FORM 10-K
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-K-ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file Number 1-7083
Crestar Financial Corporation
(Exact name of registrant as specified in its charter)
State of Virginia 54-0722175
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
919 East Main Street, Post Office Box 26665, Richmond, VA 23261-6665
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (804)782-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock $5 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
[ ]
The aggregate market value (average of the high and low prices) of
Crestar Financial Corporation voting stock held by non-affiliates as of
January 31, 1995 was $1,445,137,000.
As of January 31, 1995, Crestar Financial Corporation had 38,029,923
shares of Common Stock $5 Par Value outstanding.
The Proxy Statement of the annual meeting of shareholders to be held
April 28, 1995 is incorporated by reference in Part III of this Form
10-K.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
This commentary provides an overview of Crestar Financial Corporation's
(Crestar or the Corporation) financial condition, changes in financial
condition and results of operations for the years 1992 through 1994. The
following discussion should assist readers in their analysis of the
accompanying consolidated financial statements and supplemental
financial information.
EARNINGS OVERVIEW
Crestar Financial Corporation reported net income of $169.1 million in
1994, an increase of $28.6 million or 20% over 1993 results. Net income
for 1993 of $140.5 million represented an increase of 76% over net
income recorded in 1992. These increases reflected the continued
positive effects of lower credit costs, improved net interest margins,
growth in earning assets and noninterest income, and management of
controllable expenses.
The key profitability measures of return on average assets
(ROA) and return on average total shareholders' equity (ROE) improved in
1994 over 1993 as a result of the significantly increased earnings.
These ratios, along with other selected earnings and balance sheet
information for each of the years in the five-year period ended December
31, 1994, are shown in Table 1.
Primary earnings per share of $4.47 in 1994 increased 21% over 1993
following an increase of 59% in 1992. Significant items affecting the change in
primary earnings per share for 1994 and 1993 are
TABLE 1 SELECTED FINANCIAL INFORMATION
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS (FOR THE YEAR): 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Income from earning assets $ 926,034 $ 832,629 $ 863,677 $ 979,146 $ 1,097,824
Net interest income 581,816 527,012 482,144 421,135 414,179
Provision for loan losses 29,682 48,775 99,242 209,522 131,055
Net income 169,079 140,491 79,801 33,761 61,145
Preferred dividend requirements - 2,221 2,475 2,576 2,661
Income applicable to
common shares 169,079 138,270 77,326 31,185 58,484
EARNINGS PER SHARE
Primary:
Net Income $ 4.47 $ 3.68 $ 2.32 $ .98 $ 1.87
Average shares
outstanding (000s) 37,864 37,587 33,286 31,921 31,218
Fully diluted:
Net Income $ 4.47 $ 3.67 $ 2.32 $ .98 $ 1.87
Average shares
outstanding (000s) 37,867 37,665 33,369 31,946 31,238
Dividends declared
per common share $ 1.53 $ 1.14 $ .80 $ .86 $1.32
FINANCIAL CONDITION (AT DECEMBER 31):
Total assets $14,010,030 $13,286,947 $12,674,717 $ 11,828,261 $11,881,150
Long-term debt 366,962 191,156 210,430 161,865 168,424
Total equity 1,126,065 1,062,477 958,905 794,922 771,306
SELECTED RATIOS (FOR THE YEAR):
Return on average assets 1.24% 1.12% .67% .30% .52%
Equity leverage 12.40x 12.12x 14.20x 14.50x 15.03x
Return on average total equity 15.38% 13.53% 9.50% 4.28% 7.87%
Return on average common equity 15.38 13.90 9.73 4.19 7.99
Net interest margin 4.83 4.78 4.67 4.29 4.22
Dividend payout ratio:
On common stock 33.99 30.56 34.46 87.98 70.46
On common and preferred stock 33.99 31.66 36.49 88.90 71.75
Equity formation rate 10.15 9.24 6.04 0.47 2.22
Based on averages:
Total equity to total assets 8.06 8.25 7.04 6.90 6.65
Net loans to total equity 7.56x 6.57x 8.01x 9.22x 10.00x
</TABLE>
11
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summarized in Table 2. Each applicable item is net of federal income taxes
computed using a 35% rate for 1994 and 1993, and a 34% rate for 1992.
MERGERS AND ACQUISITIONS
Crestar continued to enhance its presence in current markets through the
completion of seven acquisitions in 1994, and the announcement of three
additional acquisitions, two of which were completed in January 1995, all
accounted for by the purchase method.
On January 11, 1994, Crestar Mortgage Corporation acquired
Mortgage Capital Corporation, a privately held wholesale mortgage
production company based in St. Paul, Minnesota, for a purchase price of
$5.2 million. Under terms of the purchase agreement, an additional $2.4
million may be paid to the former owners, depending on the future
performance of Mortgage Capital Corporation's operations through 1999.
With production offices in Illinois, Colorado, Florida and Ohio, the
purchase expands Crestar Mortgage Corporation's national wholesale
mortgage production operations. Crestar Financial Corporation's
additional six acquisitions in 1994, two acquisitions completed in
January 1995, and one pending acquisition are summarized in the
following chart:
(DOLLARS IN MILLIONS) BANKING
OFFICES
QUARTER ACQUIRED: ADDED
FINANCIAL INSTITUTION LOANS DEPOSITS (NET) PRICE
1st Quarter 1994:
Virginia Federal $ 550 $ 500 10 $ 52
Providence 250 300 6 27
NVR Federal 210 340 2 42
2nd Quarter 1994:
Piedmont Federal - 150 - 10
Annapolis Bancorp 210 250 9 16
3rd Quarter 1994:
Second National - 17 1 -
1st Quarter 1995:
Independent Bank 50 70 4 12
Jefferson Savings 210 250 5 23
Pending:
TideMark Bancorp 170 270 3 38
Total $1,650 $ 2,147 40
On January 20, 1995, Crestar completed the previously announced
acquisitions of Jefferson Savings and Loan Association, F.A. (Jefferson Savings)
and Independent Bank. Jefferson Savings, a Warrenton, Virginia based thrift
institution, represents Crestar's first operations in Warrenton, Culpeper, Front
Royal and Luray, while further strengthening Crestar's market position in
Charlottesville and Loudon County. The purchase of Independent Bank, a
Manassas-based commercial bank, added four banking offices in Prince William
County, enhancing Crestar's leading market position in one of Virginia's fastest
growing areas.
Crestar's acquisition of TideMark Bancorp, Inc. (TideMark) is
expected to be completed in March 1995. TideMark, based in Newport News,
Virginia, had 12 branches in the Hampton Roads metropolitan area and total
assets of $394 million at December 31, 1994. TideMark was the oldest and largest
financial institution headquartered in the Virginia Peninsula area of eastern
Virginia.
Each of the seven acquisitions completed in 1994 have been
accounted for under the purchase method of accounting, whereby the purchase
price has been allocated to the underlying assets acquired and liabilities
assumed based on their respective fair values at the date of acquisition.
Crestar's 1994 results include the results of operations of the acquired
institutions from the date of their respective purchase. Financial results for
1994 do not include the results of the three 1995 purchase method acquisitions
(Jefferson Savings, Independent Bank and TideMark). Financial statement note 2
contains additional information concerning mergers and acquisitions.
COMMON STOCK AND DIVIDENDS
On December 31, 1994, Crestar's common stock price was $37 5/8, down 10%
from the December 31, 1993 closing price of $41 7/8. Declines were noted
in many financial institution stocks during 1994, as increases in
interest rates led many investors to make stock portfolio changes. The
Keefe Index of bank stocks
TABLE 2 ANALYSIS OF PRIMARY
EARNINGS PER SHARE
1994 1993
VS. VS.
1993 1992
Earnings Per Share -
prior period $ 3.68 $2.32
Interest income 1.58 (.60)
Interest expense (.66) 1.31
Provision for loan losses .33 .87
Securities gains or losses (.22) (.02)
Other noninterest income .33 .54
Foreclosed properties expense .55 .47
Other noninterest expense (1.05) (.83)
Income taxes (.10) (.11)
Increased shares outstanding (.03) (.27)
Preferred dividends .06 -
Net increase .79 1.36
Earnings Per Share -
current period $ 4.47 $3.68
12
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($ per share)(Common Stock Price & Book Value Graph)
Price range
High Low Book value
1990 29 5/8 12 1/8 $23.15
1991 25 11 1/4 23.23
1992 39 3/4 17 1/4 25.24
1993 46 1/2 35 1/8 28.32
1994 49 3/4 36 1/8 30.16
(Percent)(Return On Average Assets Bar Graph)
1990 1991 1992 1993 1994
.52 .30 .67 1.12 1.24
(Percent)(Return On Average Common Equity Bar Graph)
1990 1991 1992 1993 1994
7.99 4.19 9.73 13.90 15.38
decreased 3% during 1994, while the S&P 500 posted a decline of 2%. The Keefe
Index is a composite of bank stocks tracked by Keefe, Bruyette and Woods, Inc.,
a widely known banking industry analyst and investment banking company.
Book value per common share was $30.16 at December 31, 1994,
and represented a 6% increase over Crestar's December 31, 1993 book
value per share. The ratio of year-end market value to book value was
1.25x at December 31, 1994. Total market capitalization at December 31,
1994 was $1.4 billion. On the basis of 1994 earnings per share of $4.47
and the year-end market price of $37 5/8, the December 31, 1994
price/earnings ratio was 8.4x.
Dividends declared in 1994 were $1.53 per common share, an
increase of 34% when compared with dividends declared of $1.14 per share
in 1993. Reflecting improved earnings, the common dividend was increased
during the second quarter of 1994. The current quarterly dividend of
$.40 represents an annualized dividend of $1.60, equating to a yield of
4.25% based on the year-end market price. The Corporation's objective is
to pay dividends of approximately 30% to 40% of earnings to common
shareholders. Common dividends declared in 1994 were 34% of net income
available to common shareholders compared with 31% in 1993.
CAPITAL RESOURCES AND ADEQUACY
Crestar's capital position continued to strengthen as evidenced by significant
equity growth and strong capital ratios. Average shareholders' equity grew 6%,
24% and 6% in 1994, 1993, and 1992, respectively. Equity growth in 1994 is
attributable to the record earnings of the Corporation, partially offset by
Crestar's purchase and retirement of 1.1 million shares of common stock and by
the negative impact of reflecting net unrealized losses on securities available
for sale as a component of shareholders' equity (further discussion of this
accounting change is included in "Liquidity and Interest Sensitivity" and in
financial statement note 1). In addition, in December 1993, $45 million in
preferred stock was redeemed. During 1994, Crestar purchased and retired
1,120,300 shares of common stock at an average price of $43.25 per share,
primarily to meet the needs of the dividend reinvestment plan and thrift and
profit sharing plan, the June 1994 Annapolis Bancorp, Inc. acquisition, and in
anticipation of common stock to be issued for acquisitions occurring in the
first quarter of 1995. The 1993 increase in average shareholders' equity was
primarily attributable to higher earnings, the issuance of common stock in
connection with the CFS Financial Corporation acquisition, and the October 1992
public issuance of 3.5 million common shares which was not fully reflected in
average shareholders' equity until 1993. The Corporation purchased and retired
522,300 shares of common stock at an average price of $40.31 per share during
1993. The Consolidated Statements of Changes in Shareholders' Equity provide
details of these and other equity transactions.
Crestar's equity to assets ratio at December 31, 1994 was 8.04%,
compared to a ratio of 8.00% at December 31, 1993. The average equity to assets
ratio was 8.06% for 1994, compared to 8.25% for 1993. The year-end equity
leverage ratio (defined as average total assets divided by average total
shareholders' equity) increased slightly, from 12.12x in 1993 to 12.40x in 1994.
Other capital ratios for 1994 and
13
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($ In Millions)(Net Interest Income *Bar Graph)
1990 1991 1992 1993 1994
$442 443 498 540 593
*Tax Equivalent Basis
(Percent)(Net Interest Margin *Bar Graph)
1990 1991 1992 1993 1994
4.22 4.29 4.67 4.78 4.83
*Tax Equivalent Basis
($ In Millions)(Sources Of Funds-Averages Stacked Bar Graph)
Interest-
Long-Term Other Purchased Bearing
Debt Sources-Net Liabilities Core Deposits
1990 $170 $1,223 3,372 $5,703
1991 163 1,285 2,260 6,613
1992 186 1,492 1,252 7,733
1993 215 1,856 1,502 7,711
1994 235 2,013 1,271 8,753
TABLE 3 CAPITAL ADEQUACY
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
RISK-ADJUSTED CAPITAL AT DECEMBER 31 1994 1993
<S> <C> <C>
Tier 1 Capital:
Shareholders' equity $ 1,126,065 $ 1,062,477
Goodwill and other adjustments (58,518) (48,260)
Total Tier 1 capital 1,067,547 1,014,217
Tier 2 Capital:
Allowable long-term debt 304,595 164,964
Allowable allowance for loan losses net
of other adjustments 140,794 120,691
Total Tier 2 capital 445,389 285,655
Total risk-adjusted capital 1,512,936 1,299,872
Risk-adjusted assets, net of allowance 11,345,655 9,623,545
Fourth quarter average assets, net of adjustments 13,599,856 12,874,009
Risk-adjusted capital ratios:
Tier 1 9.4% 10.5%
Total 13.3 13.5
Tier 1 leverage ratio 7.9 7.9
OTHER CAPITAL RATIOS
Average equity to:
Average total assets 8.06 8.25
Average loans, net of unearned income 13.23 15.19
Equity leverage 12.40x 12.12x
Equity formation rate 10.15% 9.24%
Period-end equity to assets 8.04 8.00
Tangible leverage ratio 7.2 7.3
</TABLE>
14
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($ In Millions)(Uses Of Funds-Averages Stacked Bar Graph)
Securities
Held To
Maturity and
Mortgage Money Securities
Loans Held Market Available
For Sale Investments For Sale Loans
1990 $121 $219 $2,362 $7,767
1991 157 738 2,151 7,275
1992 368 989 2,581 6,725
1993 368 676 3,404 6,836
1994 325 604 3,037 8,305
1993 are shown in Table 3. A key measure of equity's ability to absorb
losses is the ratio of average equity to average loans. Despite
significant loan growth and the Corporation's common stock repurchase
program, this measure continued to reflect Crestar's capital strength,
totaling 13.23% for 1994, compared to 15.19% for 1993 and 12.48% for
1992. The equity formation rate (calculated as net income less dividends
declared divided by average total equity) increased to 10.15% in 1994
from 9.24% in 1993.
Risk-based capital ratios are another measure of capital
adequacy. At December 31, 1994, Crestar's consolidated risk-adjusted
capital ratios were 9.4% for Tier 1 and 13.3% for total capital, well
above the required minimums of 4.0% and 8.0%, respectively. These ratios
are calculated using regulatory capital (either Tier 1 or total capital)
as the numerator and both on- and off-balance sheet risk-weighted assets
as the denominator. Tier 1 capital consists primarily of common equity
less goodwill and certain other intangible assets. Total capital adds
certain qualifying debt instruments and a portion of the allowance for
loan losses to Tier 1 capital. One of four risk weights, primarily based
on credit risk, is applied to both on- and off-balance sheet assets to
determine the asset denominator. Under Federal Deposit Insurance
Corporation (FDIC) rules, each of Crestar's three subsidiary banks was
considered "well-capitalized," the highest category of capitalization
defined by the regulators allowing for the lowest level of FDIC
insurance premium rates, as of December 31, 1994.
Additional regulatory capital measures include the Tier 1
leverage ratio and the tangible leverage ratio. The Tier 1 leverage
ratio is defined as Tier 1 capital divided by average total assets less
goodwill and certain other intangibles and has a regulatory minimum of
3.0%, with most institutions required to maintain a ratio of at least
4.0% to 5.0%, depending primarily upon risk profiles. At December 31,
1994, Crestar's Tier 1 leverage ratio was 7.9%. The tangible leverage
ratio is calculated by excluding intangibles from both assets and
capital and is utilized by the Federal Reserve Board in evaluating
proposals for expansion or acquisitions. At December 31, 1994, Crestar's
tangible leverage ratio was 7.2%, well within accepted Federal Reserve
Board ranges.
A double leverage ratio of over 100% measures the extent to which
the equity capital of subsidiaries is supported by Parent Company debt rather
than equity. Calculated as the investment in its subsidiaries divided by its own
equity accounts, Crestar Financial Corporation's double leverage was 99.9% at
December 31, 1994, compared to 96.8% at December 31, 1993. Financial statement
note 21 contains Parent Company financial statements.
In November 1994, Crestar sold $150 million of 8 3/4%
subordinated notes due November 15, 2004. Net of underwriting discounts,
the notes resulted in proceeds of $148.6 million to the Corporation at
an effective interest rate of 8.79%. Proceeds from the sale of the notes
have been utilized for general corporate purposes, including the cash
requirements for first quarter 1995 acquisitions. The subordinated
notes, which qualify as a component of total capital for the
Corporation's risk-adjusted capital ratios, were issued under a shelf
registration statement with the Securities and Exchange Commission.
Under the remaining terms of the shelf registration, the Corporation
may issue in the future up to $150 million in subordinated debt
securities, preferred stock or common stock, or any combination thereof.
NET INTEREST INCOME AND NET INTEREST MARGIN
The fundamental source of Crestar's earnings, net interest income, is defined as
the difference between income on earning assets and the cost of funds supporting
those assets. Significant categories of earning assets are loans and securities
while deposits and short-term borrowings represent the major portion of
interest-bearing liabilities. The level of net interest income is impacted
primarily by variations in the volume and mix of these assets and liabilities,
as well as changes in the levels of interest rates.
Net interest income in Table 4 is presented on a
tax-equivalent basis to enhance the comparability of assets with
different tax attributes. This comparability is achieved through
increasing interest income on tax-exempt assets by an amount equal to
the Federal income taxes which would have been paid had the income been
fully taxable. This tax-equivalent adjustment is based on the applicable
statutory federal corporate income tax rate and resulted in an increase
to pre-tax income from earning assets in 1994, 1993 and 1992 of $10.9
million, $12.6 million and $16.0 million, respectively. On a
tax-equivalent basis, net interest income increased $53.1 million or 10%
in 1994 following a $41.5 million or 8% rise in 1993.
15
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TABLE 4 AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS(1)
DOLLARS IN MILLIONS
<TABLE>
AVERAGE BALANCE YIELD/RATE
1994 1993 1992 1994 1993 1992
$ $ $ % % %
<S> <C> <C> <C> <C> <C> <C>
2,590 2,459 2,717 7.70 7.62 8.16 Commercial loans
215 263 309 9.59 8.53 8.86 Tax-exempt loans
1,710 1,450 1,373 8.44 8.78 10.73 Instalment loans
1,144 701 538 11.94 13.67 15.12 Bank card loans
2,424 1,734 1,442 7.51 7.77 8.87 Real estate loans
222 229 346 8.21 7.06 6.54 Construction loans
8,305 6,836 6,725 8.44 8.54 9.34 Total loans - net of unearned income(2)
768 1,684 2,351 6.45 6.83 6.98 Taxable securities held to maturity
74 100 132 9.79 10.28 10.66 Tax-exempt securities held to maturity
- 29 33 - 6.17 8.61 Common and preferred stocks
842 1,813 2,516 6.74 7.01 7.19 Total securities held to maturity
2,195 1,591 65 5.91 5.36 6.49 Securities available for sale
605 676 989 4.35 3.49 3.81 Money market investments
325 368 368 7.10 6.85 7.75 Mortgage loans held for sale
12,272 11,284 10,663 7.63 7.49 8.25 Total earning assets
1,862 1,630 1,444 2.21 2.33 3.07 Interest checking deposits
2,378 2,280 2,316 2.84 2.57 3.28 Money market deposit accounts
1,419 1,103 781 2.66 2.82 3.42 Regular savings deposits
628 571 754 3.17 3.13 4.66 Money market certificates
2,466 2,127 2,439 4.36 4.55 5.59 Other domestic time deposits
8,753 7,711 7,734 3.13 3.14 4.12 Total interest-bearing core deposits
59 44 116 4.44 4.46 6.59 Certificates of deposit $100,000 and over
- 2 4 3.10 2.88 3.28 Deposits in foreign offices
1,212 1,456 1,132 3.97 3.01 3.37 Short-term borrowings
1,271 1,502 1,252 4.00 3.05 3.66 Purchased liabilities
235 215 186 8.30 8.12 9.25 Long-term debt
10,259 9,428 9,172 3.36 3.24 4.16 Total interest-bearing liabilities
2,013 1,856 1,491 Other sources - net
12,272 11,284 10,663 2.80 2.71 3.58 Total sources of funds
4.83 4.78 4.67 Net Interest Margin/Income
</TABLE>
(1) Income and yields are computed on a tax-equivalent basis using the statutory
federal income tax rate, exclusive of the alternative minimum tax and
nondeductible interest expense, and the tax-equivalent adjustment to interest
income was $10.9 million, $12.6 million and $16.0 million for 1994, 1993 and
1992, respectively
(2) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis
These increases reflect an increase in average earning
assets of 9% in 1994 and 6% in 1993.
The net interest margin is calculated as tax-equivalent net
interest income divided by average earning assets and represents the
Corporation's net yield on its earning assets. In 1994, the net interest
margin of 4.83% improved five basis points from 4.78% in 1993.
Significant items affecting the change in the net interest margin from
1993 to 1994 are summarized in Table 5. Positive influences on the 1994
margin include favorable changes in the composition of balance sheet
earning assets and lower levels of nonperforming assets. Changes in
balance sheet mix increased the 1994 net interest margin by
approximately 22 basis points. Loans as a percentage of total earning
assets increased from an average of 61% in 1993 to 68% in 1994, as
growth in loans were partially funded from declining levels of
investment securities. On the funding side, reduced short-term
borrowings coupled with growth in free sources of funds (primarily
shareholders' equity and net demand deposits) provided a two basis point
benefit to the
16
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<TABLE>
In Thousands 1994 vs. 1993 1993 vs. 1992
Income/Expense(3) Increase Change due to(4) Increase Change due to(4)
1994 1993 1992 (Decrease) Rate(5) Volume (Decrease) Rate(5) Volume
$ $ $ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
199,399 187,463 221,732 11,936 2,055 9,881 (34,269) (13,302) (20,967)
20,578 22,418 27,414 (1,840) 2,270 (4,110) (4,996) (879) (4,117)
144,364 127,332 147,307 17,032 (5,807) 22,839 (19,975) (28,229) 8,254
136,631 95,923 81,409 40,708 (18,531) 59,239 14,514 (10,046) 24,560
181,963 134,666 127,868 47,297 (6,055) 53,352 6,798 (18,984) 25,782
18,185 16,171 22,591 2,014 2,531 (517) (6,420) 1,173 (7,593)
701,120 583,973 628,321 117,147 (7,233) 124,380 (44,348) (54,692) 10,344
49,545 115,118 164,058 (65,573) (2,974) (62,599) (48,940) (2,554) (46,386)
7,258 10,233 14,047 (2,975) (363) (2,612) (3,814) (378) (3,436)
- 1,803 2,863 (1,803) - (1,803) (1,060) (716) (344)
56,803 127,154 180,968 (70,351) (2,285) (68,066) (53,814) (3,391) (50,423)
129,666 85,331 4,234 44,335 11,994 32,341 81,097 (17,929) 99,026
26,288 23,580 37,630 2,708 5,197 (2,489) (14,050) (2,144) (11,906)
23,084 25,191 28,522 (2,107) 807 (2,914) (3,331) (3,311) (20)
939,961 845,229 879,675 91,732 18,228 73,504 (34,446) (85,445) (50,999)
41,234 38,001 44,278 3,233 (2,194) 5,427 (6,277) (11,959) 5,682
67,530 58,496 75,936 9,034 6,521 2,513 (17,440) (16,275) (1,165)
37,821 31,091 26,749 6,730 (2,207) 8,937 4,342 (6,661) 11,003
19,915 17,861 35,137 2,054 290 1,764 (17,276) (8,776) (8,500)
107,442 96,849 136,344 10,593 (4,794) 15,387 (39,495) (22,090) (17,405)
273,942 242,298 318,444 31,644 (1,258) 32,902 (76,146) (75,216) (930)
2,589 1,975 7,651 614 (11) 625 (5,676) (944) (4,732)
11 68 145 (57) - (57) (77) (9) (68)
48,169 43,787 38,096 4,382 11,716 (7,334) 5,691 (5,190) 10,881
50,769 45,830 45,892 4,939 4,947 (8) (62) (9,210) 9,148
19,507 17,489 17,197 2,018 434 1,584 292 (2,435) 2,727
344,218 305,617 381,533 38,601 11,593 27,008 (75,916) (86,644) 10,728
344,218 305,617 381,533 38,601 11,757 26,844 (75,916) (98,224) 22,308
592,743 539,612 498,142 53,131 6,471 46,660 41,470 12,779 28,691
</TABLE>
(3) Includes tax-equivalent net loan fees of $2.7, $3.1 and $4.4 million in
1994, 1993 and 1992, respectively
(4) Variances are computed on a line-by-line basis and are non-additive
(5) Variances caused by the change in rate times the change in balances are
allocated to rate
1994 net interest margin.
As nonperforming assets continued to decline, a corresponding decrease
occurred in their negative impact on the net interest margin. The lower levels
of nonperforming assets in 1994 had a favorable impact on the net interest
margin of approximately five basis points. Additional income of approximately
$12.8 million for 1994 and $9.3 million for 1993 would have been realized had
all nonperforming assets performed as originally expected.
The benefits from off-balance sheet hedging activities (primarily
interest rate swaps) declined in 1994 compared with 1993 as the notional
principal balance on favorable swaps was reduced, due to maturities and
amortization in 1994, and due to an environment of rising interest rates during
the year. Off-balance sheet hedging activities contributed $18.3 million to net
interest income in 1994, compared with $34.3 million in 1993. The reduction
equated to a 16 basis point negative impact on the 1994 net interest
17
<PAGE>
TABLE 5 ANALYSIS OF NET INTEREST MARGIN
<TABLE>
PERCENT OF AVERAGE
NET INTEREST MARGIN MARGIN CHANGE EARNING ASSETS
1994 1993 1994 VS. 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Earning Asset Mix: 22 bp
Loans - net of unearned income 67.7% 60.5%
Securities held to maturity and securities
available for sale 24.7 30.2
Money market investments 4.9 6.0
Mortgage loans held for sale 2.7 3.3
Funding Mix: 2
Interest-bearing core deposits 71.3 68.3
Purchased liabilities 10.4 13.3
Long-term debt 1.9 1.9
Other sources - net 16.4 16.5
Decreased nonperforming assets 5
Off-balance sheet hedges (16)
Interest rate changes (7)
Other (1)
Net Interest Margin 4.83% 4.78% 5 bp
</TABLE>
margin as compared to 1993 results. An additional negative impact on the net
interest margin for 1994 stemmed from changes in interest rates received on
earning assets and paid on funding sources. Such changes in interest rates
contributed a negative impact of seven basis points in comparison to 1993
average interest rates. Driving this impact were declines in average rates
earned on real estate mortgages and instalment loans, and the maturity of
higher-yielding fixed rate securities during 1994. Competitive marketing
programs have also resulted in a decline in the average rate earned on bank card
loans, from 13.67% in 1993 to 11.94% in 1994. The average rate paid on total
savings and time deposits was 3.13% in 1994, compared to 3.14% for 1993. Rate
increases on money market deposit accounts and money market certificates were
offset by declines in average rates paid on interest checking deposits, regular
savings deposits and other domestic time deposits during the year.
Acquisitions completed during 1994 added over $25 million to Crestar's
1994 net interest income. While these seven acquisitions, in the aggregate, were
accretive to the Corporation's earnings per share for 1994, they negatively
impacted Crestar's net interest margin for the year. This is primarily due to
their aggregate concentrations of residential real estate mortgage loans and
short-term investments as earning assets, when compared to Crestar's overall
earning asset composition. The impact of the acquisitions on Crestar's 1994 net
interest margin was a reduction of approximately 30 basis points.
From 1992 to 1993, the net interest margin improved from 4.67%
to 4.78%, reflecting the benefit of changes in the mix of earning assets
and lower levels of nonperforming assets.
PROVISION AND ALLOWANCE FOR
LOAN LOSSES
Both the amount of the provision and the level of the allowance for loan losses
are impacted by many factors, including general economic conditions, actual and
prospective credit losses, loan performance measures, historical trends and
other circumstances, both internal and external. The amount of the provision for
loan losses is established based on evaluations of the adequacy of the allowance
for loan losses. Individual loan-by-loan reviews are performed on large
commercial and real estate exposures in the lower quality regulatory risk
ratings. Smaller commercial and real estate credits are analyzed utilizing a
formula-based approach that encompasses the risk factors detailed above. Loan
loss allowances for the various consumer credit portfolios are based on
historical and anticipated losses and the current and projected characteristics
of the various portfolios. Management's evaluation and resulting provision and
allowance decisions are reviewed by the Board of Directors on a quarterly basis.
