipment rentals, depreciation and maintenance................................................... 189,243 195,970
Other operating expenses.......................................................................... 735,187 605,385
Other real estate expenses........................................................................ 24,746 56,644
$2,201,691 $2,045,788
Income before taxes on income.............................................................. $ 395,210 $ 398,389
Income tax expense (Note 8)....................................................................... 140,900 145,029
Net income................................................................................. $ 254,310 $ 253,360
Net income per share....................................................................... $ .25 $ .25
</TABLE>

See accompanying notes to financial statements.
F-28

<PAGE>
INDEPENDENT BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
<TABLE>
<CAPTION>
TOTAL
BEFORE
COMMON RETAINED UNREALIZED UNREALIZED
STOCK SURPLUS EARNINGS LOSSES LOSSES TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance, 1/1/93........................... $1,020,000 $1,972,930 $2,423,590 $5,416,520 $ -- $5,416,520
Net income................................ -- -- 253,360 253,360 -- 253,360
Balance, 6/30/93.......................... $1,020,000 $1,972,930 $2,676,950 $5,669,880 $ -- $5,669,880
Balance, 1/1/94........................... $1,020,000 $1,972,930 $2,823,854 $5,816,784 $ -- $5,816,784
Net income................................ -- -- 254,310 254,310 -- 254,310
Cash dividend............................. -- -- (51,000) (51,000) -- (51,000)
Unrealized losses on securities available
for sale................................ -- -- -- -- (512,558) (512,558)
Balance, 6/30/94.......................... $1,020,000 $1,972,930 $3,027,164 $6,020,094 $ (512,558) $5,507,536
</TABLE>

See accompanying notes to financial statements.
F-29

<PAGE>
INDEPENDENT BANK
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received............................................................................ $ 2,926,182 $ 3,061,681
Fees received................................................................................ 633,601 697,250
Interest paid................................................................................ (792,793) (785,338)
Cash paid to suppliers and employees......................................................... (1,184,780) (2,442,998)
Income taxes paid............................................................................ (115,815) (101,438)
Net cash provided by operating activities............................................... $ 1,466,395 $ 429,157
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of investment securities................................... $ 4,918,038 $ 4,923,565
Purchase of investment securities............................................................ (6,578,122) (4,593,894)
Net decrease in loans........................................................................ 344,744 1,566,650
Purchase of property and equipment........................................................... (20,617) (21,881)
Net cash provided by (used in) investing activities..................................... $(1,335,957) $ 1,874,440
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand, savings and time deposits............................................ $ 394,116 $ 6,248,100
Net increase in short-term borrowings........................................................ 1,491,593 --
Cash dividends paid.......................................................................... (51,000) --
Net cash provided by financing activities............................................... $ 1,834,709 $ 6,248,100
Net increase in cash and cash equivalents...................................................... $ 1,965,147 $ 8,551,697
Cash and cash equivalents at beginning of period............................................... 7,452,469 7,200,097
Cash and cash equivalents at end of period..................................................... $ 9,417,616 $ 15,751,794
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income................................................................................... $ 254,310 $ 253,360
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.............................................................................. 81,448 103,404
Provision for possible loan losses........................................................ 155,000 540,000
Decrease in deferred income tax charges................................................... 2,307 --
(Gain) loss on sale of investment securities.............................................. 19,953 (66,525)
Change in assets and liabilities:
(Increase) decrease in accrued income receivable........................................ (711) 71,795
Decrease in deferred loan fees.......................................................... (9,248) (10,734)
Increase (decrease) in accounts payable and accrued expenses............................ 58,392 (25,461)
Increase in income taxes payable........................................................ 22,778 36,734
Decrease in income taxes receivable..................................................... -- 6,857
Other prepaids, deferrals and accruals, net............................................. 882,166 (480,273)
Net cash provided by operating activities............................................ $ 1,466,395 $ 429,157
</TABLE>

See accompanying notes to financial statements.
F-30

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS:
The accounts are maintained on the accrual basis in accordance with
generally accepted accounting principles.
PRESENTATION OF CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, highly liquid debt investments with an
original maturity date of three months or less, and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods. Cash flows
from loans, demand savings, time deposits and short-term borrowings are reported
net.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE:
Securities which the bank has both the ability and intent to hold to
maturity or on a long-term basis are classified as investment securities when
they are purchased. These securities are carried at cost adjusted for
amortization of premiums and accretion of discounts, which are recognized as
adjustments to interest income.
Securities to be held for indefinite periods of time and not intended to be
held to maturity or on a long-term basis are classified as available for sale.
These securities are reported at fair value, with unrealized gains or losses
(net of tax effect) reported in a separate component of stockholders' equity.
Securities available for sale are used as part of the bank's asset/liability
strategy and may be sold in response to changes in interest rates, prepayment
risk, the need or desire to increase capital, to satisfy regulatory requirements
and other similar factors.
LOANS AND LOAN FEES:
The reserve for possible loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably anticipated. The reserve
is increased by provisions charged to operating expense and reduced by net
charge-offs. The bank makes continuous credit reviews of the loan portfolio and
considers current economic conditions, historical loan loss experience, and
other factors in determining the adequacy of the reserve balance.
Unearned interest on discounted loans is amortized to income over the life
of the loans, using the sum-of-digits formula. For all other loans, interest is
accrued daily on the outstanding balances. Generally, loans are placed in
non-accrual status when they become 90 days past due, at which time previously
accrued but uncollected interest is reversed.
Loan origination costs are amortized on a straight-line basis over the
anticipated life of the loan. Loan origination fees are amortized on a
straight-line basis or the interest method, depending upon the loan
classification. Construction loans are stated at the amount of unpaid principal,
reduced by unearned discount and fees.
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment is computed principally by
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings.................................................................. 20-35
Furniture and equipment.................................................... 3-10
Computer software.......................................................... 3-5
Vehicles................................................................... 3-4
</TABLE>

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES -- Continued
EARNINGS PER COMMON SHARE:
Earnings per common share were computed based on the assumption that all
stock dividends issued or declared for the periods covered were outstanding for
the entire period.
INCOME TAXES:
The bank has adopted FASB Statement No. 109, Accounting for Income Taxes.
Deferred income taxes are provided on the difference between the financial
reporting and the income tax reporting for depreciation expense, reserve for
loan losses and cash fees.
NOTE 2. INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
Investment securities: The carrying values and approximate market values of
investment securities are as follows:
<TABLE>
<CAPTION>
1994 1993
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
U.S. Treasury.............................. $ -- $ -- $ 3,562,225 $ 3,571,252
U.S. Agency................................ 4,888,028 4,840,532 9,795,151 9,775,149
Other securities........................... 50,000 49,757 11,050 11,050
Total.................................... $4,938,028 $4,890,289 $13,368,426 $13,357,451
</TABLE>

At June 30, 1994, gross unrealized gains were $7,404, and gross unrealized
losses were $55,143. At June 30, 1993, gross unrealized gains were $34,971, and
gross unrealized losses were $45,946. The majority of U.S. Agency securities
have a stated maturity of over five years
.
SECURITIES AVAILABLE FOR SALE:
The carrying values and approximate market values of investment securities
are as follows:
<TABLE>
<CAPTION>
1994 1993
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
U.S. Treasury...................................... $ 7,106,302 $ 6,932,656 $ -- $ --
U.S. Agency........................................ 14,915,024 14,285,889 -- --
Other securities................................... 22,100 22,100 -- --
Total............................................ $22,043,426 $21,240,645 $ -- $ --
</TABLE>

At June 30, 1994, gross unrealized gains were $2,055, and gross unrealized
losses were $804,836. The majority of U.S. Treasury securities mature within one
to five years. The majority of U.S. Agency securities have a stated maturity of
over five years. See Note 12 to the financial statements for a discussion of
accounting changes applicable to these securities.
Investment securities with values of $9,031,013 and $8,781,000 at June 30,
1994 and 1993 respectively, were pledged as collateral.
Proceeds from sales and maturities of debt securities during 1994 and 1993
were $4,918,038 and $4,923,565, respectively.
NOTE 3. LOANS
The composition of the net loans is as follows:
F-32

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. LOANS -- Continued
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Commercial............................................................. $10,408,706 $10,567,823
Real estate - mortgage................................................. 34,318,040 37,852,874
Real estate - construction............................................. 2,070,555 2,297,587
Installment to individuals............................................. 5,485,666 5,355,518
Other loans............................................................ 787,831 607,931
Total loans.......................................................... $53,070,798 $56,681,733
Less:
Unearned discount.................................................... 95,125 188,515
Deferred loan fees, net.............................................. 56,034 15,402
Loans, net of unearned discount and deferred fees...................... $52,919,639 $56,477,816
Less:
Allowance for loan losses............................................ 915,354 950,669
Loans, net............................................................. $52,004,285 $55,527,147
</TABLE>

Loans on which the accrual of interest has been discontinued or reduced
amounted to $3,087,731 at June 30, 1994. Approximately 42 percent, or
$1,275,000, of the non-accrual loans related to a piece of real estate in the
local community. The bank has a first and second deed of trust on the property;
however, action by the bank has been delayed because of bankruptcy proceedings
related to the property. If interest on non-accrual loans had been accrued, such
income would have approximated $112,235 for 1994. Interest income on those
loans, which is recorded only when received, amounted to $16,795 for 1994.
NOTE 4. ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Allowance for Possible Loan Losses represents management's judgment as
to the amount necessary to be transferred to the allowance to bring it to a
level considered adequate in relation to the risk of future losses in the loan
portfolio. While it is the bank's policy to write off in the current period
those loans or portions of loans on which a loss is considered probable, there
continues to exist the risk of future losses which cannot be quantified
precisely or attributed to specific loans. In assessing the adequacy of the
allowance for loan losses, management relies on its ongoing review of the loan
portfolio, general economic conditions, and specific client composition within
the loan portfolio. This review takes into consideration the judgments not only
of the responsible lending officers and senior management, but in addition, bank
regulatory agencies that review the loan portfolio as a part of the regular bank
examination process. Changes in the Allowance for Possible Loan Losses are as
follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Beginning balance, January 1.............................................. $ 917,815 $ 903,577
Provision for possible loan losses...................................... 155,000 540,000
Loans charged off....................................................... $ (209,816) $ (558,458)
Recovery of amounts charged off......................................... 52,355 65,550
Net loans charged off................................................... $ (157,461) $ (492,908)
Ending balance, June 30................................................... $ 915,354 $ 950,669
</TABLE>

NOTE 5. OTHER REAL ESTATE
Real estate acquired through foreclosure amounted to $2,141,705 and
$3,951,386 at June 30, 1994 and 1993. During the six months ended June 30, 1994,
$34,904 was charged to expense for other real estate activities, including $-0-
for subsequent declines in market value. The bank is in the process of
foreclosing on property amounting to $85,000. This property will then be
transferred into real estate acquired through foreclosure. This $85,000 is
included in the $2,141,705.
F-33

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 5. OTHER REAL ESTATE -- Continued
The loans which relate to other real estate for which accrual of interest
has been discontinued totaled $2,050,511 at the date of foreclosure.
NOTE 6. BANK PREMISES AND EQUIPMENT, NET
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land...................................................................... $ 785,611 $ 310,611
Buildings................................................................. 1,107,867 1,107,867
Leasehold improvements.................................................... 39,151 39,151
Furniture and equipment................................................... 1,660,768 1,510,762
Computer software......................................................... 161,960 141,385
Vehicles.................................................................. 52,321 52,321
$3,807,678 $3,162,097
Less accumulated depreciation 1,972,422 1,790,000
Bank premises and equipment, net $1,835,256 $1,372,097
</TABLE>

NOTE 7. DEPOSITS
The composition of the deposits by their source is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Demand deposits of individuals, partnerships and corporations.......... $43,066,252 $42,742,164
Time and savings deposits of individuals, partnerships and
corporations......................................................... 41,793,436 40,913,977
Certified and official checks.......................................... 563,751 1,491,435
$85,423,439 $85,147,576
</TABLE>

The bank held time deposits in denominations of $100,000 or more totaling
approximately $2,398,902 and $1,624,383 at June 30, 1994 and 1993, respectively.
NOTE 8. CORPORATE INCOME TAX EXPENSE
The company's total deferred tax liabilities and deferred tax assets at
June 30, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Total deferred tax asset..................................................... $ 187,830 $ 211,896
Less valuation allowance..................................................... -- --
$ 187,830 $ 211,896
Total deferred tax liabilities............................................... (94,835) (86,236)
Net deferred tax asset....................................................... $ 92,995 $ 125,660
</TABLE>

A reconciliation between the amount of reported Federal income tax expense
and the amount computed by multiplying the applicable statutory Federal income
tax rate is as follows:
F-34

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. CORPORATE INCOME TAX EXPENSE -- Continued
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Income before income taxes.................................................... $395,210 $398,389
Applicable statutory income tax rate.......................................... 34% 34%
Computed "expected" Federal tax expense....................................... $134,371 $135,452
Adjustments to Federal income tax resulting from: Tax-exempt income........... (99) (953)
Other......................................................................... 6,628 10,530
Provision for Federal income taxes............................................ $140,900 $145,029
</TABLE>

Income tax expense is composed of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Current....................................................................... $138,593 $145,029
Deferred...................................................................... 2,307 --
$140,900 $145,029
Difference between the depreciation methods used for book and income tax
purposes.................................................................... $ 1,384 $ --
Difference between loan loss provision charged to operating expense and the
bad debt deduction taken for income tax purposes............................ 837 --
Other......................................................................... 86 --
$ 2,307 $ --
</TABLE>

NOTE 9. LEASE COMMITMENTS
The bank has leased office space for two branches. These leases expire in
December 1996 and April 2014, and require minimum annual rentals. The bank has
the option to renew both leases. One of the leases is with a partnership which
consists of the members of the bank's Board of Directors. Under this lease the
bank has the option to purchase the building after the fifth year of the lease
based on the average of appraised values of independently contracted appraisals.
The rent shall be adjusted yearly by the percentage increase in the Consumer
Price Index.
The total minimum future rental commitment at June 30, 1994, under the
leases mentioned above is $4,200,103, which is due as follows:
<TABLE>
<S> <C>
For the year ended June 30, 1995......................................... $ 227,501
1996........................................ 227,501
1997........................................ 218,501
1998........................................ 209,501
1999........................................ 209,501
July 1, 1999 through April 30, 2014........................................ 3,107,598
$4,200,103
</TABLE>

The total minimum future rental commitment due to related parties at June
30, 1994, under the leases mentioned above is $4,155,103.
The total rental expense included in the income statements for the six
months ended June 30, 1994 and 1993, is $114,963 and $96,309, respectively.
The total rental expense paid to related parties included in the income
statements for the six months ended June 30, 1994 and 1993, is $104,750 and
$86,097, respectively.
F-35

