UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarter Ended June 30, 1995
( ) 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)
Virginia 54-0722175
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
919 E. Main Street, P.O. Box 26665, Richmond, Virginia 23261-6665
(Address of principal executive offices) (Zip Code)
(804)782-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
Common Stock, $5 par value 37,692,370
<PAGE>
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
PART I. Financial Information
ITEM 1. Financial Statements:
PAGE
Consolidated Balance Sheets . . . . . . . . . . . . . .
Consolidated Statements Of Income . . . . . . . . . . .
Consolidated Statements Of Cash Flows . . . . . . . . .
Consolidated Statements Of Changes In Shareholders'
Equity . . . . . . . . . . . . . . . . . . . . . . . . .
Notes To Consolidated Financial Statements . . . . . . . .
ITEM 2. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations:
Financial Commentary . . . . . . . . . . . . . . . . .
PART II. Other Information
ITEM 4. Submission Of Matters To A Vote Of Security
Holders . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6. Exhibits And Reports On Form 8-K:
There were no reports on Form 8-K filed during the three months ended
June 30, 1995.
<PAGE>
CONSOLIDATED BALANCE SHEETS
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars in thousands
June 30, December 31,
ASSETS 1995 1994 1994
<S> <C> <C> <C>
Cash and due from banks $ 792,741 $ 581,521 $ 907,627
Securities held to maturity (note 2) 823,555 996,038 907,368
Securities available for sale (note 3) 1,482,677 1,993,913 1,621,973
Money market investments (note 4) 518,275 1,243,975 452,556
Mortgage loans held for sale 351,982 275,527 209,525
Loans -- net of unearned income (note 5):
Business Loans:
Commercial 3,099,904 2,954,896 3,093,122
Real estate -- income property 794,264 782,116 744,888
Real estate -- construction 179,056 231,241 184,583
Consumer Loans:
Instalment 1,993,846 1,720,865 1,810,038
Bank card 1,605,362 1,154,017 1,477,285
Real estate -- mortgage 2,123,711 1,745,705 1,975,721
Loans -- net of unearned income of $1,172 and
$1,925 at June 30, 1995 and 1994, respectively;
$1,369 at December 31, 1994 9,796,143 8,588,840 9,285,637
Less: Allowance for loan losses (note 6) (222,882) (226,666) (219,189)
Loans -- net 9,573,261 8,362,174 9,066,448
Premises and equipment -- net 333,408 321,709 316,896
Customers' liability on acceptances 12,294 4,777 6,464
Intangible assets -- net (note 7) 160,348 125,069 107,211
Foreclosed properties -- net (notes 5 and 8) 13,631 25,000 18,629
Other assets 569,687 395,507 395,333
TOTAL ASSETS $14,631,859 $14,325,210 $14,010,030
LIABILITIES
Demand deposits $ 2,218,499 $ 2,268,488 $ 2,238,399
Interest checking deposits 1,857,984 1,866,427 1,916,411
Money market deposit accounts 2,485,961 2,366,184 2,342,222
Regular savings deposits 1,284,844 1,508,459 1,394,146
Domestic time deposits 3,201,735 3,321,724 2,955,756
Certificates of deposit $100,000 and over 67,643 65,188 66,218
Total deposits 11,116,666 11,396,470 10,913,152
Short-term borrowings (note 9) 1,413,719 1,326,996 1,380,806
Liability on acceptances 12,294 4,777 6,464
Other liabilities 475,599 269,864 216,581
Long-term debt (note 10) 384,577 222,419 366,962
TOTAL LIABILITIES 13,402,855 13,220,526 12,883,965
SHAREHOLDERS' EQUITY
Preferred stock. Authorized 2,000,000 shares; none issued - - -
Common stock, $5 par value. Authorized 100,000,000 shares;
outstanding 37,733,761 and 37,717,023 at June 30, 1995
and 1994, respectively; 37,331,213 at December 31, 1994 188,669 188,585 186,656
Capital surplus 342,597 273,169 281,207
Retained earnings 701,029 663,761 694,757
Net unrealized loss on securities available for sale (3,291) (20,831) (36,555)
TOTAL SHAREHOLDERS' EQUITY 1,229,004 1,104,684 1,126,065
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,631,859 $14,325,210 $14,010,030
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands, except per share data Three Months Six Months
Ended June 30, Ended June 30,
INCOME FROM EARNING ASSETS 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest and fees on loans $215,762 $169,024 $421,791 $323,988
Interest on taxable securities held to maturity 12,530 15,087 25,802 23,987
Interest on tax-exempt securities held to maturity 986 1,241 1,990 2,625
Interest and dividends on securities available for sale 22,942 30,869 46,549 71,118
Income on money market investments 4,358 6,698 10,899 10,807
Interest on mortgage loans held for sale 5,127 5,453 8,937 12,877
Total income from earning assets 261,705 228,372 515,968 445,402