Crestar's credit quality continued to reflect significant improvement in
1994. Total credit costs, including the provision for loan losses and foreclosed
properties expense, were $30.3 million in 1994, a reduction of $51.5 million or
63% from $81.8 million in 1993. Crestar made provisions for loan losses of $29.7
million in 1994, down $19.1 million or 39% from 1993. This followed a 51%
decrease in the provision for loan losses in 1993 from 1992. A
18
<PAGE>
TABLE 6 ALLOWANCE FOR LOAN LOSSES
<TABLE>
DOLLARS IN THOUSANDS 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Beginning balance $ 210,958 $ 205,017 $ 210,004 $ 149,375 $ 93,160
Allowance from acquisitions 15,687 22,000 9,700 1,850 2,012
Provision for loan losses 29,682 48,775 99,242 209,522 131,055
Loans charged off:
Commercial 14,138 28,491 44,224 68,512 31,007
Instalment 9,396 9,289 11,031 14,307 13,505
Bank card 28,573 21,064 24,458 26,078 18,465
Real estate 12,280 25,182 21,285 24,549 9,753
Construction 817 5,307 29,664 32,735 16,095
Total loans charged off 65,204 89,333 130,662 166,181 88,825
Recoveries:
Commercial 8,630 9,827 5,348 4,856 3,481
Instalment 5,308 4,851 5,330 5,909 5,463
Bank card 4,676 4,882 4,707 3,612 2,624
Real estate 5,063 847 328 1,029 400
Construction 4,389 4,092 1,020 32 5
Total recoveries 28,066 24,499 16,733 15,438 11,973
Net charge-offs 37,138 64,834 113,929 150,743 76,852
Allowance, December 31:
Commercial 61,004 63,008 86,017 97,500 68,000
Instalment 13,500 14,000 13,000 9,000 7,500
Bank card 27,000 20,000 12,000 11,500 10,000
Real estate 42,000 50,000 48,000 41,000 27,500
Construction 15,000 16,000 16,000 34,000 25,500
Unallocated 60,685 47,950 30,000 17,004 10,875
Balance, December 31 $ 219,189 $ 210,958 $ 205,017 $ 210,004 $ 149,375
Loans:
Total at year end $9,285,637 $7,287,122 $6,581,721 $7,065,786 $7,680,210
Average during year 8,305,287 6,836,478 6,725,311 7,275,301 7,767,200
Net charge-offs to:
Average total loans .45% .95% 1.69% 2.07% .99%
Provision for loan losses 125.12 132.92 114.80 71.95 58.64
Allowance for loan losses to:
Year-end loans 2.36 2.89 3.11 2.97 1.94
Net charge-offs 5.90x 3.25x 1.80x 1.39x 1.94x
Net charge-offs earnings coverage 7.66 3.89 1.74 1.65 2.63
</TABLE>
lingering recessionary climate and its impact on the quality of the commercial
and real estate loan portfolios necessitated a provision for loan losses of
$99.2 million in 1992.
As a result of the continued improved credit quality, 1994 net
charge-offs of $37.1 million were down $27.7 million or 43% from 1993.
In the years of 1990 through 1993, charge-offs related to real estate
developers and investors (REDI) contributed disproportionately to total
net charge-offs, as the REDI portfolio was the primary source of weaker
credit quality during this recessionary period. The REDI designation is
based on borrower type and encompasses non-owner occupied real estate
and construction loans as well as other forms of credit extended to real
estate developers or investors. REDI net charge-offs comprised 49% of
total net charge-offs of $64.8 million in 1993. In comparison, REDI
charge-offs in 1994 comprised 16% of total net charge-offs of $37.1
million. As a percent of average REDI loans, REDI net charge-offs were
0.5% in 1994, 2.8% in 1993 and 5.0% in 1992.
Net charge-offs as a percentage of average loans were 0.45% in
1994, compared to 0.95% in 1993 and 1.69% in 1992. The declines in this ratio
during 1994 and 1993 reflect the improved credit quality trends and economic
conditions noted above. With improvements in commercial and REDI loan net
charge-off
19
<PAGE>
<TABLE>
TABLE 7 NONINTEREST INCOME
IN THOUSANDS 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 82,851 $ 79,419 $ 73,944 $ 57,953 $ 45,946
Trust and investment advisory 55,609 57,440 51,007 48,322 45,169
Bank card-related 39,529 27,500 23,141 22,694 22,072
Mortgage servicing 18,986 15,371 13,637 13,363 12,918
Mortgage origination - net 8,495 20,631 16,631 9,504 6,331
Automated teller machine fees 10,605 9,355 7,925 5,463 4,073
Trading account activities 1,069 4,415 6,880 8,295 4,222
Commissions on letters of credit 5,135 7,272 5,081 5,899 5,651
Safe deposit box rental 3,537 2,239 3,282 3,033 2,318
Annuities 6,087 4,347 1,816 869 703
Mutual funds 2,666 3,379 1,104 224 173
Insurance 2,337 2,234 2,190 2,236 2,205
Gain on sale of mortgage
servicing rights 18,732 3,600 1,761 - 281
Gain on pension settlement - - - 2,236 -
Miscellaneous 9,408 8,826 6,429 5,573 2,530
Securities gains (losses) (10,776) 2,237 3,563 48,165 12,216
Total noninterest income $254,270 $248,265 $218,391 $233,829 $166,808
</TABLE>
levels, the largest proportion of net loan charge-offs during 1994 occurred in
the bank card loan portfolio. Net charge-offs for bank card loans were $23.9
million in 1994, compared to $16.2 million in 1993. This increase in bank card
net charge-offs is largely attributable to growth in the bank card loan
portfolio. Current expectations are that the ratio of net charge-offs to
average total loans for the full year 1995 will increase from the level achieved
in 1994, but remain below 1993's results. This expectation is based upon
assumptions regarding the general economic climate in Crestar's principal
markets and the performance characteristics of the loan portfolio, including
Crestar's continued success in resolving remaining nonperforming loans. Changes
in these conditions may produce different results.
The allowance for loan losses at December 31, 1994 was $219 million,
representing 2.36% of year-end loans, 231% of total nonperforming assets and
287% of total nonperforming loans. Comparative measures at the end of 1993 were
$211 million or 2.89% of loans, 218% coverage of total nonperforming assets and
264% coverage of total nonperforming loans. Improvement in the two coverage
ratios was due to a reduction in nonperforming assets, despite additions of
$34.0 million in nonperforming assets during 1994 arising from the Corporation's
seven acquisitions of financial institutions. Detail of the activity in the
allowance for loan losses for the past five years is shown in Table 6. Based on
current expectations relative to portfolio characteristics and performance
measures including loss projections, management considers the level of the
allowance adequate. Although the allowance for loan losses is a general
allowance applicable to all loan categories, the allocation provided in Table 6
is made to provide an indication of the relative risk assessment of the
components of the loan portfolio.
NONINTEREST INCOME
Noninterest income increased 2% in 1994, following a 14% increase in
1993. Excluding securities gains and losses, noninterest income
increased $19.0 million or 8% over 1993, compared with a 1993 increase
of $31.2 million or 15% over 1992. The 1994 increase arose from growth
in the noninterest income categories of bank card-related fee income,
mortgage income, and service charges on deposit accounts. Reflecting
promotional activities and increased merchant fee volume, bank
card-related fee income increased by $12.0 million, or 44%, during 1994.
Mortgage income increased $6.6 million, or 17%, in 1994, as increased
servicing income and gains on sale of servicing rights offset declines
in mortgage origination fees. While a higher interest rate environment
reduced origination fees from refinancing activity, there was reduced
run-off in Crestar's mortgage servicing portfolio. Crestar's loan
servicing portfolio was $7.8 billion at December 31, 1994, compared to
$6.7 billion at year-end 1993 and $4.8 billion at year-end 1992.
Service charges on deposit accounts increased 4%, or $3.4 million, from
1993 levels. Trust and investment advisory income decreased $1.8 million
or 3% from 1993, due to an increasingly competitive environment for
trust services. In addition, 1994's declining bond market impacted fees
earned based on the value of assets under management. At year-end
1994, trust assets held by Crestar's Trust and Investment Management
Group approximated $29 billion, and assets under management
20
<PAGE>
TABLE 8 NONINTEREST EXPENSE
<TABLE>
IN THOUSANDS 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Salaries $243,717 $216,248 $195,089 $176,113 $167,028
Benefits 59,863 46,378 38,749 32,908 31,131
Total personnel 303,580 262,626 233,838 209,021 198,159
Occupancy - net 42,231 38,359 35,654 32,683 31,293
Equipment 25,339 24,122 24,011 22,916 23,797
Communications 25,484 21,136 19,334 18,149 17,798
Stationery, printing and supplies 8,239 7,133 6,451 6,086 7,885
Professional fees and services 12,819 13,487 15,898 13,244 9,769
Loan expense 9,786 9,034 8,409 5,797 6,105
FDIC premiums 25,207 22,847 21,003 17,806 10,057
Advertising and marketing 19,906 13,709 8,137 7,866 11,608
Transportation 5,861 5,388 5,357 5,610 5,866
Outside data services 18,805 14,879 11,769 11,923 10,533
Bank franchise tax 3,199 2,810 2,845 3,330 3,201
Amortization of purchased intangibles 12,279 21,926 13,630 12,338 10,154
Miscellaneous 38,321 32,511 35,279 27,019 29,508
Subtotal 551,056 489,967 441,615 393,788 375,733
Foreclosed properties 652 33,055 60,188 11,833 3,106
Total noninterest expense $551,708 $523,022 $501,803 $405,621 $378,839
</TABLE>
totaled $9.0 billion. Other miscellaneous income for 1994 fell $1.2 million from
1993 levels, due primarily to reduced trading account income.
NONINTEREST EXPENSE
Noninterest expense increased $28.7 million or 5% in 1994 following an increase
of $21.2 million or 4% in 1993. Excluding foreclosed properties expense,
noninterest expense increased 12% in 1994 and 11% in 1993. The 1994 increase
reflects acquisition-related costs and expenses incurred in expanding bank card
lending. Additional expenses arising from the seven acquisitions completed in
1994 were approximately $26.3 million. Bank card expense increases, arising from
promotional expenditures and volume-driven staffing increases, amounted to
approximately $15.7 million over 1993 expense levels. Excluding these direct
expenses and the impact of foreclosed properties expense, noninterest expense
increased 4% in 1994.
Reflecting improved credit conditions and real estate markets,
foreclosed properties expense declined from $33.1 million in 1993 to only $652
thousand in 1994. Operating expenses related to foreclosed properties were down
82%, falling from $13.2 million in 1993 to $2.4 million in 1994. Market
write-downs on foreclosed properties were $0.5 million in 1994 compared to $5.8
million in 1993. Crestar recorded a net gain of $3.0 million on the sale of
foreclosed properties in 1994. In the previous year, the Corporation recorded
net losses on the sale of foreclosed properties of $4.9 million. A $6.4 million
provision for losses on foreclosed properties was also recorded in 1993.
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (SFAS 112) was adopted by Crestar on
January 1, 1994. Under SFAS 112, benefits provided to inactive or former
employees before retirement are accrued during the period of active employment,
rather than being expensed as paid. For Crestar, such benefits consist
principally of short-term disability benefits. Adoption of SFAS 112 resulted in
a pre-tax charge to employee benefit expense, recorded in the first quarter of
1994, of $1.8 million.
Total capital expenditures for 1994, 1993 and 1992 were approximately
$53 million, $55 million and $46 million, respectively. The 1994 figure included
expenditures for branch and office refurbishments, new branch computer
technology, and initial construction outlays for a new headquarters building for
Crestar Mortgage Corporation. Expenditures in 1995 are anticipated to
approximate $91 million. Of this amount, approximately $20 million will be
expenditures for the new five-story building to house Crestar Mortgage
Corporation and for the purchase of an additional office building currently
being leased.
INCOME TAXES
In 1994, Crestar's income tax expense was $85.6 million, up from $63.0
million in 1993 and $19.7 million in 1992. The effective tax rates for
1994, 1993 and 1992 were 33.6%, 31.0% and 19.8%, respectively. The 1994
increase in the effective tax rate was attributable to reduced
proportions of tax-exempt interest and dividends, higher provisions for
state income taxes, and a favorable deferred tax adjustment recorded in
1993, which reflected an increase in net
21
<PAGE>
deferred tax assets due to
provisions of the Omnibus Budget Reconciliation Act of 1993. The
increase in Crestar's effective tax rate from 1992 to 1993 was
attributable to higher earnings in 1993, and due to the utilization of
available alternative minimum tax credit carryforwards in 1992.
In 1993, Crestar adopted the asset and liability method of accounting for
income taxes as required by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under this method, deferred tax assets and
liabilities are based on the differences between financial statement and tax
basis of assets and liabilities. The tax effects of these differences are
measured using enacted tax rates that will be effective for the period during
which the differences are expected to reverse. A valuation allowance is provided
against deferred tax assets if, and to the extent, it is more likely than not
that the deferred tax assets will not be fully realized. In management's
judgment, no valuation allowance was necessary at December 31, 1994 and 1993.
Deferred tax expense is measured by the change in the net deferred tax assets
or liabilities for the period.
LIQUIDITY AND INTEREST SENSITIVITY
Bank liquidity is a measure of the ability to generate and maintain sufficient
cash flows to fund operations and to meet financial obligations to depositors
and borrowers promptly and in a cost-effective manner. Liquidity is provided
through securities available for sale, money market investments, maturing loans
and investments, and the ability to generate new deposits or borrowings as
needed.
Core deposits provide a typically stable source of liquidity.
Interest-bearing core deposits represented 69% of total funding sources at
December 31, 1994 compared with 65% at December 31, 1993. Core deposits are
supplemented by additional sources of liquidity in the form of short-term
borrowings and large CDs, normally available from both national and local
markets. While Crestar's short-term borrowings include local funds, national
sources are also utilized to acquire funds. Crestar's liquidity position is
actively managed on a daily basis, monitored regularly by the Asset/Liability
Management Committee (ALCO) and reviewed periodically with the Board of
Directors. ALCO's overall objective is to optimize net interest income within
the constraints of prudent capital adequacy, liquidity needs, the interest rate
and economic outlook, market opportunities, and customer requirements. General
strategies to accomplish this objective include maintaining a strong balance
sheet, achieving solid core deposit growth, accepting manageable interest rate
risk, adhering to conservative financial management principles and practicing
prudent dividend policies.
Interest sensitivity refers to the volatility of profitability
as a result of changes in interest rates. Crestar's goal is to limit
interest rate exposure to prudent levels as determined by the
Corporation's ALCO committee. The level of exposure taken is based on an
assessment of the market environment, and will vary from period to
period.
The primary tool used by ALCO in assessing interest rate
exposure is net interest income simulations. The committee establishes
limits on net interest income at risk for a twenty-four month period. A
two year net interest income forecast is prepared regularly based on
flat, high, low and most likely interest rate scenarios. The high and
low interest rate scenarios are based upon an assessment of the historic
volatility of interest rates. The expected dynamics of the balance sheet
under each scenario, including shifts in loans and deposits, are
included in the simulations. By its nature, this simulation process
includes numerous assumptions, for both long-term and short-term
timeframes, including assumptions on average balances and yields. Many
of the assumptions are both highly qualitative and subjective. The high
rate and low rate estimates generated by this process are then compared
to the flat scenario. At year-end 1994, Crestar's projection of pre-tax
net interest income at risk, as a percentage of the next twenty-four
month's net interest income under a flat scenario, was 3.4% for a high
interest rate scenario, and 4.4% for a falling interest rate scenario.
The net interest income at risk percentage does not consider future
discretionary actions, including hedging activity, that may be entered
into to manage future earnings volatility.
A second interest sensitivity tool is the quantification of
market value changes for all assets and liabilities given an increase or
decrease in interest rates. This approach provides a longer term view of
interest rate risk, capturing predominantly all expected future cash
flows. Assets and liabilities with option characteristics are valued
based on numerous interest rate path valuations using Monte Carlo rate
simulation techniques. The banking industry and its regulatory
authorities are moving toward a market value method of interest
sensitivity assessment. Crestar has been developing this tool and is
incorporating it as another component of interest rate risk management
to supplement the results achieved through net interest income
simulation.
Another interest rate risk tool used by Crestar is the
interest rate "gap," or mismatch in repricing between interest-sensitive
assets and liabilities, which provides a general indication of interest
sensitivity at a specific point in time. Table 9 reflects the earlier of
the maturity or repricing dates for various assets and liabilities at
December 31, 1994. At that point in time, Crestar had a cumulative
negative six-month gap with
22
<PAGE>
TABLE 9 INTEREST SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
DECEMBER 31, 1994
IN MILLIONS MATURITY/RATE SENSITIVITY
WITHIN 2-3 4-6 7-12 OVER
USES OF FUNDS ONE MONTH MONTHS MONTHS MONTHS ONE YEAR TOTAL
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 2,169.0 $ 49.5 $ 56.3 $ 62.9 $ 554.5 $ 2,892.2
Tax-exempt 149.8 0.7 6.1 3.6 40.7 200.9
Instalment 508.5 74.6 118.4 513.2 595.3 1,810.0
Bank card 224.1 57.3 102.5 229.5 863.9 1,477.3
Real estate 528.5 264.1 321.5 588.9 1,017.6 2,720.6
Construction 136.1 0.7 2.3 5.8 39.7 184.6
Securities held to maturity 10.1 23.2 29.7 88.9 755.5 907.4
Securities available for sale 318.3 15.8 68.3 115.4 1,104.2 1,622.0
Money market investments 447.6 0.1 4.9 - - 452.6
Mortgage loans held for sale 209.5 - - - - 209.5
Total earning assets 4,701.5 486.0 710.0 1,608.2 4,971.4 12,477.1
Interest sensitivity hedges on assets (700.0) (254.4) (102.2) 39.3 1,017.3 -
Total uses $ 4,001.5 $ 231.6 $ 607.8 $ 1,647.5 $5,988.7 $12,477.1
SOURCES OF FUNDS
Interest checking deposits $ 1,916.4 $ - $ - $ - $ - $ 1,916.4
Money market deposit accounts 2,342.2 - - - - 2,342.2
Regular savings deposits 1,394.1 - - - - 1,394.1
Money market certificates and
other domestic time deposits 331.1 411.0 613.2 713.1 887.4 2,955.8
Certificates of deposit
$100,000 and over 24.2 11.9 15.2 7.4 7.5 66.2
Short-term borrowings 1,380.8 - - - - 1,380.8
Long-term debt 0.1 0.3 0.3 10.6 355.7 367.0
Total interest-bearing liabilities 7,388.9 423.2 628.7 731.1 1,250.6 10,422.5
Other sources - net - - - - 2,054.6 2,054.6
Total sources $ 7,388.9 $ 423.2 $ 628.7 $ 731.1 $3,305.2 $12,477.1
Cumulative maturity/rate
sensitivity gap $ (3,387.4) $ (3,579.0) $ (3,599.9) $ (2,683.5) $ - $ -
ADJUSTMENTS
Beta adjustments:
Interest checking (beta factor .21) $ 1,514.0
Money market accounts
(beta factor .57) 1,007.2
Regular savings (beta factor .13) 1,212.9
Demand deposit sensitivity (724.9)
Cumulative adjusted maturity/rate
sensitivity gap $ (378.2) $ (569.8) $ (590.7) $ 325.7 $ - $ -
</TABLE>
$3.6 billion excess of interest-sensitive sources of funds over uses of funds.
This generally indicates that earnings should improve in a declining interest
rate environment as liabilities reprice more quickly than assets. The opposite
would be true of a positive, or asset-sensitive, gap.
In addition to the traditional gap measurement presentation,
Table 9 also presents interest sensitivity on an adjusted basis. The
first of these adjustments is made through the use of beta factors,
which are based on a ratio of actual changes in consumer deposit rates
to changes in the prime rate during interest rate cycles for the last
several years. Essentially, the beta factors recognize that certain
consumer deposit rates are less interest-sensitive than market-based
rates such as commercial paper. In addition to a beta adjustment, the
table also incorporates an adjustment to reflect the sensitivity of much
of the Corporation's commercial
23
<PAGE>
TABLE 10 OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS (1)
<TABLE>
DECEMBER 31, 1994 WEIGHTED AVERAGE
DOLLARS IN THOUSANDS AVERAGE FIXED ESTIMATED
NOTIONAL EXPECTED RECEIVE FAIR
BALANCE MATURITY RATE VALUE COMMENTS
<S> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS
Generic interest rate swaps $ 600,000 1.5 yrs. 6.35% Convert floating rate
Unrealized gross gains $ 169 assets to fixed rate.
Unrealized gross losses (20,738)
Net unrealized loss (20,569)
Amortizing interest rate swaps 860,166 2.4 yrs. 5.26% Convert floating rate
Unrealized gross gains 3 assets to fixed rate.
Unrealized gross losses (74,581)
Net unrealized loss (74,578)
Interest rate floors 200,000 .1 yrs. 5.50%(2) Minimize interest rate
Unrealized gross gains - risk associated with
Unrealized gross losses (83) falling rates on variable
Net unrealized loss (83) rate assets. Tied to
London Interbank
Offered Rate (LIBOR).
HEDGES OF LENDING COMMITMENTS
Forward contracts 266,439 .2 yrs. n/a Hedges of residential
Unrealized gross gains 265 mortgage lending
Unrealized gross losses (241) commitments.
Net unrealized gain 24
Total hedges against
interest rate risk $1,926,605 $ (95,206)
</TABLE>
(1) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities; carrying amounts not material
(2) Average strike rate for interest rate floors
demand deposit balances to the level of interest rates. On a cumulative
six-month basis, Crestar had a liability sensitive "adjusted gap" at December
31, 1994, with $591 million excess of interest-sensitive sources of funds over
uses of funds.
Each of the above three tools used to assess interest rate risk have
strengths and weaknesses. While Crestar believes that the above methodologies
provide a meaningful representation of the Corporation's interest rate
sensitivity, the methodologies do not necessarily take into account all business
developments which can have an impact on net interest income, such as changes in
credit quality or changes in the amount and composition of earning assets and
sources of funds.
As noted, Crestar incurs a degree of interest rate risk as a
provider of banking services to its customers. This risk can be reduced
through derivative interest rate contracts, such as interest rate swaps,
caps and floors. The majority of Crestar's outstanding derivative
instruments at December 31, 1994 are utilized to convert certain
variable rate assets to fixed rates in order to lock in a profitable
interest spread based on the underlying fixed rate funding sources.
Because financial derivatives typically do not have actual principal
dollars transferred between parties, notional principal amounts are used
to express the volume of such transactions. However, the notional amount
of derivative contracts does not represent direct credit exposure.
Crestar's direct credit exposure is generally limited to the estimated
replacement cost of those instruments with a positive market value.
Crestar has established policies governing derivative activities, and
the counterparties used by Crestar are considered high quality credits.
In addition, Crestar may demand collateral from a counterparty to
further minimize credit risk. There were no past due amounts or reserves
for possible derivative credit losses at December 31, 1994, nor has
Crestar ever experienced any charge-offs related to the credit risk of
derivative transactions. No interest rate swaps, floors or caps used as
hedges against interest rate risk were sold or terminated prior to
maturity during 1994, and at December 31, 1994 there were no deferred
gains or
24
<PAGE>
TABLE 11 OFF-BALANCE SHEET DERIVATIVES-EXPECTED MATURITIES (1)
DECEMBER 31, 1994
DOLLARS IN THOUSANDS WITHIN ONE TO
ONE YEAR FIVE YEARS TOTAL
ASSET RATE CONVERSIONS
Generic interest rate swaps:
Notional amount $300,000 $ 300,000 $ 600,000
Average fixed receive rate 6.86% 5.83% 6.35%
Estimated fair value $ 169 $ (20,738) $ (20,569)
Amortizing interest rate swaps:
Notional amount $ 5,351 $ 854,815 $ 860,166
Average fixed receive rate 8.48% 5.24% 5.26%
Estimated fair value $ 3 $ (74,581) $ (74,578)
Interest rate floors:
Notional amount $200,000 - $ 200,000
Average strike rate 5.50% - 5.50%
Estimated fair value $ (83) - $ (83)
HEDGES OF LENDING COMMITMENTS
Forward contracts: (2)
Notional amount $266,439 - $ 266,439
Estimated fair value 24 - 24
Total hedges against
interest rate risk:
Notional amount $771,790 $1,154,815 $1,926,605
Estimated fair value 113 (95,319) (95,206)
1 Includes only off-balance sheet derivative financial instruments
related to interest rate risk management activities
2 Hedges of residential mortgage lending commitments
losses arising from termination of hedged transactions prior to
maturity. The notional amount of Crestar's interest rate swaps, caps
and floors (excluding customer positions where Crestar simply acts as
an intermediary) was $1.7 billion at December 31, 1994. Forward
contracts with a notional amount of $266 million, utilized to hedge
lending commitments of Crestar's mortgage banking subsidiary, were
also outstanding at December 31, 1994, bringing the total notional
value of derivative financial instruments related to interest rate
risk management activities to $1.927 million at year-end 1994. Tables
10, 11 and 12 present information regarding fair values, maturity,
average rates, and activity during 1994 for these off-balance sheet
derivative instruments. Net unrealized losses on these instruments
totaled $95.2 million as of year-end 1994. These derivatives have
maturities ranging from one month to 4.5 years. Financial statement
note 22 contains additional information pertaining to these types of
agreements.
Estimated fair values of financial instruments held at
December 31, 1994 and 1993 are presented in financial statement note 23.
Management is concerned about the comparability of fair value estimates
between financial institutions due to the wide range of valuation
techniques utilized and the numerous estimates and assumptions that must
be made, given the absence of active secondary markets for many
financial instruments. This is particularly true for estimated fair
values computed for loan portfolios and deposit liabilities. Lack of
uniform valuation methodologies introduces a great degree of
subjectivity to such fair value estimates.
A brief description of the methodologies used in computing
fair value estimates, and the resulting estimated fair values, are
provided in financial statement note 23. Crestar's loan portfolio, which
constitutes the Corporation's largest financial instrument asset
category, had an estimated fair value of approximately 99.7% of recorded
book value at December 31, 1994. The effects of a rising interest rate
environment, partially offset by improved credit quality trends, were
major factors in the determination of the estimated fair value for net
loans. Deposit liabilities payable on short notice or demand, which
constituted 72% of Crestar's total deposits at December 31, 1994, were
assigned an estimated fair value equal to the balance payable on demand,
in accordance with mandatory accounting standards. However, recent
purchase transactions of bank deposits have generally reflected premiums
of approximately 4% to 10% of recorded book value,
25
<PAGE>
TABLE 12 OFF-BALANCE SHEET DERIVATIVES ACTIVITY (1)
<TABLE>
<CAPTION>
IN THOUSANDS 1994
ASSET RATE CONVERSIONS LIABILITY RATE CONVERSIONS
INTEREST RATE SWAPS INTEREST RATE SWAPS HEDGES OF
GENERIC AMORTIZING INTEREST GENERIC INTEREST LENDING
RECEIVE RECEIVE RATE PAY PAY RATE COMMIT-
FIXED FIXED FLOORS VARIABLE FIXED CAPS MENTS(2) TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning
balance $ 650,000 $812,089 $200,000 $ 55,000 $ 4,000 $ 400,000 $ 943,330 $ 3,064,419
Additions 100,000 100,000 - - - - 8,448,201 8,648,201
Maturities/
Amortizations (150,000) (51,923) - (55,000) (4,000) (400,000) (9,125,092) (9,786,015)
Ending balance $ 600,000 $860,166 $200,000 $ - $ - $ - $ 266,439 $ 1,926,605
</TABLE>
1 Includes only off-balance sheet derivative financial instruments
related to interest rate risk management activities
2 Forward contracts hedging residential mortgage lending commitments;
maturities represent contracts delivered
reflecting the relationship value of such deposits over their projected
life and their value as a low cost source of funds. In general, the
rising interest rate environment of 1994 increased the fair values of
both non-interest bearing and fixed rate deposit liabilities, while
decreasing the fair values of fixed rate loan balances, investment
securities and off-balance sheet derivative instruments.
Effective January 1, 1994, Crestar adopted Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities." In accordance with
SFAS 115, securities are classified as either securities held to
maturity, securities available for sale or trading account securities.
Securities held to maturity are carried at amortized cost on the
Corporation's Consolidated Balance Sheets, as Crestar has the ability
and positive intent to hold these securities to maturity. Trading
account securities are carried at fair value as they are intended to be
sold in the near term. Securities available for sale are carried at fair
value and represent securities not classified as held to maturity
TABLE 13 DEBT RATINGS
(AS OF JANUARY 31, 1995)
STANDARD
SECURITY MOODY'S & POOR'S BANKWATCH
8 3/4% Subordinated
Notes due 2004 Baa1 BBB+ BBB+
8 1/4% Subordinated
Notes due 2002 Baa1 BBB+ BBB+
8 5/8% Subordinated
Notes due 1998 Baa1 BBB+ BBB+
Commercial Paper P-2 Not rated TBW-1
Crestar Bank
Deposit Notes:
Long-Term A2 A Not rated
Short-Term P-1 A-1 TBW-1
or trading account securities. With the adoption of SFAS 115, unrealized
holding gains or losses on securities available for sale are excluded
from the Consolidated Statement of Income and reported, net of tax, as a
separate component of shareholder's equity. In accordance with SFAS 115,
the Corporation's consolidated financial statements for periods prior to
January 1, 1994 have not been retroactively changed to conform to
current securities classifications. Prior to January 1, 1994, investment
securities which management intended to sell as part of its asset/
liability management strategy, or that may have been sold in response to
changes in interest rates, prepayment risk or other similar factors,
were classified as securities held for sale, and were stated at the
lower of aggregate amortized cost or market value. All other investment
securities were accounted for in a manner similar to securities held to
maturity or trading account securities.