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financial needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the statement of financial
position. The contract or notional amounts of those instruments reflect the
extent of involvement the bank has in particular classes of financial
instruments.
The bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
6/30/94 6/30/93
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit......................................... $10,257,779 $10,157,663
Standby letters of credit............................................ 548,069 486,575
$10,805,848.. $10,644,238
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of conditions established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The bank evaluates each customer's credit
worthiness on case-by-case basis. The amount of collateral obtained if deemed
necessary by the bank upon extension of credit is based on management's credit
evaluation of the counter-party. Collateral held varies but may include cash,
securities, accounts receivable, inventory, property, plant, and equipment, and
income-producing commercial properties and residential properties.
Standby letters of credit are conditional commitments issued by the bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The bank requires collateral
supporting this type of commitment on the same basis as other commitments to
extend credit. The extent of collateral held for those commitments at June 30,
1994, varies from - 0-percent to 100 percent; the average amount collateralized
is 41.4 percent. The extent of collateral held for those commitments at June 30,
1993, varies from -0-percent to 100 percent; the average amount collateralized
was 55.0 percent.
NOTE 11. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
Most of the bank's business activity is with customers located within the
metropolitan area, principally in Manassas and Woodbridge, Virginia.
Although the portfolio is well diversified among industries, a substantial
portion of its debtors' ability to honor their contracts is dependent upon the
employment and economic trends of the regional Northern Virginia economy.
Generally, the loans are secured by assets or stock. The loans are expected to
be repaid from cash flow or proceeds from the sale of selected assets of the
borrowers. The bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by the company upon
extension of credit is based on management's credit evaluation of the
counter-party. Collateral held varies but may include cash; securities; accounts
receivable; inventory; property, plant, and equipment; and income-producing
commercial properties and residential properties.
NOTE 12. NEW ACCOUNTING STANDARDS
Effective January 1, 1994, the bank 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 held to maturity (investment securities), securities available for
sale, or trading account securities. Investment securities
F-36

<PAGE>
INDEPENDENT BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 12. NEW ACCOUNTING STANDARDS -- Continued
are carried at amortized cost, as the bank has the ability and positive intent
to hold these securities to maturity. Securities available for sale are carried
at fair value and represent securities not intended to be held to maturity or on
a long-term basis.
With the adoption of SFAS 115, unrealized holding gains and losses on
securities available for sale are excluded from the Statement of Income and
reported, net of tax, as a separate component of stockholders' equity. On
January 1, 1994, securities having an amortized cost of approximately $20
million were classified as securities available for sale. The initial effect of
adopting SFAS 115 is not material.
At June 30, 1994, on after tax basis, the amortized cost of securities
available for sale exceeded the fair value of such securities by $512,558. The
net unrealized gain or loss of securities available for sale, which is recorded
as a component of stockholders' 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 bank's 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 were accounted for in a manner similar to securities held to
maturity.
F-37

Annex I

AGREEMENT AND PLAN OF REORGANIZATION

among

CRESTAR FINANCIAL CORPORATION,

CRESTAR BANK,

and

INDEPENDENT BANK

August 26, 1994

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I
General

1.1. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Issuance of Crestar Common Stock and Payment of Cash . . . . . . 1
1.3. Taking of Necessary Action . . . . . . . . . . . . . . . . . . . 2

ARTICLE II
Effect of Merger on Common Stock, Assets, Liabilities
and Capitalization of Crestar, Crestar Bank and Independent

2.1. Conversion of Stock; Exchange Ratio; Cash Election . . . . . . . 2
2.2. Manner of Exchange . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 5
2.4. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5. Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE III
Representations and Warranties

3.1. Representations and Warranties of Independent. . . . . . . . . . 5
(a) Organization, Standing and Power. . . . . . . . . . . . . . 5
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . 6
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Investments . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Financial Statements. . . . . . . . . . . . . . . . . . . . 7
(f) Absence of Undisclosed Liabilities. . . . . . . . . . . . . 8
(g) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) Options, Warrants and Related Matters . . . . . . . . . . . 9
(i) Property. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(j) Additional Schedules Furnished to Crestar . . . . . . . . . 10
(k) Agreements in Force and Effect. . . . . . . . . . . . . . . 11
(l) Legal Proceedings; Compliance with Laws . . . . . . . . . . 11
(m) Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 12
(n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 14
(o) Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 15
(p) Absence of Changes. . . . . . . . . . . . . . . . . . . . . 15
(q) Brokers and Finders . . . . . . . . . . . . . . . . . . . . 15
(r) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 16
(s) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(t) Environmental Matters . . . . . . . . . . . . . . . . . . . 16
(u) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2. Representations and Warranties of Crestar and Crestar Bank . . . 18
(a) Organization, Standing and Power. . . . . . . . . . . . . . 18
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . 18
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Financial Statements. . . . . . . . . . . . . . . . . . . . 20
(e) Absence of Undisclosed Liabilities. . . . . . . . . . . . . 20
(f) Absence of Changes. . . . . . . . . . . . . . . . . . . . . 21
(g) Brokers and Finders . . . . . . . . . . . . . . . . . . . . 21
(h) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 21
(i) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 21
(j) Property. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(k) Agreements in Force and Effect. . . . . . . . . . . . . . . 22
(l) Legal Proceedings; Compliance with Laws . . . . . . . . . . 22
(m) Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 23
(n) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV
Conduct and Transactions Prior to
Effective Time of the Merger

4.1. Access to Records and Properties of Crestar, Crestar Bank
and Independent; Confidentiality . . . . . . . . . . . . . . . . 25
4.2. Registration Statement, Proxy Statement, Shareholder
Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3. Operation of the Business of Independent . . . . . . . . . . . . 26
4.4. No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.6. Regulatory Filings; Best Efforts . . . . . . . . . . . . . . . . 28
4.7. Public Announcements . . . . . . . . . . . . . . . . . . . . . . 28
4.8. Operating Synergies; Conformance to Reserve Policies, Etc. . . . 29
4.9. Crestar Rights Agreement . . . . . . . . . . . . . . . . . . . . 29
4.10.Agreement as to Efforts to Consummate . . . . . . . . . . . . . 29
4.11.Adverse Changes in Condition. . . . . . . . . . . . . . . . . . 30
4.12.NYSE Listing. . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.13.Updating of Schedules . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE V
Conditions of Merger

5.1. Conditions of Obligations of Crestar and Crestar Bank. . . . . . 31
(a) Representations and Warranties; Performance of
Obligations; No Adverse Change. . . . . . . . . . . . . 31
(b) Authorization of Merger . . . . . . . . . . . . . . . . . . 31
(c) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . 31
(d) The Registration Statement. . . . . . . . . . . . . . . . . 31
(e) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Regulatory Approvals. . . . . . . . . . . . . . . . . . . . 32
(g) Affiliate Letters . . . . . . . . . . . . . . . . . . . . . 32
(h) Title Matters . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Accruals for Loan Loss Reserves and Expenses; Tax/Bad
Debt Reserve. . . . . . . . . . . . . . . . . . . . . . . . 32
(j) Acceptance by Crestar and Crestar Bank Counsel. . . . . . . 33
5.2. Conditions of Obligations of Independent . . . . . . . . . . . . 33
(a) Representations and Warranties; Performance of
Obligations; No Adverse Change. . . . . . . . . . . . . . . 33
(b) Authorization of Merger . . . . . . . . . . . . . . . . . . 33
(c) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . 33
(d) The Registration Statement. . . . . . . . . . . . . . . . . 34
(e) Regulatory Approvals. . . . . . . . . . . . . . . . . . . . 34
(f) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . 34
(g) Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . 35
(h) NYSE Listing. . . . . . . . . . . . . . . . . . . . . . . . 35
(i) Acceptance by Independent's Counsel . . . . . . . . . . . . 35

ARTICLE VI
Closing Date; Effective Time

6.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2. Filings at Closing . . . . . . . . . . . . . . . . . . . . . . . 35
6.3. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . 36

ARTICLE VII
Termination; Survival of Representations,
Warranties and Covenants; Waiver and Amendment

7.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 38
7.3. Survival of Representations, Warranties and Covenants. . . . . . 38
7.4. Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . 38

ARTICLE VIII
Additional Covenants

8.1. Indemnification and Independent Officers and Directors;
Liabilities Insurance. . . . . . . . . . . . . . . . . . . . . . 39
8.2. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3. Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . 40

ARTICLE IX
Miscellaneous

9.1. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . 42
9.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 42

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization (the "Agreement") dated as
of August 26, 1994 among CRESTAR FINANCIAL CORPORATION, a Virginia
corporation ("Crestar"), CRESTAR BANK, a Virginia banking corporation
wholly-owned by Crestar ("Crestar Bank"), and INDEPENDENT BANK, a Virginia
banking corporation ("Independent"), recites and provides:

A. The boards of directors of Crestar, Crestar Bank and Independent
deem it advisable to merge Independent into Crestar Bank (the "Merger")
pursuant to this Agreement and the Plan of Merger attached as Exhibit A
(the "Plan of Merger") whereby the holders of shares of common stock of
Independent, par value $1.00, ("Independent Common Stock") will receive in
exchange therefor common stock of Crestar ("Crestar Common Stock") and/or
cash.

B. To effectuate the foregoing, the parties desire to adopt a plan of
reorganization in accordance with the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement, and of the representations, warranties, conditions and
promises herein contained, Crestar, Crestar Bank, and Independent hereby
adopt this Agreement whereby at the "Effective Time of the Merger" (as
defined in Article VI hereof): Independent shall be merged into Crestar
Bank in accordance with the Plan of Merger; the outstanding shares of
Independent Common Stock shall be converted into shares of Crestar Common
Stock and/or cash as provided in this Agreement on the basis, terms and
conditions contained herein and in the Plan of Merger; and thereafter the
outstanding shares of Independent Common Stock shall be canceled. In
connection therewith, the parties hereto agree as follows:

ARTICLE I
General

1.1. Merger. Subject to the provisions of this Agreement and the
Plan of Merger, at the Effective Time of the Merger the separate existence
of Independent shall cease and Independent shall be merged with and into
Crestar Bank (the "Surviving Bank").

1.2. Issuance of Crestar Common Stock and Payment of Cash.
Crestar agrees that at the Effective Time of the Merger it will issue to
the holders of Independent Common Stock Crestar Common Stock and/or pay
cash to the extent set forth in, and in accordance with, the terms of this
Agreement and the Plan of Merger.

1.3. Taking of Necessary Action. In case at any time after the
Effective Time of the Merger any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving Bank
with full title to all properties, assets, rights, approvals, immunities
and franchises of Independent, the officers and directors of Crestar and of
the Surviving Bank shall take all such necessary action.

ARTICLE II
Effect of Merger on Common Stock, Assets, Liabilities
and Capitalization of Crestar, Crestar Bank and Independent

2.1. Conversion of Stock; Exchange Ratio; Cash Election. At the
Effective Time of the Merger:

(a) Conversion of Stock. Each share of Independent Common
Stock which is issued and outstanding at the Effective Time of the
Merger (other than shares held of record by Crestar and shares to be
exchanged for cash) shall, and without any action by the holder
thereof, be converted into the number of shares of Crestar Common
Stock determined in accordance with subsection 2.1(b). All such
shares of Crestar Common Stock shall be validly issued, fully paid and
nonassessable.

(b) Exchange Ratio. Each share of Independent Common Stock
(other than shares held by Crestar of record and shares to be
exchanged for cash) shall be converted into the number of shares of
Crestar Common Stock determined by dividing $12.25 (the "Price Per
Share") by the average closing price of Crestar Common Stock as
reported on the New York Stock Exchange (the "NYSE") for each of the
10 trading days ending on the 10th day prior to the day of the
Effective Time of the Merger (the "Average Closing Price") (the result
of the quotient determined by dividing the Price Per Share by the
Average Closing Price and rounded to the nearest thousandths decimal
point being hereinafter called the "Exchange Ratio"), but in no case
shall the Exchange Ratio be less than .2269 shares or greater than
.3063 shares of Crestar Common Stock for each share of Independent
Common Stock.

The Exchange Ratio at the Effective Time of the Merger shall
be adjusted to reflect any consolidation, split-up, other subdivisions
or combinations of Crestar Common Stock, any dividend payable in
Crestar Common Stock, or any capital reorganization involving the
reclassification of Crestar Common Stock on or subsequent to the date
of this Agreement.

(c) Cash Election. All holders of shares of Independent
Common Stock will be given the option by Crestar of exchanging their
shares for the Price Per Share in cash (subject to all applicable
withholding taxes), provided that the number of shares that may be
exchanged for cash shall not exceed 40% of the outstanding shares of
Independent Common Stock immediately prior to the Effective Time of
the Merger. The cash election must be made at or prior to the time
Independent shareholders vote on the Merger, and, once such vote has
been taken, cash elections shall be irrevocable. If the number of
shares for which a cash election is made exceeds 40% of the
outstanding shares of Independent Common Stock immediately prior to
the Effective Time of the Merger, Crestar first will pay cash for
shares submitted for cash exchange by each holder of 100 or fewer
Independent shares (if such holder has submitted all his shares for
cash exchange) and then will pay cash for the remaining shares
submitted for cash pro rata. Shares not exchanged for cash after
proration will be exchanged for Crestar Common Stock at the Exchange
Ratio.

2.2. Manner of Exchange. (a) Independent shareholders who elect
to exchange some or all of their shares of Independent Common Stock for
cash must submit to Crestar Bank certificates for the Independent shares
being exchanged for cash at or prior to the meeting of Independent's
shareholders referred to in Section 4.2. At the direction of Independent
and subject to an escrow agreement, such shares shall be held by Crestar
Bank subject to release or exchange as described in the foregoing sentence.
If the Merger is approved by Independent's shareholders at the shareholders
meeting, a shareholder's election to receive cash shall be irrevocable and
Crestar Bank will retain certificates for shares submitted for cash
purchase until either (i) termination of this Agreement, upon which Crestar
Bank promptly will return such certificates, or (ii) the Effective Time of
the Merger, when Crestar Bank (which shall act as exchange agent) will
exchange such certificates for cash to the extent required by this
Agreement and the Plan of Merger.

(b) After the Effective Time of the Merger, each holder of
a certificate for theretofore outstanding shares of Independent Common
Stock, upon surrender of such certificate to Crestar Bank (which shall
act as exchange agent), unless previously surrendered to Crestar Bank
in connection with exercise of the cash option, and a Letter of
Transmittal shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of full shares of
Crestar Common Stock for which shares of Independent Common Stock
theretofore represented by the certificate or certificates so
surrendered shall have been exchanged as provided in this Article II
or cash if the cash option provided in subsection 2.1(c) is properly
elected, or, in the event of proration, a combination of cash and
Crestar Common Stock. Until so surrendered after the Effective Time
of the Merger, each outstanding certificate which, prior to the
Effective Time of the Merger, represented Independent Common Stock
will be deemed to evidence the right to receive either (i) the number
of full shares of Crestar Common Stock into which the shares of
Independent Common Stock represented thereby may be converted in
accordance with the Exchange Ratio or (ii) the Price Per Share
multiplied by the number of shares represented by such certificate
(subject to all applicable withholding taxes) in cash if the cash
option provided in subsection 2.1(c) was properly elected, or (iii) a
combination thereof; and, after the Effective Time of the Merger
(unless the cash option was properly elected) will be deemed for all
corporate purposes of Crestar to evidence ownership of the number of
full shares of Crestar Common Stock into which the shares of
Independent Common Stock represented thereby were converted.