At December 31, 1994, the amortized cost of securities
available for sale, net of tax, exceeded the fair value of such
securities by $36.6 million. The net unrealized gain or loss on
securities available for sale, recorded as a component of shareholders'
equity, will continue to be subject to change in future periods due to
fluctuations in market values, acquisition activities, and sales,
purchases, maturities and calls of securities classified as available
for sale.
Securities held to maturity at December 31, 1994 had an
amortized cost of $907.4 million and a market value of $860.8 million.
Unrealized pre-tax losses on such securities at year-end 1994 were $48.2
million, with unrealized pre-tax gains of $1.6 million. No sales of
investments classified as securities held to maturity occurred during
1994.
The Corporation's debt ratings are presented in Table 13. In
the second quarter of 1994, Moody's raised its ratings on Crestar's
subordinated notes from Baa2 to Baa1. In the fourth quarter of 1994,
Standard
26
<PAGE>
TABLE 14 ANALYSIS OF SECURITIES HELD TO MATURITY (1)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
AVERAGE AVERAGE
EXPECTED STATED
PAR AMORTIZED MARKET AVERAGE MATURITY MATURITY
DOLLARS IN THOUSANDS VALUE COST VALUE YIELD(2) (YRS/MOS) (YRS/MOS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and Federal agencies:
One to five years $ 10,000 $ 10,307 $ 9,987 5.0% 01/00 01/00
Mortgage-backed obligations
of Federal agencies:
Within one year 1,652 1,684 1,675 6.2
One to five years 79,797 80,966 75,988 6.2
Five to ten years 312,712 315,604 298,534 6.5
After ten years 200,289 200,422 190,037 7.3
Total mortgage-backed
obligations of Federal agencies 594,450 598,676 566,234 6.7 06/03 08/03
States and political subdivisions:
Within one year 2,575 2,575 2,605 9.8
One to five years 18,790 18,885 19,189 10.4
Five to ten years 12,100 12,115 11,719 7.9
After ten years 34,305 33,789 32,053 9.0
Total states and political
subdivisions 67,770 67,364 65,566 9.2 08/03 10/03
Other taxable securities:
Within one year 1,005 1,005 1,005 5.4
One to five years 130,575 130,622 126,736 5.5
Five to ten years 65,035 64,890 58,975 5.5
After ten years 34,602 34,504 32,268 6.3
Total other taxable securities 231,217 231,021 218,984 5.6 02/10 06/04
Total securities held to maturity $903,437 $ 907,368 $860,771 6.6% 05/04 07/11
</TABLE>
1 Maturity line classifications are based on stated maturity
2 Tax-equivalent basis, based on amortized cost
& Poor's raised its ratings on Crestar's subordinated notes from BBB to
BBB+. In their announcements regarding these debt rating upgrades, both
agencies cited Crestar's strong financial condition and rising
profitability.
SOURCES OF FUNDS
Crestar's largest and most important funding source is core deposits,
which totaled $10.8 billion at December 31, 1994, an increase of $729
million, or 7%, over December 31, 1993 balances. Average core deposits
increased by $1.2 billion, or 12% from 1993 to 1994. Of this increase,
approximately $950 million was attributable to the acquisitions
consummated during 1994. While money market certificates displayed
relatively low growth, other domestic time deposits increased by $308
million, or 15%, from year-end 1993 levels. Savings accounts increased
$153 million or 12% during 1994. Transaction accounts, which include
demand, interest checking and money market deposit accounts, grew $257
million or 4% over year-end 1993 levels. These increases reflect
successful promotional efforts during 1994, including "Welcome Aboard"
campaigns aimed at welcoming customers of acquired financial
institutions to Crestar. Crestar's purchase of three financial
institutions during the first quarter of 1995, as discussed in financial
statement note 2, is expected to initially add approximately $590
million in deposits.
Purchased liabilities are composed of certificates of
deposit of $100,000 and over (large CDs), deposits in foreign offices,
and short-term borrowings. Total
TABLE 15 SECURITIES OF STATES AND
POLITICAL SUBDIVISIONS BY QUALITY RATING
DECEMBER 31, 1994 AMORTIZED PERCENT
DOLLARS IN THOUSANDS COST OF TOTAL
Moody's Ratings:
Aaa $ 49,382 73.3%
Aa 9,494 14.1
A 3,776 5.6
Baa 285 .4
Not rated by Moody's 4,427 6.6
Total $ 67,364 100.0%
27
<PAGE>
purchased liabilities decreased $217 million or 13% from December 31, 1993,
reflecting both growth in core deposits and management strategies in a rising
interest rate environment. At December 31, 1994, approximately 49% of
Crestar's purchased funds consisted of funds invested by local customers and,
as such, are less volatile than other categories of purchased funds. National
sources accounted for 51% of purchased liabilities. At December 31, 1994,
Crestar had $1.2 billion in market value of unpledged marketable securities.
Long-term debt increased $176 million during 1994, primarily
reflecting the issuance of $150 million in subordinated ten-year notes
in November 1994 (see "Capital Resources and Adequacy").
USES OF FUNDS
Total earning assets at December 31, 1994 increased $426 million or 4%
from year-end 1993, compared with a 6% increase in the prior year. Average
earning
(Average Core Deposit Mix Stacked Bar Graph)
(Percent)
Interest
Checking &
Money Regular Other
Demand Market Savings Consumer
Deposits Deposits Deposits Deposits
1990 21 32 5 42
1991 19 33 5 43
1992 18 40 8 34
1993 20 41 11 28
1994 19 39 13 29
assets for 1994 increased $987 million or 9% above the average level
of earning assets in 1993. This increase was attributable to the seven
financial institution acquisitions completed during 1994. In 1994, higher
levels of securities available for sale and loans were partially offset by
a decline in securities classified as held to maturity.
Total securities (classified as either held to maturity or available
for sale) as of December 31, 1994 decreased $992 million or 28% from
December 31, 1993, as funds from maturities and sales were utilized to
fund some loan portfolio growth and to reduce short-term borrowings. This
followed a $293 million or 9% increase in 1993. The composition of Crestar's
securities portfolio along with related yield and maturity information as of
December 31, 1994 is presented in Tables 14 and 16. Both average expected
maturity and actual stated maturity are shown. The average expected maturity
considers prepayments and
TABLE 16 ANALYSIS OF SECURITIES AVAILABLE FOR SALE (1)
<TABLE>
<CAPTION>
December 31, 1994
AVERAGE AVERAGE
EXPECTED STATED
PAR AMORTIZED MARKET AVERAGE MATURITY MATURITY
DOLLARS IN THOUSANDS VALUE COST VALUE YIELD(2) (YRS/MOS) (YRS/MOS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and Federal agencies:
Within one year $ 175,000 $ 177,126 $ 176,539 5.8%
One to five years 539,800 534,688 515,091 4.9
Five to ten years 4,500 4,616 4,074 5.8
Total U.S. Treasury and
Federal agencies 719,300 716,430 695,704 5.1 01/06 01/06
Mortgage-backed obligations
of Federal agencies:
Five to ten years 67,098 70,307 68,580 7.6
After ten years 604,811 612,270 581,027 7.0
Total mortgage-backed
obligations of Federal agencies 671,909 682,577 649,607 7.1 08/07 12/07
Other taxable securities:
One to five years 13,871 13,881 13,718 5.6
Five to ten years 9,154 9,134 9,039 6.4
After ten years 158,664 156,375 152,880 6.3
Total other taxable securities 181,689 179,390 175,637 6.3 05/08 23/01
Total interest-earning investments 1,572,898 1,578,397 1,520,948 6.1 05/01 08/06
Common and preferred stocks 101,032 101,032 101,025 6.7
Total securities available for sale $1,673,930 $1,679,429 $1,621,973 6.1%
</TABLE>
(1) Maturity line classifications are based on stated maturity
(2) Tax-equivalent basis, based on amortized cost
28
<PAGE>
(Earning Asset Mix Pie Chart)
($ In Millions)
Securities
Held To
Maturity and
Mortgage Money Securities
Loans Held Market Available
For Sale Investments For Sale Loans
December 31, 1994 $209.5 $452.6 $2,529.4 $9,285.6
2% 4% 20% 74%
Total $12,477.1
(Funding Mix Pie Chart)
($ In Millions)
Interest-
Other Bearing
Long-Term Sources- Purchased Core
Debt Net Funds Deposits
December 31, 1994 $367.0 $2,054.6 $1,447.0 $8,608.5
3% 16% 12% 69%
Total $12,477.1
amortization, resulting in a more realistic measure of maturities than
actual stated maturity. The "Other taxable securities" category consists
largely of collateralized mortgage obligations and certificates of
automobile collateralized receivables. Crestar's holdings of tax-exempt
securities have declined over the past five years and management expects
that trend to continue as maturities occur within the portfolio. Table
15 presents the distribution of tax-exempt securities by investment
grade as determined by Moody's Investors Service. All of the $4.4
million of securities shown as not rated by Moody's at year end are
rated A or better by Standard & Poor's. None of Crestar's securities
holdings by individual issuer (excluding U.S. Treasury and Federal
agencies) exceeded 10% of total shareholders' equity at December 31,
1994.
During 1994, approximately $1.7 billion of securities were
sold, generating securities losses of $10.8 million. The majority of
such securities losses were incurred in the fourth quarter of 1994, when
Crestar sold approximately $300 million in lower-yielding U.S. Treasury
securities in conjunction with the overall management of interest rate
risk for the Corporation. All securities sold in 1994 were from the
Corporation's securities available for sale portfolio. In 1993, over
$350 million in U.S. Treasury securities and almost $15 million in
adjustable rate preferred stock were sold for net gains of $2.2 million.
Money market investments decreased by $198 million or 30% from
December 31, 1993 to $453 million at December 31, 1994. Average balances
of money market investments declined from $676 million in 1993 to $605
million in 1994, while Crestar's average short-term borrowings declined
$244 million during this same time period. Year-end money market
investment levels reflect an appropriate level of money market
investments given liquidity needs and balance sheet management
strategies. Declines in mortgage origination and refinancing activity,
attributable to a rising interest rate environment, contributed to a
lower level of mortgage loans held for sale, which decreased from $591
million at December 31, 1993 to $210 million at December 31, 1994.
Year-end total loans net of unearned income increased $2.0
billion or 27% in 1994, compared to an increase of 11% in 1993.
Period-end loans attributable to 1994 acquisitions were approximately
$1.0 billion. Reflecting the economic rebound in Crestar's market area,
commercial loans increased by 11% in 1994 following a 1% decrease in
1993. While commercial loans continued to be Crestar's largest loan
category, the percentage of commercial loans to total loans at year-end
declined from 36% in 1993 to 31% in 1994. This reduction is the result
of strong consumer lending growth in 1994 and the impact of acquisition
activity. Tax-exempt loans continued to decline, primarily due to loan
maturities, decreasing 13% in 1994.
Bank card loans increased $501 million or 51% in 1994, and
totaled $1.48 billion at December 31, 1994. This growth arises from a
continuation of strong promotional activities, including efforts outside
Virginia, Maryland and Washington, DC, that had previously resulted in
an increase of $412 million, or 73%, in bank card loans during 1993.
Instalment loans increased 18% in 1994, reflecting both acquisitions and
internally generated growth in both direct and indirect loans. In 1993,
instalment loans increased
29
<PAGE>
TABLE 17 LOAN PORTFOLIO ANALYSIS
<TABLE>
<CAPTION>
DECEMBER 31,
DOLLARS IN MILLIONS 1994 1993 1992 1991 1990
$ % $ % $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial 2,892 31 2,609 36 2,635 40 3,048 43 3,442 45
Tax-exempt 201 2 231 3 289 4 343 5 399 5
Instalment 1,810 20 1,533 21 1,360 21 1,367 19 1,415 18
Bank card 1,477 16 976 13 564 9 567 8 546 7
Real estate:
Residential 1,976 21 945 13 776 12 594 8 553 7
Income property 745 8 769 11 744 11 674 10 645 9
Total real estate 2,721 29 1,714 24 1,520 23 1,268 18 1,198 16
Construction 185 2 224 3 214 3 473 7 680 9
Total loans - net of
unearned income 9,286 100 7,287 100 6,582 100 7,066 100 7,680 100
</TABLE>
TABLE 18 LOANS TO REAL ESTATE DEVELOPERS AND INVESTORS-
GEOGRAPHIC DISTRIBUTION AND PROPERTY TYPE
<TABLE>
DECEMBER 31, 1994 REGION
TOTAL GREATER
IN MILLIONS CORPORATION WASHINGTON EASTERN WESTERN CAPITAL
<S> <C> <C> <C> <C> <C>
Land acquisition and
development $ 92.6 $ 56.3 $ 26.2 $ 4.4 $ 5.7
Residential developments 244.5 128.0 72.0 38.6 5.9
Commercial projects:
Office buildings 146.5 88.4 31.9 11.0 15.2
Retail stores and malls 202.0 144.3 42.6 7.2 7.9
Hotels and motels 81.2 44.0 23.1 14.1 -
Industrial buildings 147.3 101.6 17.3 4.3 24.1
Total commercial
projects 577.0 378.3 114.9 36.6 47.2
Special use 52.3 20.0 12.1 18.3 1.9
Other 96.9 57.4 15.7 3.9 19.9
Total REDI loans $1,063.3 $640.0 $240.9 $101.8 $80.6
</TABLE>
TABLE 19 LOANS TO REAL ESTATE
DEVELOPERS AND INVESTORS (REDI)
DECEMBER 31,
IN MILLIONS 1994 1993
Commercial -
Developer lines $ 98.7 $ 101.1
Tax-exempt:
Income property mortgage 67.5 82.0
Construction .1 .2
Real estate -
Income property 745.0 769.0
Construction 152.0 191.0
Total REDI loans $1,063.3 $1,143.3
30
<PAGE>
TABLE 20 NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
DECEMBER 31,
DOLLARS IN THOUSANDS
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial $28,708 $37,788 $ 87,121 $144,830 $ 81,876
Instalment 3,408 902 930 1,440 2,230
Real estate 30,011 33,548 45,422 48,247 69,724
Construction 7,279 5,843 8,506 48,745 48,614
Total nonaccrual loans 69,406 78,081 141,979 243,262 202,444
Restructured loans 6,878 1,733 249 27,005 18,244
Total nonperforming loans 76,284 79,814 142,228 270,267 220,688
Foreclosed properties - net 18,629 16,951 78,584 79,692 16,516
Total nonperforming assets $94,913 $96,765 $220,812 $349,959 $237,204
Past due loans:
Commercial $ 1,608 $ 2,089 $ 3,252 $ 3,364 $ 8,046
Instalment:
Student loan 14,705 7,879 9,057 11,456 33,860
Other 1,368 1,049 2,562 1,701 1,354
Bank card 10,831 6,216 7,266 7,935 7,805
Real estate 6,991 7,758 3,779 4,587 4,237
Construction 198 197 46 3,760 528
Total past due loans $35,701 $25,188 $ 25,962 $ 32,803 $ 55,830
Nonperforming assets to:
Loans and foreclosed properties - net 1.02% 1.32% 3.32% 4.90% 3.08%
Total assets .68 .73 1.74 2.96 2.00
Allowance for loan losses to:
Nonperforming assets 231 218 93 60 63
Nonperforming loans 287 264 144 78 68
Allowance for loan losses plus
shareholders' equity to
nonperforming assets 14.17x 13.16x 5.27x 2.87x 3.88x
</TABLE>
13%. Real estate mortgage loans increased $1.0 billion or 59% over 1993,
and totaled $2.7 billion at December 31, 1994. Merger activity in 1994 centered
on thrift institutions, and these acquisitions had a significant percentage of
residential real estate mortgage loans as a percentage of total loans. This
acquisition activity created a majority of Crestar's increase in real estate
mortgage loans in 1994. Residential real estate mortgage loans represented 21%
of the Corporation's total loan portfolio at December 31, 1994, up from 13% at
year-end 1993.
Based upon Standard Industrial Classification codes used for bank
regulatory reporting purposes, the Corporation had no aggregate loan
concentrations of 10% or more of total loans in any particular industry at
year-end 1994. Under an internal classification of borrower type, Crestar does
have a concentration of loans to real estate developers and investors (REDI).
Crestar had $1.06 billion in REDI loans outstanding at year-end 1994, compared
to $1.14 billion at year-end 1993 (see Tables 18 and 19). While REDI loan
balances fell slightly in 1994, other types of loans, including consumer loan
balances, increased significantly. Together, these two factors led to a decline
in REDI loans as a percentage of total loans from 16% at December 31, 1993 to
11% at December 31, 1994. The reduction in REDI balances occurred despite
Crestar's 1994 acquisitions, which added approximately $150 million in REDI
balances (at time of acquisition) during the year. REDI balances have shown a
downward trend over the past several years due to declining levels of commercial
development, sales of projects, paydowns and pay-outs of construction and
income property projects, and migration into foreclosed properties, charge-offs
and write-downs. Diversification of the REDI portfolio by geographic region and
by project type is detailed in Table 18. Crestar's Greater Washington region
comprises the largest portion of this portfolio, followed by the Eastern region.
The primary REDI loan exposure in both regions relate to commercial projects.
31
<PAGE>
TABLE 21 NONPERFORMING LOANS-QUARTERLY ACTIVITY
<TABLE>
<CAPTION>
IN MILLIONS THREE MONTHS ENDED
1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEC. 31 SEPT. 30 JUNE 30 MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31
Beginning balance $ 62.9 $ 77.4 $ 89.5 $ 79.8 $ 100.1 $ 117.8 $ 118.9 $ 142.2
Acquisition additions - - 4.0 8.1 - - 9.5 -
Other additions 27.6 20.9 19.2 27.4 24.7 11.7 23.4 20.8
Payments, sales
and reductions (10.0) (18.9) (22.1) (15.0) (22.8) (15.8) (10.8) (10.1)
Charge-offs (2.7) (4.8) (6.6) (7.1) (7.6) (9.5) (10.3) (15.4)
Reinstatements to
accrual status (0.8) (5.5) (4.1) (2.7) (10.3) (2.8) (9.4) (10.5)
Transfers to foreclosed
properties (0.7) (6.2) (2.5) (1.0) (4.3) (1.3) (3.5) (8.1)
Net increase (decrease) 13.4 (14.5) (12.1) 9.7 (20.3) (17.7) (1.1) (23.3)
Ending balance $ 76.3 $ 62.9 $ 77.4 $ 89.5 $ 79.8 $ 100.1 $ 117.8 $ 118.9
</TABLE>
RISK ELEMENTS
Nonperforming assets consist of foreclosed properties, formally
restructured loans and nonaccrual loans. Properties are considered
foreclosed if acquired through traditional legal procedures or in
settlement of loans, or when the customer has abandoned the property to
Crestar. Loans may be restructured as to rate, maturity or other terms
as determined on an individual credit basis. Generally, loans are placed
in nonaccrual status when principal or interest is 90 days or more past
due, or earlier if it is known or expected that interest will not be
paid or collection of all principal and interest is unlikely. Any loan
past due 90 days or more and, based on a determination of
collectibility, is not classified as nonaccrual, is classified as a past
due loan. Table 20 presents the level of these assets for the past five
years, and Tables 21 and 22 summarize quarterly activity in
nonperforming loans and foreclosed properties for 1994 and 1993.
At December 31, 1994, nonperforming assets of $94.9 million were down
$1.9 million or 2% from December 31, 1993, despite $34.0 million in
acquisition-related balances acquired during 1994. At year-end 1994,
approximately $14.1 million of nonperforming assets were attributable to
acquisitions completed in 1994. REDI nonperforming assets totaled $59.1 million
and comprised 62% of total nonperforming assets and 5.6% of total REDI loans at
December 31, 1994. The REDI nonperforming asset balance reflects a decrease of
$3.2 million from December 31, 1993. Apart from the REDI portfolio, commercial
and residential real estate nonperforming assets declined during the year, while
increases of $2.5 million were noted in instalment nonperforming assets.
Reflecting additions from 1994 acquisitions, foreclosed properties increased
$1.7 million or 10% from December 31, 1993 to December 31, 1994. The December
31, 1994 balance of $18.6 million is net of a $7.2 million valuation allowance
to address exposure to prevailing market and economic conditions and the
potential impact of such conditions on the marketability of the portfolio. The
ratio of nonperforming assets to loans and foreclosed properties-net at December
31, 1994 was 1.02%, compared to 1.32% at December 31, 1993 and 3.32% at December
31, 1992. Based on current portfolio trends, and barring an unexpected
deterioration in the economy, management does not expect the ratio of
nonperforming assets to loans and foreclosed properties to change significantly
during 1995. However, interim periods in 1995 could show increases in the total
balance of nonperforming assets due to future acquisitions of financial
institutions, the impact of higher interest rates on borrowers, and loan growth.
Potential problem loans consist of loans that are currently performing
in accordance with contractual terms but for which potential operating or
financial concerns of the obligors have caused management to have serious doubts
regarding the ability of such obligors to continue to comply with present
repayment terms. At December 31, 1994, potential problem loans that are not
included in Table 20 as nonperforming or past due loans amounted to
approximately $210 million, compared to $205 million at December 31, 1993. Of
the year-end 1994 balance, 67% consisted of commercial loan balances, with an
additional 27% representing commercial real estate loans. In addition, $17
million of standby letters of credit in various industries were being monitored
at December 31, 1994. Depending on changes in the
32
<PAGE>
TABLE 22 FORECLOSED PROPERTIES-QUARTERLY ACTIVITY
<TABLE>
<CAPTION>
IN MILLIONS THREE MONTHS ENDED
1994 1993
DEC. 31 SEPT. 30 JUNE 30 MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance $23.6 $25.0 $24.5 $17.0 $ 34.7 $ 45.0 $ 75.0 $ 78.6
Acquisition additions - net - - 6.1 15.8 - - 8.9 -
Additions 1.5 7.4 2.7 3.8 4.3 3.4 7.7 11.0
Market write-downs (0.2) (0.1) (0.2) - - (0.1) (2.8) (2.9)
Reductions (6.3) (7.7) (8.1) (13.4) (23.1) (13.6) (36.3) (11.7)
Provision for losses - (1.0) - 1.3 1.1 - (7.5) -
Net increase (decrease) (5.0) (1.4) 0.5 7.5 (17.7) (10.3) (30.0) (3.6)
Ending balance $18.6 $23.6 $25.0 $24.5 $ 17.0 $ 34.7 $ 45.0 $ 75.0
</TABLE>
TABLE 23 NONACCRUAL LOANS AS A PERCENT OF LOAN CATEGORY
DECEMBER 31, 1994 1993 1992 1991 1990
Commercial .9% 1.3% 3.0% 4.3% 2.1%
Instalment .2 .1 .1 .1 .1
Real estate 1.1 2.0 3.0 3.8 5.8
Construction 3.9 2.6 4.0 10.3 7.2
Total .7% 1.1% 2.2% 3.4% 2.6%
economy and other future events, these loans and others not presently identified
could be classified as nonperforming assets in the future. There are no loans
classified for regulatory purposes as loss, doubtful, substandard, or special
mention that have not been disclosed above, that either (i) represent or result
from trends or uncertainties that management reasonably expects will materially
impact future operating results, liquidity or capital resources or (ii)
represent material credits about which management is aware of any information
that causes management to have serious doubts as to the ability of such
borrowers to comply with loan repayment terms.
FUTURE ACCOUNTING CHANGES
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
(SFAS 114) in May 1993. SFAS 114 was further amended by the FASB in October 1994
through the issuance of Statement of Financial Accounting Standards No. 118.
Effective January 1, 1995, SFAS 114, as amended by SFAS 118, requires that
impaired loans within the scope of the statements be measured and reported on
the basis of the present value of expected cash flows discounted at the loan's
effective interest rate, or at the fair value of the loan's collateral if the
loan is deemed "collateral dependent." The impact of adopting SFAS 114, as
amended by SFAS 118, is expected to be immaterial to the financial condition and
operations of Crestar.
INFLATION
The effect of changing prices on financial institutions is typically different
than on non-banking companies since virtually all of a bank's assets and
liabilities are monetary in nature. In particular, interest rates are
significantly affected by inflation, but neither the timing nor magnitude of the
changes are directly related to price level indices. Therefore, the Corporation
can best counter inflation over the long term by managing net interest income
and controlling net increases in noninterest income and expenses.
33
<PAGE>
Consolidated Balance Sheets
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS DECEMBER 31,
1994 1993
<S> <C> <C> <C>
ASSETS Cash and due from banks (NOTE 16) $ 907,627 $ 716,652
Securities held to maturity (NOTE 3) 907,368 1,824,617
Securities available for sale (NOTE 4) 1,621,973 1,697,000
Money market investments (NOTE 5) 452,556 650,633
Mortgage loans held for sale 209,525 591,233
Loans - net of unearned income (NOTES 6, 16 AND 22):
Commercial 2,892,180 2,608,798
Tax-exempt 200,942 230,852
Instalment 1,810,038 1,532,936
Bank card 1,477,285 976,200
Real estate 2,720,609 1,713,876
Construction 184,583 224,460
Loans - net of unearned income of $1,369 in 1994;
$2,988 in 1993 9,285,637 7,287,122
Less: Allowance for loan losses (NOTE 7) (219,189) (210,958)
Loans - net 9,066,448 7,076,164
Premises and equipment - net (NOTES 8 AND 12) 316,896 302,704
Customers' liability on acceptances 6,464 11,578
Intangible assets - net (NOTE 9) 122,953 96,152
Foreclosed properties - net (NOTES 6 AND 10) 18,629 16,951
Other assets 379,591 303,263
TOTAL ASSETS (NOTE 23) $14,010,030 $13,286,947
LIABILITIES Demand deposits $ 2,238,399 $ 2,234,536
Interest checking deposits 1,916,411 1,791,100
Money market deposit accounts 2,342,222 2,214,537
Regular savings deposits 1,394,146 1,241,592
Money market certificates 550,596 538,869
Other domestic time deposits 2,405,160 2,097,448
Certificates of deposit $100,000 and over 66,218 45,914
Deposits in foreign offices - 1,782
Total deposits 10,913,152 10,165,778
Short-term borrowings (NOTE 11) 1,380,806 1,616,743
Liability on acceptances 6,464 11,578
Other liabilities 216,581 239,215
Long-term debt (NOTE 12) 366,962 191,156
Total Liabilities (NOTE 23) 12,883,965 12,224,470
SHAREHOLDERS' Preferred stock. Authorized 2,000,000 shares; none issued - -
EQUITY Common stock, $5 par value. Authorized 100,000,000 shares;
outstanding 37,331,213 in 1994; 37,515,671 in 1993 186,656 187,578
Capital surplus 281,207 248,896
Retained earnings 694,757 626,003
Net unrealized loss on securities available for sale (NOTE 4) (36,555) -
Total Shareholders' Equity (NOTES 12, 14, 16 AND 18) 1,126,065 1,062,477
Commitments and contingencies (NOTES 8 AND 22)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,010,030 $13,286,947
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
Consolidated Statements of Income
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA YEARS ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C> <C>
INCOME Interest and fees on loans $692,710 $575,085 $617,686
FROM Interest and dividends on taxable securities
EARNING held to maturity 49,546 116,676 166,322
ASSETS Interest on tax-exempt securities held to maturity 4,785 6,820 9,346
Interest and dividends on securities
available for sale 129,666 85,331 4,234
Income on money market investments 26,243 23,526 37,567
Interest on mortgage loans held for
sale 23,084 25,191 28,522
Total income from earning assets 926,034 832,629 863,677
INTEREST Interest checking deposits 41,234 38,001 44,278
EXPENSE Money market deposit accounts 67,530 58,496 75,936
Regular savings deposits 37,821 31,091 26,749
Money market certificates 19,915 17,861 35,137
Other domestic time deposits 107,442 96,849 136,344
Certificates of deposit $100,000 and
over 2,589 1,975 7,651
Deposits in foreign offices 11 68 145
Total interest on deposits 276,542 244,341 326,240
Short-term borrowings 48,169 43,787 38,096
Long-term debt 19,507 17,489 17,197
Total interest expense 344,218 305,617 381,533
NET CREDIT Net interest income 581,816 527,012 482,144
INCOME Provision for loan losses (NOTE 7) 29,682 48,775 99,242
Net credit income 552,134 478,237 382,902
NONINTEREST Trust and investment advisory income 55,609 57,440 51,007
INCOME Service charges on deposit accounts 82,851 79,419 73,944
Bank card-related income 39,529 27,500 23,141
Other income (NOTE 15) 87,057 81,669 66,736
Securities gains (losses) (NOTES 3
AND 4) (10,776) 2,237 3,563
Total noninterest income 254,270 248,265 218,391
NET CREDIT AND NONINTEREST INCOME 806,404 726,502 601,293
NONINTEREST Personnel expense (NOTES 17 AND 18) 303,580 262,626 233,838
EXPENSE Occupancy expense - net 42,231 38,359 35,654
Equipment expense 25,339 24,122 24,011
Other expense (NOTE 19) 180,558 197,915 208,300
Total noninterest expense 551,708 523,022 501,803
NET INCOME Income before income taxes 254,696 203,480 99,490
Income tax expense (NOTE 13) 85,617 62,989 19,689
Net income 169,079 140,491 79,801
Preferred dividend requirements
(NOTE 14) - 2,221 2,475
Net income applicable to common
shares $169,079 $138,270 $ 77,326
EARNINGS PER SHARE (NOTE 14):
Primary $ 4.47 $ 3.68 $ 2.32
Fully diluted 4.47 3.67 2.32
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
Consolidated Statements Of Cash Flows
Crestar Financial Corporation and Subsidiaries
<TABLE>
<CAPTION>
IN THOUSANDS YEARS ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C> <C>
OPERATING Net Income $ 169,079 $ 140,491 $ 79,801
ACTIVITIES Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provisions for loan losses, foreclosed
properties and other losses 30,436 57,995 116,781
Depreciation and amortization of premises
and equipment 33,285 31,460 28,910
Securities losses (gains) 10,776 (2,237) (3,563)
Amortization of intangible assets 12,279 21,926 13,630
Deferred income tax expense (benefit) 5,274 9,291 (19,654)
Loss (gain) on foreclosed properties (2,517) 11,026 28,825
Gain on sale of mortgage servicing rights (18,732) (3,600) (1,761)
Net decrease in trading account 1,486 14,834 159,277
Origination of loans held for sale (2,453,007) (3,239,014) (2,510,021)
Proceeds from sale of loans held for sale 2,849,856 3,015,016 2,586,124
Net decrease (increase) in accrued interest
receivable, prepaid expenses and other assets 30,328 (4,183) 51,274
Net decrease in accrued interest payable,
accrued expenses and other liabilities (51,781) (106,713) (31,302)
Other, net 11,882 (1,200) (9,809)
Net cash provided (used) by operating activities 628,644 (54,908) 488,512
INVESTING Proceeds from maturities and calls of securities
ACTIVITIES held to maturity 246,916 792,455 609,485
Proceeds from maturities and calls of securities
available for sale 549,581 79,820 -
Proceeds from sales of securities held to maturity - - 6,473
Proceeds from sales of securities available for sale 1,739,244 376,493 237,961
Purchases of securities held to maturity (568,336) (813,753) (1,865,861)
Purchases of securities available for sale (664,022) (571,454) -
Net decrease (increase) in money market investments 238,321 522,815 (276,056)
Principal collected on non-bank subsidiary loans 11,284 26,189 45,731
Loans originated by non-bank subsidiaries (459,856) (91,945) (355,384)
Net decrease (increase) in other loans (380,789) (67,536) 630,973
Purchases of premises and equipment (35,735) (37,048) (28,694)
Proceeds from sales of foreclosed properties 38,480 75,983 86,302
Proceeds from sales of mortgage servicing rights 32,198 7,625 2,687
Aquisitions of net assets of financial institutions 23,703 26,419 1,996,067
Other, net (7,583) (12,031) (7,697)
Net cash provided by investing activities 763,406 314,032 1,081,987
FINANCING Net increase (decrease) in demand, interest checking,
ACTIVITIES money market and regular savings deposits (188,404) 378,894 655,594
Net decrease in short-term borrowings (442,145) (33,773) (91,615)
Net decrease in certificates of deposit (631,758) (474,560) (2,390,537)
Proceeds from issuance of long-term debt 152,743 972 124,529
Principal payments on long-term debt (9,796) (71,072) (76,721)
Cash dividends paid (57,477) (45,091) (29,121)
Common stock purchased and retired (48,450) (21,054) -
Proceeds from the issuance of common stock 24,212 14,979 108,918
Redemption of preferred stock - (46,350) -
Net cash used by financing activities (1,201,075) (297,055) (1,698,953)
CASH AND Increase (decrease) in cash and cash equivalents 190,975 (37,931) (128,454)
CASH Cash and cash equivalents at beginning of year 716,652 754,583 883,037
EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF YEAR $ 907,627 $ 716,652 $ 754,583
</TABLE>
Cash and cash equivalents consist of cash and due from banks. See
accompanying notes to consolidated financial statements.
36
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
NET UNREALIZED
GAIN (LOSS) ON
PREFERRED SECURITIES
STOCK COMMON STOCK CAPITAL RETAINED AVAILABLE
IN THOUSANDS (NOTE 14) SHARES AMOUNT SURPLUS EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $ 45,000 32,228 $161,142 $ 98,820 $489,960 $ - $ 794,922
Net Income - - - - 79,801 - 79,801
Cash dividends declared on:
Preferred stock ($2.75 per share) - - - - (2,475) - (2,475)
Common stock ($.80 per share) - - - - (26,647) - (26,647)
Change in valuation allowance
for marketable equity securities - - - - 4,369 - 4,369
Common stock issued:
For dividend reinvestment plan - 284 1,420 6,208 - - 7,628
For thrift and profit sharing plan - 51 254 886 - - 1,140
Upon exercise of stock options
(net of tax benefit of $444) - 142 708 2,318 - - 3,026
Upon conversion of
debentures (NOTES 12 AND 14) - 2 9 8 - - 17
In public offering (NOTE 14) - 3,450 17,250 79,874 - - 97,124
Balance, December 31, 1992 $ 45,000 36,157 $180,783 $188,114 $545,008 $ - $ 958,905
Net Income - - - - 140,491 - 140,491
Cash dividends declared on:
Preferred stock ($2.46 per share) - - - - (2,221) - (2,221)
Common stock ($1.14 per share) - - - - (42,252) - (42,252)
Change in valuation allowance
for marketable equity securities - - - - 4,769 - 4,769
Common stock purchased
and retired (NOTE 14) - (522) (2,612) - (18,442) - (21,054)
Common stock issued:
For acquisition of financial
institution - 1,411 7,057 48,151 - - 55,208
For dividend reinvestment plan - 235 1,173 7,720 - - 8,893
Upon exercise of stock options
(net of tax benefit of $1,198) - 235 1,176 4,910 - - 6,086
Upon conversion of
debentures (NOTES 12 AND 14) - - 1 1 - - 2
Redemption of preferred stock (45,000) - - - (1,350) - (46,350)
Balance, December 31, 1993 $ - 37,516 $187,578 $248,896 $626,003 $ - $1,062,477
Net Income - - - - 169,079 - 169,079
Cash dividends declared on
common stock ($1.53 per share) - - - - (57,477) - (57,477)
Cumulative effect of change in
accounting for securities
available for sale (NOTE 4) - - - - - 32,209 32,209
Change in net unrealized gain (loss)
on securities available for sale
(NOTE 4) - - - - - (68,764) (68,764)
Common stock purchased and retired - (1,120) (5,602) - (42,848) - (48,450)
Common stock issued:
For acquisition of financial
institution - 264 1,321 11,267 - - 12,588
For dividend reinvestment plan - 266 1,330 9,842 - - 11,172
For thrift and profit sharing plan - 160 803 5,940 - - 6,743
For directors' stock
compensation plan - 2 9 69 - - 78
Upon exercise of stock options
(net of tax benefit of $1,193) - 231 1,156 5,141 - - 6,297
Upon conversion of
debentures (NOTES 12 AND 14) - 12 61 52 - - 113
BALANCE, DECEMBER 31, 1994 $ - 37,331 $186,656 $281,207 $694,757 $(36,555) $1,126,065
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
(1) ACCOUNTING POLICIES
The accounting and reporting policies of Crestar Financial Corporation
and Subsidiaries conform to generally accepted accounting principles and
to general practice within the banking industry. Certain
reclassifications have been made to the prior years' consolidated
financial statements to conform to the 1994 presentation. The following
is a summary of the more significant policies:
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Crestar Financial Corporation
and Subsidiaries (Crestar or the Corporation) include the accounts of
all wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation. In the condensed
financial statements of Crestar Financial Corporation (Parent), the
investments in subsidiaries are stated at equity in the net assets of
such subsidiaries (note 21).
Business combinations accounted for as purchases are
included from their respective dates of acquisition. The excess of cost
over the estimated fair value of the tangible assets and liabilities
acquired is recorded as intangible assets and amortized over the periods
estimated to be benefited.
Assets held in an agency or fiduciary capacity are not assets
of Crestar and are not included in the accompanying consolidated balance
sheets.
(b) SECURITIES
Effective January 1, 1994, Crestar prospectively adopted Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities." In accordance with
SFAS 115, securities are classified as either securities held to
maturity, securities available for sale, or trading securities.
Securities held to maturity are carried at amortized cost, as the
Corporation has the positive intent and ability to hold these
securities to maturity. Trading securities are carried at estimated fair
value as they are intended to be sold in the near term: trading
securities are classified as money market investments on the
accompanying consolidated balance sheets. Securities not classified as
held to maturity or trading are classified as available for sale.
Available for sale securities are stated at estimated fair value, with
the unrealized gains and losses, net of tax, reported in a separate
component of shareholders' equity. Quoted market prices are used to
determine estimated fair value.
In accordance with SFAS 115, the Corporation's consolidated
financial statements for periods prior to January 1, 1994 have not been
retroactively changed to conform to current securities classifications.
Prior to January 1, 1994, investment securities which management
intended to sell as a part of its asset/liability management strategy,
or that may have been sold in response to changes in interest rates,
prepayment risk or other similar factors, were classified as
securities held for sale, and were stated at the lower of aggregate
amortized cost or estimated market value. All other investment
securities were accounted for in a manner similar to securities held to
maturity or trading securities.
The amortized cost of securities classified as held
to maturity or available for sale is adjusted for amortization of
premiums and accretion of discounts to maturity, or earlier call date if
appropriate, using the level yield method. Such amortization is included
in interest income from securities. Realized gains and losses, and
declines in value judged to be other than temporary are included in
securities gains (losses) in the accompanying consolidated statements of
income. Realized gains and losses are computed using the specific
identification method.
(c) MONEY MARKET INVESTMENTS
Money market investments are stated at cost, which approximates market
value, except for trading account securities, which are carried at
market value. Securities held for trading purposes are classified as
trading account securities. Trading securities primarily include U.S.
Treasury and municipal debt obligations. Trading securities may include
from time to time positions in certain derivative financial instruments
such as futures contracts and purchased options (see related discussion
in note 22). Adjustments to market and trading account gains and losses
are classified as other income in the accompanying consolidated
statements of income. Trading account interest and dividend income is
included in income on money market investments.
(d) MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost
or market value. Adjustments to market and realized gains and losses are
classified as other income in the accompanying consolidated statements
of income.
(e) LOANS
Loans are stated at the principal amount outstanding net of unearned
income. Interest on some instalment loans and some second mortgage loans
is accrued using the sum-of-the-months-digits method (78ths method),
which does not produce results materially different from the level yield
method. Interest on other loans is accrued by multiplying the applicable
rates by the principal amounts outstanding. Most equipment leases,
included in the commercial loan category, are accounted for using the
direct financing method for financial reporting purposes.
38
<PAGE>
Interest receipts on nonaccrual loans are recognized as interest
revenue or are applied to principal when management believes the
ultimate collectibility of principal is in doubt. Loans generally are
placed in nonaccrual status when the collection of principal or interest
is 90 days or more past due, or earlier if collection is uncertain based
upon an evaluation of the net realizable value of the collateral and the
financial strength of the borrower. Instalment loans are placed in
nonaccrual status when past due 120 days and are charged off when past
due 180 days. Generally, bank card loans are not placed in nonaccrual
status, but are charged off at the earlier of when past due 180 days or
notification of bankruptcy.
Loan origination and commitment fees and certain direct loan
origination costs are deferred and the net amount is amortized as an
adjustment of the related loan's yield. Crestar amortizes these amounts
over the contractual life of the related loans or over the commitment
period.
(f) ALLOWANCE FOR LOAN LOSSES
The determination of the balance of the allowance for loan losses is
based upon a review and analysis of the loan portfolio. The allowance
reflects an amount that, in management's judgment, is adequate to
provide for losses inherent in the portfolio. Management's review
includes monthly analyses of past due, problem and nonaccrual loans and
a detailed periodic classification report.
Estimates of future losses involve the exercise of judgment and the
use of assumptions. The principal factors considered in determining the
adequacy of the allowance are the composition of the loan portfolio,
historical loss experience, anticipated losses, economic conditions, the
value and adequacy of collateral, and the current level of the
allowance.
Accrued interest receivable is generally charged against the
allowance for loan losses when deemed uncollectible.
(g) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization charges are computed
under the straight-line method. Premises and equipment are depreciated
over the estimated useful lives of the assets, except for leasehold
improvements which are amortized over the terms of the respective leases
or the estimated useful lives of the improvements, whichever is shorter.
Certain noncancelable leases have been capitalized and are classified as
premises and equipment in the accompanying consolidated balance
sheets. Related amounts representing capital lease obligations are
classified as long-term debt in the accompanying consolidated balance
sheets and are amortized using the interest method to allocate payments
between principal and interest. The initial carrying amounts represent
the present value of the future rental payments, discounted at the
incremental borrowing rate of the lessee. Most of these capital lease
assets are amortized over the lease term.
Estimated lives of the principal items of premises and equipment
are: buildings and improvements - 3 to 50 years; and furniture, fixtures
and equipment - 3 to 12 years. The costs of major renovations are
capitalized, while the costs of ordinary maintenance and repairs are
expensed as incurred.
(h) INTANGIBLE ASSETS
Goodwill is amortized on a straight-line basis over 15 years. Deposit
base intangibles are amortized over the estimated lives of the related
deposit relationships, ranging from 4 to 15 years. Mortgage servicing
rights are amortized in proportion to, and over the period of, estimated
net servicing income to be derived from the servicing activities. The
period of amortization ranges from 5 to 14 years, depending on the
expected life of the mortgages being serviced.
(i) FORECLOSED PROPERTIES
Property acquired through legal foreclosure proceedings, abandonment
of the property, acceptance of deed in lieu of foreclosure or transfer
in exchange for an outstanding loan is initially recorded at estimated
fair value less estimated selling costs at the date of foreclosure,
establishing a new cost basis. At the time of foreclosure, any excess of
cost over the estimated fair value is charged to the allowance for loan
losses, and estimated selling costs are expensed as foreclosed
properties expense. After foreclosure, valuations are routinely
performed by management and the property is carried at the lower of cost
or fair value less estimated selling costs. Write-downs are charged
against current earnings or any applicable foreclosed property valuation
allowance.
(j) INCOME TAXES
The Parent and its subsidiaries file a consolidated federal income tax
return. The provision for income taxes for each company is recorded on
the basis of filing separate income tax returns, after adjustments
relating to consolidated income tax regulations and signed tax sharing
agreements. Income taxes currently payable or receivable by each
subsidiary are paid to or received from the Parent.
In 1993, the Corporation changed its method of accounting for income
taxes (note 13) and, accordingly, records a provision for income taxes
based on the amounts of current and deferred taxes payable (or
refundable) for the year. The deferred tax expense or benefit represents
the change in the net deferred tax
39
<PAGE>
asset or liability during the period.
Deferred tax assets and liabilities are recognized for the tax effects
of differing carrying values of assets and liabilities for tax and
financial statement reporting purposes that will reverse in future
periods.
In 1992 and prior years, a provision for deferred income taxes was
made for revenue and expenses in the consolidated financial statements
that were reported in different periods for tax purposes than for
financial reporting purposes.
(k) EARNINGS PER SHARE
Primary earnings per share are computed by dividing net income
applicable to common shares by the weighted average number of common
shares outstanding during the period, including average common
equivalent shares attributable to dilutive stock options.
Fully diluted earnings per common share are computed using average
common shares, including the maximum dilutive effect of average common
equivalent shares, increased by the number of shares that would result
from assuming that the 5% convertible subordinated debentures were
converted into common stock at the beginning of the applicable period
and using net income increased by interest and amortization of debt
issuance expense, net of tax effect, relating to those debentures. Net
income for 1993 and 1992 was further reduced by the dividends applicable
to the Series B preferred stock.
(l) INTEREST RATE SWAPS, CAPS, COLLARS
AND FLOORS
Crestar uses interest rate swaps, caps, collars and floors for interest
rate risk management and in connection with interest rate risk
management services provided to customers (note 22).
Interest rate swaps, caps and floors used to achieve interest rate
risk management objectives are accounted for on an accrual basis and the
net interest differential, including premiums paid, if any, is
recognized as an adjustment to the interest income or expense of the
related asset or liability. Upon early termination of these derivative
instruments, the net proceeds received or paid are deferred and
amortized over the lesser of the remaining contract life or the maturity
of the related asset or liability. At December 31, 1994 and 1993 there
were no deferred gains or losses arising from termination of hedged
transactions prior to maturity.
Fee income from matched arrangements for which Crestar serves as a
financial intermediary is recognized over the lives of the related
agreements and is classified as other income in the consolidated
statements of income.
(m) RETIREMENT, POSTRETIREMENT AND
POSTEMPLOYMENT BENEFITS
Substantially all employees are covered by a pension plan. The net
periodic pension expense includes a service cost component, a component
reflecting the actual return on plan assets, an interest cost component,
and the effect of deferring and amortizing certain actuarial gains and
losses and the unrecognized net transition asset over 15 years.
On January 1, 1993, Crestar adopted Statement of Financial Accounting
Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Under SFAS 106, costs of retiree benefits
other than pensions are accrued in a manner similar to pension costs.
Prior to 1993, these other retiree benefit costs were expensed when
paid.
Statement of Financial Accounting Standards No. 112 (SFAS 112),
"Employers' Accounting for Postemployment Benefits," was adopted by
Crestar on January 1, 1994. Under SFAS 112, benefits provided to
inactive or former employees before retirement are accrued during the
period of active employment, rather than being expensed as paid.
Adoption of SFAS 112 resulted in a pre-tax charge to employee benefit
expense of $1.8 million in the first quarter of 1994. Postemployment
benefits expense for periods prior to 1994 has not been restated.
(2) MERGERS AND ACQUISITIONS
On January 11, 1994, Crestar Mortgage Corporation, a subsidiary of
Crestar, acquired the stock of Mortgage Capital corporation ("Mortgage
Capital"), a wholesale mortgage loan production company, with an initial
purchase payment of $5.2 million. Under the terms of the purchase
agreement, an additional $2.4 million may be paid to the former owners
depending on the future performance of Mortgage Capital's operations
over the next five years.
On January 28, 1994, Crestar acquired Virginia Federal Savings Bank
(Virginia Federal), for a purchase price of $52 million. The excess of
the cost over the estimated fair value of the tangible net assets
acquired was approximately $3.0 million.
On March 18, 1994, Crestar completed the acquisitions of Providence
Savings and Loan Association ("Providence") and NVR Federal Savings
Bank ("NVR"). Crestar acquired the stock of Providence for a purchase
price of $27 million. Crestar acquired the assets and assumed certain
liabilities of NVR for a purchase price of $42 million. The excesses of
the costs over the estimated fair values of tangible net
40
<PAGE>
assets acquired
were approximately $19.9 million and $11.2 million for Providence and
NVR, respectively.
On May 14, 1994, Crestar acquired the deposits of Piedmont Federal
Savings Association, which had been operating under Resolution Trust
Corporation (RTC) conservatorship. In connection with this acquisition,
Crestar paid a $10 million premium to the RTC.
On June 10, 1994, Crestar completed the acquisition of Annapolis
Bancorp, Inc. (Annapolis), a holding company for Annapolis Federal
Savings Bank. Crestar acquired the stock of Annapolis for a purchase
price of approximately $16 million, which included 264,200 shares of
Crestar stock and $2.9 million in cash. The excess of the cost over the
estimated fair value of the tangible net assets acquired was
approximately $18.3 million.
On September 16, 1994, Crestar Bank acquired from the RTC
approximately $17 million in deposits related to two branches of Second
National Federal Savings Association located in Fairfax and Woodbridge,
Virginia. In connection with this acquisition, Crestar paid a $112
thousand premium to the RTC.
The above acquisitions were accounted for as purchases and,
accordingly, the results of their operations are included in the
accompanying consolidated financial statements since their respective
acquisition dates. The results of operations of the above acquisitions
for the periods prior to their respective acquisition dates were not
material to the results of operations of Crestar. The seven acquisitions
completed during 1994 are summarized as follows:
<TABLE>
DOLLARS IN MILLIONS 1994
PRIMARY ACQUISITION AT ACQUISITION DATE
NAME LOCATION DATE ASSETS DEPOSITS
<S> <C> <C> <C> <C>
Second National Savings Salisbury, MD September 16 $ - $ 17
Annapolis Bancorp, Inc. Annapolis, MD June 10 300 250
Piedmont Federal Savings Manassas, VA May 14 - 150
NVR Federal Savings Bank McLean, VA March 18 425 340
Providence Savings and Loan Vienna, VA March 18 375 300
Virginia Federal Savings Bank Richmond, VA January 28 700 500
Mortgage Capital Corporation St. Paul, MN January 11 18 -
</TABLE>
Also during 1994, Crestar announced three acquisitions to be completed
during 1995. On January 20, 1995 Crestar completed two of these
acquisitions, Independent Bank (Independent), Manassas, Virginia and
Jefferson Savings and Loan (Jefferson), Warrenton, Virginia.
The acquisitions of Independent and Jefferson were each for a
combination of cash and Crestar stock, valued at approximately $12
million for Independent, including 198,400 shares of Crestar stock, and
$23 million for Jefferson, including 471,400 shares of Crestar stock.
Independent and Jefferson had total assets of approximately $80 million
and $280 million, respectively, and total deposits of $70 million and
$250 million, respectively, at acquisition date. Each of these
acquisitions was accounted for as a purchase. Crestar's financial
statements for 1994 do not include these acquisitions.
Crestar expects to complete its acquisition of TideMark Bancorp,
Inc. (TideMark), Newport News, Virginia, in March 1995. The acquisition
of TideMark is for a combination of cash and Crestar stock valued at
approximately $38 million, to be accounted for as a purchase. TideMark
had total assets and deposits of approximately $394 million and $270
million at December 31, 1994, respectively.
Crestar expects the ten acquisitions completed or announced in 1994
to have a positive contribution to earnings within the first twelve
months following completion.
41
<PAGE>
(3) SECURITIES HELD TO MATURITY
The amortized cost (carrying values) and approximate market values of
securities held to maturity at December 31 follow:
<TABLE>
AMORTIZED UNREALIZED UNREALIZED MARKET
IN THOUSANDS COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
1994
U.S. Treasury and Federal agencies $ 10,307 $ - $ 320 $ 9,987
Mortgage-backed obligations of
Federal agencies 598,676 846 33,288 566,234
Other taxable securities 231,021 20 12,057 218,984
States and political subdivisions 67,364 755 2,553 65,566
Total $ 907,368 $ 1,621 $48,218 $ 860,771
1993
U.S. Treasury and Federal agencies $ 45,857 $ 166 $ 146 $ 45,877
Mortgage-backed obligations of
Federal agencies 1,437,519 18,906 1,452 1,454,973
Other taxable securities 231,509 1,106 365 232,250
States and political subdivisions 84,121 2,935 53 87,003
Common and preferred stocks 25,611 - - 25,611
Total $1,824,617 $ 23,113 $ 2,016 $1,845,714
</TABLE>
The stated maturities of securities held to maturity at December 31,
1994 follow:
IN THOUSANDS
AMORTIZED MARKET
COST VALUE
1994
Due in one year or less $ 5,264 $ 5,285
Due after one year through five years 240,780 231,900
Due after five years through ten years 392,609 369,228
Due after ten years 268,715 254,358
Total $907,368 $860,771
At December 31, 1994 and 1993, securities held to maturity with an
aggregate carrying value of $442,406,000 and $635,298,000, respectively,
were pledged to secure deposits and for other purposes. Gross gains of
$1.0 million and gross losses of $2.2 million were realized on sales of
securities held to maturity in 1992.
(4) SECURITIES AVAILABLE FOR SALE
The amortized cost and approximate market values of securities available
for sale at December 31 follow:
<TABLE>
AMORTIZED UNREALIZED UNREALIZED MARKET
IN THOUSANDS COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
1994
U.S. Treasury and Federal
agencies $ 716,430 $ 69 $20,795 $ 695,704
Mortgage-backed obligations of
Federal agencies 682,577 1,430 34,400 649,607
Other taxable securities 179,390 116 3,869 175,637
Common and preferred stocks 101,032 18 25 101,025
Total $1,679,429 $ 1,633 $59,089 $1,621,973
1993 U.S. Treasury and
Federal agencies $1,512,596 $32,554 $ 1,081 $1,544,069
Mortgage-backed obligations of
Federal agencies 17,312 24 5 17,331
Other taxable securities 167,092 1,304 - 168,396
Total $1,697,000 $33,882 $ 1,086 $1,729,796
</TABLE>
42
<PAGE>
The stated maturities of securities available for sale at December 31,
1994 follow:
AMORTIZED MARKET
IN THOUSANDS COST VALUE
Due in one year or less $ 177,126 $ 176,539
Due after one year through five years 548,569 528,809
Due after five years through ten years 84,057 81,693
Due after ten years 768,645 733,907
1,578,397 1,520,948
Common and preferred stocks 101,032 101,025
Total $1,679,429 $1,621,973
At December 31, 1994 and 1993, securities available for sale with an
aggregate carrying value of $790,827,000 and $573,787,000 respectively,
were pledged to secure deposits and for other purposes.
Proceeds from sales of securities available for sale were $1.7
billion in 1994, $376 million in 1993 and $238 million in 1992. Gross
gains of $6.2, $4.1 and $4.9 million and gross losses of $17.0 million,
$1.9 million and $141 thousand were realized on such sales during 1994,
1993 and 1992, respectively.
As a result of Crestar's adoption of SFAS 115 as discussed in note
1(b), securities having an amortized cost of $2.932 billion, and an
estimated market value of $2.983 billion, were classified as securities
available for sale on January 1, 1994. The initial effect of adoption
of SFAS 115 was an increase in shareholders' equity of $32.2 million,
which was the amount by which the fair value of securities available for
sale, net of a deferred tax liability of $19 million, exceeded the
amortized cost of such securities on January 1, 1994.
(5) MONEY MARKET INVESTMENTS
Money market investments at December 31 included:
IN THOUSANDS 1994 1993
Trading account securities $ 3,574 $ 5,060
Federal funds sold 268,155 3,815
Securities purchased under agreements to resell 175,500 609,805
Domestic time deposits 138 25,128
U.S. Treasury 5,189 6,825
Total money market investments $452,556 $650,633
(6) NONPERFORMING ASSETS
Nonperforming assets include nonperforming loans and foreclosed
properties. Nonperforming loans consist of loans on which income is
recognized on the cash basis (nonaccrual loans) and loans which meet the
accounting definition of a troubled debt restructuring (restructured
loans). Nonaccrual loans are classified as loans in the accompanying
consolidated balance sheets. There were no material commitments to lend
additional funds to customers whose loans were classified as nonaccrual
at December 31, 1994. At December 31, 1994 and 1993, loans accounted for
as restructured loans, included in nonaccrual loans, totaled $7.9
million and $20.1 million, respectively.
In addition to the loans classified as nonaccrual at December 31, 1994
and 1993, there were $35.7 million and $25.2 million, respectively,
that were past due 90 days or more, the majority of which were
collateralized or in the process of collection. Instalment and bank card
past due loans are subject to established charge-off procedures as
discussed in note 1(e).
Non-cash additions to foreclosed properties were $10.4 million, $17.2
million and $114.1 million in 1994, 1993 and 1992, respectively. The
amounts of nonperforming assets at December 31 follow:
IN THOUSANDS 1994 1993
Nonaccrual loans $69,406 $ 78,081
Restructured loans 6,878 1,733
Total nonperforming loans 76,284 79,814
Foreclosed properties - net 18,629 16,951
Total nonperforming assets $94,913 $ 96,765
Average nonperforming loans for
the year $75,528 $116,613
Average nonperforming assets for
the year $98,452 $170,869
43
<PAGE>
The aggregate recorded investment in nonperforming loans outstanding at
December 31, 1994, 1993 and 1992, the pro forma interest income that
would have been earned in 1994, 1993 and 1992 if such loans had not been
classified as nonperforming, and the amount of interest income actually
included in net interest income for such years follows:
<TABLE>
IN THOUSANDS NONPERFORMING LOAN CATEGORY
1994 COMMERCIAL CONSTRUCTION REAL ESTATE ALL OTHER TOTAL
<S> <C> <C> <C> <C> <C>
RECORDED INVESTMENT $28,708 $7,279 $36,889 $3,408 $ 76,284
PRO FORMA INTEREST 4,041 769 4,082 133 9,025
INTEREST EARNED 156 - 181 - 337
1993
Recorded investment $39,487 $5,843 $33,582 $ 902 $ 79,814
Pro forma interest 4,990 948 1,706 78 7,722
Interest earned 421 - - - 421
1992
Recorded investment $87,120 $8,506 $45,671 $ 931 $142,228
Pro forma interest 7,790 3,362 1,872 103 13,127
Interest earned 377 - 2 - 379
</TABLE>
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," (SFAS 114), as amended, will be
adopted prospectively by Crestar on January 1, 1995. In future
reporting periods, impaired loans within the scope of the statement will
be measured and valued on the basis of the present value of expected
cash flows discounted at the loan's effective interest rate, or at the
fair value of the loan's collateral if the loan is deemed collateral
dependent. The 1995 impact on Crestar's results of operations and
financial position of adopting SFAS 114 is expected to be immaterial.