(c) For shares of Independent Common Stock to be converted
into Crestar Common Stock, until such outstanding certificates
formerly representing Independent Common Stock are surrendered, no
dividend payable to holders of record of Crestar Common Stock for any
period as of any date subsequent to the Effective Time of the Merger
shall be paid to the holder of such outstanding certificates in
respect thereof. After the Effective Time of the Merger, there shall
be no further registry of transfer on the records of Independent of
shares of Independent Common Stock. If a certificate representing
such shares is presented to Crestar, it shall be canceled and
exchanged for a certificate representing shares of Crestar Common
Stock as herein provided. Upon surrender of certificates of
Independent Common Stock in exchange for Crestar Common Stock, there
shall be paid to the recordholder of the certificates of Crestar
Common Stock issued in exchange therefor (i) the amount of dividends
theretofore paid for such full shares of Crestar Common Stock as of
any date subsequent to the Effective Time of the Merger which have not
yet been paid to a public official pursuant to abandoned property laws
and (ii) at the appropriate payment date the amount of dividends with
a record date after the Effective Time of the Merger but prior to
surrender and a payment date subsequent to surrender. No interest
shall be payable for such dividends upon surrender of outstanding
certificates.

(d) At the Effective Time of the Merger, each share of
Independent Common Stock held of record by Crestar shall be canceled,
retired and cease to exist.

2.3. No Fractional Shares. No certificates or scrip for
fractional shares of Crestar Common Stock will be issued. In lieu thereof,
Crestar will pay the value of such fractional shares in cash on the basis
of the Average Closing Price.

2.4. Assets. At the Effective Time of the Merger, the corporate
existence of Independent shall be merged into and continued in Crestar Bank
as the Surviving Bank. All rights, franchises and interests of Independent
in and to any type of property and choses in action shall be transferred to
and vested in the Surviving Bank by virtue of the Merger without any deed
or other transfer. The Surviving Bank without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interests, including appointments, designations
and nominations, and all other rights and interests as trustee, executor,
administrator, transfer agent or registrar of stocks and bonds, guardian of
estates, assignee, receiver and committee, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights,
franchises and interests were held or enjoyed by Independent at the
Effective Time of the Merger, which in any event shall include the vesting
of such rights, franchises and interests in Crestar Bank without impairment
or reversion to the fullest extent permitted in accordance with and as
provided in Section 13.1-721 of the Virginia Stock Corporation Act
("VSCA").

2.5. Liabilities. At the Effective Time of the Merger, the
Surviving Bank shall be liable for all liabilities of Independent, as
provided in Section 13.1-721 of the VSCA. All deposits, debts, liabilities
and obligations of Independent, accrued, absolute, contingent or otherwise,
and whether or not reflected or reserved against on balance sheets, books
of accounts, or records of Independent shall be those of the Surviving Bank
and shall not be released or impaired by the Merger. All rights of
creditors and other obligees and all liens on property of Independent shall
be preserved unimpaired.

ARTICLE III
Representations and Warranties

3.1. Representations and Warranties of Independent. Independent
represents and warrants to Crestar and Crestar Bank as follows:

(a) Organization, Standing and Power. Independent is a
banking corporation duly organized, validly existing and in good
standing under the laws of Virginia and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and to perform this
Agreement to effect the transactions contemplated thereby.
Independent's deposits are insured by the Bank Insurance Fund of
Federal Deposit Insurance Corporation (the "FDIC") to the maximum
extent permitted by law. Independent has delivered to Crestar
complete and correct copies of (i) its Articles of Incorporation and
(ii) its By-laws.

(b) Capital Structure. The authorized capital stock of
Independent consists of 5,000,000 shares of Independent Common Stock
and no shares of preferred stock. On the date hereof, 1,020,000
shares of Independent Common Stock were outstanding. All of the
outstanding shares of Independent Common Stock were validly issued,
fully paid and nonassessable.

Independent knows of no person who beneficially owns 5% or
more of the outstanding Independent Common Stock as of the date
hereof, except as disclosed on Schedule A-1.

(c) Authority. Subject to the approval of this Agreement
and the Plan of Merger by the shareholders of Independent as
contemplated by Section 4.2, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
and thereby and by the Plan of Merger have been duly and validly
authorized by all necessary action on the part of Independent, and
this Agreement is a valid and binding obligation of Independent,
enforceable in accordance with its terms. The execution and delivery
of this Agreement, the consummation of the transactions contemplated
hereby and by the Plan of Merger and compliance by Independent with
any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation or By-laws or
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
note, bond, debenture, mortgage, indenture, license, material
agreement or other material instrument or obligation to which
Independent is a party, or by which it or any of its properties or
assets may be bound, or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Independent or any
of its properties or assets. No consent or approval by any
governmental authority, other than compliance with applicable federal
and state securities and banking laws, and regulations of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"),
the FDIC and the Bureau of Financial Institutions of the Virginia
State Corporation Commission ("SCC"), is required in connection with
the execution and delivery by Independent of this Agreement or the
consummation by Independent of the transactions contemplated hereby or
by the Plan of Merger.

(d) Investments. All securities owned by Independent of
record and beneficially are free and clear of all mortgages, liens,
pledges, encumbrances or any other restriction, whether contractual or
statutory, which would materially impair the right of Independent
freely to dispose of any such security at any time, except as noted on
Schedule A-1. Any securities owned of record by Independent in an
amount equal to 5% or more of the issued and outstanding voting
securities of the issuer thereof have been noted on such Schedule A-1.
There are no voting trusts or other agreements or undertakings binding
on Independent with respect to the voting of such securities. With
respect to all repurchase agreements pursuant to which Independent has
sold securities, Independent has a valid, perfected first lien or
security interest in the government securities or other collateral
securing the repurchase agreement, and the value of the collateral
securing each such repurchase agreement equals or exceeds the amount
of the debt secured by such collateral under such agreement. Since
May 31, 1994, there has been no significant deterioration in the
quality of the portfolio of investment securities owned by
Independent.

(e) Financial Statements. Schedule A-2 contains copies of
the following financial statements of Independent (the "Independent
Financial Statements"):

(i) Balance Sheets as of December 31, 1993, 1992 and
1991 (audited) and as of March 31, 1994 and March 31, 1993
(unaudited);

<PAGE>

(ii) Statements of Operations for each of the years
ended December 31, 1993, 1992, and 1991 (audited) and the
three months ended March 31, 1994 and 1993 (unaudited);

(iii) Statements of Shareholders' Equity for each of
the years ended December 31, 1993, 1992 and 1991 (audited);
and

(iv) Statements of Cash Flows for each of the years
ended December 31, 1993, 1992 and 1991 (audited).

Such financial statements and the notes thereto have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated unless otherwise
noted in the Independent Financial Statements. Each of such balance
sheets, together with the notes thereto, presents fairly as of its
date the financial condition and assets and liabilities of
Independent. The statements of operations, shareholders' equity and
cash flows, together with the notes thereto, present fairly the
results of operations, shareholders' equity and cash flows of
Independent for the periods indicated.

(f) Absence of Undisclosed Liabilities. At March 31, 1994
and December 31, 1993, Independent had no material obligations or
liabilities (contingent or otherwise) of any nature which were not
reflected in the Independent Financial Statements as of such dates, or
disclosed in the notes thereto, except for those which are disclosed
in Schedules specifically referred to herein or which in the aggregate
are immaterial.

(g) Tax Matters. Independent has filed or caused to be
filed or (in the case of returns or reports not yet due) will file all
tax returns and reports required to have been filed by or for it
before the Effective Time of the Merger, and all information set forth
in such returns or reports is or (in the case of such returns or
reports not yet due) will be accurate and complete. Independent has
paid or made adequate provision for or (with respect to returns or
reports not yet filed) before the Effective Time of the Merger will
pay or make adequate provision for all taxes, additions to tax,
penalties, and interest for all periods covered by those returns or
reports. Except as set forth on Schedule B, there are, and at the
Effective Time of the Merger will be, no unpaid taxes, additions to
tax, penalties, or interest due and payable by Independent or by any
other person that are or could become a lien on any asset or otherwise
adversely affect the business, property or financial condition of
Independent. Independent has collected or withheld, or will collect
or withhold before the Effective Time of the Merger, all amounts
required to be collected or withheld by it for any taxes, and all such
amounts have been, or before the Effective Time of the Merger will
have been, paid to the appropriate governmental agencies or set aside
in appropriate accounts for future payment when due. Independent is
in compliance with, and its records contain all information and
documents (including, without limitation, properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting
and tax withholding requirements under federal, state, and local laws,
rules, and regulations, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Code.
The balance sheets contained in the Independent Financial Statements
fully and properly reflect, as of the dates thereof, the aggregate
liabilities of Independent for all accrued taxes, additions to tax,
penalties and interest. For periods ending after December 31, 1993,
the books and records of Independent fully and properly reflect its
liability for all accrued taxes, additions to tax, penalties and
interest. Except as disclosed in Schedule B, Independent has not
granted (nor is it subject to) any waiver of the period of limitations
for the assessment of tax for any currently open taxable period, and
no unpaid tax deficiency has been asserted against or with respect to
Independent by any taxing authority. Independent has not made or
entered into, nor does Independent hold any asset subject to, a
consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder or a "safe harbor lease" subject to former
Section 168(f)(8) of the Code and the regulations thereunder.
Schedule B describes all tax elections, consents and agreements
affecting Independent. To the knowledge of Independent, no
Independent shareholder is a "foreign person" for purposes of Section
1445 of the Code.

(h) Options, Warrants and Related Matters. There are no
outstanding unexercised options, warrants, calls, commitments or
agreements of any character to which Independent is a party or by
which it is bound, calling for the issuance of securities of
Independent or any security representing the right to purchase or
otherwise receive any such security.

(i) Property. Independent owns (or enjoys use of under
capital leases) all property reflected on the balance sheets included
in the Independent Financial Statements as of March 31, 1994 and
December 31, 1993 (except property sold or otherwise disposed of in
the ordinary course of business). All property shown as being owned
is owned free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except those referred to in
such Independent Financial Statements or the notes thereto, liens for
current taxes not yet due and payable, any unfiled mechanics' liens
and such encumbrances and imperfections of title, if any, as are not
substantial in character or amount or otherwise impair Independent's
business operations. The leases relating to leased property are
fairly reflected in such Independent Financial Statements.

All property and assets material to the business or
operations of Independent are in substantially good operating
condition and repair and such property and assets are adequate for the
business and operations of Independent as currently conducted.

(j) Additional Schedules Furnished to Crestar. In addition
to any Schedules furnished to Crestar pursuant to other provisions of
this Agreement, Independent has furnished to Crestar the following
Schedules which are correct and complete as of the date hereof:

(1) Employees. Schedule C lists as of the date hereof
(A) the names of and current annual salary rates for all
present employees of Independent who received, respectively,
$60,000 or more in aggregate compensation, whether in salary
or otherwise, during the year ended December 31, 1993, or
are presently scheduled to receive salary in excess of
$60,000 during the year ending December 31, 1994, (B) the
number of shares of Independent Common Stock owned
beneficially by each director of Independent, and (C) the
names of and the number of shares of Independent Common
Stock owned by each person who Independent has reason to
believe beneficially owns 5% or more of the outstanding
Independent Common Stock.

(2) Certain Contracts. Schedule D lists all notes,
bonds, mortgages, indentures, licenses, lease agreements and
other contracts and obligations to which Independent is a
party as of the date hereof except for those entered into by
Independent in the ordinary course of its banking and trust
business consistent with its prior practice and that do not
involve an amount greater than $25,000.

(3) Employment Contracts and Related Matters.
Independent is not a party to any employment contract or
severance arrangement not terminable at the option of
Independent without liability. Except in all cases as set
forth on Schedule E, Independent is not a party to (A) any
retirement, profit sharing or pension plan or thrift plan or
agreement or employee benefit plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974
("ERISA")), (B) any management or consulting agreement not
terminable at the option of Independent without liability or
(C) any union or labor agreement.

(4) Real Estate. Schedule F describes, as of the date
hereof, all interests in real property owned, leased or
otherwise claimed by Independent, including Other Real
Estate Owned.

(5) Affiliates. Schedule G sets forth the names and
number of shares of Independent Common Stock owned as of the
date hereof beneficially or of record by any persons
Independent considers to be affiliates of Independent
("Independent Affiliates") as that term is defined for
purposes of Rule 145 under the 1933 Act.

(k) Agreements in Force and Effect. All contracts,
agreements, plans, leases, policies and licenses referred to in any
Schedule of Independent referred to herein are valid and in full force
and effect, and Independent has not breached any material provision
of, nor is in material default in any respect under the terms of, any
such contract, agreement, lease, policy or license.

(l) Legal Proceedings; Compliance with Laws. Except as set
forth in Schedule H, there is no legal, administrative, arbitration or
other proceeding or governmental investigation pending or, to the
knowledge of Independent's management, threatened or probable of
assertion against Independent. Except as set forth in Schedule H,
Independent has complied in all material respects with any laws,
ordinances, requirements, regulations or orders applicable to its
business. Independent has all material licenses, permits, orders or
approvals (collectively, the "Permits") of any federal, state, local
or foreign governmental or regulatory body that are necessary for the
conduct of its business; the Permits are in full force and effect; no
violations are or have been recorded in respect of any Permits nor has
Independent received notice of any violations; and no proceeding is
pending or, to the knowledge of Independent, threatened to revoke or
limit any Permit. Except as set forth in Schedule H, Independent has
not entered into any agreements or written understandings during the
last three years with the SCC, the FDIC or any other regulatory agency
having authority over it. Independent is not subject to any judgment,
order, writ, injunction or decree which materially adversely affects,
or might reasonably be expected materially adversely to affect, the
financial condition, results of operations, business or prospects of
Independent.

(m) Employee Benefit Plans.

(1) Schedule E includes a correct and complete list
of, and Crestar has been furnished a true and correct copy
of (A) all qualified pension and profit-sharing plans, all
deferred compensation, consultant, severance, thrift,
option, bonus and group insurance contracts and all other
incentive, welfare and employee benefit plans, trust,
annuity or other funding agreements, and all other
agreements that are presently in effect, or have been
approved prior to the date hereof, maintained for the
benefit of employees or former employees of Independent or
the dependents or beneficiaries of any employee or former
employee of Independent, whether or not subject to ERISA
(the "Employee Plans"), (B) the most recent actuarial and
financial reports prepared or required to be prepared with
respect to any Employee Plan and (C) the most recent annual
reports filed with any governmental agency, the most recent
favorable determination letter issued by the Internal
Revenue Service, and any open requests for rulings or
determination letters, that pertain to any such Employee
Plan. Schedule E identifies each Employee Plan that is
intended to be qualified under Section 401(a) of the Code
and each such plan is qualified.

(2) Neither Independent nor any employee pension
benefit plan (as defined in Section 3(2) of ERISA (a
"Pension Plan")) maintained or previously maintained by it,
has incurred any material liability to the Pension Benefit
Guaranty Corporation ("PBGC") or to the Internal Revenue
Service with respect to any Pension Plan. There is not
currently pending with the PBGC any filing with respect to
any reportable event under Section 4043 of ERISA nor has any
reportable event occurred as to which a filing is required
and has not been made.