(7) ALLOWANCE FOR LOAN LOSSES
Transactions in the consolidated allowance for loan
losses for the years ended December 31 were:
IN THOUSANDS 1994 1993 1992
Beginning balance $210,958 $205,017 $ 210,004
Charge-offs (65,204) (89,333) (130,662)
Recoveries 28,066 24,499 16,733
Net charge-offs (37,138) (64,834) (113,929)
Provision for loan losses 29,682 48,775 99,242
Allowance from acquisitions - net 15,687 22,000 9,700
Net increase (decrease) 8,231 5,941 (4,987)
Ending balance $219,189 $210,958 $ 205,017
Foreign activities represented less than 1 percent of total assets,
revenues, income before income taxes and net income for all years
presented.
Allowance from acquisitions for 1994 is net of a $4.2 million
reduction in the allowance for loan losses initially recorded upon the
purchase of CFS Financial Corporation (CFS) in May 1993. This reduction
in the initial valuation of the acquired allowance was based on
subsequent and more detailed analysis of the creditworthiness of the CFS
loan portfolio as of the date of acquisition. The impact of this
reduction on the other values assigned to the assets acquired and
liabilities assumed in the CFS purchase was to decrease goodwill by $2.7
million and to decrease the deferred income tax asset by $1.5 million.
44
<PAGE>
(8) PREMISES AND EQUIPMENT
Premises and equipment at December 31 included:
IN THOUSANDS 1994 1993
Land $ 55,745 $ 53,611
Buildings and improvements 273,816 262,992
Furniture, fixtures and
equipment 249,612 224,978
Capitalized leases:
Land and buildings 3,947 4,072
Equipment 518 518
Less: Accumulated
depreciation and
amortization (284,238) (261,449)
299,400 284,722
Construction in progress 17,496 17,982
Total premises and
equipment - net $ 316,896 $ 302,704
At December 31, 1994, future minimum lease payments under noncancelable
capital and operating leases that have an initial term in excess of one
year follow:
OPERATING CAPITAL
IN THOUSANDS LEASES LEASES
1995 $ 15,953 $ 417
1996 14,215 265
1997 11,812 257
1998 9,380 253
1999 7,115 188
Later years 25,544 1,038
Total minimum lease
payments $ 84,019 $ 2,418
Imputed interest (rates
ranging from 8 5/8-14 3/8%) (1,048)
Present value of net
minimum lease payments
(included in long-term debt) $ 1,370
Total minimum lease payments included in the preceding table have not
been reduced by future minimum sublease rentals of $1.4 million. There
were no new capital lease obligations incurred in 1994, 1993 or 1992.
Crestar owns and, along with its subsidiaries, is the principal
tenant of the corporate headquarters building in Richmond, Virginia, an
operations center in Richmond, and regional office buildings in Roanoke
and Norfolk, Virginia and Washington, DC. At December 31, 1994, Crestar
had 336 banking locations, the majority of which were located in bank
owned facilities. Management considers these properties to be suitable
and adequate for current operations.
Lease expense relating to both cancelable and noncancelable
operating lease agreements (including month-to-month rental agreements)
is shown below. Customarily, these leases provide that the lessee pay
taxes, maintenance, insurance and certain other operating expenses
applicable to the leased property.
IN THOUSANDS 1994 1993 1992
Buildings $18,515 $16,598 $17,309
Equipment 1,977 1,639 1,559
Total lease expense $20,492 $18,237 $18,868
(9) INTANGIBLE ASSETS
Intangible assets at December 31 included:
IN THOUSANDS 1994 1993
Goodwill and deposit base intangibles $106,639 $74,104
Mortgage servicing rights 15,742 21,378
Favorable lease rights 572 670
Total intangible assets - net $122,953 $96,152
Accumulated amortization of goodwill was $23,421,000 and $17,320,000 for
1994 and 1993, respectively. During 1994, goodwill and deposit base
intangibles were reduced by $13.1 million due to recognition of an
income tax benefit arising from an IRS settlement of issues related to
the tax treatment of intangible assets. Additionally, a $7.0 million
reduction in goodwill and deposit base intangibles was recorded in 1994
due to recognition of an income tax benefit from reclassifications of
goodwill and deposit base intangible assets recorded for specific
acquisitions.
45
<PAGE>
(10) ALLOWANCE FOR FORECLOSED PROPERTIES
Transactions in the allowance for losses on foreclosed properties for
the years ended December 31 were:
IN THOUSANDS 1994 1993 1992
Beginning balance $ 5,574 $ 10,264 $ -
Provision for foreclosed properties (323) 6,400 12,000
Write-downs (3,610) (13,136) (1,736)
Allowance from acquisitions 5,539 2,046 -
Net increase (decrease) 1,606 (4,690) 10,264
Ending balance $ 7,180 $ 5,574 $10,264
(11) SHORT-TERM BORROWINGS
Short-term borrowings outstanding as of December 31 and their related
weighted average interest rates were:
<TABLE>
IN THOUSANDS 1994 1993 1992
AMOUNT RATE AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased $ 742,672 6.29% $ 670,407 3.23% $ 443,467 3.28%
Securities sold under repurchase
agreements 481,938 5.93 819,132 2.76 1,006,219 3.18
Commercial paper 230 4.81 319 2.63 7,435 2.99
Notes payable 153,976 5.42 110,792 2.64 119,019 2.70
U.S. Treasury demand notes - - 13,487 2.64 17,886 2.45
Other 1,990 3.63 2,606 2.75 13,990 3.73
Total short-term borrowings $1,380,806 $1,616,743 $1,608,016
</TABLE>
Federal funds purchased generally mature daily. Securities sold under
repurchase agreements generally mature within 1 to 365 days or are due
upon demand. Commercial paper matures within 270 days, and master notes,
the principal component of notes payable, are due upon demand.
At December 31, 1994, the Parent's unused committed lines of credit
totaled $30 million.
The Corporation paid $319,139,000, $296,483,000 and $383,986,000 in
interest on deposits and short-term borrowings in 1994, 1993 and 1992,
respectively.
(12) LONG-TERM DEBT
Long-term debt at December 31 included:
<TABLE>
IN THOUSANDS 1994 1993
<S> <C> <C>
Parent:
8 3/4% Subordinated notes due 2004 $149,615 $ -
8 1/4% Subordinated notes due 2002 125,000 125,000
8 5/8% Subordinated notes due 1998 49,966 49,955
5% Convertible subordinated debentures due 1994 - 134
Total Parent 324,581 175,089
7-8 1/4% Mortgage indebtedness maturing through 2009 10,101 13,130
8 5/8-14 3/8% Capital lease obligations maturing through
2006 1,370 1,965
4 1/8-8% Federal Home Loan Bank obligations payable through
2008 13,099 972
6 1/4-9 1/2% Collateralized mortgage obligation bonds
maturing through 2019 17,811 -
Total consolidated long-term debt $366,962 $191,156
</TABLE>
In 1994, Crestar completed the sale of $150 million of 8 3/4%
subordinated notes due November 15, 2004. Net of underwriting discounts,
the notes resulted in net proceeds to the Corporation of $148.6 million.
Proceeds from the sale of the notes will be used for general corporate
purposes, including cash requirements for pending acquisitions
discussed in note 2.
Neither the 8 3/4% nor the 8 1/4% subordinated notes are redeemable
prior to maturity. The 8 5/8% subordinated notes may not be exchanged or
redeemed prior to maturity, except upon the occurrence of certain events
relating to the federal income tax treatment of the notes to the
Corporation. The 8 3/4%, 8 1/4% and 8 5/8% subordinated notes all
qualify as Tier 2 capital
46
<PAGE>
for federal bank regulatory purposes. Expenses
relating to the issuance of the 8 3/4%, 8 1/4% and 8 5/8% notes are
being amortized to maturity on a straight-line basis. Outstanding debt
agreements at December 31, 1994 place restrictions upon the disposal of
subsidiaries' common stock.
During 1994, all remaining 5% convertible subordinated debentures
were converted into 12,210 common shares of Crestar. Upon conversion to
common stock, the unamortized expense attributable to the 5% debentures
was charged to capital surplus.
During 1994, $23,174,000 of collateralized mortgage obligation
bonds were assumed in the acquisitions of Virginia Federal and Annapolis
discussed in note 2. Federal Home Loan Bank obligations of $10,000,000
were assumed in the acquisition of NVR Savings.
Mortgage indebtedness consists of the debt relating to two pledged
facilities owned by Crestar Bank which have an aggregate carrying value
of $21,903,000 at December 31, 1994. Mortgage payments in 1994,
including interest, were $4,066,000; payments in 1995 are expected to be
$1,528,000.
The Corporation made payments of $17,662,000, $17,928,000 and
$13,534,000 in interest on long-term debt in 1994, 1993 and 1992,
respectively.
The combined maturities of all long-term debt for the years 1995
through 1999 follow:
IN THOUSANDS 1995 1996 1997 1998 1999
Parent $ - $ - $ - $49,966 $ -
Consolidated 24,094 2,132 1,801 1,325 1,179
(13) INCOME TAXES
The current and deferred components of income tax expense allocated to
continuing operations in the accompanying consolidated statements of
income were:
IN THOUSANDS 1994 1993 1992
Current:
Federal $78,352 $54,060 $ 37,996
State and local 1,991 (362) 1,347
Total current tax expense 80,343 53,698 39,343
Deferred:
Federal 4,918 9,975 (17,886)
State and local 356 (684) (1,768)
Total deferred tax expense (benefit) 5,274 9,291 (19,654)
Total income tax expense $85,617 $62,989 $ 19,689
In addition to the state and local income tax expenses above, which
pertain to the non-bank affiliates and to the non-Virginia banks,
Crestar Bank incurred Virginia bank franchise taxes of $3,199,000 in
1994, $2,810,000 in 1993 and $2,845,000 in 1992. This tax is imposed on
banks in Virginia in lieu of income and personal property taxes. Crestar
Bank remits 80 percent of the tax to the Virginia municipalities in
which it does business and the remaining 20 percent to the Commonwealth
of Virginia.
The differences between the amounts computed by applying the
statutory federal income tax rate to income before income taxes and the
actual income tax expense allocated to operations were:
47
<PAGE>
<TABLE>
IN THOUSANDS 1994 1993 1992
<S> <C> <C> <C>
Income before income taxes $254,696 $203,480 $ 99,490
Tax expense at statutory rate 89,144 71,218 33,826
Increase (decrease) in taxes resulting from:
Tax-exempt interest and dividends (7,296) (8,355) (10,573)
Nondeductible interest expense 459 531 790
Alternative minimum tax (carryforward used) - - (6,457)
Amortization of goodwill 2,141 1,075 872
Amortization of deposit base intangibles - - 1,073
State income taxes 1,525 292 (278)
Adoption of SFAS 109 - (540) -
Deferred tax effect of 1993 tax rate change - (1,593) -
Other - net (356) 361 436
Total decrease in taxes (3,527) (8,229) (14,137)
Total income tax expense $ 85,617 $ 62,989 $ 19,689
Effective tax rate 33.6% 31.0% 19.8%
</TABLE>
The Corporation made income tax payments of $79,708,000, $52,234,000 and
$37,371,000 during 1994, 1993 and 1992, respectively.
Effective January 1, 1993, Crestar adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" as discussed
in note 1(j). The sources and tax effects of temporary differences that
gave rise to significant portions of deferred income tax assets
(liabilities) at December 31 were:
IN THOUSANDS 1994 1993
Deferred Income Tax Assets:
Allowance for loan losses $ 64,816 $ 71,113
Intangible assets 13,983 -
Foreclosed properties 8,827 4,743
Compensation and employee benefits 19,435 12,646
Unrealized loss on securities available for sale 20,901 -
Other 11,892 5,240
Total Deferred Income Tax Assets 139,854 93,742
Deferred Income Tax Liabilities:
Premises and equipment (12,867) (15,838)
Intangible assets - (11,979)
Securities (4,440) (3,109)
Deferred loan fees and costs (5,358) (2,442)
Loans (790) (5,326)
Lease receivables (1,477) (2,591)
Other (11,535) (3,740)
Total Deferred Income Tax Liabilities (36,467) (45,025)
Net Deferred Income Tax Asset $103,387 $ 48,717
The net deferred income tax asset is included in other assets in the
accompanying consolidated balance sheets. There was no valuation
allowance relating to the net deferred income tax asset at December 31,
1994 and 1993. The net deferred income tax asset at January 1, 1993,
included a valuation allowance of $1.1 million representing a capital
loss carryforward expiring in 1998. This allowance was reduced to zero
during 1993 as a result of a decrease in the corresponding temporary
difference. Crestar has sufficient taxable income in the available
carryback periods and future taxable income from reversing taxable
differences to realize substantially all of its deferred income tax
assets. Management believes, based on the Corporation's history of
generating significant earnings and expectations of future earnings,
that it is more likely than not that all recorded deferred income tax
assets will be realized.
The primary timing differences and the resulting deferred income
tax benefit for the year ended December 31, 1992, were:
48
<PAGE>
IN THOUSANDS
Deduction for loan losses on tax returns greater than the
provision charged to operating expense $ 4,840
Financial statement AMT less than tax return AMT (6,457)
Depreciation (1,420)
Amortization of acquired intangible assets 1,351
Accretion of discount on securities (1,801)
Deferral and amortization of loan fees and costs (449)
Unrealized losses on foreclosed properties (12,782)
Other - net (2,936)
Total deferred income tax benefit $(19,654)
The tax returns through 1990 have either been examined or are no longer
subject to examination by the Internal Revenue Service (IRS). During
1994, the IRS completed an examination of the tax returns for 1988
through 1990. There was no material effect on consolidated earnings.
Also during 1994, the IRS began an examination of the tax returns for
1991 through 1993. Management believes that any deficiency that may be
determined will not have a material effect on consolidated earnings.
(14) SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
During 1994 and 1993 the Corporation purchased and retired 1,120,300 and
522,300 shares of common stock at an average cost of $43.25 and $40.31
per share, respectively. There were no shares of common stock purchased
and retired in 1992.
During 1994, all remaining subordinated debentures were converted
to shares of common stock as discussed in note 12. During 1993 and 1992,
$2,000 and $17,000 of subordinated debentures were converted to 216 and
1,837 shares of common stock, respectively.
At December 31, 1994, common stock was reserved for issuance to
directors, officers or employees, with respect to stock options
granted from 1987 through 1994 as explained in note 18. There were
2,300,000 shares reserved for the Performance Equity Plan and the 1993
Stock Incentive Plan, which provide awards to key executives based upon
attainment of specific long-term corporate goals. No shares were
beneficially owned by a subsidiary.
In December 1993, all 900,000 shares of the Adjustable Rate
Cumulative Preferred Stock Series B were redeemed at 103% of the stock's
stated value, or a price per share of $51.50, plus accrued and unpaid
dividends.
In 1992, Crestar completed the public offering and sale of
3,450,000 shares of common stock at $29.25 per share, providing a net
addition of $97.1 million to shareholders' equity.
Average common and common equivalent shares used in the
determination of earnings per share were:
IN THOUSANDS 1994 1993 1992
Primary 37,864 37,587 33,286
Plus assumed
conversion of
debentures - 15 15
Other 3 63 68
Fully diluted 37,867 37,665 33,369
Fully diluted earnings per common share are calculated using net
income increased by interest and amortization of debt issuance expense,
net of tax effect, relating to the outstanding 5% convertible
subordinated debentures. Net income for 1993 and 1992 is further reduced
by the dividends applicable to the Series B preferred stock. The
adjustments are as follows:
IN THOUSANDS 1994 1993 1992
Interest and
amortization of
debt issuance
expense $ 2 $ 7 $ 7
Tax effect (1) (2) (2)
Preferred dividends,
Series B - (2,221) (2,475)
Net adjustment
to net income $ 1 $ (2,216) $ (2,470)
49
<PAGE>
(15) OTHER INCOME
Other income in the consolidated statements of
income includes:
IN THOUSANDS 1994 1993 1992
Mortgage servicing $18,986 $15,371 $13,637
Mortgage origination - net 8,495 20,631 16,631
Automated teller machine fees 10,605 9,355 7,925
Trading account activities 1,069 4,415 6,880
Commissions on letters of credit 5,135 7,272 5,081
Safe deposit box rental 3,537 2,239 3,282
Gain on sale of mortgage servicing rights 18,732 3,600 1,761
Miscellaneous 20,498 18,786 11,539
Total other income $87,057 $81,669 $66,736
(16) REGULATORY REQUIREMENTS AND RESTRICTIONS
Crestar Bank, Crestar Bank N.A. and Crestar Bank MD (Banks) are subject
to certain requirements imposed by state and federal banking statutes
and regulations. These requirements, among other things, establish
minimum levels for capital and restrict the amount of dividends that may
be distributed and the amount of loans that may be made by the Banks to
the Parent and require that the Banks maintain a minimum reserve balance
with the Federal Reserve Bank.
Under the current supervisory practices of the Banks' regulatory
agencies, prior approval from those agencies is required if cash
dividends declared in any given year exceed net income for that year
plus retained earnings of the two preceding years. The amount of
dividends available to the Parent from the Banks at January 1, 1995,
without prior approval, was approximately $132.0 million. Cash
dividends paid by the Banks to the Parent in 1994, 1993 and 1992 were
$95.2 million, $93.8 million and $30.1 million, respectively.
Section 23A of the Federal Reserve Act imposes limitations on the
amount of credit that may be extended to the Parent by the Banks.
Generally, up to 10% of the Banks' regulatory capital, surplus,
undivided profits, allowance for loan losses and contingency reserves
may be loaned by the Banks to the Parent. As of December 31, 1994,
$127.3 million of credit was available to the Parent under this
limitation, although no extensions of credit were outstanding.
For the reserve maintenance period in effect at December 31, 1994
and 1993, the Banks were required to maintain average daily balances
totaling approximately $343.0 million and $339.6 million, respectively,
with the Federal Reserve Bank. The average amount of reserve balances
for the year ended December 31, 1994 totaled approximately $431.1
million.
As of January 1, 1994, aggregate loans to directors and executive
officers and their associates were $10,854,000. Additions and repayments
totaled $228,000 and $1,957,000 respectively, during 1994 and the
balance was $9,125,000 at year end. These loans were made in the
ordinary course of business and were arms-length in terms of credit
risk, interest rates and collateral requirements prevailing at the time
for comparable transactions. These loans do not represent more than a
normal credit risk. None of these loans were nonaccrual, past due or
restructured at December 31, 1994.
(17) PENSION PLANS
As of December 31, 1994, the Corporation had various non-contributory
defined benefit pension plans. Benefits under the plans are based on
length of service and a percentage of qualifying compensation during the
final years of employment. The Corporation's funding policy is to
contribute annually the maximum amount that can be contributed for
federal income tax purposes. Contributions are intended to provide not
only for benefits attributed to service to date but also for those
expected to be earned in the future.
Net periodic pension expense in 1994, 1993 and 1992 includes:
IN THOUSANDS 1994 1993 1992
Service cost - benefits earned
during the year $ 6,539 $ 4,949 $ 4,906
Interest expense on projected
benefit obligation 9,072 6,784 6,244
Actual return on plan assets (1,185) (18,906) (9,859)
Net amortization and deferral (9,854) 9,167 1,175
Net periodic pension expense $ 4,572 $ 1,994 $ 2,466
50
<PAGE>
The following table sets forth the Plans' funded status and amounts
recognized in the Corporation's consolidated balance sheets at December
31, 1994 and 1993, based on a measurement date of September 30 for each
respective year:
IN THOUSANDS 1994 1993
Accumulated benefit obligation, including vested
benefits of $73,579 in 1994; $81,540 in 1993 $ (75,514) $ (82,621)
Projected benefit obligation for service
rendered to date (108,153) (121,416)
Plan assets at fair value, primarily listed
stocks and U.S. Treasury bonds 122,952 123,480
Plan assets in excess of projected benefit
obligation 14,799 2,064
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions (22,282) (324)
Unrecognized net asset (obligation) at October 1,
being recognized over 15 years 2,221 (2,614)
Accrued pension expense $ (5,262) $ (874)
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation were 8.5% and 5.0%, respectively, in
1994 and 7.25% and 5.0%, respectively, in 1993. The expected long-term
rate of return on assets was 9.0% and 8.5% for 1994 and 1993,
respectively.
(18) OTHER EMPLOYEE BENEFIT PLANS
The Corporation maintains a stock incentive plan which allows for the
granting of incentive and non-qualified stock options to all employees
on a discretionary basis. The Corporation also maintains a stock option
plan under which no future options will be granted, but under which
previously granted options were outstanding at December 31, 1994. Stock
options are granted at prices equal to the fair market value of the
stock on the date of grant. Options are exercisable starting one year
from the date of grant, or upon retirement, disability or death; options
expire seven years from the date of grant for options granted prior to
1989 and ten years from the date of grant for options granted in 1989
and thereafter. Effective in January 1992, all stock appreciation rights
(SARs), which had previously been granted in tandem with options, were
canceled. No new grants of SARs have been made since that time.
Summarized activity relating to options and SARs follows:
<TABLE>
1994 1993 1992
OPTIONS OPTIONS OPTIONS SARS
<S> <C> <C> <C> <C>
Outstanding, January 1 1,053,301 1,120,800 931,000 481,521
Granted 215,200 207,730 363,550 -
Canceled or retired (1,200) (4,350) (7,400) (481,521)
Exercised ($14.75 to $40.38 per share) (239,784) (270,879) (166,350) -
Outstanding, December 31
($14.75 to $48.25 per share) 1,027,517 1,053,301 1,120,800 -
Exercisable, December 31 815,017 885,151 762,750 -
</TABLE>
The Corporation provides postretirement life and contributory health
insurance benefit plans for eligible retirees. Since 1993, the cost of
such benefits have been accrued in a manner similar to pension costs.
Prior to 1993, such costs were expensed when paid. Postretirement
benefits expense for periods prior to 1993 have not been restated.
The projected status of Crestar's postretirement life and
contributory health insurance benefit plans for eligible retirees as of
December 31 follow:
51
<PAGE>
<TABLE>
IN THOUSANDS 1994 1993
<S> <C> <C>
Accumulated postretirement benefit obligations (other than
pensions):
Retirees $ (29,155) $ (27,821)
Eligible active plan participants (7,786) (5,599)
Ineligible active participants (8,400) (7,740)
Total (45,341) (41,160)
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 6,627 5,512
Unrecognized transition obligation to be recognized
over 20 years 30,780 32,490
Accrued postretirement benefit expense $ (7,934) $ (3,158)
Postretirement benefit expense for the years ended
December 31 included:
</TABLE>
<TABLE>
IN THOUSANDS 1994 1993
<S> <C> <C>
Service cost $ 873 $ 573
Interest cost 2,977 2,131
Amortization of transition obligation 1,710 1,710
Net postretirement benefit expense $ 5,560 $ 4,414
</TABLE>
The weighted average annual assumed rate of increase in the per capita
cost of covered benefits for health insurance is 12% for 1995 and is
assumed to decrease gradually to 7% in 1999 and remain at that level
thereafter. Increasing the assumed health care trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation for the medical plan by approximately
$3.8 million, and would increase the aggregate of the service and
interest components of net postretirement benefit expense by
approximately $350 thousand for 1994. The weighted average discount rate
used in projecting the accumulated plan benefit obligation was 8.5% for
1994, and the average rate of annual compensation increase was 5%.
The Corporation maintains a grantor trust to pay certain employee
benefits as they become due. Assets of the trust are restricted to use
for applicable employee benefit plans, including deferred compensation
and medical benefit plans. Such trust assets of approximately $62
million and $63 million at December 31, 1994 and 1993, respectively, are
included in the Corporation's total assets.
The Corporation has thrift and profit-sharing plans covering
substantially all full-time employees beginning January 1 after date of
hire. The Corporation makes matching contributions of 50 cents for every
$1 of employee contributions to the thrift plan, up to 6 percent of base
pay. Employer profit-sharing contributions are determined by applying a
formula based on return on equity to covered compensation. Thrift and
profit-sharing plan expenses totaled $16.5 million, $11.0 million and
$8.3 million in 1994, 1993 and 1992, respectively.
(19) OTHER EXPENSE
Other expense in the consolidated statements of income includes:
IN THOUSANDS 1994 1993 1992
Communications $ 25,484 $ 21,136 $ 19,334
Stationery, printing and supplies 8,239 7,133 6,451
Professional fees and services 12,819 13,487 15,898
Loan expense 9,786 9,034 8,409
FDIC premiums 25,207 22,847 21,003
Advertising and marketing 19,906 13,709 8,137
Transportation 5,861 5,388 5,357
Outside data services 18,805 14,879 11,769
Amortization of purchased intangibles 12,279 21,926 13,630
Foreclosed properties 652 33,055 60,188
Miscellaneous 41,520 35,321 38,124
Total other expense $180,558 $197,915 $208,300
52
<PAGE>
(20) CONDENSED BANK INFORMATION
Condensed Consolidated Balance Sheets for Crestar Bank, Crestar Bank
N.A. and Crestar Bank MD at December 31, 1994 follow:
<TABLE>
<CAPTION>
IN THOUSANDS CRESTAR BANK CRESTAR BANK N.A. CRESTAR BANK MD
<S> <C> <C> <C>
Cash and due from banks $ 804,122 $ 149,381 $ 49,527
Securities held to maturity 629,832 88,903 176,091
Securities available for sale 1,010,578 421,661 91,280
Money market investments 291,153 366,040 89,000
Mortgage loans held for sale 209,525 - -
Loans - net of unearned income 8,224,408 425,475 635,754
Less: Allowance for loan losses (192,501) (15,187) (11,501)
Loans - net 8,031,907 410,288 624,253
Premises and equipment - net 252,894 46,272 16,044
Customers' liability on acceptances 6,464 - -
Intangible assets 88,817 10,078 24,058
Other assets 345,204 38,367 22,113
Total Assets $11,670,496 $1,530,990 $1,092,366
Deposits $ 8,819,064 $1,285,145 $ 959,034
Short-term borrowings 1,576,861 84,038 18,656
Notes payable to Parent 213,000 10,000 -
Liability on acceptances 6,464 - -
Other liabilities 147,362 5,800 8,711
Long-term debt 32,261 3,099 7,021
Total liabilities 10,795,012 1,388,082 993,422
Common stock 210,000 5,258 12,210
Capital surplus 135,713 87,801 69,061
Retained earnings 558,530 55,564 19,754
Net unrealized loss on securities
available for sale (28,759) (5,715) (2,081)
Total Shareholder's Equity 875,484 142,908 98,944
Total Liabilities and
Shareholder's Equity $11,670,496 $1,530,990 $1,092,366
</TABLE>
Condensed Consolidated Statements of Income for Crestar Bank, Crestar
Bank N.A. and Crestar Bank MD for the year ended December 31, 1994
follow:
<TABLE>
<CAPTION>
IN THOUSANDS CRESTAR BANK CRESTAR BANK N.A. CRESTAR BANK MD
<S> <C> <C> <C>
Income from earning assets $ 794,246 $ 76,931 $ 61,287
Interest expense 301,156 28,722 23,082
Net interest income 493,090 48,209 38,205
Provision for loan losses 27,565 (4,000) 1,850
Net credit income 465,525 52,209 36,355
Noninterest income 214,972 24,691 21,268
Securities gains (losses) (10,649) 49 (4)
Net credit and noninterest income 669,848 76,949 57,619
Noninterest expense 442,685 57,229 44,622
Income before income taxes 227,163 19,720 12,997
Applicable income tax expense 76,483 6,414 5,539
Net income $ 150,680 $ 13,306 $ 7,458
</TABLE>
53
<PAGE>
(21) CONDENSED PARENT INFORMATION
The Parent's Condensed Balance Sheets at December 31 were:
<TABLE>
<CAPTION>
IN THOUSANDS DECEMBER 31,
1994 1993
<S> <C> <C>
Cash in banks $ 33,143 $ 31,276
Securities held to maturity 11,544 12,967
Securities available for sale 81,200 -
Money market investments 4,898 31,940
Securities purchased under agreements to resell 173,630 109,000
Notes receivable from subsidiaries 223,000 173,000
Investments in subsidiaries:
Bank subsidiaries 1,117,336 1,020,943
Non-bank subsidiaries 7,843 8,038
Other assets 13,565 11,735
Total Assets $1,666,159 $1,398,899
Commercial paper $ 230 $ 320
Master notes 153,976 110,792
Securities sold to subsidiary under repurchase agreements 4,565 2,706
Other liabilities 56,742 47,515
Long-term debt 324,581 175,089
Total shareholders' equity 1,126,065 1,062,477
Total Liabilities and Shareholders' Equity $1,666,159 $1,398,899
</TABLE>
The Parent's retained earnings were $694,757,000 and $626,003,000 as of
December 31, 1994 and 1993, respectively, and were comprised primarily
of the undistributed earnings of its subsidiaries. The Parent's
Condensed Statements of Income for each of the last three fiscal years
ended December 31 were:
<TABLE>
IN THOUSANDS 1994 1993 1992
<S> <C> <C> <C>
Cash dividends from bank subsidiaries $ 95,229 $ 93,834 $30,100
Interest from subsidiaries 14,777 14,844 11,418
Interest on securities held to maturity and available for
sale 1,742 1,634 2,536
Income on money market investments 398 1,762 -
Income on securities purchased under agreements to resell 5,208 3,014 6,184
Other income 35 36 28
Securities losses (145) (1,859) (979)
Total income 117,244 113,265 49,287
Interest on short-term borrowings 4,782 3,021 4,046
Interest on long-term debt 16,318 15,754 15,628
Other expense 2,146 1,099 1,269
Interest on note payable to subsidiary - - 99
Total expense 23,246 19,874 21,042
Income before income taxes and equity in undistributed
net income of subsidiaries 93,998 93,391 28,245
Income tax benefit (1,050) (1,451) (1,529)
Income before equity in undistributed net income of
subsidiaries 95,048 94,842 29,774
Equity in undistributed net income of subsidiaries 74,031 45,649 50,027
Net Income $169,079 $140,491 $79,801
</TABLE>
54
<PAGE>
The Parent's Condensed Statements of Cash Flows for each of the last
three fiscal years ended December 31 were:
<TABLE>
IN THOUSANDS YEARS ENDED DECEMBER 31,
OPERATING ACTIVITIES 1994 1993 1992
<S> <C> <C> <C>
Net Income $ 169,079 $ 140,491 $ 79,801
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed net income of subsidiaries (74,031) (45,649) (50,027)
Depreciation and amortization of premises and
equipment 51 52 51
Securities losses 145 1,859 979
Amortization and accretion, net 259 248 314
Net decrease (increase) in accrued interest
receivable, prepaid expenses and other assets (1,222) (3,780) 1,104
Net increase (decrease) in accrued interest
payable, accrued expenses and other liabilities 7,364 (3,899) 12,266
Net cash provided by operating activities 101,645 89,322 44,488
INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity - - 1,015
Proceeds from maturities of securities available for sale 108,500 - -
Proceeds from sales of securities held to maturity - - 6,175
Proceeds from sales of securities available for sale 606 22,191 -
Purchases of securities held to maturity - (749) -
Purchases of securities available for sale (189,700) - -
Net decrease (increase) in securities purchased under
agreements to resell (64,630) 105,441 (69,441)
Net decrease (increase) in other money market investments 27,042 (31,940) -
Net increase in notes receivable from subsidiaries (50,000) - (65,000)
Decrease in payable to subsidiary - (45,000) -
Increase in investments in subsidiaries (8,000) (2,500) (15,750)
Net cash paid for acquisitions (28,877) (5,524) -
Net cash provided (used) by investing activities (205,059) 41,919 (143,001)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 37,381 (12,636) (31,058)
Principal payments on long-term debt - (19,349) (70,000)
Proceeds from issuance of long-term debt 149,615 - 124,529
Redemption of preferred stock - (46,350) -
Cash dividends paid (57,477) (45,091) (29,121)
Common stock purchased and retired (48,450) (21,054) -
Proceeds from the issuance of common stock 24,212 14,979 108,918
Net cash provided (used) by financing activities 105,281 (129,501) 103,268
Increase in cash and cash equivalents 1,867 1,740 4,755
Cash and cash equivalents at beginning of year 31,276 29,536 24,781
Cash and cash equivalents at end of year $ 33,143 $ 31,276 $ 29,536
</TABLE>
(22) COMMITMENTS, CONTINGENCIES AND OTHER FINANCIAL INSTRUMENTS
In the normal course of business, Crestar is a party to commitments,
contingent liabilities and other financial instruments that are not
reflected in the accompanying consolidated financial statements.
Commitments to extend credit, standby letters of credit, interest rate
caps, floors and collars, swaps, and forward contracts are some of the
vehicles used by Crestar in meeting the financing needs of its customers
and managing its own exposure to fluctuations in interest rates. These
items involve, to varying degrees, elements of credit and interest rate
risk in excess of the amounts recognized in the consolidated balance
sheets. Any losses which may result from these transactions are not
expected to have a material effect on the accompanying consolidated
financial statements. Notional principal amounts often are used to
express the volume of the transaction, but the amounts potentially
subject to credit risk are much
55
<PAGE>
smaller. The contract or notional
amount, the estimated fair value and the credit risk amount of each
class of such instruments at December 31 was:
<TABLE>
IN THOUSANDS 1994 1993
ESTIMATED ESTIMATED
FAIR VALUE CONTRACT/ FAIR VALUE CONTRACT/
ASSET NOTIONAL CREDIT RISK ASSET NOTIONAL CREDIT RISK
(LIABILITY) AMOUNT AMOUNT (LIABILITY) AMOUNT AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Financial instruments whose
notional or contract
amounts equaled
maximum credit risk:
Legally binding unfunded
commitments to extend
credit $ (4,660) $5,532,943 $5,532,943 $ (12,900) $4,521,484 $4,521,484
Standby letters of credit - 372,113 372,113 - 394,156 394,156
Commercial and similar
letters of credit - 92,439 92,439 - 75,913 75,913
Recourse obligations - 890,005 890,005 - 710,415 710,415
Other - - - - 12,890 12,890
Total $ (4,660) $6,887,500 $6,887,500 $ (12,900) $5,714,858 $5,714,858
Financial instruments whose
notional or contract
amounts exceeded the
amount of credit risk:
Interest rate risk management
Interest rate swaps
Asset rate
conversions:
Receive fixed $(95,147) $1,460,166 $ 30,869 $ 18,234 $1,462,089 $ 52,488
Liability rate
conversions:
Pay variable - - - 1,355 55,000 1,805
Pay fixed - - - (394) 4,000 80
Interest rate floors (83) 200,000 1,000 2,208 200,000 6,208
Interest rate caps - - - (232) 400,000 2,000
Forward contracts 24 266,439 265 3,400 943,330 4,115
As a financial intermediary
Interest rate swaps - 133,682 3,532 695 193,616 7,189
Interest rate floors - 7,000 18 10 50,000 260
Interest rate collars 31 37,688 1,408 41 82,051 1,678
Interest rate caps 18 113,104 1,113 18 59,600 667
Total $(95,157) $2,218,079 $ 38,205 $ 25,335 $3,449,686 $ 76,490
</TABLE>
Commitments to extend credit are legally binding agreements to lend
to a customer which typically contain clauses that permit cancellation
of the commitment in the event of credit deterioration of the borrower.
Standby letters of credit are conditional commitments issued by Crestar
to guarantee the performance of customers to a third party. Crestar
receives a commitment fee for entering into such agreements.
The credit risk associated with commitments to extend credit and
standby letters of credit is similar to direct lending; therefore, all
of these items are subject to the Corporation's loan approval and review
procedures and policies. Based upon management's credit evaluation of
the customer, Crestar may require the customer to provide various types
of collateral as security for the agreement, including balances on
deposit, investment securities, real estate and inventory. The maximum
credit risk associated with commitments to extend credit and standby
letters of credit assumes that the counterparty defaults and the
collateral proves to be worthless.
The total contract amounts do not necessarily represent future cash
requirements, since many of
56
<PAGE>
these items are expected to expire without
being drawn upon. At December 31, 1994, approximately $15.0 million of
the standby letters of credit and $20.1 million of the commercial and
similar letters of credit were participated to other financial
institutions.
A geographic concentration exists within Crestar's loan portfolio
since most of Crestar's business activity is with customers located in
Virginia, Maryland or Washington, DC. Based upon Standard Industrial
Classification codes used for regulatory purposes, the Corporation had
no aggregate loan concentration of 10% or more of total loans in any
particular industry at December 31, 1994. However, under a broader view
of the portfolio, Crestar had $1.1 billion in loans outstanding to real
estate developers and investors at year-end 1994. These loans are
diversified by geographic region within Crestar's market and by project
type and are made in accordance with the Corporation's normal credit and
underwriting guidelines and risk management policies.
The Corporation services mortgage loans other than those included in
the accompanying consolidated financial statements and, in some cases,
accepts a recourse liability on the serviced loans. At December 31,
1994, approximately $531.2 million of the balance of these loans
serviced with recourse was insured by agencies of the Federal government
or private insurance companies.
As a financial institution, Crestar entails a degree of interest
rate risk as a provider of banking services to its customers. This risk
can be managed through derivative interest rate contracts, such as
interest rate swaps, caps and floors. Changes in the fair value of such
derivatives are generally offset by changes in the implied fair value of
the underlying hedged asset or liability. As hedges against interest
rate risk at December 31, 1994, Crestar was participating in interest
rate (fixed receive) swaps, $1.31 billion of which were used to convert
certain variable rate commercial and real estate loans to fixed rates,
and $150 million were used to convert variable rate securities to fixed
rates. Crestar also had interest rate floor agreements outstanding on
December 31, 1994, which the Corporation uses to minimize interest rate
risk associated with variable rate assets. In addition, Crestar serves
as a financial intermediary in interest rate swap, cap, collar and floor
agreements, providing risk management services to customers. As an
intermediary, Crestar typically becomes a principal in the exchange of
interest payments between parties and, therefore, is exposed to loss
should one of the parties default. The Corporation performs normal
credit review on each counterparty and minimizes its exposure to the
interest rate risk inherent in these items by entering into offsetting
positions or by using hedging techniques to minimize risk.
The notional amount of these over-the-counter traded interest rate
swaps, caps, collars and floors does not represent Crestar's credit
exposure, which the Corporation believes is a combination of current
replacement cost (approximately $2.2 million at December 31, 1994) plus
an amount for additional market movement (approximately $35.7 million at
December 31, 1994). Three counterparties constituted 35%, 16% and 12% of
the estimated credit exposure at December 31, 1994.
Crestar has also entered into $266.4 million (contract amount) of
forward agreements to reduce the interest rate risk arising from changes
in market rates from the time residential mortgage lending commitments
are made until those commitments are funded.
Crestar may, from time to time, enter into certain derivative
contracts, such as purchased futures or options contracts, for trading
purposes as discussed in note 1(c). Such contract amounts were not
material in 1994.
The fair values of commitments to extend credit, standby letters of
credit and commercial and similar letters of credit were estimated based
on the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and creditworthiness
of counterparties. Unfunded loan commitments are generally priced at
market at the time of funding and are subject to certain credit
standards. The fair values of forward agreements are estimated based on
current settlement values. The fair values of interest rate swaps, caps
and floors are estimated based on the amount the Corporation would
receive or pay to terminate the contracts or agreements. Such amounts
are determined using a valuation model which considers current market
yields, counterparty credit risk and other relevant variables. The
carrying value of interest rate swaps, caps and floors, and other
off-balance sheet financial instruments was not material at December 31,
1994 and 1993.
Certain litigation is pending against Crestar. Management, after
reviewing this litigation with legal counsel, is of the opinion that
these matters, when resolved, will not have a material effect on the
accompanying consolidated financial statements.
57
<PAGE>
(23) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Value of Financial Instruments," defines the
fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. As the majority of
Crestar's financial instruments lack an available trading market,
significant estimates, assumptions and present value calculations are
required to determine estimated fair value. Comparability among
financial institutions is difficult due to the wide range of acceptable
valuation techniques and the subjectivity of required assumptions.
Crestar's remaining assets and liabilities, not considered financial
instruments, have not been valued differently than customary, historical
cost accounting, nor have lines of business been separately valued.
Information regarding the estimated fair values of Crestar's financial
instruments at December 31 follows:
<TABLE>
IN THOUSANDS ESTIMATED FAIR VALUE CARRYING VALUE
ASSETS (LIABILITIES) ASSETS (LIABILITIES)
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Cash and due from banks $ 907,627 $ 716,652 $ 907,627 $ 716,652
Securities held to maturity 860,771 1,845,714 907,368 1,824,617
Securities available for sale 1,621,973 1,729,796 1,621,973 1,697,000
Money market investments 452,556 650,633 452,556 650,633
Net loans, including loans held for sale 9,247,000 7,878,000 9,275,973 7,667,397
Other financial instrument assets 174,118 180,111 174,159 179,086
Deposits with no stated maturities (7,891,178) (7,481,765) (7,891,178) (7,481,765)
Deposits with stated maturities (2,961,000) (2,707,000) (3,021,974) (2,684,013)
Short-term borrowings (1,380,806) (1,616,743) (1,380,806) (1,616,743)
Long-term debt (363,730) (211,401) (366,962) (191,156)
Other financial instrument liabilities (177,184) (200,230) (177,168) (200,276)
Off-balance sheet financial instruments - net (99,817) 12,435 - -
</TABLE>
The carrying amounts in the table are included in the consolidated
balance sheets under the indicated captions, except for off balance
sheet financial instruments which are discussed in note 22.
The carrying value of cash and due from bank balances and money
market investments approximates fair value. Financial instruments
actively traded in a secondary market, such as securities, were valued
using available quoted market prices.
The Corporation's loan portfolio was valued based on estimated
future cash flows, discounted at various rates. The discount rates used
were commensurate with rates paid on U.S. Treasury securities with
various maturity dates, adjusted for noninterest operating costs,
anticipated credit losses and prepayment risk. The estimated fair
value of the loan portfolio excludes the intangible value attributable
to account relationships, including bank card, home equity line or
similar revolving line of credit arrangements.
Other financial instrument assets consist largely of customers'
liability on acceptances and accrued interest receivable, for which
carrying amount approximates fair value. The fair value of other
financial instruments included in other assets was based on estimates of
the present value of future net cash flows.
The carrying value of demand deposits, interest checking deposits,
money market deposit accounts and regular savings deposits is defined by
SFAS 107 to approximate fair value. Deposits with stated maturities were
valued based on estimated future cash flows, discounted at various
rates. The discount rates used were commensurate with rates paid on U.S.
Treasury securities, adjusted for factors such as operating expenses and
prepayment risk. The estimated fair value of deposits excludes the
intangible value attributable to long-term relationships with
depositors.
The carrying value of short-term borrowings approximates fair value.
Long-term debt was valued based on interest rates currently available to
Crestar for debt with similar terms and remaining maturities.
Other financial instrument liabilities consist largely of liability
on acceptances, interest payable on deposits and balances due upon
settlement of securities purchases, for which carrying value
approximates fair value. The fair value of other financial instrument
liabilities was estimated based on estimates of the present value of
future net cash payments.
58
<PAGE>
(24) QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Consolidated quarterly results of operations for the years ended
December 31 were:
<TABLE>
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA FIRST SECOND THIRD FOURTH
1994 QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Income from earning assets $217,030 $228,372 $239,480 $241,152
Net interest income 140,666 144,929 149,278 146,943
Provision for loan losses 10,032 8,850 8,100 2,700
Securities gains (losses) (1,718) (49) 12 (9,021)
Other noninterest income 65,173 68,192 65,377 66,304
Net credit and noninterest income 194,089 204,222 206,567 201,526
Noninterest expense 134,010 140,733 140,104 136,861
Income before income taxes 60,079 63,489 66,463 64,665
Net Income 40,482 42,608 43,604 42,385
Earnings Per Share
Primary:
Net Income $ 1.07 $ 1.12 $ 1.15 $ 1.13
Average shares outstanding (000s) 37,835 37,930 38,063 37,637
Fully diluted:
Net Income $ 1.07 $ 1.12 $ 1.15 $ 1.13
Average shares outstanding (000s) 37,850 37,931 38,063 37,637
Dividends declared on common stock .33 .40 .40 .40
1993
Income from earning assets $202,125 $204,928 $213,119 $212,457
Net interest income 124,602 128,805 135,646 137,959
Provision for loan losses 18,500 3,006 13,769 13,500
Securities gains (losses) 1,111 1,511 (385) -
Other noninterest income 59,259 61,364 61,739 63,666
Net credit and noninterest income 166,472 188,674 183,231 188,125
Noninterest expense 123,084 140,547 129,148 130,243
Income before income taxes 43,388 48,127 54,083 57,882
Net Income 30,894 33,710 37,153 38,734
Earnings Per Share
Primary:
Net Income $ .83 $ .88 $ .96 $ 1.01
Average shares outstanding (000s) 36,678 37,440 38,154 38,063
Fully diluted:
Net Income $ .83 $ .88 $ .96 $ 1.00
Average shares outstanding (000s) 36,710 37,479 38,174 38,088
Dividends declared on common stock .25 .28 .28 .33
</TABLE>
59
<PAGE>
CRESTAR FINANCIAL CORPORATION
THE BOARD OF DIRECTORS AND SHAREHOLDERS
We have audited the accompanying consolidated balance sheets of Crestar
Financial Corporation and subsidiaries as of December 31, 1994 and 1993
and the related consolidated statements of income, cash flows and
changes in shareholders' equity for each of the years in the three-year
period ended December 31, 1994. These consolidated financial statements
are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Crestar Financial Corporation and subsidiaries as of December 31,
1994 and 1993, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 1994,
in conformity with generally accepted accounting principles.
Effective January 1, 1994, the Corporation changed its method of
accounting to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
January 12, 1995
STATEMENT ON CORPORATE RESPONSIBILITY
The financial statements on pages 34 to 59 have been prepared by
management in accordance with generally accepted accounting principles
and include some amounts that are necessarily based on our best
estimates and judgments. We are responsible for the accuracy, integrity,
objectivity, consistency and fair presentation of the financial
statements and all other financial information contained in this Annual
Report. One way we fulfill these responsibilities is by relying on a
system of internal controls, which has been designed to ensure that
transactions are properly authorized and recorded in our financial
records. Included in the system is an internal auditing function that
independently assesses the effectiveness of internal controls and
recommends possible improvements thereto. Because of inherent
limitations in any system of controls, there can be no absolute
assurance that errors or irregularities will not occur. Nevertheless,
we believe that our system of internal controls provides reasonable
assurance as to the integrity and reliability of our financial records.
Some of the financial information in this Annual Report is presented
on a tax-equivalent basis to improve comparative analysis. In addition,
some of the business segment information incorporates allocation methods
for which there is no generally accepted accounting principles. However,
in all other respects, it is consistent with the audited financial
statements.
Through its Audit committee, which is composed of directors who are
not officers or employees of the Corporation, the Board of Directors
fulfills its oversight responsibility for determining that the
accounting policies employed by management in preparing the
Corporation's financial statements are appropriate and that our system
of internal controls is adequately reviewed and maintained. The
Committee periodically reviews, with management and the internal
auditors, accounting policies, control procedures, and audit and
regulatory examination reports of the Corporation and its subsidiaries.
In addition, our independent auditors meet regularly with and have full
and free access to the Committee, privately and with management present,
to discuss the results of their audits and other auditing, accounting
and financial reporting matters. The Committee reports to the full Board
after each of its meetings.
KPMG Peat Marwick LLP have audited the accompanying consolidated
financial statements. Their report, located above, represents their
judgment as to whether our consolidated financial statements present
fairly our financial position and results of operations and cash flows
in conformity with generally accepted accounting principles.
We are committed to ensure that corporate affairs are conducted in
accordance with consistently applied standards of conduct applicable to
all officers and associates. In essence, everyone is expected to manage
their responsibilities with integrity. Our standards provide guidance on
general business conduct, political activities, community involvement,
outside employment and business activities, conflict of interests,
personal finances, and the use and safeguard of confidential
information.
Crestar Financial Corporation
60
<PAGE>
BOARD OF DIRECTORS OF CRESTAR FINANCIAL CORPORATION
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
RICHARD M. BAGLEY
President
Bagley Investment
Company
Hampton, Virginia
Real Estate Investments
AUDIT COMMITTEE
J. CARTER FOX
Chairman &
Chief Executive Officer
Chesapeake Corporation
Richmond, Virginia
Paper and Forest Products
Manufacturer
EXECUTIVE COMMITTEE
PATRICK D. GIBLIN
Vice Chairman &
Chief Financial Officer
Crestar Financial
Corporation and
Crestar Bank
BONNIE GUITON HILL
Dean of the
McIntire School
Of Commerce
University Of Virginia
Charlottesville, Virginia
AUDIT COMMITTEE
GENE A. JAMES
President &
Chief Executive Officer
Southern States
Cooperative, Inc.
Richmond, Virginia
Farm Supply Cooperative
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
H. GORDON LEGGETT, JR.
Executive Vice President
Leggett Stores
Lynchburg, Virginia
Retail Department Store
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
CHARLES R. LONGSWORTH
Chairman Emeritus
The Colonial Williamsburg
Foundation
Williamsburg, Virginia
Educational Museum,
Hotels and Restaurants
EXECUTIVE COMMITTEE AND
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
(CHAIRMAN)
PATRICK J. MAHER
Chairman &
Chief Executive Officer
Washington Gas
Washington, DC
Natural Gas Utility
AUDIT COMMITTEE
FRANK E. MCCARTHY
Executive Vice President
National Automobile
Dealers Association
McLean, Virginia
EXECUTIVE COMMITTEE
G. GILMER MINOR III
Chairman, President &
Chief Executive Officer
Owens & Minor, Inc.
Richmond, Virginia
Medical/Surgical
Supply Distributor
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
GORDON F. RAINEY, JR.
Partner, Chairman of the
Executive Committee
Hunton & Williams
Richmond, Virginia
Attorneys
AUDIT COMMITTEE
FRANK S. ROYAL
Member & President
Frank S. Royal, M.D., P.C.
Richmond, Virginia
Family Medicine
EXECUTIVE COMMITTEE
RICHARD G. TILGHMAN
Chairman &
Chief Executive Officer
Crestar Financial
Corporation and
Crestar Bank
EXECUTIVE COMMITTEE
(CHAIRMAN)
EUGENE P. TRANI
President
Virginia Commonwealth
University
Richmond, Virginia
AUDIT COMMITTEE
WILLIAM F. VOSBECK
President
Vosbeck Associates, Inc.
Alexandria, Virginia
Architectural Planning and
Development
EXECUTIVE COMMITTEE AND
AUDIT COMMITTEE
(CHAIRMAN)
L. DUDLEY WALKER
Chairman
Bassett-Walker, Inc.
Martinsville, Virginia
Textile and Apparel
Manufacturer
AUDIT COMMITTEE
JAMES M. WELLS III
President
Crestar Financial
Corporation and
Crestar Bank
EXECUTIVE COMMITTEE
KAREN HASTIE WILLIAMS
Partner
Crowell & Moring
Washington, DC
Attorneys
HUMAN RESOURCES AND
COMPENSATION COMMITTEE
61
<PAGE>
PRINCIPAL OFFICERS OF CRESTAR FINANCIAL CORPORATION
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
RICHARD G. TILGHMAN, 54
Chairman &
Chief Executive Officer
28 years of service, Elected
President and Chief
Executive Officer in 1985
and Chairman in 1986.
JAMES M. WELLS III, 48
President
26 Years of service. Elected
Executive Vice President of
Corporate Banking in 1985
and of the Banking Group
in 1986 and to current
position in 1988.
PATRICK D. GIBLIN, 62
Vice Chairman &
Chief Financial Officer
21 years of service. Elected
Executive Vice President-
Finance in 1976 and to
current position in 1985
C. GARLAND HAGEN, 49
Corporate Executive
Vice President-
Investment Bank
22 years of service. Elected
Executive Vice President in
1985 and to current
position in 1987.
WILLIAM C. HARRIS, 57
Corporate Executive
Vice President &
President-Greater
Washington Banking
31 years of service. Elected
President-Northern Region
in 1983 and to current
position in 1986.
ROBERT F. NORFLEET, JR., 55
Corporate Executive
Vice President &
Senior Credit Officer
28 years of service. Elected
President-Capital Region
& Executive Vice
President-Corporate
Banking in 1987 and to
current position in 1994.
O.H. PARRISH, JR., 52
Corporate Executive
Vice President &
President-Virginia Banking
29 years of service. Elected
Executive Vice President &
Senior Credit Officer in
1985 and to current
position in 1994.
WILLIAM K. BUTLER II, 48
President-Eastern Region
22 years of service. Elected
President-Norfolk in 1984
and to current position in
1985.
F. EDWARD HARRIS, 53
President-Western Region
30 years of service. Elected
Executive Vice President-
Western Region in 1982
and to current position in
1985.
C.T. HILL, 44
President-Capital Region
24 years of service. Elected
Senior Vice President-
Commercial Banking in
1983, Executive Vice
President-Capital Region
Commercial Division in
1990 and to current
position in 1994.
WILLIAM M. GINTHER, 48
Group Executive Vice
President-Technology &
Operations
24 years of service. Elected
Executive Vice President in
1987 and to current
position in 1994.
JAMES J. KELLEY, 50
Group Executive Vice
President-Management
Resources Group
21 years of service. Elected
Senior Vice President in
1986 and to current
position in 1995.
62
<PAGE>
STATEMENT OF BUSINESS
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
Crestar Financial Corporation (Crestar) is the holding company for
Crestar Bank (Virginia), Crestar Bank N.A. (Washington, DC), and Crestar
Bank MD (Maryland). At December 31, 1994, Crestar Financial Corporation
had $10.9 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 Virginia stock corporation and
registered bank holding company. During the 1960s and 1970s, UVB
acquired 18 other Virginia banks and formed one de novo bank. On
December 31, 1979, all of the UVB banks were merged into United Virginia
Bank. During the 1980s, nine more banks were acquired, including NS&T
Bank, N.A. in the District of Columbia in 1985 and Bank of Bethesda in
Maryland in 1986. In September 1987, UVB changed its name to Crestar
Financial Corporation and its bank subsidiaries adopted their present
names, all using the common identifier "Crestar." Since 1990, Crestar
Financial Corporation has acquired 15 banks and thrifts in Virginia,
Maryland and Washington, DC.
Crestar Financial Corporation is supervised and examined by
the Board of Governors of the Federal Reserve System under the Bank
Holding Company Act of 1956 (BHCA). The BHCA Act requires Federal
Reserve approval for bank acquisitions and regulates nonbanking
activities of bank holding companies. Deposits of Crestar's three
subsidiary banks are insured by the Federal Deposit Insurance
Corporation (FDIC). At December 31, 1994, approximately 65% of Crestar's
deposits were insured by the Bank Insurance Fund (BIF) of the FDIC, with
the remainder insured by the Savings Association Insurance Fund (SAIF)
of the FDIC. Each subsidiary has a different group of regulators:
Crestar Bank, the lead bank located in Virginia, is regulated by the
State Corporation Commission of Virginia and the Federal Reserve Bank of
Richmond; Crestar Bank N.A. of Washington, DC is regulated by the
Comptroller of the Currency; and Crestar Bank MD of Maryland is
regulated by the Maryland Bank Commissioner and the Federal Reserve Bank
of Richmond.
The BHCA currently prohibits acquisition of a bank located
outside the state in which the operations of a holding company's banking
subsidiaries are principally conducted unless the acquisition is
specifically authorized by a statute of the state in which the target
bank is located. Under recently enacted federal legislation, the
restriction on interstate acquisitions will be abolished effective
September 1995, and thereafter bank holding companies from any state
will be able to acquire banks and bank holding companies located in any
other state, subject to certain conditions, including nationwide and
state imposed concentration limits. Banks also will be able to branch
across state lines by acquisition, merger or de novo, effective June 1,
1997 (unless state law permits interstate branching at an earlier date),
if state law expressly permits interstate branching.
A fundamental principle underlying the Federal Reserve's
supervision and regulation of bank holding companies is that bank
holding companies should be a source of managerial and financial
strength to their subsidiary banks. Subsidiary banks in turn are to be
operated in a manner that protects the overall soundness of the
institution and the safety of deposits. Bank regulators can take various
remedial measures to deal with banks and bank holding companies that
fail to meet legal and regulatory standards.
The 1989 Financial Reform, Recovery, and Enforcement Act
(FIRREA) expanded federal regulatory enforcement powers. The Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) created
five capital-based supervisory levels for banks and requires bank
holding companies to guarantee compliance with capital restoration plans
of under-capitalized insured depository affiliates. All three Crestar
banks were considered "well-capitalized" under regulatory definitions in
effect at December 31, 1994, the highest rating presently available.
Crestar serves customers through a network of 336 banking
offices and 278 automated teller machines as of December 31, 1994. The
Crestar banks 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. Services also are provided through
non-bank subsidiaries. Crestar Insurance Agency, Inc. offers a variety
of personal and business insurance products. Securities brokerage and
investment banking services are offered by Crestar Securities
Corporation. Mortgage loan origination, servicing, and wholesale lending
are offered by Crestar Mortgage Corporation, and Capitoline Investment
Services Incorporated provides investment advisory services. Both
Crestar Mortgage and Capitoline are subsidiaries of Crestar Bank.
The mission of Crestar Financial Corporation is to provide a
broad array of financial products and services at a price that
represents the best value for our customers' money, and, by doing so, to
provide a superior return for our shareholders.
Crestar's executive offices are located at Crestar Center, 919
East Main Street, Richmond, Virginia. Regional headquarters are located
in Norfolk and Roanoke, Virginia and in Washington, DC. Crestar's
Operations Center is located in Richmond.