(3) Full payment has been made (or proper accruals
have been established) of all contributions which are
required for periods prior to Closing under the terms of
each Employee Plan, ERISA, or a collective bargaining
agreement, no accumulated funding deficiency (as defined in
Section 302 of ERISA or Section 412 of the Code) whether or
not waived, exists with respect to any Pension Plan
(including any Pension Plan previously maintained by
Independent), and there is no "unfunded current liability"
(as defined in Section 412 of the Code) with respect to any
Pension Plan.

(4) No Employee Plan is a "multiemployer plan" (as
defined in Section 3(37) of ERISA). Independent has not
incurred any liability under Section 4201 of ERISA for a
complete or partial withdrawal from a multiemployer plan (as
defined in Section 3(37) of ERISA). Independent has not
participated in or agreed to participate in, a multiemployer
plan (as defined in Section 3(37) of ERISA).

(5) All "employee benefit plans," as defined in
Section 3(3) of ERISA, that are maintained by Independent
and all "employee benefit plans," as defined in Section 3(3)
of ERISA that were previously maintained by Independent
comply and have been administered in compliance in all
material respects with ERISA and all other applicable legal
requirements, including the terms of such plans, collective
bargaining agreements and securities laws. Independent has
no material liability under any such plan that is not
reflected in the Independent Financial Statements.

(6) No prohibited transaction has occurred with
respect to any Employee Plan that is an "employee benefit
plan" (as defined in Section 3(3) of ERISA) maintained by
Independent or any "employee benefit plan" as defined in
Section 3(3) of ERISA that was previously maintained by
Independent that would result, in material liability to
Independent under ERISA or in the imposition of a material
excise tax on Independent under Section 4975 of the Code.

(7) Schedule E identifies each Employee Plan that is
an "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) and which is funded. The funding under each
such plan does not exceed the limitations under Section
419A(b) or 419A(c) of the Code. Independent is not subject
to taxation on the income of any such plan or any such plan
previously maintained by Independent.

(8) Schedule E identifies the method of funding
(including any individual accounting) for all post-
retirement medical or life insurance benefits provided by
Independent for the employees of Independent. Schedule E
also discloses the funded status of these Employee Plans.

(9) Schedule E identifies each corporate owned life
insurance policy, including any key man insurance policy and
policy insuring the life of any director or employee of
Independent, and indicates for each such policy, the face
amount of coverage, cash surrender value, if any, and annual
premiums.

(10) No trade or business is, or has ever been, treated
as a single employer with Independent for employee benefit
purposes under ERISA and the Code.

(n) Insurance. All policies or binders of fire, liability,
product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of Independent are described on
Schedule I and are valid and enforceable in accordance with their
terms, are in full force and effect, and insure against risks and
liabilities to the extent and in the manner deemed appropriate and
sufficient by Independent. Independent is not in default with respect
to any provision contained in any such policy or binder and has not
failed to give any notice or present any claim under any such policy
or binder in due and timely fashion. Independent has not received
notice of cancellation or non-renewal of any such policy or binder.
Independent has no knowledge of any inaccuracy in any application for
such policies or binders, any failure to pay premiums when due or any
similar state of facts that might form the basis for termination of
any such insurance. Independent has no knowledge of any state of
facts or of the occurrence of any event that is reasonably likely to
form the basis for any material claim against it not fully covered
(except to the extent of any applicable deductible) by the policies or
binders referred to above. Independent has not received notice from
any of its insurance carriers that any insurance premiums will be
materially increased in the future or that any such insurance coverage
will not be available in the future on substantially the same terms as
now in effect.

(o) Loan Portfolio. Each loan outstanding on the books of
Independent is in all respects what it purports to be, was made in the
ordinary course of business, was not known to be uncollectible at the
time it was made, accrues interest in accordance with the terms of the
loan (except for loans shown in the Independent Financial Statements
as non-accrual loans), and was made in accordance with Independent's
standard loan policies. The records of Independent regarding all
loans outstanding and Other Real Estate Owned by Independent on its
books are accurate in all material respects and the risk
classifications assigned by Independent for the loans outstanding are,
in the best judgment of the management of Independent, appropriate.
The reserves for possible loan losses on the outstanding loans of
Independent, as reflected in the Independent Financial Statements,
have been established in accordance with generally accepted accounting
principles and with the requirements of the SCC and the FDIC and in
the best judgment of the management of Independent are adequate to
absorb all known and anticipated loan losses in the loan portfolio of
Independent. Except as identified on Schedule J, no loan in excess of
$50,000 has been classified by examiners (regulatory or internal) as
"Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets",
"Concerned Loans", or words of similar import. The Other Real Estate
Owned included in any nonperforming asset of Independent is carried
net of reserves at the lower of cost or fair market value based on
independent appraisals that comply with the requirements of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989
and Uniform Standards of Professional Appraisal Practice. To the best
knowledge of the management of Independent, each loan reflected as an
asset on the Independent Financial Statements is the legal, valid and
binding obligation of the obligor and any guarantor, and except as to
loans subject to collection actions (which in the aggregate do not
exceed $250,000) no defense, offset or counterclaim has been asserted
with respect to any such loan).

(p) Absence of Changes. Since May 31, 1994 as to its
investment securities portfolio and since December 31, 1993 as to its
other assets, there has not been any material adverse change in the
aggregate assets or liabilities, earnings or business of Independent.
Since December 31, 1993 the business of Independent has been conducted
only in the ordinary course.

(q) Brokers and Finders. Neither Independent nor its
officers, directors or employees have employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated herein except
for the engagement of Baxter Fentriss and Company, whose fee for its
engagement shall not exceed $160,000.

(r) Subsidiaries, Partnerships and Joint Ventures.
Independent has no subsidiaries and is not a party to any joint
venture agreement or partnership.

(s) Reports. Since January 1, 1989, Independent has filed
all material reports and statements, together with any amendments
required to be made with respect thereto, that were required to be
filed with (i) the FDIC, (ii) the SCC and (iii) any other governmental
or regulatory authority or agency having jurisdiction over its
operations. No such report or statement, or any amendments thereto,
contains any statement which, at the time and in light of the
circumstances under which it was made, was false or misleading with
respect to any material fact or omitted to state any material fact
necessary in order to make the statements contained therein not false
or misleading.

(t) Environmental Matters. For purposes of this
subsection, the following terms shall have the indicated meaning:

"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any governmental entity relating to (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal
life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances. The term "Environmental Law" includes without limitation
(i) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901, et seq; the Clean Air Act, as amended, 42 U.S.C.
Section 7401, et seq; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251, et seq; the Toxic Substances Control
Act, as amended, 15 U.S.C. Section 9601, et seq; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Section 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq; and
all comparable state and local laws, and (ii) any common law
(including without limitation common law that may impose strict
liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Substance.

"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any material containing any
such substance as a component. Hazardous Substances include without
limitation petroleum or any derivative or by-product thereof,
asbestos, radioactive material, and polychlorinated biphenyls.

"Loan Portfolio Properties and Other Properties Owned" means
those properties owned or operated by Independent, including those
properties serving as collateral for any loans made by Independent or
for which Independent serves in a trust relationship.

Except as disclosed in Schedule K, to the knowledge of
Independent after inquiry of Independent's loan officers,

(i) Independent has not been or is not in violation
of or liable under any Environmental Law;

(ii) none of the Loan Portfolio Properties and Other
Properties Owned by Independent has been or is in violation
of or liable under any Environmental Law; and

(iii) there are no actions, suits, demands, notices,
claims, investigations or proceedings pending or threatened
relating to the liability of the Loan Portfolio Properties
and Other Properties Owned by Independent under any
Environmental Law, including without limitation any notices,
demand letters or requests for information from any federal
or state environmental agency relating to any such
liabilities under or violations of Environmental Law.

(u) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the
date hereof, no written statement, certificate, schedule, list or
other written information furnished by or on behalf of Independent at
any time to Crestar, in connection with this Agreement, when
considered as a whole, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. Each
document delivered or to be delivered by Independent to Crestar is or
will be a true and complete copy of such document, unmodified except
by another document delivered by Independent to Crestar.

(v) Subject to the limitations imposed by federal and state
banking laws and except as disclosed in the Independent Financial
Statements, there are no restrictions precluding Independent from
paying dividends when, as and if declared by its board of directors.

3.2. Representations and Warranties of Crestar and Crestar Bank.
Crestar and Crestar Bank represent and warrant to Independent as follows:

(a) Organization, Standing and Power. Crestar is a
corporation duly organized, validly existing and in good standing
under the laws of Virginia and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted.

(b) Capital Structure. The authorized capital stock of
Crestar consists of 100,000,000 shares of Common Stock, of which
37,482,661 shares were issued and outstanding as of March 31, 1994,
and 2,000 shares of Preferred Stock of which none were issued and
outstanding as of March 31, 1994. All of such issued and outstanding
shares of Crestar Common were validly issued, fully paid and
nonassessable at such date.

<PAGE>

(c) Authority. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary action on the
part of Crestar; and this Agreement is a valid and binding obligation
of Crestar, enforceable in accordance with its terms. The execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby and compliance by Crestar with any of the
provisions hereof will not (i) conflict with or result in a breach of
any provision of its Articles of Incorporation or By-laws or a default
(or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Crestar is a party, or by which it
or any of its properties or assets may be bound or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Crestar or any of its properties or assets. No consent
or approval by any governmental authority, other than compliance with
applicable federal and state securities and banking laws, rules of the
NYSE and regulations of the Federal Reserve Board, the FDIC and the
SCC is required in connection with the execution and delivery by
Crestar of this Agreement or the consummation by Crestar of the
transactions contemplated hereby or by the Plan of Merger.

The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and by the Plan
of Merger have been duly and validly authorized by all necessary
action on the part of Crestar Bank, and this Agreement is a valid and
binding obligation of Crestar Bank, enforceable in accordance with its
terms. The execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby and by the Plan of Merger and
compliance by Crestar Bank with any of the provisions hereof or
thereof will not (i) conflict with or result in a breach of any
provision of its Articles of Incorporation or By-laws or a default (or
give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or
obligation to which Crestar Bank is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
Crestar Bank or any of its properties or assets. No consent or
approval by any government authority, other than compliance with
applicable federal and state securities and banking laws, and
regulations of the Federal Reserve Board, the FDIC and the SCC, is
required in connection with the execution and delivery by Crestar Bank
of this Agreement or the consummation by Crestar Bank of the
transactions contemplated hereby or by the Plan of Merger.

(d) Financial Statements. Crestar has on or prior to the
date hereof delivered to Independent copies of the following
consolidated financial statements of Crestar (the "Crestar Financial
Statements"):

(i) Consolidated Balance Sheets as of December 31,
1993 and 1992 (audited) and as of March 31, 1994 and 1993
(unaudited);

(ii) Consolidated Income Statements for each of the
years ended December 31, 1993, 1992, and 1991 (audited) and
the three months ended March 31, 1994 and 1993 (unaudited);

(iii) Consolidated Statements of Changes in
Shareholders' Equity for each of the years ended December
31, 1993, 1992 and 1991 (audited) and the three months ended
March 31, 1994 and 1993 (unaudited); and

(iv) Consolidated Statements of Cash Flows for each of
the years ended December 31, 1993, 1992 and 1991 (audited)
and the three months ended March 31, 1994 and 1993
(unaudited).

Such consolidated financial statements and the notes thereto have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated unless
otherwise noted in the Crestar Financial Statements. Each of such
consolidated balance sheets, together with the notes thereto, presents
fairly as of its date the financial condition and assets and
liabilities of Crestar. The consolidated income statements,
statements of changes in shareholders' equity and statements of cash
flows, together with the notes thereto, present fairly the results of
operations, shareholders' equity and cash flows of Crestar for the
periods indicated.

(e) Absence of Undisclosed Liabilities. At March 31, 1994
and December 31, 1993, Crestar and its consolidated subsidiaries had
no material obligations or liabilities, (contingent or otherwise) of
any nature which were not reflected in the Crestar Financial Statement
as of such dates, or disclosed in the notes thereto, except for those
which are disclosed in Schedules specifically referred to herein or
which in the aggregate are immaterial.

(f) Absence of Changes. Since March 31, 1994 there has not
been any material adverse change in the condition (financial or
otherwise), aggregate assets or liabilities, earnings or business of
Crestar. Since March 31, 1994 the business of Crestar has been
conducted only in the ordinary course.

(g) Brokers and Finders. Neither Crestar, Crestar Bank nor
any of their respective officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated herein.

(h) Subsidiaries. Crestar's first-tier subsidiaries are
Crestar Bank, Crestar Bank N.A., Crestar Bank MD, Crestar Insurance
Agency, Inc., and Crestar Securities Corporation. Such corporations
are duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation and have all
requisite corporate power and authority to own, lease and operate
their properties and to carry on their business as now being conducted
in all material respects.

(i) Tax Matters. Each of Crestar, Crestar Bank, and all
other corporations that are members of the same "affiliated group," as
defined in Section 1504(a)(1) of the Code, as Crestar (collectively,
the "Crestar Group") has filed or caused to be filed or (in the case
of returns or reports not yet due) will file all tax returns and
reports required to have been filed by or for it before the Effective
Time of the Merger. Each member of the Crestar Group has paid or made
adequate provision for or (with respect to returns or reports not yet
filed) before the Effective Time of the Merger will pay or make
adequate provision for all taxes, additions to tax, penalties, and
interest for all periods covered by those returns or reports. The
balance sheets contained in the Crestar Financial Statements fully and
properly reflect, as of the dates thereof, the aggregate liabilities
of the members of the Crestar Group for all accrued taxes, additions
to tax, penalties and interest. For periods ending after March 31,
1994, the books and records of each member of the Crestar Group fully
and properly reflect its liability for all accrued taxes, additions to
tax, penalties and interest. Except as disclosed in Schedule L, no
member of the Crestar Group has granted (nor is it subject to) any
waiver of the period of limitations for the assessment of tax for any
currently open taxable period, and no unpaid tax deficiency has been
asserted against or with respect to any member of the Crestar Group by
any taxing authority.

(j) Property. Crestar and Crestar Bank own (or enjoy use
of under capital leases) all property reflected on the balance sheets
included in the Crestar Financial Statements as of March 31, 1994 and
December 31, 1993 as being owned by them (except property sold or
otherwise disposed of in the ordinary course of business). All
property shown as being owned is owned free and clear of mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever,
except those referred to in such Crestar Financial Statements or the
notes thereto, liens for current taxes not yet due and payable, any
unfiled mechanic's liens and such encumbrances and imperfections of
title, if any, as are not substantial in character or amount or
otherwise would materially impair Crestar's consolidated business
operations. The leases relating to leased property are fairly
reflected in such Crestar Financial Statements.

All property and assets material to the business or
operations of Crestar and Crestar Bank are in substantially good
operating condition and repair.

(k) Agreements in Force and Effect. All material
contracts, agreements, plans, leases, policies and licenses of Crestar
and Crestar Bank are valid and in full force and effect; and Crestar
and Crestar Bank have not breached any material provision of, nor are
in default in any material respect under the terms of, any such
contract, agreement, lease, policy or license, the effect of which
breach or default would have a material adverse effect upon Crestar
and its subsidiaries taken as a whole.

(l) Legal Proceedings; Compliance with Laws. There is no
legal, administrative, arbitration or other proceeding or governmental
investigation pending, or, to the knowledge of Crestar's and Crestar
Bank's management, threatened or probable of assertion which, if
decided adversely, would have a material adverse effect on the
financial condition, results of operations, business or prospects of
Crestar on a consolidated basis. Crestar and Crestar Bank have
complied with any laws, ordinances, requirements, regulations or
orders applicable to their respective businesses, except where
noncompliance would not have a material adverse effect on the
financial condition, results of operations, business or prospects of
Crestar on a consolidated basis. Crestar and Crestar Bank have all
licenses, permits, orders or approvals of any federal, state, local or
foreign governmental or regulatory body that are necessary for the
conduct of the respective businesses of Crestar and Crestar Bank and
the absence of which would have a material adverse effect on the
financial condition, results of operations, business or prospects of
Crestar on a consolidated basis; the Permits are in full force and
effect; neither Crestar nor Crestar Bank is aware of any material
violations that are or have been recorded in respect of any Permit nor
has Crestar or Crestar Bank received notice of any violations; and no
proceeding is pending or, to the knowledge of Crestar or Crestar Bank,
threatened to revoke or limit any Permit. Neither Crestar nor Crestar
Bank is subject to any judgment, order, writ, injunction or decree
which materially adversely affects, or might reasonably be expected to
materially adversely affect, the financial condition, results of
operations, business or prospects of Crestar on a consolidated basis.

(m) Employee Benefit Plans.

(1) Neither Crestar nor any of its subsidiaries, nor
any employee benefit pension plan (as defined in Section
3(2) of ERISA (a "Pension Plan")) maintained by it, has
incurred any material liability to the PBGC or to the
Internal Revenue Service with respect to any Pension Plan,
deferred compensation, consultant, severance, thrift,
option, bonus and group insurance contract or any other
incentive, welfare and employee benefit plan and agreement
presently in effect, or approved prior to the date hereof,
for the benefit of employees or former employees of Crestar
and its subsidiaries or the dependents or beneficiaries of
any employee or former employee of Crestar or any subsidiary
(the "Crestar Employee Plans"). There is not currently
pending with the PBGC any filing with respect to any
reportable event under Section 4043 of ERISA nor has any
reportable event occurred as to which a filing is required
and has not been made.

(2) Full payment has been made (or proper accruals
have been established) of all contributions which are
required for periods prior to the Closing Date under the
terms of each Crestar Employee Plan, ERISA, or a collective
bargaining agreement, and no accumulated funding deficiency
(as defined in Section 302 of ERISA or Section 412 of the
Code) whether or not waived, exists with respect to any
Pension Plan.

(3) No Crestar Employee Plan is a "multiemployer plan"
(as defined in Section 3(37) of ERISA). Neither Crestar nor
Crestar Bank has incurred any material liability under
Section 4201 of ERISA for a complete or partial withdrawal
from a multiemployer plan (as defined in Section 3(37) of
ERISA). Neither Crestar nor Crestar Bank has participated
in or agreed to participate in, a multiemployer plan (as
defined in Section 3(37) of ERISA).

(4) All "employee benefit plans," as defined in
Section 3(3) of ERISA, that are maintained by Crestar comply
and have been administered in compliance in all material
respects with ERISA and all other applicable legal
requirements, including the terms of such plans, collective
bargaining agreements and securities laws. Neither Crestar
nor Crestar Bank has any material liability under any such
plan that is not reflected in the Crestar Financial
Statements.

(5) No prohibited transaction has occurred with
respect to any "employee benefit plan" (as defined in
Section 3(3) of ERISA) maintained by Crestar or Crestar Bank
that would result, directly or indirectly, in material
liability to Crestar or Crestar Bank under ERISA or in the
imposition of a material excise tax on Crestar or Crestar
Bank under Section 4975 of the Code.

(n) Disclosure. Except to the extent of any subsequent
correction or supplement with respect thereto furnished prior to the
date hereof, no written statement, certificate, schedule, list or
other written information furnished by or on behalf of Crestar at any
time to Independent, in connection with this Agreement when considered
as a whole, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary
in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each
document delivered or to be delivered by Crestar to Independent is or
will be a true and complete copy of such document, unmodified except
by another document delivered by Crestar to Independent.

ARTICLE IV
Conduct and Transactions Prior to
Effective Time of the Merger

4.1. Access to Records and Properties of Crestar, Crestar Bank
and Independent; Confidentiality. Between the date of this Agreement and
the Effective Time of the Merger, each of Crestar and Crestar Bank on the
one hand, and Independent on the other, agree to give to the other
reasonable access to all the premises and books and records (including tax
returns filed and those in preparation) of it and its subsidiaries and to
cause its officers to furnish the other with such financial and operating
data and other information with respect to the business and properties as
the other shall from time to time request for the purposes of verifying the
representations and warranties set forth herein and determining that there
has been no material adverse change in the quality of Independent's
securities portfolio since May 31, 1994 and Independent's loan portfolio
since December 31, 1993, preparing the Registration Statement (as defined
in Section 4.2) and applicable regulatory filings (as set forth in Section
4.6), and preparing financial statements of Independent as of a date prior
to the Effective Time of the Merger in order to facilitate Crestar in
performance of its post-Closing Date financial reporting requirements;
provided, however, that any such investigation shall be conducted in such
manner as not to interfere unreasonably with the operation of the
respective business of the other. Crestar and Independent shall each
maintain the confidentiality of all confidential information furnished to
it by the other party hereto concerning the business, operations, and
financial condition of the party furnishing such information, and shall not
use any such information except in furtherance of the Merger. If this
Agreement is terminated, each party hereto shall promptly return all
documents and copies of, and all workpapers containing, confidential
information received from the other party hereto. The obligations of
confidentiality under this Section 4.1 shall survive any such termination
of this Agreement and shall remain in effect, except to the extent that (a)
one party shall have directly or indirectly acquired the assets and
business of the other party; (b) as to any particular confidential
information with respect to one party, such information (i) shall become
generally available to the public other than as a result of an unauthorized
disclosure by the other party or (ii) was available to the other party on a
nonconfidential basis prior to its disclosure by the first party; or (c)
disclosure by any party is required by subpoena or order of a court of
competent jurisdiction or by order of a regulatory authority of competent
jurisdiction.

4.2. Registration Statement, Proxy Statement, Shareholder
Approval. Independent will duly call and will hold a meeting of its
shareholders as soon as practicable for the purpose of approving the Merger
and will comply fully with the provisions of the VSCA, the 1933 Act and the
1934 Act and the rules and regulations of the Securities and Exchange
Commission (the "SEC") under such acts to the extent applicable, and the
Articles of Incorporation and By-laws of Independent relating to the call
and holding of a meeting of shareholders for such purpose. Subject to
action taken by its Board of Directors pursuant to or as a result of the
exception clause to the first sentence of Section 4.4 hereof, the Board of
Directors of Independent will recommend to and encourage shareholders that
they vote in favor of the Merger. Crestar and Independent will jointly
prepare the proxy statement-prospectus to be used in connection with such
meeting (the "Proxy Statement-Prospectus") and Crestar will prepare and
file with the SEC a Registration Statement on Form S-4 (the "Registration
Statement"), of which such Proxy Statement-Prospectus shall be a part, and
use its best efforts promptly to have the Registration Statement declared
effective. In connection with the foregoing, Crestar will comply with the
requirements of the 1933 Act, the 1934 Act, the NYSE and the rules and
regulations of the SEC under such acts with respect to the offering and
sale of Crestar Common Stock in connection with the Merger and with all
applicable state Blue Sky and securities laws. The notices of such
meetings and the Proxy Statement-Prospectus shall not be mailed to
Independent shareholders until the Registration Statement shall have become
effective under the 1933 Act. Independent covenants that none of the
information supplied by Independent and Crestar covenants that none of the
information supplied by Crestar in the Proxy Statement-Prospectus will, at
the time of the mailing of the Proxy Statement-Prospectus to Independent
shareholders, contain any untrue statement of a material fact nor will any
such information omit any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading; and at all times
subsequent to the time of the mailing of the Proxy Statement-Prospectus, up
to and including the date of the meeting of Independent shareholders to
which the Proxy Statement-Prospectus relates, none of such information in
the Proxy Statement-Prospectus, as amended or supplemented, will contain an
untrue statement of a material fact or omit any material fact required to
be stated therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.

Crestar, as the sole shareholder of Crestar Bank, hereby approves this
Agreement and the Plan of Merger.

4.3. Operation of the Business of Independent. Independent
agrees that from December 31, 1993 to the Effective Time of the Merger, it
has operated, and it will operate, its business substantially as presently
operated and only in the ordinary course and in general conformity with
applicable laws and regulations, and, consistent with such operation, it
will use its best efforts to preserve intact its present business
organizations and its relationships with persons having business dealings
with it. Without limiting the generality of the foregoing, Independent
agrees that it will not, without the prior written consent of Crestar,
(i) make any change in the salaries, bonuses or title of any officer;
(ii) make any change in the title, salaries or bonuses of any other
employee, other than those permitted by current employment policies in the
ordinary course of business, any of which changes shall be reported
promptly to Crestar; (iii) enter into any bonus, incentive compensation,
deferred compensation, profit sharing, thrift, retirement, pension, group
insurance or other benefit plan or any employment or consulting agreement
or increase benefits under existing plans; (iv) create or otherwise become
liable with respect to any indebtedness for money borrowed or purchase
money indebtedness except in the ordinary course of business; (v) amend its
Articles of Incorporation or By-laws; (vi) issue or contract to issue any
shares of Independent capital stock or securities exchangeable for or
convertible into capital stock; (vii) purchase any shares of Independent
capital stock; (viii) enter into or assume any material contract or
obligation, except in the ordinary course of business; (ix) waive, release,
compromise or assign any right or claim of substantial value; (x) propose
or take any other action which would make any representation or warranty in
Section 3.1 hereof untrue; (xi) introduce any new products or services or
change the rate of interest on any deposit instrument to above-market
interest rates; (xii) make any change in policies respecting extensions of
credit or loan charge-offs; (xiii) change reserve requirement policies;
(xiv) change securities portfolio policies; (xv) acquire a policy or enter
into any new agreement, amendment or endorsement or make any changes
relating to insurance coverage, including coverage for its directors and
officers, which would result in an additional annual payment obligation of
$50,000 or more; (xvi) propose or take any action with respect to the
closing of any branches; or (xvii) make any change in any tax election or
accounting method or system of internal accounting controls, except as may
be appropriate to conform to any change in regulatory accounting
requirements or generally accepted accounting principles. Independent
further agrees that, between the date of this Agreement and the Effective
Time of the Merger, it will consult and cooperate with Crestar regarding
(i) loan portfolio management, including management and work-out of
nonperforming assets, and credit review and approval procedures, including
notice to Crestar's Credit Review Department Management of any new
nonresidential loans in excess of $150,000, and (ii) securities portfolio
and funds management, including management of interest rate risk.

4.4. No Solicitation. Unless and until this Agreement shall have
been terminated pursuant to its terms, neither Independent nor any of its
executive officers, directors, representatives, agents or affiliates shall,
directly or indirectly, encourage, solicit or initiate discussions or
negotiations (with any person other than Crestar) concerning any merger,
sale of substantial assets, tender offer, sale of shares of stock or
similar transaction involving Independent or (except as required in the
Proxy-Statement Prospectus or otherwise required by law) disclose, directly
or indirectly, any information not customarily disclosed to the public
concerning Independent, afford to any other person access to the
properties, books or records of Independent or otherwise assist any person
preparing to make or who has made such an offer, or enter into any
agreement with any third party providing for a business combination
transaction, equity investment or sale of significant amount of assets,
except in a situation in which a majority of the full Board of Directors of
Independent has determined in good faith, upon advice of counsel, that such
Board has a fiduciary duty to consider and respond to a bona fide proposal
by a third party (which proposal was not directly or indirectly solicited
by Independent or any of its officers, directors, representatives, agents
or affiliates) and provides written notice of its intention to consider
such proposal and the material terms thereof to Crestar at least three
business days before responding to the proposal. Independent will promptly
communicate to Crestar the terms of any proposal which it may receive in
respect to any of the foregoing transactions.

4.5. Dividends. Independent agrees that since March 31, 1994 and
prior to the Effective Time of the Merger it will not declare or pay any
dividends other than cash dividends, which shall not exceed $0.05 per share
per quarter; provided that Independent's earnings shall, in the reasonable
judgment of Independent management after consultation with Crestar, be
sufficient to support any such dividend; and further provided that,
following the date of this Agreement, the record date for each Independent
dividend shall be the same as Crestar's record date for its dividend for
the same quarter for which the Independent dividend is paid with the result
that, if the Independent Board of Directors declares a dividend,
shareholders of Independent will be entitled to receive either an
Independent cash dividend or Crestar regular cash dividend for the fiscal
quarter for which the dividend is declared.

4.6. Regulatory Filings; Best Efforts. Crestar and Independent
shall jointly prepare all regulatory filings required to consummate the
transactions contemplated by the Agreement and the Plan of Merger and
submit the filings for approval with the Federal Reserve Board and the SCC
as soon as practicable after the date hereof. Crestar and Independent
shall use their commercially reasonable best efforts to obtain approvals of
such filings. Subject to action taken by the Board of Directors of
Independent pursuant to or as a result of the exception clause to the first
sentence of Section 4.4 hereof, each of Crestar, Crestar Bank and
Independent shall use its commercially reasonable best efforts in good
faith, and each of them shall cause its subsidiaries to use their
commercially reasonable best efforts in good faith, to take all such action
as may be necessary or appropriate in order to effect the Merger.

4.7. Public Announcements. Each party will consult with the
other before issuing any press release or otherwise making any public
statements with respect to the Merger and except as may be required by law,
shall not issue any press release or make any such public statement prior
to such consultations and approval of the other party, which approval shall
not be unreasonably withheld.

4.8. Operating Synergies; Conformance to Reserve Policies, Etc.
Between the date hereof and the Effective Time of the Merger, Independent's
management will work with Crestar Bank to achieve appropriate operating
efficiencies following the Closing Date. Customer notification and direct
contact with Independent's deposit customers by Crestar Bank will commence
30 days prior to the Closing Date. At the request of Crestar Bank and upon
receipt by Independent of written confirmation from Crestar and Crestar
Bank that (i) all regulatory approvals have been obtained, (ii) they have
no knowledge of any circumstances allowing them to terminate this Agreement
under Article VII, and (iii) there are no conditions to the obligations of
Crestar and Crestar Bank under this Agreement set forth in Article V, which
they believe will not be fulfilled so as to permit them to consummate the
Merger and the other transactions contemplated hereby, on the day prior to
the Effective Time of the Merger, Independent shall establish such
additional accruals, reserves and charge-offs, through appropriate entries
in its accounting books and records, as may be necessary to conform
Independent's accounting and credit loss reserve practices and methods to
those of Crestar Bank (as such practices and methods are to be applied from
and after the Effective Time of the Merger) and to Crestar Bank's plans
with respect to the conduct of the business of Independent following the
Merger and the costs and expenses relating to the consummation by
Independent of the Merger and the other transactions contemplated hereby.
Any such change in Independent's practices and methods agreed to by
Independent prior to the Effective Time of the Merger, and any effects
thereof, including any such accruals, reserves and charge-offs, shall not
be deemed to cause any representation, warranty or covenant of Independent
to be untrue and inaccurate as of the Effective Time of the Merger or any
other date.