63
<PAGE>
FORM 10-K CROSS-REFERENCE INDEX
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
PART I Item I Business 63
Guide 3 Disclosures 16-17, 19-21, 27-33, 38-40, 42, 44, 46, 65, 68-70
Item 2 Properties 45, 63
Item 3 Legal Proceedings None
Item 4 Submission of Matters
to a Vote of Security Holders None
PART II Item 5 Market for the Registrant's
Common Equity and Related Shareholder
Matters 50, 70, Back Cover
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and
Analysis of Financial Condition and
Results of Operations 11-33
Item 8 Financial Statements and
Supplementary Data
Consolidated Financial Statements:
Crestar Financial Corporation and Subsidiaries
Consolidated Balance Sheets 34
Consolidated Statements of Income 35
Consolidated Statements of Cash Flows 36
Consolidated Statements of Changes in
Shareholders' Equity 37
Notes to Consolidated Financial Statements 38-59
Independent Auditors' Report 60
Condensed Financial Information of
Registrant 46, 47, 50, 54-55
Selected Quarterly Financial Data 59
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure None
PART III
Item 10 Directors(1) and Executive Officers of the Registrant 61, 62
Item 11 Executive Compensation(1)
Item 12 Security Ownership of Certain Beneficial Owners
and Management(1)
Item 13 Certain Relationships and Related Transactions(1)
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K:
See Item 8 for a listing of all Financial Statements and
Supplementary Data
Reports on Form 8-K:
There was one report on Form 8-K filed during the three
month period ended December 31, 1994. Information relating
to Crestar Financial Corporation's consolidated financial
condition and results of operations as of and for the
three month period ended September 30, 1994 was included
in a Form 8-K filed on November 9, 1994. The Form 8-K
was filed solely to permit incorporation by reference of
the financial information into a registration statement on
Form S-3, filed November 10, 1994, relating to the
issuance by Crestar Financial Corporation of $150 million
in 8 3/4% subordinated debentures, due November 15, 2004.
Exhibits(2)
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf on February
24, 1995 by the undersigned, thereunto duly authorized.
CRESTAR FINANCIAL CORPORATION, /s/ John C. Clark III
JOHN C. CLARK III,
Registrant Corporate Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed on February 24,
1995 by the following persons in the capacities indicated.
/s/ Richard G. Tilghman /s/ James D. Barr
RICHARD G. TILGHMAN, JAMES D. BARR, Group Executive
Chairman and Chief Executive Vice President, Controller and
officer Treasurer
/s/ James M. Wells III
JAMES M. WELLS III, President A MAJORITY OF THE DIRECTORS OF THE
REGISTRANT whose names appear on
page 61.
/s/ Patrick D. Giblin
PATRICK D. GIBLIN,
Vice Chairman and Chief
Financial Officer
</TABLE>
(1) This information is omitted pursuant to Instruction G of Form 10-K
since the Registrant intends to file with the Commission a
definitive Proxy Statement, pursuant to Regulation 14A, not later
than 120 days after December 31, 1994.
(2) A list of Exhibits was filed separately. Copies of any Exhibits not
contained herein may be obtained by writing to John C. Clark III,
Secretary, Crestar Financial Corporation, 919 East Main Street,
Richmond, VA 23261-6665.
NOTE: Any information not included herein has been omitted because it is
not applicable.
64
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
MATURITY AND RATE SENSITIVITY OF SELECTED LOANS
<TABLE>
DECEMBER 31, 1994
IN MILLIONS MATURITY
WITHIN 1 YEAR 1-5 YEARS OVER 5 YEARS TOTAL
<S> <C> <C> <C> <C>
Commercial $1,829.4 $777.0 $285.8 $2,892.2
Tax-exempt 23.5 32.9 144.5 200.9
Construction 132.1 47.7 4.8 184.6
1,985.0 857.6 435.1 3,277.7
Less: Loans with predetermined rates 378.2 422.7 196.6 997.5
Loans with adjustable rates $1,606.8 $434.9 $238.5 $2,280.2
</TABLE>
TIME DEPOSITS $100,000 AND OVER
<TABLE>
DECEMBER 31, 1994
IN MILLIONS MATURITY
WITHIN 3 MOS. 4-6 MOS. 7-12 MOS. OVER 1 YR. TOTAL
<S> <C> <C> <C> <C> <C>
Certificates of deposit $100,000 and over $36.1 $15.2 $ 7.4 $ 7.5 $ 66.2
Other domestic time deposits 22.1 18.5 26.5 39.2 106.3
Money market certificates 13.6 11.0 6.4 - 31.0
Total $71.8 $44.7 $40.3 $46.7 $203.5
</TABLE>
<TABLE>
MAXIMUM SHORT-TERM BORROWINGS
IN THOUSANDS MAXIMUM OUTSTANDING AT ANY MONTH END
1994 1993 1992
<S> <C> <C> <C>
Federal funds purchased $1,522,138 $ 699,202 $ 495,139
Securities sold under repurchase agreements 785,452 1,144,303 1,006,219
Commercial paper 454 677 7,435
Notes payable 163,731 112,365 244,883
Term federal funds purchased - 50,000 -
U.S. Treasury demand notes 1,571 24,147 27,765
Other 2,635 14,494 15,074
</TABLE>
SHORT-TERM BORROWINGS-AVERAGE BALANCES AND RATES
<TABLE>
1994 1993 1992
DOLLARS IN THOUSANDS AMOUNT RATE AMOUNT RATE AMOUNT RATE
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased $ 595,390 4.23% $ 525,956 3.28% $ 456,383 3.76%
Securities sold under
repurchase agreements 481,899 3.75 803,558 2.90 439,980 3.02
Commercial paper 304 3.41 503 2.75 1,861 3.32
Notes payable 131,562 3.67 108,200 2.48 209,757 3.26
Term federal funds purchased - - 4,658 3.21 - . -
U.S. Treasury demand notes 713 6.81 7,781 2.76 15,934 3.72
Other 2,149 6.54 4,999 4.11 7,972 2.02
Total $1,212,017 3.97% $1,455,655 3.01% $1,131,887 3.37%
</TABLE>
65
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (SIX YEARS) AND SUPPLEMENTARY DATA
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
IN THOUSANDS, EXCEPT PER SHARE DATA
INCOME FROM EARNING ASSETS 1994 1993
<S> <C> <C>
Interest and fees on loans $692,710 $575,085
Interest and dividends on taxable securities held to
maturity 49,546 116,676
Interest on tax-exempt securities held to maturity 4,785 6,820
Interest and dividends on securities available for sale 129,666 85,331
Income on money market investments 26,243 23,526
Interest on mortgage and other loans held for sale 23,084 25,191
Total income from earning assets 926,034 832,629
INTEREST EXPENSE
Interest checking deposits 41,234 38,001
Money market deposit accounts 67,530 58,496
Regular savings deposits 37,821 31,091
Money market certificates 19,915 17,861
Other domestic time deposits 107,442 96,849
Certificates of deposit $100,000 and over 2,589 1,975
Deposits in foreign offices 11 68
Total interest on deposits 276,542 244,341
Short-term borrowings 48,169 43,787
Long-term debt 19,507 17,489
Total interest expense 344,218 305,617
NET INTEREST INCOME 581,816 527,012
Provision for loan losses 29,682 48,775
Net credit income 552,134 478,237
NONINTEREST INCOME
Trust and investment advisory income 55,609 57,440
Service charges on deposit accounts 82,851 79,419
Bank card-related income 39,529 27,500
Gain on pension settlement - -
Other income 87,057 81,669
Securities gains (losses) (10,776) 2,237
Total noninterest income 254,270 248,265
Net credit and noninterest income 806,404 726,502
NONINTEREST EXPENSE
Personnel expense 303,580 262,626
Occupancy expense - net 42,231 38,359
Equipment expense 25,339 24,122
Other expense 180,558 197,915
Total noninterest expense 551,708 523,022
INCOME BEFORE INCOME TAXES 254,696 203,480
Income tax expense 85,617 62,989
Net Income $169,079 $140,491
EARNINGS PER SHARE
Primary $ 4.47 $ 3.68
Fully diluted 4.47 3.67
SUPPLEMENTARY DATA
Average shares outstanding (000s):
Primary 37,864 37,587
Fully diluted 37,867 37,665
</TABLE>
66
<PAGE>
<TABLE>
YEARS ENDED DECEMBER 31,
1992 1991 1990 1989
<S> <C> <C> <C>
$617,686 $735,128 $ 850,467 $ 871,317
166,322 156,216 194,486 123,093
9,346 11,751 13,564 17,803
4,234 18,987 9,239 -
37,567 42,621 17,609 8,455
28,522 14,443 12,459 9,565
863,677 979,146 1,097,824 1,030,233
44,278 47,164 45,102 44,226
75,936 90,174 87,253 81,995
26,749 19,823 19,375 21,724
35,137 62,692 61,714 68,291
136,344 185,207 181,900 149,328
7,651 33,927 90,907 135,833
145 1,209 539 741
326,240 440,196 486,790 502,138
38,096 101,614 179,883 130,616
17,197 16,201 16,972 17,289
381,533 558,011 683,645 650,043
482,144 421,135 414,179 380,190
99,242 209,522 131,055 44,846
382,902 211,613 283,124 335,344
51,007 48,322 45,169 42,043
73,944 57,953 45,946 37,146
23,141 22,694 22,072 21,971
- 2,236 - 1,072
66,736 54,459 41,405 45,067
3,563 48,165 12,216 1,052
218,391 233,829 166,808 148,351
601,293 445,442 449,932 483,695
233,838 209,021 198,159 193,684
35,654 32,683 31,293 28,767
24,011 22,916 23,797 23,749
208,300 141,001 125,590 116,594
501,803 405,621 378,839 362,794
99,490 39,821 71,093 120,901
19,689 6,060 9,948 17,053
$ 79,801 $ 33,761 $ 61,145 $ 103,848
$ 2.32 $ .98 $ 1.87 $ 3.28
2.32 .98 1.87 3.25
33,286 31,921 31,218 30,739
33,369 31,946 31,238 31,110
</TABLE>
67
<PAGE>
CONSOLIDATED AVERAGE BALANCES/NET INTEREST INCOME/RATES (1)
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
1994 1993
INCOME(4)/ YIELD/ INCOME(4)/ YIELD/
DOLLARS IN THOUSANDS BALANCE EXPENSE RATE BALANCE EXPENSE RATE
$ $ % $ $ $
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Taxable securities held to maturity 768,241 49,545 6.45 1,684,418 115,118 6.83
Tax-exempt securities held to maturity 74,136 7,258 9.79 99,548 10,233 10.28
Common and preferred stocks - - - 29,247 1,803 6.17
Total securities held to maturity (2) 842,377 56,803 6.74 1,813,213 127,154 7.01
Securities available for sale (2) 2,194,513 129,666 5.91 1,591,366 85,331 5.36
Money market investments (2) 604,472 26,288 4.35 675,801 23,580 3.49
Mortgage and other loans held for sale (2) 325,047 23,084 7.10 367,564 25,191 6.85
Commercial loans 2,590,100 199,399 7.70 2,458,893 187,463 7.62
Tax-exempt loans 214,588 20,578 9.59 262,838 22,418 8.53
Instalment loans 1,710,460 144,364 8.44 1,450,394 127,332 8.78
Bank card loans 1,144,186 136,631 11.94 701,669 95,923 13.67
Real estate loans 2,424,380 181,963 7.51 1,733,753 134,666 7.77
Construction loans 221,573 18,185 8.21 228,931 16,171 7.06
Total loans-net of unearned (2,3) 8,305,287 701,120 8.44 6,836,478 583,973 8.54
Allowance for loan losses (226,461) (215,974)
Loans-net 8,078,826 6,620,504
Cash and due from banks 723,896 689,968
Premises and equipment-net 317,438 293,796
Customers' liability on acceptances 8,537 16,260
Intangible assets-net 129,109 94,860
Foreclosed properties-net 22,924 54,149
Other assets 384,876 367,933
TOTAL ASSETS 13,632,015 12,585,414
TOTAL EARNING ASSETS 12,271,696 936,961 7.63 11,284,422 845,229 7.49
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking deposits 1,862,445 41,234 2.21 1,629,692 38,001 2.33
Money market deposit accounts 2,378,068 67,530 2.84 2,280,096 58,496 2.57
Regular savings deposits 1,419,422 37,821 2.66 1,102,510 31,091 2.82
Money market certificates 627,634 19,915 3.17 571,215 17,861 3.13
Other domestic time deposits 2,465,470 107,442 4.36 2,127,471 96,849 4.55
Certificates of deposit $100,000 and over 58,313 2,589 4.44 44,302 1,975 4.46
Deposits in foreign offices 358 11 3.10 2,348 68 2.88
Total savings and time deposits (2) 8,811,710 276,542 3.14 7,757,634 244,341 3.15
Demand deposits 2,064,497 1,925,211
Total deposits 10,876,207 9,682,845
Short-term borrowings (2) 1,212,017 48,169 3.97 1,455,655 43,787 3.01
Long-term debt (2) 234,886 19,507 8.30 215,375 17,489 8.12
Liability on acceptances 8,537 16,260
Other liabilities 201,217 176,582
Total liabilities 12,532,864 11,546,717
Preferred stock - 43,890
Common shareholders' equity 1,099,151 994,807
Total shareholders' equity 1,099,151 1,038,697
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 13,632,015 12,585,414
Total interest-bearing liabilities 10,258,613 344,218 3.36 9,428,664 305,617 3.24
Other sources - net 2,013,083 1,855,758
TOTAL SOURCES OF FUNDS 12,271,696 344,218 2.80 11,284,422 305,617 2.71
NET INTEREST SPREAD 4.27 4.25
NET INTEREST INCOME/MARGIN 592,743 4.83 539,612 4.78
</TABLE>
(1) Income and yields are computed on a tax-equivalent basis using the
statutory federal income tax rate exclusive of the alternative
minimum tax and nondeductible interest expense
(2) Indicates earning asset or interest-bearing liability
68
<PAGE>
<TABLE>
1992 1991 1990 1989
INCOME(4)/ YIELD/ INCOME(4)/ YIELD INCOME(4)/ YIELD INCOME(4)/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
$ $ % $ $ % $ $ % $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,351,260 164,058 6.98 1,754,747 153,793 8.76 2,056,062 191,935 9.34 1,334,945 120,772 9.05
131,789 14,047 10.66 159,466 17,680 11.09 182,601 20,412 11.18 242,112 26,808 11.07
33,241 2,863 8.61 29,500 3,168 10.74 29,976 3,346 11.16 29,150 3,040 10.43
2,516,290 180,968 7.19 1,943,713 174,641 8.98 2,268,639 215,693 9.51 1,606,207 150,620 9.38
65,258 4,234 6.49 207,042 18,987 9.17 93,115 9,238 9.92 - - -
988,604 37,630 3.81 738,457 42,755 5.79 218,532 17,795 8.14 96,371 8,658 8.98
367,827 28,522 7.75 156,608 14,443 9.22 120,861 12,459 10.31 94,020 9,565 10.17
2,717,387 221,732 8.16 3,170,906 300,781 9.49 3,510,961 370,981 10.57 3,379,598 373,326 11.04
309,366 27,414 8.86 372,095 39,245 10.55 428,430 52,960 12.36 503,573 65,927 13.09
1,373,268 147,307 10.73 1,399,952 158,596 11.33 1,393,160 155,938 11.19 1,398,379 153,498 10.98
538,324 81,409 15.12 526,442 82,223 15.62 488,666 79,694 16.31 464,440 76,896 16.56
1,441,535 127,868 8.87 1,186,230 118,679 10.00 1,208,042 128,542 10.64 1,180,336 132,022 11.19
345,431 22,591 6.54 619,676 50,875 8.21 737,941 82,486 11.18 755,806 92,996 12.30
6,725,311 628,321 9.34 7,275,301 750,399 10.31 7,767,200 870,601 11.21 7,682,132 894,665 11.65
(224,143) (198,805) (114,580) (92,264)
6,501,168 7,076,496 7,652,620 7,589,868
652,023 622,989 667,243 664,186
276,930 275,561 271,421 267,868
20,991 26,416 24,451 25,931
84,831 92,405 93,204 89,846
101,562 39,582 11,362 6,465
344,927 261,435 252,256 218,598
11,920,411 11,440,704 11,673,704 10,659,360
10,663,290 879,675 8.25 10,321,121 1,001,225 9.70 10,468,347 1,125,786 10.75 9,478,730 1,063,508 11.22
1,444,359 44,278 3.07 1,025,073 47,164 4.60 919,726 45,102 4.90 870,860 44,226 5.08
2,315,630 75,936 3.28 1,683,227 90,174 5.36 1,364,589 87,253 6.39 1,189,857 81,995 6.89
781,185 26,749 3.42 404,831 19,823 4.90 394,349 19,375 4.91 443,595 21,724 4.90
753,500 35,137 4.66 942,716 62,692 6.65 782,073 61,714 7.89 845,467 68,291 8.08
2,438,795 136,344 5.59 2,557,439 185,207 7.24 2,242,642 181,900 8.11 1,792,679 149,328 8.33
116,065 7,651 6.59 463,007 33,927 7.33 1,080,842 90,907 8.41 1,466,998 135,833 9.26
4,417 145 3.28 18,222 1,209 6.63 6,792 539 7.94 8,185 741 9.05
7,853,951 326,240 4.15 7,094,515 440,196 6.20 6,791,013 486,790 7.17 6,617,641 502,138 7.59
1,686,673 1,502,404 1,505,796 1,525,986
9,540,624 8,596,919 8,296,809 8,143,627
1,131,887 38,096 3.37 1,778,336 101,614 5.71 2,284,596 179,883 7.87 1,457,820 130,616 8.96
185,894 17,197 9.25 162,838 16,201 9.95 170,106 16,972 9.98 175,052 17,289 9.88
20,991 26,416 24,451 25,931
201,394 87,108 121,074 137,239
11,080,790 10,651,617 10,897,036 9,939,669
45,000 45,000 45,000 49,227
794,621 744,087 731,668 670,464
839,621 789,087 776,668 719,691
11,920,411 11,440,704 11,673,704 10,659,360
9,171,732 381,533 4.16 9,035,689 558,011 6.18 9,245,715 683,645 7.39 8,250,513 650,043 7.88
1,491,558 1,285,432 1,222,632 1,228,217
10,663,290 381,533 3.58 10,321,121 558,011 5.41 10,468,347 683,645 6.53 9,478,730 650,043 6.86
4.09 3.52 3.36 3.34
498,142 4.67 443,214 4.29 442,141 4.22 413,465 4.36
</TABLE>
(3) Nonaccrual loans are included in the average loan balances and
income on such loans is recognized on a cash basis
(4) The tax-equivalent adjustment to net interest income was $10.9
million in 1994, $12.6 million in 1993, $16.0 million in 1992, $22.1
million in 1991, $28.0 million in 1990 and $33.3 million in 1989
69
<PAGE>
SELECTED RATIOS AND OTHER DATA
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
RATIOS 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net interest margin (1) 4.83% 4.78% 4.67% 4.29% 4.22% 4.36%
Noninterest expense to:
Net interest income (1) and
noninterest income 65.14 66.38 70.03 59.91 62.21 64.58
Average assets 4.05 4.16 4.21 3.55 3.25 3.40
Net Income to net interest and
noninterest income 20.22 18.12 11.39 5.15 10.52 19.65
Average earning assets to
average total assets 90.02 89.66 89.45 90.21 89.67 88.92
Net Income to:
Average earning assets 1.38 1.24 .75 .33 .58 1.10
Average assets 1.24 1.12 .67 .30 .52 .97
Average total equity 15.38 13.53 9.50 4.28 7.87 14.43
Income applicable to common
shares to average common equity 15.38 13.90 9.73 4.19 7.99 15.06
Average total equity to:
Average loans 13.23 15.19 12.48 10.85 10.00 9.37
Average assets 8.06 8.25 7.04 6.90 6.65 6.75
Dividend payout ratio:
On common stock 33.99 30.56 34.46 87.98 70.46 36.19
On common and preferred stock 33.99 31.66 36.49 88.90 71.75 37.96
Equity formation rate 10.15 9.24 6.04 .47 2.22 8.95
Long-term debt at year end to:
Total equity at year end 32.59 17.99 21.94 20.36 21.84 22.68
Total equity and long-term debt
at year end 24.58 15.25 18.00 16.92 17.92 18.48
Net charge-offs to:
Average total loans .45 .95 1.69 2.07 .99 .55
Provision for loan losses 125.12 132.92 114.80 71.95 58.64 94.28
Allowance for loan losses to
year-end loans 2.36 2.89 3.11 2.97 1.94 1.20
Nonperforming assets to year-
end loans and foreclosed
properties - net 1.02 1.32 3.32 4.90 3.08 .97
Net charge-offs earnings coverage 7.66x 3.89x 1.74x 1.65x 2.63x 3.92x
Equity leverage 12.40 12.12 14.20 14.50 15.03 14.81
OTHER DATA
Cash dividends declared per
common share $ 1.53 $ 1.14 $ .80 $ .86 $ 1.32 $ 1.20
Number of average primary
shares (000s) 37,864 37,587 32,286 31,921 31,218 30,739
Market price of common stock:
High $49 3/4 $46 1/2 $39 3/4 $ 25 $29 5/8 $34 1/8
Low 36 1/8 35 1/8 17 1/4 11 1/4 12 1/8 23 1/2
Last 37 5/8 41 7/8 39 17 3/4 13 3/4 28 3/4
At year end:
Book value per common share 30.16 28.32 25.24 23.23 23.15 22.73
Fully diluted price/earnings
multiple 8.42x 11.41x 16.81x 18.11x 7.35x 8.85x
Dividend yield on common stock 4.07% 2.72% 2.05% 4.85% 9.60% 4.17%
Number of common shareholders
of record 12,708 12,769 12,139 12,637 12,545 12,536
Number of banking offices 336 302 289 266 263 252
Number of employees 7,169 6,576 6,122 5,771 6,175 6,180
Full-time equivalent employees 6,747 6,279 5,891 5,581 6,029 6,029
</TABLE>
(1) Tax-equivalent basis
70
<PAGE>
GENERAL INFORMATION
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
CORPORATE HEADQUARTERS
Crestar Center
919 East Main Street, P.O. Box 26665
Richmond, Virginia 23261-6665
(804)782-5000 TELEX: 827420
ANNUAL MEETING
The 1995 Annual Meeting of Shareholders will be
held at 10:00 a.m. on Friday, April 28, 1995 in our
Corporate Headquarters auditorium.
COMMON STOCK
Crestar's common stock is traded on the New York
Stock Exchange where our symbol is CF. Dividends
are customarily paid on the 21st of February, May,
August and November.
QUARTERLY COMMON STOCK
PRICES AND DIVIDENDS
The high, low and last price of Crestar's common
stock for each quarter of 1994 and 1993 and the
dividends declared per share are shown below.
QUARTER MARKET PRICE DIVIDENDS
ENDED HIGH LOW LAST DECLARED
1994
March 31 $46 $39 3/8 $42 5/8 $.33
June 30 49 1/2 40 3/4 45 1/2 .40
September 30 49 3/4 44 5/8 45 5/8 .40
December 31 45 5/8 36 1/8 37 5/8 .40
1993
March 31 $46 1/2 $35 3/4 $42 5/8 $.25
June 30 46 1/2 35 1/8 41 3/4 .28
September 30 45 39 7/8 42 3/4 .28
December 31 46 1/8 37 1/4 41 7/8 .33
In January 1995, a quarterly dividend on common stock of $.40 per share
was declared.
FINANCIAL INFORMATION
To obtain financial information on Crestar, contact
Eugene S. Putnam, Jr., Senior Vice President-Investor
Relations and Corporate Finance, at the Corporate
Headquarters, (804)782-5619.
CORPORATE PUBLICATIONS
Crestar's Annual Report and Form 10-K, Quarterly
Reports and other corporate publications are available
on request by writing or calling our Investor Relations
Department at the Corporate Headquarters,
(804)782-7152.
SHAREHOLDER INFORMATION
In you have questions about a specific stock owner-
ship account, write or call our Investor Relations
Department at the Corporate Headquarters,
(804)782-7933.
DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLAN
Common shareholders receive a 5% discount from
market price when they reinvest their Crestar
dividends in additional shares. Shareholders partici-
pating in the Plan can also make optional cash
purchases of common stock at market price and pay
no brokerage commissions. To obtain our Plan
prospectus and enrollment card, write or call our
Investor Relations Department at the Corporate
Headquarters, (804)782-7933.
CASH DIVIDEND DIRECT DEPOSIT
Shareholders may elect to have their Crestar dividends
directly deposited to a checking, savings or money
market account. This service provides a convenient
and safe method of receiving dividends and is offered
at no cost to shareholders. To obtain additional
information and an enrollment form, write or call our
Investor Relations Department at the Corporate
Headquarters, (804)782-7933.
<PAGE>
Exhibits
The following exhibits are filed with this form or are incorporated by
reference in response to Item 14(c). Those exhibits not included herein
have been omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or the
notes thereto.
3 (a) Restated Articles of Incorporation (filed as Exhibit 3(a) to
Registrant's 1993 Form 10-K and incorporated by reference herein).
3 (b) Bylaws as amended through February 26, 1993 (filed as Exhibit 3(b) to
Registrant's 1993 Form 10-K and incorporated by reference herein).
4 (a) Indenture dated as of September 1, 1993 for subordinated debt
securities (filed as Exhibit 4.1 to Registration Statement No. 33-50387
and incorporated by reference herein). Pursuant to this Indenture, a
series of $150,000,000 of 8 3/4% subordinated Notes due 2004 have been
issued, the terms of which are described in 4(g) below.
4 (b) Indenture dated as of February 1, 1985 for subordinated debt securities
(filed as Exhibit 4(c) to Registrant's 1995 for 10-K and incorporated
by reference herein). Pursuant to this Indenture, a series of
$50,000,000 of 8 5/8% Subordinated Notes Due 1998 and a series of
$125,000,000 of 8 1/4% Subordinated Notes Due 2002 have been issued,
the terms of which are described in 4(c) and 4(e) below.
4 (c) First Supplemental Indenture dated as of march 1, 1986 covering
$50,000,000 of 8-5/8% Subordinated Notes Due 1998 (filed as Exhibit
4(b) to Registration Statement No. 33-4332 and incorporated by
reference herein).
4 (d) Second Supplemental Indenture dated as of September 1, 1986 (filed as
Exhibit 4.1 to Registrant's Form 8-K current Report dated July 16, 1992
and incorporated by reference herein).
4 (e) Third Supplemental Indenture dated as of July 1, 1992 covering
$125,000,000 of 8 1/4% Subordinated Notes Due 2002 (filed as Exhibit
4(c) to Registrant's 1992 Form 10-K and incorporated by reference
herein).
4 (f) Rights Agreement dated June 23, 1989, between the Registrant and Mellon
Bank, NA, as Rights Agent (filed as Exhibit 4.1 to the Registrant's
Form 8-K current Report dated June 23, 1989, and incorporated by
reference herein).
4 (g) Board of Directors Resolutions approving issuance of $150,000,000 of 8
3/4% Subordinated Notes due 2004 (filed herewith).
10 (a) Performance Equity Plan of United Virginia Bankshares Incorporated
(filed as Exhibit 10(a) to Registrant's 1987 Form 10-K and
incorporated by reference herein).
10 (b) Management Incentive Compensation plan of Crestar Financial
Corporation (filed as Exhibit 10(b) to Registrant's 1989 Form 10-K and
incorporated by reference herein).
10 (c) Executive Life Insurance Plan (filed as Exhibit 10(d) to Registrant's
1985 Form 10-K and incorporated by reference herein).
10 (d) Crestar Financial Corporation Executive Life Insurance Plan as amended
and restated effective January 1, 1991 (filed as Exhibit 10(d) to
Registrant's 1993 Form 10-K and incorporated by reference herein).
10 (e) Crestar Financial Corporation Executive Welfare Plan (filed as Exhibit
10(d) to Registrant's 1990 Form 10-K and incorporated by reference
herein).
10 (f) Amendments (effective December 18, 1992) to Crestar Financial
Corporation Executive Welfare Plan (filed as Exhibit 10(e) to
Registrant's 1992 Form 10-K and incorporated by reference herein).
10 (g) 1981 Stock Option Plan of Crestar Financial Corporation and Affiliated
Corporations as amended through January 25, 1991 (filed as Exhibit
10(e) to Registrant's 1991 Form 10-K and incorporated by reference
herein).
10 (h) Severance Agreement between the Corporation and Richard G. Tilghman
(filed as Exhibit 10(g) to Registrant's 1992 Form 10-K and incorporated
by reference herein); as amended by letter agreement dated March 27,
1995 (filed herewith).
10 (i) Severance Agreement between the Corporation and Patrick D. Giblin
(filed as Exhibit 10(h) to Registrant's 1992 Form 10-K and incorporated
by reference herein); as amended by letter agreement dated March 27,
1995 (filed herewith).
10 (j) Severance Agreement between the Corporation and Oscar H. Parrish (filed
as Exhibit 10(i) to Registrant's 1992 Form 10-K and incorporated by
reference herein); as amended by letter agreement dated March 27, 1995
(filed herewith).
10 (k) Severance Agreement between the Corporation and James M. Wells (filed
as Exhibit 10(j) to Registrant's 1992 Form 10-K and incorporated by
reference herein); as amended by letter agreement dated March 27, 1995
(filed herewith).
10 (l) Severance Agreement between the Corporation and William C.
Harris (filed as Exhibit 10(k) to Registrant's 1992 Form 10-K
and incorporated by reference herein); as amended by letter
agreement dated March 27, 1995 (filed herewith).
10 (m) Crestar Financial Corporation Excess Benefit Plan (filed as Exhibit
10-K to Registrant's Form 1990 10-K and incorporated by reference
herein).
10 (n) Amendments (effective December 18, 1992) to Crestar Financial
Corporation Excess Benefit Plan (filed as Exhibit 10(m) to Registrant's
1992 form 10-K and incorporated by reference herein).
10 (o) United Virginia Bankshares Incorporated Deferred Compensation Program
Under Incentive Compensation Plan of United Virginia Bankshares
Incorporated and Affiliated Corporations (filed as Exhibit 10(m) to
Registrant's 1988 Form 10-K and incorporated by reference herein).
10 (p) Crestar Financial Corporation deferred Compensation Plan for Outside
Directors of Crestar Financial corporation and Crestar Bank (filed as
Exhibit 10(n) to Registrant's 1988 10-K and incorporated by reference
herein).
10 (q) Amendments (effective April 24, 1991) to Crestar Financial Corporation
Deferred Compensation Plan for Outside Directors of Crestar Financial
Corporation and crestar Bank (filed as Exhibit 10(p) to Registrant's
1992 Form 10-K and incorporated by reference herein).
10 (r) Crestar Financial Corporation Additional Nonqualified Executive Plan
(filed as Exhibit 10(n) to Registrant's 1990 Form 10-K and incorporated
by reference herein).
10 (s) Amendments (effective December 18, 1992) to Crestar Financial
Corporation Additional Nonqualified Executive Plan (filed as Exhibit
10(r) to Registrant's 1992 Form 10-K and incorporated by reference
herein).
10 (t) Crestar Financial Corporation Executive Severance Plan (filed as
Exhibit 10(o) to Registrant's 1990 Form 10-K and incorporated by
reference herein).
10 (u) Amendments (effective September 15, 1992 October 23, 1992 and December
18, 1992 to Crestar Financial Corporation Executive Severance Plan
(filed as Exhibit 10 (t) to Registrant's 1992 Form 10-K and
incorporated by reference herein).
10 (v) Crestar Financial Corporation Benefit Assurance Plan (filed as Exhibit
10(p) to Registrant's 1990 Form 10-K and incorporated by reference
herein).
10 (w) Amendments (effective December 18, 1992) to Crestar Financial
Corporation Benefit Assurance Plan (filed as Exhibit 10(v) to
registrant's 1992 Form 10-K and incorporated by reference herein).
10 (x) Crestar Financial Corporation Supplemental Benefit Plan (filed as
Exhibit 10(q) to Registrant's 1990 Form 10-K and incorporated by
reference herein).
10 (y) Amendments (effective December 18, 1992) to Crestar Financial
Corporation Supplemental Benefit Plan (filed as Exhibit 10(x) to
Registrant's 1992 Form 10-K and incorporated by reference herein).
10 (z) United Virginia Bankshares Incorporated Deferred Compensation Plan for
Selected Employees of United Virginia Bankshares Incorporated and
Affiliated Corporations (filed as Exhibit 10(r) to Registrant's 1990
Form 10-K and incorporated by reference herein).
10 (aa) Amendment (effective January 1, 1987) to United Virginia Bankshares
Incorporated Deferred Compensation Plan for Selected Employees of
United Virginia Bankshares Incorporated and Affiliated Corporations
(filed as Exhibit 10(z) to Registrant's 1992 Form 10-K and incorporated
by reference herein).
10 (ab) Crestar Financial Corporation Premium Assurance Plan (filed as Exhibit
10(s) to Registrant's 1991 Form 10-K and incorporated by reference
herein).
10 (ac) Amendments (effective December 18, 1992) to Crestar Financial
Corporation Premium Assurance Plan (filed as Exhibit 10(ab) to
Registrant's 1992 Form 10-K and incorporated by reference herein).
10 (ad) Crestar Financial Corporation 1993 Stock Incentive Plan (filed as
Exhibit 10(ad) to Registrant's 1993 Form 10-K and incorporated
by reference herein).
10 (ae) Crestar Financial Corporation Directors' Stock Compensation Plan
(filed as Exhibit 10(ae) to Registrant's 1993 Form 10-K and
incorporated by reference herein).
10 (af) Crestar Financial Corporation Temporary Executive Benefit Plan as
amended through December 18, 1992 (filed as Exhibit 10(af) to
Registrant's 1993 Form 10-K and incorporated by reference herein).
10 (ag) Crestar Financial Corporation Permanent Executive Benefit Plan as
amended through December 18, 1992 (filed as Exhibit 10(ag) to
Registrant's 1993 Form 10-K and incorporated by reference herein).
10 (ah) Approval and Summary of Supplemental Executive Retirement Plan
(filed herewith).
21 Subsidiaries (filed herewith).
23 Consent of KPMG Peat Marwick LLP (filed herewith).
Note: All item 10 documents represent Executive Compensation Plans or
Arrangements, or Amendments thereto.
Exhibit 4(g)
CRESTAR FINANCIAL CORPORATION
BOARD OF DIRECTORS MEETING
Friday, September 23, 1994
RESOLUTIONS AUTHORIZING THE ISSUANCE OF UP TO $150 MILLION IN DEBT SECURITIES
UPON TERMS DETERMINED BY THE PRICING COMMITTEE:
WHEREAS, the Board of Directors of Crestar Financial Corporation on
September 24, 1993 authorized the filing of a shelf registration for
$300,000,000 of securities and appointed a Pricing Committee to
establish the terms of any subordinated Debt Securities to be issued
in connection with the shelf registration; and,
WHEREAS, The Board of Directors has determined, upon the advice
and recommendation of management, that there is a current need to
raise capital to fund the Corporation's ongoing mergers and
acquisitions program.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of
Crestar Financial Corporation hereby authorizes the sale and
issuance of up to $150 million in Debt Securities at such time and
upon such terms and provisions as may be determined by the Pricing
Committee in accordance with resolutions adopted by the board of
Directors on September 24, 1993; and,
BE IT FURTHER RESOLVED,that the Pricing Committee and other officers
of the Corporation are authorized to take any and all actions
necessary or advisable to effectuate the authorized sale and
issuance of Debt Securities.
CRESTAR FINANCIAL CORPORATION
PRICING COMMITTEE OF THE BOARD OF DIRECTORS
RESOLUTIONS
NOVEMBER 9, 1994
RESOLVED, that the Company shall issue its subordinated
notes registered pursuant to Registration Statement No. 33-50387
(the "Notes") with the following terms: (1) the Notes shall be
designated "8 3/4 Subordinated Notes Due November 15, 2004", (2)
the Notes shall have a maximum aggregate principal amount of
$150,000,000, (3) the Notes shall mature and the principal
thereon shall be due on November 15, 2004, (4) the Notes shall
bear interest at the rate of 8 3/4% per annum from November 15,
1994, and the Company shall pay interest on the principal amount
of the Notes semi-annually on May 15 and November 15 of each year
to the persons in whose names the Notes are registered at the
close of business on April 30 and October 31, as the case may be,
next preceding such May 15 and November 15, (5) principal and
interest on the Notes shall be payable at the office or agency of
the Company in the Borough of Manhattan, the City and State of
New York or the City of Richmond, Virginia or at any other office
of the Company maintained by the Company for such purpose;
provided, however, that the Company may, at its option, make
interest payments by mailing a check to the address of the person
entitled thereto as such address shall appear in the Note
register, (6) the Notes shall be issued in denominations of
$1,000 and integral multiples thereof, (7) the Notes shall be
issued in whole in the form of a global security, and the
depositary of the Notes shall be The Depository Trust Company,
(8) Crestar Bank shall be appointed to serve as authenticating
agent for the Notes, (9) Crestar Bank and Chemical Bank each
shall be appointed to act as paying agent for the Notes;
provided, however, as long as the Notes are in the form of a
global security the Notes shall be paid in accordance with the
provisions of the applicable letter of representations and (10)
the Notes shall have other terms as set forth in the form of
certificate for such Notes attached hereto as Exhibit A; and
further
RESOLVED, that the form, terms and provisions of the
proposed underwriting agreement (the "Underwriting Agreement")
between the Company and Morgan Stanley & Co. Incorporated, as
representative of the underwriters named therein, in the form
attached hereto as Exhibit B, including pricing and other terms
and conditions of the sale of the Notes, is hereby approved; and
further
RESOLVED, that the form of Note attached hereto as Exhibit A
is hereby approved; and further
RESOLVED, that the Authorized Officers hereby are authorized
and directed to execute and deliver, on behalf of the Company,
under its corporate seal, and attested by its Secretary or one of
its Assistant Secretaries the Underwriting Agreement with such
changes, amendments, additions, deletions and modifications as
the officer so acting may deem necessary; and further
RESOLVED, that all actions heretofore taken by officers,
employees and agents of the Company in furtherance of the
transactions contemplated by these resolutions are hereby
ratified, adopted and approved; and further
RESOLVED, that all officers, employees and agents of the
Company are hereby authorized and directed to take any actions
they deem necessary to implement the intent of the foregoing
resolutions.
-2-
<PAGE>
Exhibit A
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY")
OR A NOMINEE OF THE DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE
COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE TO BE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY AMOUNT PAYABLE
THEREUNDER IS MADE PAYABLE TO CEDE & CO. OR SUCH OTHER NAME, ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN DEFINITIVE REGISTERED FORM, THIS NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
CRESTAR FINANCIAL CORPORATION
8 3/4% SUBORDINATED NOTE DUE NOVEMBER 15, 2004
No. 1 CUSIP 226 091 AC0
Crestar Financial Corporation, a corporation duly organized and
existing under the laws of the Commonwealth of Virginia
(hereinafter called the "Company," which term includes any successor
corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to CEDE & CO. or registered assigns
the principal sum of $150,000,000 (ONE HUNDRED AND FIFTY MILLION
DOLLARS) at the office or agency of the Company in the Borough of
Manhattan, the City and State of New York or the City of
Richmond, Virginia, on November 15, 2004, in such coin or currency of
the United States of America as at the time shall be legal tender for
the payment of public and private debts, and to pay interest
semi-annually on May 15 and November 15 of each year on said principal
sum, commencing May 15, 1995, at the rate of 8 % per annum, at said
offices or agencies, in like coin or currency, from November 15,
1994, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, until payment of such
principal sum has been made or duly provided for. The interest so
payable on any May 15 or November 15 will, subject to certain
exceptions provided in the Indenture referred to herein, be paid to
the person in whose name this Note is registered at the close of
business on the April 30 or October 31, as the case may be, next
preceding such May 15 or November 15 and may, at the option of the
Company, be paid by check mailed to the registered address of such
person. Any such interest not so punctually paid or duly provided for
will forthwith cease to be payable to the Holder on such Regular Record
Date and may be paid by the Company, at its election, either to the
person in whose name this Note is registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof to be given to the
Holder of this Note not less than 10 days prior to such Special
Record Date, or at any time in any other lawful manner, all as more
fully provided in said Indenture. Additional provisions of this Note
are set forth on the reverse hereof including, without
limitation, provisions subordinating the payment of principal and
interest on the Notes to the prior payment in full of Senior
Indebtedness as defined in the Indenture. Such provisions shall for
all purposes have the same effect as though fully set forth at this
place. This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereof shall have
been signed by the Trustee or a duly appointed authenticating agent
under the Indenture referred to herein.
IN WITNESS WHEREOF, Crestar Financial Corporation has caused
this instrument to be duly executed under its corporate seal.
Dated: November 16, 1994 CRESTAR FINANCIAL CORPORATION
ATTEST:
BY:_______________________________
Vice Chairman of the Board
___________________________________
Secretary
[SEAL]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED THEREIN REFERRED
TO IN THE WITHIN-MENTIONED INDENTURE.
CHEMICAL BANK, AS TRUSTEE
BY:____________________________________
AUTHORIZED OFFICER
<PAGE>
This Note is one of a duly authorized issue of securities of
the Company (herein called the "Securities"), all issued or to be
issued in one or more series under and pursuant to an Indenture, dated
as of September 1, 1993 (herein called the "Indenture"), duly executed
and delivered by the Company to Chemical Bank, a New York corporation,
as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company, and the Holders of
the Securities and of the termsupon which the Securities are, and are
to be, authenticated and delivered. This Note is one of the series
designated on the face hereof, limited in aggregate principal amount to
$150,000,000 (the "Notes").
The Notes will mature on November 15, 2004, and are not redeemable
prior to maturity. The payment of principal of and interest on this
Note is expressly subordinated and subject in right of payment, as
provided in the Indenture, to the prior payment of any and all Senior
Indebtedness of the Company, as defined in the Indenture. This Note is
issued subject to such provisions, and each holder of this Note, by
accepting the same, agrees, expressly for the benefit of the present
and future holders of Senior Indebtedness, whether now or hereafter
outstanding, to and shall be bound by such provisions.
If an Event of Default (defined in the Indenture as certain
events involving the bankruptcy, insolvency or reorganization of the
Company) shall occur and be continuing, the principal of all the Notes
may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any
time by the Company and the Trustee with the consent of the Holders
of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding, as defined in the Indenture, of
each series to be affected, provided, however, that no such
supplemental indenture shall change the Stated Maturity of any
Security, or reduce the principal amount thereof, or reduce the rate or
change the time of payment of interest thereon,or make the principal
thereof or interest thereon payable in any coin or currency other than
that hereinbefore provided, or change the place of payment thereof, or
impair or affect the right of any Holder of a Security to institute
suit for payment thereof, or reduce the aforesaid percentage of
Securities, the consent of the Holders of which is required for any
such supplemental indenture, without the consent of the Holder of each
Outstanding Security affected thereby. It is also provided in the
Indenture that the Holders of not less than a majority in aggregate
principal amount of the Notes at the time Outstanding may on behalf of
the Holders of all of the Notes waive compliance by the Company with
certainprovisions of the Indenture and any past default under the
Indenture with respect to the Notes and its consequences, except a
default in the payment of the principal of or interest on any of the
Notes or a default with respect to any provision of the Indenture that
cannot be modified or amended without the consent of the Holder of
each Outstanding Note.
Subject to the rights of the Holders of Senior Indebtedness of
the Company set forth in this Note and as provided in the Indenture, no
reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter orimpair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place and rates, and in the coin or currency as
herein prescribed.
The Notes are issuable in registered form without coupons and will
be sold in denominations of $1,000 and integral multiples of $1,000 in
excess thereof. Upon due presentment for registration of transfer of
this Note at the office or agency of the Company in the Borough of
Manhattan, the City and State of New York or the City of Richmond,
Virginia, or any other location as may be provided for pursuant to the
Indenture, a new Note or Notes of authorized denominations foran equal
aggregate principal amount will be issued to the transferee in
exchange herefor, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental
charge imposed in connection therewith.
This Note may be exchanged for certificated securities registered
in the names of the various beneficial owners hereof only if (a) the
Depositary is at any time unwilling or unable to continue as Depositary
or is ineligible to actas Depositary under the Indenture and a
successor Depositary is not appointed by the Company within 90 days, or
(b) the Company elects to issue certificated securities to all
beneficial owners (as certified to the Company by the Depositary or a
successor Depositary) of the Notes.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name this Note is registered as
the owner of this Note, for the purpose of receiving payment of or on
account of the principal hereof and, subject to the provisions on the
face hereof, interest hereon, and for all other purposes, whether or
not this Noteshall be overdue and neither the Company nor the Trustee
nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
This Note shall be deemed to be a contract made under the
laws of the Commonwealth of Virginia and for all purposes shall be
governed by and construed in accordance with the laws of said
Commonwealth, provided, however, that the rights, duties, immunities
and standard of care of the Trustee under the Indenture shall be
governed by the laws of the State of New York.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this Note, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM-- as tenants in common UNIT GIFT MIN ACT--........Custodian....
TEN ENT-- as tenants by the (Cus) (Minor)
entireties Under Uniform Gifts to Minors
JT TEN-- as joint tenants with Act...........................
rights of survivor- (State)
ship and not as Tenants
in Common
Additional abbreviations may also be used though not in the above list.
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address of assignee)
the within Note and does hereby irrevocably constitute and appoint
_______________ (Attorney) to transfer the said Note in the Security
Register of the Company, with full power of substitution in the
premises.
Dated: _________________ _________________________
NOTICE: The signature to this
assignment must correspond with
the name as written upon the face
of this Note in every particular
without alteration or enlargement
or any change whatever.
______________________________________
SIGNATURE GUARANTEED: The signature
must be guaranteed by a commercial bank
or trust company or by a member firm of
the New York Stock Exchange or another
national securities exchange. Notarized
or witnessed signatures are not acceptable.
<PAGE>
(Crestar Logo and Letterhead)
March 27, 1995
Mr. Richard G. Tilghman
Crestar Financial Corporation
919 East Main Street
Richmond, VA 23219
Dear Richard:
This letter is to advise you of two changes to your severance agreement
with Crestar Financial Corporation dated January 1, 1990 (the
"Agreement"). On December 16, 1994, the Board of Directors approved a
one-year extension of the Agreement - until December 31, 1997. In
addition, the Board passed a resolution amending your Agreement to
remove any reference to reduction in benefits due to income earned
during the term of the Agreement.
Accordingly, paragraph 6(B) of your Agreement is revised to read as
follows:
(B) Neither you nor any Record Owner is required to mitigate
the amount of any payment provided for in Section 5. In
addition, you are not required to mitigate the amount of your
benefit entitlement under the Plan, nor, despite any provision
of the Plan to the contrary, may the amount of your benefit
entitlement under the Plan be reduced or adjusted by any
compensation or benefits received by you that are Mitigation
Amounts.
If you consent to these modifications to your Agreement, please sign and
return to me the enclosed copy of this letter.
Sincerely,
CRESTAR FINANCIAL CORPORATION
By
Group Executive Vice President and
Human Resources Director
ACCEPTED AND AGREED TO:
Chief Executive Officer Date:
Employee Date:
<PAGE>
(Crestar Logo and Letterhead)
March 27, 1995
Mr. Patrick D. Giblin
Crestar Financial Corporation
919 East Main Street
Richmond, VA 23219
Dear Pat:
This letter is to advise you of two changes to your severance agreement
with Crestar Financial Corporation dated January 1, 1990 (the
"Agreement"). On December 16, 1994, the Board of Directors approved a
one-year extension of the Agreement - until December 31, 1997. In
addition, the Board passed a resolution amending your Agreement to
remove any reference to reduction in benefits due to income earned
during the term of the Agreement.
Accordingly, paragraph 6(B) of your Agreement is revised to read as
follows:
(B) Neither you nor any Record Owner is required to mitigate
the amount of any payment provided for in Section 5. In
addition, you are not required to mitigate the amount of your
benefit entitlement under the Plan, nor, despite any provision
of the Plan to the contrary, may the amount of your benefit
entitlement under the Plan be reduced or adjusted by any
compensation or benefits received by you that are Mitigation
Amounts.
If you consent to these modifications to your Agreement, please sign and
return to me the enclosed copy of this letter.
Sincerely,
CRESTAR FINANCIAL CORPORATION
By
Group Executive Vice President and
Human Resources Director
ACCEPTED AND AGREED TO:
Chief Executive Officer Date:
Employee Date:
<PAGE>
(Crestar Logo and Letterhead)
March 27, 1995
Mr. O. H. Parrish, Jr.
Crestar Financial Corporation
919 East Main Street
Richmond, VA 23219
Dear O.H.
This letter is to advise you of two changes to your severance agreement
with Crestar Financial Corporation dated January 1, 1990 (the
"Agreement"). On December 16, 1994, the Board of Directors approved a
one-year extension of the Agreement - until December 31, 1997. In
addition, the Board passed a resolution amending your Agreement to
remove any reference to reduction in benefits due to income earned
during the term of the Agreement.
Accordingly, paragraph 6(B) of your Agreement is revised to read as
follows:
(B) Neither you nor any Record Owner is required to mitigate
the amount of any payment provided for in Section 5. In
addition, you are not required to mitigate the amount of your
benefit entitlement under the Plan, nor, despite any provision
of the Plan to the contrary, may the amount of your benefit
entitlement under the Plan be reduced or adjusted by any
compensation or benefits received by you that are Mitigation
Amounts.
If you consent to these modifications to your Agreement, please sign and
return to me the enclosed copy of this letter.
Sincerely,
CRESTAR FINANCIAL CORPORATION
By
Group Executive Vice President and
Human Resources Director
ACCEPTED AND AGREED TO:
Chief Executive Officer Date:
Employee Date:
<PAGE>
(Crestar Logo and Letterhead)
March 27, 1995
Mr. James M. Wells, III
Crestar Financial Corporation
919 East Main Street
Richmond, VA 23219
Dear Jim:
This letter is to advise you of two changes to your severance agreement
with Crestar Financial Corporation dated January 1, 1990 (the
"Agreement"). On December 16, 1994, the Board of Directors approved a
one-year extension of the Agreement - until December 31, 1997. In
addition, the Board passed a resolution amending your Agreement to
remove any reference to reduction in benefits due to income earned
during the term of the Agreement.
Accordingly, paragraph 6(B) of your Agreement is revised to read as
follows:
(B) Neither you nor any Record Owner is required to mitigate
the amount of any payment provided for in Section 5. In
addition, you are not required to mitigate the amount of your
benefit entitlement under the Plan, nor, despite any provision
of the Plan to the contrary, may the amount of your benefit
entitlement under the Plan be reduced or adjusted by any
compensation or benefits received by you that are Mitigation
Amounts.
If you consent to these modifications to your Agreement, please sign and
return to me the enclosed copy of this letter.
Sincerely,
CRESTAR FINANCIAL CORPORATION
By
Group Executive Vice President and
Human Resources Director
ACCEPTED AND AGREED TO:
Chief Executive Officer Date:
Employee Date:
<PAGE>
(Crestar Logo and Letterhead)
March 27, 1995
Mr. Richard G. Tilghman
Crestar Financial Corporation
919 East Main Street
Richmond, VA 23219
Dear Richard:
This letter is to advise you of two changes to your severance agreement
with Crestar Financial Corporation dated January 1, 1990 (the
"Agreement"). On December 16, 1994, the Board of Directors approved a
one-year extension of the Agreement - until December 31, 1997. In
addition, the Board passed a resolution amending your Agreement to
remove any reference to reduction in benefits due to income earned
during the term of the Agreement.
Accordingly, paragraph 6(B) of your Agreement is revised to read as
follows:
(B) Neither you nor any Record Owner is required to mitigate
the amount of any payment provided for in Section 5. In
addition, you are not required to mitigate the amount of your
benefit entitlement under the Plan, nor, despite any provision
of the Plan to the contrary, may the amount of your benefit
entitlement under the Plan be reduced or adjusted by any
compensation or benefits received by you that are Mitigation
Amounts.
If you consent to these modifications to your Agreement, please sign and
return to me the enclosed copy of this letter.
Sincerely,
CRESTAR FINANCIAL CORPORATION
By
Group Executive Vice President and
Human Resources Director
ACCEPTED AND AGREED TO:
Chief Executive Officer Date:
Employee Date:
<PAGE>
BOARD OF DIRECTORS MEETING, OCTOBER 28, 1994
APPROVAL OF SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
BOARD APPROVAL REQUIRED
RESOLVED, The the appropriate officers of the Corporation are hereby
authorized and directed to design, adopt and implement a Supplemental
Executive Retirement Plan as described in the attached exhibit, and with
such other terms as such officers may deem appropriate or necessary to
carry out the actions required by this resolution.
<PAGE>
BOARD OF DIRECTORS, OCTOBER 28, 1994
PROPOSED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PURPOSE: Retirement benefits payable to Crestar's senior executive
offers under qualified and nonqualified plans are not
competitive with other banks in our peer group. A
supplemental executive retirement plan can meet this
competitive need and also promote flexibility in
retirement planning for executives and the Corporation.
ELIGIBILITY: Officers in grades 41 and above
BENEFIT: Annual benefit based single life annuity providing 50% of
executive s average 3 year total compensation (base
salary plus bonus) reduced by benefits payable under
Retirement Plan, Additional Nonqualified Executive Plan
and Excess Plan, commencing at age 60 with 20 years of
service; payment options same as annuity options
available under the Retirement Plan. Early retirement
benefit payable at ages 55 through 59, with 5% reduction
per year prior to age 60.
VESTING: Fully vested at age 55 with 20 years of service
FUNDING: Payable from general assets
AMENDMENT & Board may amend or terminate at any time, provided that
TERMINATION consent must be obtained from (a) any participant who has
reached age 55 and has 20 years of service, and (b) any
participant or beneficiary who is in pay status if any
such amendment or termination would reduce the
participant's or beneficiary's benefit.
CHANGE Agreement is binding on Crestar's successor. Any
IN Control: participant whose employment terminates following a
change in control and who has 20 years of service
(with Crestar and its successor) may elect to begin
receiving plan benefits prior to age 55, provided that
such benefit is proportionately reduced.
<PAGE>
Exhibit 21
All subsidiaries of the Registrant included in the Consolidated
Financial Statements as of December 31, 1994 are listed below:
<TABLE>
Description Jurisdiction of
Subsidiary of Activity Incorporation
<S> <C> <C>
Crestar Bank (1) Banking Virginia
Crestar Mortgage Mortgage Banking
Corporation (2) Services Virginia
Crestar Mortgage (3) Mortgage Origination
Capital Corporation Virginia
CMC OREO, Inc. (3) Real Estate Holding Virginia
Crestar Leasing Equipment Leasing
Corporation (2) Virginia
Capitoline Investment Investment Advisory Virginia
Services Incorporated (2) Services
Southern Finance Investment Securities Virginia
Corporation (2) Holding
Southern Hotel Service, Inc. (2) Real Estate Holding Virginia
(Inactive)
Southern Service Corporation (2) Real Estate Holding Virginia
(Inactive)
Crestar Securities Discount Brokerage Virginia
Corporation (1) Services
Crestar Insurance Agency, Insurance
Incorporated (1) Virginia
Crestar Bank, N.A. (1) Banking National Banking
Association
Crestar Bank MD (1) Banking Maryland
Annapolis Federal Funding Investment Securities Maryland
Corporation I (4) Holding
Commonwealth Investment Real Estate Holding Virginia
Services Corp. (2) (Inactive)
First Arlington Service Corp. (2) Trustee on Acquired Bank's Virginia
Deeds of Trusts
River Properties, Inc. (2) Real Estate Holding Virginia
CRPC, Inc. (2) Real Estate Holding Virginia
The Plaza Company of Virginia (2) Real Estate Holding Virginia
Hampton Industrial, Inc. (2) Real Estate Holding Virginia
Capital REFG, Inc. (2) Real Estate Holding Virginia
Eastern REFG, Inc. (2) Real Estate Holding Virginia
Second Eastern REFG, Inc. (2) Real Estate Holding Virginia
Mortage Investment OREO, Inc. (2) Real Estate Holding Virginia
GWR REFG, Inc. (2) Real Estate Holding Virginia
Second GWR REFG, Inc. (2) Real Estate Holding Virginia
Third GWR REFG, Inc. (2) Real Estate Holding Virginia
Fourth GWR REFG, Inc. Real Estate Holding Virginia
Fifth GWR REFG, Inc. Real Estate Holding Virginia
Capital OREO, Inc. (2) Real Estate Holding Virginia
Eastern OREO, Inc. (2) Real Estate Holding Virginia
Palisades Condominium Owners Real Estate Holding Virginia
Association (6)
GWR OREO, Inc. (2) Real Estate Holding Virginia
Western OREO, Inc. (2) Real Estate Holding Virginia
Corporate OREO, Inc. (2) Real Estate Holding Virginia
Villiages Of KC Properties, Inc. (2) Real Estate Holding Virginia
Hilltop of Virginia, Inc. (2) Real Estate Holding Virginia
CFG Vessels, Inc. (2) Real Estate Holding Virginia
MDRP, Inc. (2) Real Estate Holding Maryland
MD Oreo, Inc. (4) Real Estate Holding Maryland
DCRP, Inc. (5) Real Estate Holding District
of Columbia
DC OREO, Inc. (5) Real Estate Holding District
of
Columbia
</TABLE>
(1) Wholly-owned by Crestar Financial Corporation
(2) Wholly-owned by Crestar Bank
(3) Wholly-owned by Crestar Mortgage Corporation
(4) Wholly-owned by Crestar Bank MD
(5) Wholly-owned by Crestar Bank N.A.
(6) Wholly-owned by Eastern OREO, Inc.
Note: In addition to the subsidiaries enumerated above, Crestar Bank,
Crestar Bank N.A. and Crestar Bank MD may, in the ordinary course of
business, hold as collateral a majority of the capital stock of other
companies and, as a result of realizing such control, companies may
constitute subsidiaries within the definition contained in the
instructions for the preparation of this report. Detail of any such
transactions are not known to the Registrant, but if any exist, such
companies are not deemed to be subsidiaries by the Registrant and are
not believed to be of material importance as such.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Crestar Financial Corporation
We consent to incorporation by reference in Registration Statement No.
33-57710 on Form S-3, in Registration Statement No. 33-50387 on Form
S-3, in Registration Statement No. 33-50921 on Form S-8, in Registration
Statement No. 33-63606 on Form S-8 and in Registration Statement No.
33-54523 on Form S-8 of Crestar Financial Corporation of our report
dated January 12, 1995, relating to the consolidated balance sheets of
Crestar Financial Corporation and Subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income, cash flows
and changes in shareholders' equity for each of the years in the
three-year period ended December 31, 1994, which report appears in the
December 31, 1994 annual report on Form 10-K of Crestar Financial
Corporation. Our report refers to a change in accounting for certain
investments in debt and equity securities in 1994.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
March 29, 1995
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
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