4.9. Crestar Rights Agreement. Crestar agrees that any rights
issued pursuant to the Rights Agreement adopted by it in 1989 shall be
issued with respect to each share of Crestar Common Stock issued pursuant
to the terms hereof and the Plan of Merger, regardless of whether there has
occurred a Distribution Date under the terms of such Rights Agreement prior
to the Effective Time of the Merger.

4.10. Agreement as to Efforts to Consummate. Subject to the terms
and conditions of this Agreement, each of Crestar and Independent agrees to
use all commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, as soon as practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including, without limitation,
using reasonable effort to lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated herein. Each of Crestar and
Independent shall use its commercially reasonable efforts to obtain
consents of all third parties and governmental bodies necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.

4.11. Adverse Changes in Condition. Crestar and Independent each
agrees to give written notice promptly to the other concerning any material
adverse change in its condition (financial or other) from the date of this
Agreement until the Effective Time of the Merger that might adversely
affect the consummation of the transactions contemplated hereby or upon
becoming aware of the occurrence or impending occurrence of any event or
circumstance which would cause or constitute a material breach of any of
the representations, warranties or covenants of such party contained
herein. Each of Crestar and Independent shall use its commercially
reasonable best efforts to prevent or promptly to remedy the same.

4.12. NYSE Listing. If the shares of Crestar Common Stock to be
issued in the Merger are not repurchased on the open market, Crestar will
file with the NYSE a Supplemental Listing Application for the shares of
Crestar Common Stock to be issued in the Merger and use its best efforts to
have such shares approved for listing on the NYSE prior to the Effective
Time of the Merger.

4.13. Updating of Schedules. Independent shall notify Crestar,
and Crestar shall notify Independent, of any changes, additions or events
which may cause any material change in or material addition to any
Schedules delivered by it under this Agreement, promptly after the
occurrence of same by delivery of updates of all Schedules, which shall
include all updated Independent Financial Statements as are prepared by
Independent in the ordinary course of its business. At the Closing Date,
Independent shall notify Crestar, and Crestar shall notify Independent, of
any changes, additions or events which may cause any change in or addition
to any Schedules delivered by it under this Agreement by delivery of
updates of all Schedules. No notification made on or before the Closing
Date pursuant to this Section 4.13 shall be deemed to cure any breach of
any representation or warranty made in this Agreement or any Schedule
unless Crestar or Independent, as the case may be, specifically agree
thereto in writing, nor shall any such notification be considered to
constitute or give rise to a waiver by Independent on the one hand, or
Crestar or Crestar Bank, on the other hand, of any condition set forth in
this Agreement.

ARTICLE V
Conditions of Merger

5.1. Conditions of Obligations of Crestar and Crestar Bank. The
obligations of Crestar and Crestar Bank to consummate the Merger in
accordance with this Agreement are subject to the satisfaction at or prior
to the Effective Time of the Merger of the following conditions unless
waived by Crestar and Crestar Bank.

(a) Representations and Warranties; Performance of
Obligations; No Adverse Change. The representations and warranties of
Independent set forth in Section 3.l hereof shall be true and correct
in all material respects as of the date of this Agreement and as of
the Effective Time of the Merger as though made on and as of the
Effective Time of the Merger (or on the date when made in the case of
any representation and warranty which specifically relates to an
earlier date); Independent shall have performed all obligations
required to be performed by it under this Agreement prior to the
Effective Time of the Merger; there shall have occurred no material
adverse change in the condition (financial or otherwise) of
Independent from May 31, 1994 with respect to Independent's investment
securities portfolio, or from December 31, 1993 with respect to
Independent's other assets to the Effective Time of the Merger
(exclusive of actions taken by Independent at Crestar's request
pursuant to Section 4.8 hereof); and Crestar and Crestar Bank shall
have received a certificate signed by the Chief Executive Officer and
by the Chief Financial Officer of Independent, which may be to their
best knowledge after due inquiry, to such effects.

(b) Authorization of Merger. All action necessary to
authorize the execution, delivery and performance of this Agreement by
Independent and the consummation of the transactions contemplated
herein (including the shareholder action referred to in Section 4.2)
shall have been duly and validly taken by the Board of Directors of
Independent and by the shareholders of Independent and Independent
shall have full power and right to merge on the terms provided herein.

(c) Opinion of Counsel. Crestar and Crestar Bank shall
have received an opinion of Davis, Graham & Stubbs, counsel to
Independent, dated the Closing Date and satisfactory in form and
substance to counsel to Crestar and Crestar Bank, substantially in the
form attached hereto as Exhibit B.

(d) The Registration Statement. The Registration Statement
shall be effective under the 1933 Act and shall not be subject to a
stop order or threatened stop order by the SEC or any state securities
authority.

(e) Tax Opinion. Crestar and Crestar Bank shall have
received, in form and substance satisfactory to them, an opinion of
Hunton & Williams to the effect that, for federal income tax purposes,
the Merger will qualify as a "reorganization" under Section 368(a) of
the Code, and no taxable gain will be recognized by Crestar, Crestar
Bank or Independent in the Merger (i) upon the transfer of
Independent's assets to Crestar Bank in exchange for Crestar Common
Stock, cash and the assumption of Independent's liabilities (but
Independent or Crestar Bank may be required to include certain amounts
in income as a result of the termination of any bad-debt reserve
maintained by Independent for federal income tax purposes and other
possible required changes in tax accounting methods) or (ii) upon the
distribution of such Crestar Common Stock and cash to Independent
shareholders.

(f) Regulatory Approvals. All required approvals from
federal and state regulatory authorities having jurisdiction to permit
Crestar and Crestar Bank to consummate the Merger and to issue Crestar
Common Stock to Independent shareholders shall have been received and
shall have contained no conditions deemed in good faith to be
materially disadvantageous by Crestar.

(g) Affiliate Letters. Within 60 days of the date hereof,
each shareholder of Independent who is an Independent Affiliate shall
have executed and delivered a commitment and undertaking in the form
of Exhibit E to the effect that (1) such shareholder will dispose of
the shares of Crestar Stock received by him in connection with the
Merger only in accordance with the provisions of paragraph (d) of Rule
145 under the 1933 Act; (2) such shareholder will not dispose of any
of such shares until Crestar has received, at its expense, an opinion
of counsel acceptable to it that such proposed disposition will not
violate the provisions of any applicable securities laws; and (3) the
certificates representing said shares may bear a legend referring to
the foregoing restrictions.

(h) Title Matters. Crestar shall have received evidence
satisfactory to it as to the accuracy of the representations made by
Independent in Section 3.1(i).

(i) Accruals for Loan Loss Reserves and Expenses; Tax/Bad
Debt Reserve. Independent shall have cooperated with Crestar Bank to
make no later than the time provided for in Section 4.8 hereof,
appropriate accruals for loan loss reserves and expenses, and, when
indicated, charge-offs. Any such accruals for reserves for loan
losses or expenses, or charge-offs, shall not be deemed to cause any
representations, warranty or covenant of Independent not to be true
and accurate as of the Effective Time of the Merger or as of any other
time.

(j) Acceptance by Crestar and Crestar Bank Counsel. The
form and substance of all legal matters contemplated hereby and of all
papers delivered hereunder shall be reasonably acceptable to counsel
for Crestar and Crestar Bank.

5.2. Conditions of Obligations of Independent. The obligations
of Independent to consummate the Merger in accordance with this Agreement
are subject to the satisfaction at or prior to the Effective Time of the
Merger of the following conditions unless waived by Independent:

(a) Representations and Warranties; Performance of
Obligations; No Adverse Change. The representations and warranties of
Crestar and Crestar Bank set forth in Section 3.2 hereof shall be true
and correct in all material respects as of the date of this Agreement
and as of the Effective Time of the Merger as though made on and as of
the Effective Time of the Merger (or on the date when made in the case
of any representation and warranty which specifically relates to an
earlier date); Crestar and Crestar Bank shall have performed in all
material respects all obligations required to be performed by them
under this Agreement prior to the Effective Time of the Merger; there
shall have occurred no material adverse change in the condition
(financial or otherwise), assets, liabilities, properties, business or
prospects of Crestar or Crestar Bank from March 31, 1994 to the
Effective Time of the Merger; and Independent shall have received a
certificate signed by the Chief Executive Officer and by the Chief
Financial Officer of Crestar and Crestar Bank, which may be to their
best knowledge after due inquiry, to such effects.

(b) Authorization of Merger. All action necessary to
authorize the execution, delivery and performance of this Agreement by
Crestar and Crestar Bank and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the
Boards of Directors of Crestar and Crestar Bank and the shareholders
of Independent and Crestar Bank and Independent shall have full power
and right to merge on the terms provided herein.

(c) Opinion of Counsel. Independent shall have received an
opinion of Hunton & Williams, counsel to Crestar and Crestar Bank,
dated the Closing Date and satisfactory in form and substance to
counsel to Independent, substantially in the form attached hereto as
Exhibit C.

(e) Regulatory Approvals. All required approvals from
federal and state regulatory authorities having jurisdiction to permit
Independent to consummate the Merger and to permit Crestar to issue
Crestar Common Stock to Independent shareholders shall have been
received.

(f) Tax Opinion. Crestar, Crestar Bank and Independent
shall have received, in form and substance reasonably satisfactory to
them, an opinion of Hunton & Williams to the effect that, for federal
income tax purposes, the Merger will qualify as a "reorganization"
under Section 368(a) of the Code; no taxable gain will be recognized
by Crestar, Crestar Bank or Independent in the Merger (i) upon the
transfer of Independent's assets to Crestar in exchange for Crestar
Common Stock, cash and the assumption of Independent's liabilities
(but Independent or Crestar Bank may be required to include certain
amounts in income as a result of the termination of any bad-debt
reserve maintained by Independent for federal income tax purposes and
other possible required changes in tax accounting methods) or
(ii) upon the distribution of such Crestar Common Stock and cash to
Independent shareholders; no taxable gain will be recognized by an
Independent shareholder on the exchange by such shareholder of shares
of Independent Common Stock solely for shares of Crestar Common Stock
(including any fractional share interest) in the Merger; an
Independent shareholder who receives cash and shares of Crestar Common
Stock (including any fractional share interest) for shares of
Independent Common Stock in the Merger pursuant to the cash election
will recognize any gain realized (including any gain treated as a
dividend) up to the amount of cash received (excluding cash in lieu of
a fractional share of Crestar Common Stock), but will not recognize
any loss; an Independent shareholder's basis in Crestar Common Stock
(including any fractional share interest) received in the Merger will
be the same as the shareholder's basis in the Independent Common Stock
surrendered in exchange therefor, decreased by the amount of any cash
received (excluding cash in lieu of a fractional share of Crestar
Common Stock) and increased by the amount of any gain recognized
(including any gain treated as a dividend) by the shareholder; the
holding period of such Crestar Common Stock (including any fractional
share interest) for an Independent shareholder will include the
holding period of the Independent Common Stock surrendered in exchange
therefor, if such Independent Common Stock is held as a capital asset
by the shareholder at the Effective Time of the Merger; and an
Independent shareholder who receives cash in lieu of a fractional
share of Crestar Common Stock will recognize gain or loss equal to any
difference between the amount of cash received and the shareholder's
basis in the fractional share interest.

(g) Fairness Opinion. Independent shall have received an
opinion from Baxter Fentriss and Company that the consideration to be
paid to shareholders of Independent pursuant to Section 2.1 is fair
from a financial point of view to the shareholders of Independent and
such opinion shall not have been rescinded or modified in any way
between the date it is issued and the Effective Time of the Merger.

(h) NYSE Listing. If the shares of Crestar Common Stock to
be issued in the Merger are not repurchased on the open market, such
shares to be issued in the Merger shall have been approved for
listing, upon notice of issuance, on the NYSE.

(i) Acceptance by Independent's Counsel. The form and
substance of all legal matters contemplated hereby and of all papers
delivered hereunder shall be acceptable to counsel for Independent.

ARTICLE VI
Closing Date; Effective Time

6.1. Closing Date. Unless another date or place is agreed to in
writing by the parties, the closing of the transactions contemplated in
this Agreement shall take place at the offices of Crestar, 919 East Main
Street, Richmond, Virginia, at 10:00 o'clock A.M., local time, on such date
as Crestar shall designate to Independent at least 10 days prior to the
designated Closing Date and as reasonably acceptable to Independent;
provided, that the date so designated shall not be earlier than 30 days
after Federal Reserve Board approval, and no later than March 31, 1995 (the
"Closing Date").

6.2. Filings at Closing. Subject to the provisions of Article V,
on the Closing Date, Crestar shall cause Articles of Merger relating to the
Plan of Merger to be filed in accordance with the VSCA, and each of Crestar
and Independent shall take any and all lawful actions to cause the Merger
to become effective.

6.3. Effective Time. Subject to the terms and conditions set
forth herein, including receipt of all required regulatory approvals, the
Merger shall become effective on the day after the Closing Date (the
"Effective Date") and before the opening of business on the Effective Date
as provided in the Articles of Merger filed with the Virginia State
Corporation Commission are made effective (the "Effective Time of the
Merger").

ARTICLE VII
Termination; Survival of Representations,
Warranties and Covenants; Waiver and Amendment

7.1. Termination. This Agreement shall be terminated, and the
Merger abandoned, if the shareholders of Independent shall not have given
the approval required by Section 4.2. Notwithstanding such approval by
such shareholders, this Agreement may be terminated at any time prior to
the Effective Time of the Merger, by:

(a) The mutual consent of Crestar, Crestar Bank and
Independent, as expressed by their respective Boards of Directors;

(b) Either Crestar or Crestar Bank on the one hand or
Independent on the other hand, as expressed by their respective Boards
of Directors, after March 31, 1995;

<PAGE>

(c) By Crestar and Crestar Bank in writing authorized by
its respective Board of Directors if Independent has, or by
Independent in writing authorized by its Board of Directors, if
Crestar or Crestar Bank has, in any material respect, breached (i) any
covenant or agreement contained herein, or (ii) any representation or
warranty contained herein, in any case if such breach has not been
cured by the earlier of 30 days after the date on which written notice
of such breach is given to the party committing such breach or the
Closing Date; provided that it is understood and agreed that any party
may terminate this Agreement on the basis of any such material breach
of any representation or warranty contained herein notwithstanding any
qualification therein relating to the knowledge of the other party;

(d) Either Crestar or Crestar Bank on the one hand or
Independent on the other hand, as expressed by their respective Boards
of Directors, in the event that any of the conditions precedent to the
obligations of such parties to consummate the Merger have not been
satisfied or fulfilled or waived by the party entitled to so waive on
or before the Closing Date, provided that no party shall be entitled
to terminate this Agreement pursuant to this subparagraph (d) if the
condition precedent or conditions precedent which provide the basis
for termination can reasonably be and are satisfied within a
reasonable period of time, in which case, the Closing Date shall be
appropriately postponed but not beyond March 31, 1995;

(e) (A) Crestar and Crestar Bank, or by Independent, if the
Boards of Directors of Crestar and Crestar Bank, or the Board of
Directors of Independent shall have determined in their sole
discretion, exercised in good faith, that the Merger, has become
inadvisable or impracticable by reason of the threat or the
institution of any litigation, proceeding or investigation to restrain
or prohibit the consummation of the transactions contemplated by this
Agreement or to obtain other relief in connection with this Agreement,
or (B) Crestar and Crestar Bank, if the Boards of Directors of Crestar
and Crestar shall have determined in their sole discretion exercised
in good faith, that the Merger has been deemed inadvisable or
impractical by reason of commencement of a competing offer for
Independent Common Stock which is significantly better than Crestar's
offer, and which Crestar certifies to Independent, in writing, it is
unwilling to meet;

(f) Crestar, Crestar Bank or Independent, if the Federal
Reserve Board, or the SCC deny approval of the Merger and the time
period for all appeals or requests for reconsideration has run;

(g) Crestar, following Crestar's due diligence audit of
Independent, which audit shall be conducted reasonably, if such due
diligence audit reveals that (i) Independent has unrecorded or
unfunded liabilities or employee benefit plans not disclosed on the
Independent Financial Statements or the other Schedules hereto,
unrecognized depreciation, material legal proceedings (pending or
threatened) not disclosed on the Independent Financial Statements or
the other Schedules hereto, material liability arising from non-
compliance with existing law, or that (ii) there are potential losses
in the loan portfolio since December 31, 1993 and the securities
portfolio since May 31, 1994 of Independent for which additional
reserves are required in accordance with generally accepted accounting
practices as consistently applied by Independent, with the aggregate
result of (i) and (ii) causing a reduction of Independent's
shareholders' equity in excess of $650,000 from that as reflected in
the Independent Financial Statements at December 31, 1993; provided,
however, that such reduction in excess of $650,000 of Independent's
shareholders' equity shall be in addition to the amount of all
accruals, reserves, charge-offs or other actions taken in accordance
with Section 4.8.

7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement and the Merger pursuant to Section 7.1, this
Agreement, other than the provisions of Sections 4.1 (last three sentences)
and 9.1, shall become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders. Nothing
contained in this Section 7.2 shall relieve any party from liability for
any breach of this Agreement.

7.3. Survival of Representations, Warranties and Covenants. The
respective representations and warranties, obligations, covenants and
agreements (except for those contained in Sections 1.3, 2.1, 2.2, 2.3, 2.4,
2.5, 4.1 (last three sentences), 8.1, 8.2, 8.3, 9.1, 9.2, 9.3, 9.4 and 9.6,
which shall survive the effectiveness of the Merger) of Crestar, Crestar
Bank and Independent contained herein shall expire with, and be terminated
and extinguished by, the effectiveness of the Merger and shall not survive
the Effective Time of the Merger.

7.4. Waiver and Amendment. Any term or provision of this
Agreement may be waived in writing at any time by the party which is, or
whose shareholders are, entitled to the benefits thereof and this Agreement
may be amended or supplemented by written instructions duly executed by all
parties hereto at any time, whether before or after the meeting of
Independent shareholders referred to in Section 4.2 hereof, excepting
statutory requirements and requisite approvals of shareholders and
regulatory authorities, provided that any such amendment or waiver executed
after shareholders of Independent have approved this Agreement and the Plan
of Merger shall not modify either the amount or form of the consideration
to be received by such shareholders for their shares of Independent Common
Stock or otherwise materially adversely affect such shareholders without
their approval.

ARTICLE VIII
Additional Covenants

8.1. Indemnification and Independent Officers and Directors;
Liabilities Insurance. After the Effective Time of the Merger, Crestar
acknowledges its obligation to provide and agrees to provide,
indemnification to the directors, employees and officers of Independent
following the Effective Time of the Merger to the same extent as if
Independent were maintaining its separate existence after such time. Such
indemnification shall continue for a period of not less than five years to
the extent permitted under the VSCA and the Articles of Incorporation and
Bylaws of Crestar, provided that all rights to indemnification in respect
of any claim asserted or made within such period shall continue until the
final disposition of such claim. Crestar will provide officers and
directors liability insurance coverage to all Independent directors and
officers, whether or not they become part of the Crestar organization after
the Effective Time of the Merger to the same extent it is provided to
Crestar's officers and directors, provided that coverage will not extend to
acts as to which notice has been given prior to the Effective Time of the
Merger.

8.2. Employee Matters. Any Independent senior manager who might
be displaced as a result of the Merger, will be interviewed by his/her
Crestar Bank counterpart with the goal of determining if there are mutually
beneficial employment opportunities available within Crestar Bank or an
affiliate of Crestar.

Crestar Bank will undertake to continue employment of all branch
personnel who meet Crestar's employment qualification requirements, either
at existing Independent offices or at Crestar or Crestar Bank offices.
Independent non-branch personnel terminated as a result of the Merger will
be interviewed prior to the Effective Time of the Merger for open positions
with Crestar Bank. Except as provided on Exhibit D, Crestar or Crestar
Bank will pay a severance benefit to each person who is an employee of
Independent at the Effective Time of the Merger and who (x) is not offered
a comparable position with Crestar or a subsidiary of Crestar (the
acceptance of a position with Crestar or a subsidiary of Crestar shall
establish that such position was comparable) or (y) is terminated without
cause within six months after the Effective Time of the Merger. The amount
of such severance benefit will equal one week of such employee's base pay
immediately before the Effective Time of the Merger for each full year of
service with Independent up to 20 years, and two weeks of such base pay for
each full year of service with Independent over 20 years; provided,
however, that the severance benefit shall not be less than four weeks of
base pay. Out-placement counseling will be available through the Virginia
Employment Commission for any such Independent employees terminated without
cause. Independent shall take or cause to be taken such actions as are
necessary to terminate its severance pay policies or plans effective prior
to the Effective Time of the Merger.

8.3. Employee Benefit Matters. (a) Transferred Employees. All
employees of Independent immediately prior to the Effective Time of the
Merger who are employed by Crestar, Crestar Bank or another Crestar
subsidiary following the Effective Time of the Merger ("Transferred
Employees") will be covered by Crestar's employee benefit plans as to which
they are eligible based on their length of service, compensation, job
classification, and position, including, where applicable, any incentive
compensation plan. Notwithstanding the foregoing, Crestar may determine to
continue any of the Independent benefit plans for Transferred Employees in
lieu of offering participation in Crestar's benefit plans providing similar
benefits (e.g., medical and hospitalization benefits), to terminate any of
the Independent benefit plans, or to merge any such benefit plans with
Crestar's benefit plans. Except as specifically provided in this Section
8.3 and as otherwise prohibited by law, Transferred Employees' service with
Independent shall be recognized as service with Crestar for purposes of
eligibility to participate and vesting, if applicable (but not for purposes
of benefit accrual) under Crestar's benefit plans, subject to applicable
break-in-service rules.

(b) Health Plans. Crestar agrees that any pre-existing
condition, limitation or exclusion in its health plans shall not apply
to Transferred Employees or their covered dependents who are covered
under a medical or hospitalization indemnity plan maintained by
Independent on the date of the Merger and who then change coverage to
Crestar's medical or hospitalization indemnity health plan at the time
such Transferred Employees are first given the option to enroll in
Crestar's health plans.

(c) Independent Profit Sharing Plan. Crestar agrees that
immediately following the Merger, all participants who then have
accounts in the profit sharing plan maintained by Independent (the
"Profit Sharing Plan") shall be fully vested in their account
balances. Crestar, at its election, may continue the Profit Sharing
Plan for the benefit of Transferred Employees (with such amendments as
Crestar may deem appropriate or necessary to coordinate benefits with
benefits provided under the Crestar Employees' Thrift and Profit
Sharing Plan (the "Crestar Thrift Plan")), or may merge the Profit
Sharing Plan into the Crestar Thrift Plan or the Crestar Merger Plan
for Transferred Employees, provided that any such merger shall comply
with Internal Revenue Code Section 414(l), or may cease additional
benefit accruals under and contributions to the Profit Sharing Plan
and continue to hold the assets of such Plan until they are
distributable in accordance with its terms, or may terminate the
Profit Sharing Plan and distribute benefits. In the event of a merger
of the Profit Sharing Plan and the Crestar Thrift Plan or a cessation
of accruals and contributions under the Profit Sharing Plan or a
termination of the Profit Sharing Plan, the Crestar Thrift Plan will
recognize for purposes of eligibility to participate, early
retirement, and eligibility for vesting, all Transferred Employees'
service with Independent, subject to applicable break-in-service
rules. Independent agrees to cooperate with Crestar in implementing
any decision under this subsection (c) with respect to the Profit
Sharing Plan. Independent also agrees that prior to the earlier of
December 31, 1994, or the Closing Date, it will submit a request to
Internal Revenue Service for a new favorable determination letter on
the Profit Sharing Plan.

(d) Crestar Retirement Plan. The Retirement Plan for
Employees of Crestar Financial Corporation and Affiliated Corporations
will recognize for purposes of eligibility to participate, vesting and
eligibility for early retirement, but not for benefit accrual purposes
all Transferred Employees' service with Independent, subject to
applicable break-in-service rules.

ARTICLE IX
Miscellaneous

9.1. Expenses. Each party hereto shall bear and pay the costs
and expenses incurred by it relating to the transactions contemplated
hereby.

9.2. Entire Agreement. This Agreement contains the entire
agreement among Crestar, Crestar Bank and Independent with respect to the
Merger and the related transactions and supersedes all prior arrangements
or understandings with respect thereto.

9.3. Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or
construction of any provisions of this Agreement.

9.4. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered personally or sent by registered or certified mail, postage
prepaid, addressed as follows:

If to Crestar or Crestar Bank:

Crestar Financial Corporation
919 East Main Street
Richmond, Virginia 23219
Attention: John C. Clark III
Corporate Senior Vice President,
Secretary and General Counsel

Copy to:

Lathan M. Ewers, Jr.
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219

If to Independent:

Eugene F. Peters
Chairman of the Board of Directors
Independent Bank
8751 Sudley Road
Manassas, Virginia 22110-4533

Copy to:

Harold I. Freilich
Davis, Graham & Stubbs
1225 New York Avenue, NW #1200
Washington, DC 20005

9.5. Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.

9.6. Governing Law. Except as may otherwise be required by the
laws of the United States, this Agreement shall be governed by and
construed in accordance with the laws of Virginia.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf and its corporate seal to be
hereunto affixed and attested by its officers thereunto duly authorized,
all as of the day and year first above written.

CRESTAR FINANCIAL CORPORATION

By /s/ Shannon S. Carter
Name: Shannon S. Carter
Title: Senior Vice President, Mergers
and Acquisitions

CRESTAR BANK

By /s/ Shannon S. Carter
Name: Shannon S. Carter
Title: Senior Vice President, Mergers
and Acquisitions

INDEPENDENT BANK

By /s/ Eugene F. Peters
Name: Eugene F. Peters
Title: Chairman of the Board

/s/ Gary R. English /s/ D. Sharon Matts

/s/ Eugene F. Peters /s/ Robert E. Shea

/s/ Richard C. Barnes /s/ John C. Scott

/s/ Craig J. Gehring /s/ Larry C. Morgan

At least two-thirds of the Directors of Independent Bank affix their
signatures hereto for the purpose of agreeing, subject to the exceptions
and circumstances contemplated in Section 4.4 above, to vote all shares of
Independent Common Stock owned by them and with respect to which they have
power to vote in favor of the Merger and to cause the Merger to be
recommended by the Board of Directors of Independent to the shareholders of
Independent in the proxy statement sent to shareholders in connection with
such shareholders' meeting.

<PAGE>

Exhibit A

PLAN OF MERGER
OF
INDEPENDENT BANK
INTO
CRESTAR BANK

Section 1. Independent Bank ("Independent") shall, upon the time that
Articles of Merger are made effective by the State Corporation Commission
of Virginia (the "Effective Time of the Merger"), be merged (the "Merger")
into Crestar Bank, which shall be the "Surviving Bank".

Section 2. Conversion of Stock. At the Effective Time of the Merger:

(i) Each share of Crestar Bank Common Stock outstanding
immediately prior to the Effective Time of the Merger shall continue
unchanged as an outstanding share of Common stock of the Surviving
Bank.

(ii) Subject to Section 4, each share of Independent
Common Stock which is issued and outstanding immediately prior to the
Effective Time of the Merger (other than shares held of record by
Crestar Financial Corporation ("Crestar") and shares to be exchanged
for cash) and which, under the terms of Section 3 is to be converted
into Crestar Common Stock, shall be converted into the number of
shares of Crestar Common Stock determined by dividing $12.25 (the
"Price Per Share") by the average closing price of Crestar Common
Stock as reported on the New York Stock Exchange for each of the 10
trading days ending on the 10th day prior to the day of the Effective
Time of the Merger (the "Average Closing Price"). The result of the
quotient determined by dividing the Price Per Share by the Average
Closing Price and rounded to the nearest thousandths decimal point
being hereinafter called the "Exchange Ratio", but in no case shall
the Exchange Ratio be less than .2269 shares or greater than .3063
shares of Crestar Common Stock for each share of Independent Common
Stock.

(iii) Subject to Section 4, each share of Independent
Common Stock outstanding immediately prior to the Effective Time of
the Merger which, under the terms of Section 3, is to be converted
into the right to receive cash, shall be converted into the right to
receive the Price Per Share in cash (subject to all applicable
withholding taxes).

(iv) At the Effective Time of the Merger, Independent's
transfer books shall be closed and no further transfer of Independent
Common Stock shall be permitted.

Section 3. Manner of Conversion. The manner in which each
outstanding share of Independent Common Stock shall be converted into
Crestar Common Stock or cash, as specified in Section 2, after the
Effective Time of the Merger, shall be as follows:

(i) All cash elections which shall have been made for
shares of Independent Common Stock and for which certificates shall
have been delivered to Crestar Bank subject to the terms of the
Agreement (as hereinafter defined) at or prior to the meeting of
Independent shareholders at which the Merger is considered, shall, if
the Merger is approved by Independent's shareholders at this meeting,
be irrevocable. Pursuant to the terms of the Agreement Crestar Bank
shall retain certificates for such shares submitted for cash purchase
until either (i) termination of the Agreement (as hereinafter
defined), upon which Crestar Bank promptly shall return such
certificates, or (ii) the Effective Time of the Merger, when Crestar
Bank (which shall act as exchange agent) shall exchange such
certificates for cash, at the Price Per Share, subject to Section 4.
Certificates for shares of Independent Common Stock shall be submitted
in exchange for cash accompanied by a Letter of Transmittal (to be
promptly furnished by Crestar Bank, as exchange agent, to Independent
shareholders of record as of the Effective Time of the Merger). Until
so surrendered, each outstanding certificate which prior to the
Effective Time of the Merger represented Independent Common Stock
shall be deemed to evidence only the right to receive the Price Per
Share (subject to all applicable withholding taxes) multiplied by the
number of shares evidenced by the certificates, without interest
thereon.

(ii) Each share of Independent Common Stock, other than
shares held of record by Crestar and shares for which a cash election
has been made (and are not exchanged for cash because of Section 4),
shall be exchanged for shares of Crestar Common Stock as determined by
the Exchange Ratio.

(iii) No fractional shares of Crestar Common Stock shall be
issued, but instead the value of fractional shares shall be paid in
cash (subject to all applicable withholding taxes), for which purpose
the Average Closing Price shall be employed.

(iv) Certificates for shares of Independent Common Stock
shall be submitted in exchange for Crestar Common Stock accompanied by
a Letter of Transmittal (to be promptly furnished by Crestar Bank to
Independent's shareholders of record as of the Effective Time of the
Merger). Until so surrendered, each outstanding certificate which,
prior to the Effective Time of the Merger, represented Independent
Common Stock, shall be deemed to evidence only the right to receive
(a) shares of Crestar Common Stock as determined by the Exchange
Ratio, or (b) in the case of shares for which cash elections shall
have been made, cash (subject to all applicable withholding taxes)
multiplied by the number of shares evidenced by the certificates
without interest thereon. Until such outstanding shares formerly
representing Independent Common Stock are so surrendered, no dividend
payable to holders of record of Crestar Common Stock as of any date
subsequent to the Effective Time of the Merger shall be paid to the
holder of such outstanding certificates in respect thereof. Upon such
surrender, dividends accrued or declared on Crestar Common Stock shall
be paid in accordance with Section 2.2 of the Agreement and Plan of
Reorganization dated as of August 25, 1994 (the "Agreement") among
Crestar, Crestar Bank and Independent.

Section 4. Proration of Shares Purchased with Cash. The number of
shares of Independent Common Stock to be exchanged for cash cannot exceed
40% of the outstanding shares of Independent Common Stock immediately prior
to the Effective Time of the Merger. If shareholders of Independent elect
to exchange for cash more than this number of shares of Independent Common
Stock, Crestar shall purchase all shares submitted by holders of 100 or
fewer shares (if such holder has submitted all his shares for cash
exchange) and then purchase shares submitted by other holders pro rata so
as to require Crestar to pay cash for no more than 40% of the shares of
Independent Common Stock. A shareholder submitting shares for cash
purchase all of whose shares are not exchanged for cash because of the
proration provisions of this Section 4 shall receive shares of Crestar
Common Stock at the Exchange Ratio for all shares of Independent Common
Stock not exchanged for cash.

Section 5. Articles of Incorporation, Bylaws and Directors of the
Surviving Bank. At the Effective Time of the Merger, there shall be no
change caused by the Merger in the Articles of Incorporation (except any
change caused by the filing of Articles of Merger relating to the Merger),
By-laws, or Board of Directors of the Surviving Bank.

Section 6. Conditions to Merger. Consummation of the Merger is
subject to the following conditions:

(i) The approving vote of the holders of more than a two-
thirds majority of the outstanding shares of Independent Common Stock
entitled to vote.

(ii) The approval of the Merger by the Board of Governors
of the Federal Reserve System and the State Corporation Commission of
Virginia.

(iii) The satisfaction of the conditions or the waiver of
such conditions by the party for whose benefit they were imposed, as
contained in the Agreement.

Section 7. Effect of the Merger. The Merger shall have the effect
provided by Section 6.1-44 and Section 13.1-721 of the Code of Virginia.

Section 8. Amendment. Pursuant to Section 13.1-718(I) of the
Virginia Stock Corporation Act, the Boards of Directors of Crestar Bank and
Independent reserve the right to amend this Plan of Merger at any time
prior to issuance of the certificate of merger by the State Corporation
Commission of Virginia, provided, however, that any such amendment made
subsequent to the submission of this Plan of Merger to the shareholders of
Independent, may not: (i) alter or change the amount or kind of shares,
securities, cash, property or rights to be received in exchange for or in
conversion of all or any of the shares of any class or series of
Independent; (ii) alter or change any of the terms and conditions of this
Plan of Merger if such alteration or change would adversely affect the
shares of any class or series of Independent; or (iii) alter or change any
term of the certificate of incorporation of Independent (except as provided
herein).

<PAGE>
Annex II
BAXTER FENTRISS AND COMPANY
9100 Arboretum Parkway, Suite 280
Richmond, Virginia 23236

September 22, 1994

The Board of Directors
Independent Bank
8751 Sudley Road
Manassas, Virginia 22110

Dear Members of the Board:

Independent Bank of Manassas, Virginia ("Independent") and Crestar Financial
Corporation of Richmond, Virginia ("Crestar") have entered into an Agreement
providing for the acquisition of Independent by Crestar ("Merger"). The terms of
the Merger are set forth in an Agreement and Plan of Reorganization dated August
26, 1994.

The terms of the Merger provide that, each common share of Independent ($1.00
par value) will be converted into the number of shares of Crestar common stock
($5.00 par value) determined by dividing by $12.25, subject to certain
adjustments for the changing market price of Crestar, or cash equal to $12.25
per share.

You have asked our opinion as to whether the proposed transaction pursuant to
the terms of the Agreement and Plan of Reorganization are fair to the
shareholders of Independent from a financial point of view.

In rendering our opinion, we have evaluated the financial statements of
Independent and the consolidated financial statements of Crestar which were
available to us from published sources. In addition, we have, among other
things: (a) to the extent deemed relevant, analyzed selected public information
of certain other financial institutions and compared Independent and Crestar
from a financial point of view to the other financial institutions; (b)
reviewed the historical market price ranges of the common stock of Independent;
(c) compared the terms of the Merger with the terms of certain other comparable
transactions to the extent information concerning such acquisitions was publicly
available; (d) reviewed the Agreement and Plan of Reorganization and related
documents; and (e) made such other analyses and examinations as we deemed
necessary. We have also met with various senior officers of Independent and
Crestar to discuss the foregoing as well as other matters we believe relevant to
our opinion.

We have not independently conducted a due diligence review of Crestar nor have
we reviewed registration statements, proxy materials, regulatory applications or
other documents which must be prepared prior to the completion of the
acquisition.

We have not independently verified the financial and other information
concerning Independent, or Crestar or other data which we have considered in our
review. We have assumed the accuracy and completeness of all such information;
however, we have no reason to believe that such information is not accurate and
complete. Our conclusion is rendered on the basis of securities market
conditions prevailing as of the date hereof and on the conditions and prospects,
financial and otherwise, of Independent and Crestar as they exist and are known
to us as of June 30, 1994.

We have acted as financial advisor to Independent in connection with the Merger
and will receive from Independent a fee for our services, a significant portion
of which is contingent upon the consummation of Merger.

It is understood that this opinion may be included in its entirety in any
communication by Independent or the Board of Directors to the stockholders of
Independent. The opinion may not, however, be summarized, excerpted from or
otherwise publicly referred to without our prior written consent.

Based on the foregoing, and subject to the limitations described above, we are
of the opinion that the terms of the Merger are fair to the shareholders of
Independent from a financial point of view.

Very truly yours,

/s/ Baxter Fentriss and Company

<PAGE>
REVOCABLE PROXY INDEPENDENT BANK
8751 SUDLEY ROAD
MANASSAS, VIRGINIA 22110-1827
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
ON DECEMBER 14, 1994
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Independent Bank ("Independent") hereby
appoints Richard C. Barnes and John C. Scott, and each of them, with full power
of substitution, as proxies, attorneys-in-fact and agents for the undersigned,
to vote all the shares of the common stock of Independent which the undersigned
would be entitled to vote if personally present and acting at the Special
Meeting of Shareholders of Independent to be held at the Holiday Inn, 10800
Vandor Lane, Manassas, Virginia on December 14, 1994 at 10:00 o'clock a.m., and
at any adjournment or adjournments thereof (the "Special Meeting") as follows:
The Board of Directors recommends a vote FOR the following proposal:
1. APPROVAL OF AGREEMENT: Approval of the Agreement and Plan of
Reorganization between Independent, Crestar Financial Corporation ("Crestar")
and Crestar Bank, dated August 26, 1994, and a related Plan of Merger
(collectively, the "Agreement"), pursuant to which (a) Independent will merge
with and into Crestar Bank, (b) simultaneously therewith and as a result
thereof, all of the issued and outstanding common stock of Independent will be
converted into and exchanged for shares of common stock of Crestar at the
Exchange Ratio (as defined in the Agreement), or, upon election, cash in the
amount of $12.25 per share of Independent common stock, subject to certain
limitations.
[] FOR [] AGAINST [] ABSTAIN
2. Proxyholders are authorized to vote upon such other matters as may
properly come before the Special Meeting. Management is not aware of any other
matter that may come before the Special Meeting.
By signing this proxy, the undersigned acknowledges receipt of the Notice
of Special Meeting of Shareholders, dated November 10, 1994, and the
accompanying Proxy Statement/Prospectus of Independent and Crestar.
This proxy when properly executed will be voted as directed herein by the
undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE AGREEMENT AND THE MERGER OF INDEPENDENT WITH AND INTO CRESTAR BANK AS
PROVIDED THEREIN. This proxy will not prevent you from voting in person if you
attend the Special Meeting. You may also revoke your proxy by delivering a
written instrument or a duly executed proxy bearing a later date to the
Secretary of Independent at any time prior to the Special Meeting.
Signature
Signature (if held jointly)
Dated: , 1994
Please sign exactly as the name appears hereon, date and return in the
enclosed envelope. Joint owners should each sign personally. Corporation proxies
should be signed by an authorized officer. Partnership proxies should be signed
by an authorized partner. Executors, administrators, trustees, etc., should so
indicate when signing.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.

<PAGE>
CASH OPTION ELECTION
AND
LETTER OF TRANSMITTAL
To Independent Bank
8751 Sudley Road
Manassas, Virginia 22110-1827
Gentlemen:
On December 14, 1994 at the special meeting of shareholders of Independent
Bank ("Independent"), shareholders will consider an Agreement and Plan of
Reorganization (the "Agreement") dated as of August 26, 1994 among Crestar
Financial Corporation ("Crestar"), Crestar Bank and Independent. The Agreement
provides for the Merger of Independent into Crestar Bank with the conversion of
Independent common stock into Crestar common stock or, at the election of
Independent shareholders, cash. Independent common stock is being valued at
$12.25 per share in the Merger.
The Agreement requires Independent shareholders who elect to exchange any
of their shares of Independent common stock in the Merger for cash to make such
election prior to the 1994 special meeting. Certificates for the shares being
exchanged for cash must be submitted to Independent at or prior to such meeting.
Such certificates are enclosed with this letter.
I elect to exchange the number of shares of Independent common stock
designated below for $12.25 cash per share (subject to all applicable
withholding taxes). I enclose the certificates for such shares.
I understand that the total number of shares of Independent common stock
that may be exchanged for cash is subject to proration as described under the
caption "The Merger -- Cash Option" in the Proxy Statement/Prospectus.
Independent shares not eligible to be exchanged for cash will be exchanged for
Crestar common stock.
I understand that if the Merger is approved by Independent shareholders at
the special meeting, this election to receive cash is irrevocable. Crestar Bank
will retain the certificates for shares submitted for cash purchase in escrow
until either termination of the Agreement, upon which Crestar Bank will promptly
return such certificates, or the Effective Time of the Merger, when Crestar Bank
<TABLE>
<CAPTION>
will exchange such certificates for cash.
<S> <C> <C>
DESCRIPTION OF SHARES OF INDEPENDENT COMMON STOCK SUBMITTED FOR CASH
NAME AND ADDRESS OF REGISTERED HOLDER(S) CERTIFICATE(S) ENCLOSED
(KINDLY NOTE ADDRESS CHANGES) (ATTACH LIST IF NECESSARY)
CERTIFICATE # NOS. OF SHARES

The undersigned represents and warrants that the undersigned has, and at
the Effective Time of the Merger will have, full power and authority to submit,
sell, assign and transfer the shares represented by the certificate(s)
submitted. Under the penalties of perjury, I certify that the information
provided on this form is true, correct and complete and I am not subject to
backup withholding due to notified payee underreporting.

SIGN HERE
Date
(Signature(s) of Registered Agent)
Please sign exactly as name appears on
stock certificate(s). See Instruction 2.

Please insert your Social
Security or other tax
identifying number below

<PAGE>

SPECIAL INSTRUCTIONS
Fill in only if mailing is to be made other than in the name or to the
address specified above.
SPECIAL MAILING INSTRUCTIONS
Mail To:
(Type or print)
Name
Address
(Number) (Street)
(City) (State) (Zip)
INSTRUCTIONS FOR SUBMITTING CERTIFICATES OF INDEPENDENT BANK COMMON STOCK
1. GENERAL. This form must be filled in, dated and signed, and accompanied
by your certificate or certificates for shares of Independent common stock.
Delivery should be made at the address shown. Proper delivery is at risk of the
owner. If sent by mail, registered mail is suggested. For your convenience, a
return envelope is enclosed.
2. SIGNATURES. The signature (or signatures in the case of certificates
owned by two or more joint holders) on the Letter of Transmittal should
correspond exactly with the name(s) as written on the face of the certificates.
If the certificate(s) transmitted hereby is registered in the name of two
or more joint holders, all such holders must sign the Letter of Transmittal.
If surrendered certificates are registered in different ways on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of such
certificates.
If the Letter of Transmittal is signed by a person other than the record
holder of the certificate(s) listed, the certificate(s) must be endorsed or
accompanied by appropriate stock powers, in either case signed by the record
holder(s) in the name(s) that appears on the certificate(s) and the signature(s)
must be guaranteed by a member of a national securities exchange or of the
National Association of Securities Dealers, Inc., or a United States commercial
bank or trust company.
3. FIDUCIARIES AND REPRESENTATIVES. If a Letter of Transmittal, an
endorsement or a certificate or a stock power is signed by a trustee, executor,
administrator, guardian, officer of a corporation, attorney-in-fact, or other
person in any representative or fiduciary capacity, the person signing, unless
such person is the record holder of the shares, must give such person's full
title in such capacity and appropriate evidence of authority to act in such
capacity must be forwarded with the Letter of Transmittal.
4. TIME IN WHICH TO SUBMIT CERTIFICATES. Certificate(s) for Independent
common stock must be submitted prior to Independent's special meeting of
shareholders on December 14, 1994 at 10:00 a.m. See "The Merger -- Cash Option"
in the Proxy Statement/Prospectus dated November 10, 1994.
All questions concerning the validity of this form will be determined by
Independent and/or Crestar Bank and will be final and binding.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO INDEPENDENT AT
(703) 369-2400.

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