INTEREST EXPENSE
Interest checking deposits 10,489 10,405 20,942 20,146
Money market deposit accounts 24,183 15,622 46,793 29,371
Regular savings deposits 9,166 9,393 18,627 17,714
Domestic time deposits 39,018 33,405 72,397 62,610
Certificates of deposit $100,000 and over 954 573 1,811 1,058
Total interest on deposits 83,810 69,398 160,570 130,899
Short-term borrowings 16,620 9,380 34,578 19,993
Long-term debt 8,173 4,665 16,034 8,915
Total interest expense 108,603 83,443 211,182 159,807
NET INTEREST INCOME 153,102 144,929 304,786 285,595
Provision for loan losses (note 6) 13,500 8,850 23,600 18,882
NET CREDIT INCOME 139,602 136,079 281,186 266,713
NONINTEREST INCOME
Trust and investment advisory income 15,151 14,441 28,689 29,444
Service charges on deposit accounts 21,765 21,116 43,356 41,895
Bank card-related income 11,919 9,247 22,977 16,975
Other income 22,307 21,771 42,660 41,567
Securities losses (1,050) (49) (3,460) (1,767)
Total noninterest income 70,092 66,526 134,222 128,114
NET CREDIT AND NONINTEREST INCOME 209,694 202,605 415,408 394,827
NONINTEREST EXPENSE
Personnel expense 76,308 75,992 152,624 150,789
Occupancy expense -- net 10,616 10,061 21,576 20,855
Equipment expense 6,904 6,069 13,916 11,997
Other expense 45,175 46,994 87,357 87,618
Total noninterest expense 139,003 139,116 275,473 271,259
INCOME BEFORE INCOME TAXES 70,691 63,489 139,935 123,568
Income tax expense (note 11) 23,307 20,881 46,960 40,478
NET INCOME $ 47,384 $ 42,608 $ 92,975 $ 83,090
EARNINGS PER COMMON SHARE $ 1.24 $ 1.12 $ 2.44 $ 2.19
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands Six Months Ended June 30,
1995 1994
<S> <C> <C> <C>
OPERATING Net Income $ 92,975 $ 83,090
ACTIVITIES Adjustments to reconcile net income
to net cash provided by operating activities:
Provisions for loan losses, foreclosed
properties and other losses 23,650 18,357
Depreciation and amortization of premises
and equipment 17,480 16,113
Securities losses 3,460 1,767
Amortization of intangible assets 6,229 6,437
Deferred income tax expense 7,560 2,411
Loss (gain) on foreclosed properties (1,567) 144
Gain on sale of mortgage servicing rights (5,900) (9,332)
Net decrease (increase) in trading account (621) 4,888
Origination of loans held for sale (795,725) (1,431,638)
Proceeds from sales of loans held for sale 653,268 1,762,485
Net decrease (increase) in accrued
interest receivable, prepaid expenses
and other assets (19,978) 19,186
Net increase in accrued interest payable,
accrued expenses and other liabilities 21,931 30,954
Other, net 7,367 10,259
Net cash provided by operating activities 10,129 515,121
INVESTING Proceeds from maturities and calls of
ACTIVITIES securities held to maturity 82,930 155,355
Proceeds from maturities and calls of
securities available for sale 176,893 220,437
Proceeds from sales of securities
available for sale 977,747 1,478,024
Purchases of securities held to maturity - (594,771)
Purchases of securities available for sale (592,124) (416,367)
Net increase in money market investments (65,098) (556,500)
Principal collected on non-bank
subsidiary loans 11,067 9,801
Loans originated by non-bank
subsidiaries (91,024) (118,295)
Net decrease (increase) in other loans (85,616) 2,421
Purchases of premises and equipment (31,288) (18,462)
Proceeds from sales of foreclosed
properties 19,394 21,415
Proceeds from sales of mortgage
servicing rights 8,305 15,268
Acquisitions of net assets of
financial institutions (12,173) 7,122
Other, net (4,747) (5,510)
Net cash provided by investing activities 394,266 199,938
FINANCING Net decrease in demand, interest checking,
ACTIVITIES money market and regular savings deposits (294,529) (62,309)
Net decrease in short-term borrowings (69,152) (495,949)
Net decrease in certificates of
deposit (67,109) (257,837)
Proceeds from issuance of long-term
debt - 158
Principal payments on long-term debt (12,184) (2,787)
Cash dividends paid (32,387) (27,404)
Common stock purchased and retired (61,289) (18,912)
Proceeds from the issuance of common
stock 17,369 14,850
Net cash used by financing activities (519,281) (850,190)
CASH AND Decrease in cash and cash equivalents (114,886) (135,131)
CASH Cash and cash equivalents at beginning of year 907,627 716,652
EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 792,741 $ 581,521
</TABLE>
Cash and cash equivalents consist of cash and due from banks. See accompanying
notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars in thousands Shareholders' Equity Shares of Common Stock
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Balance, April 1 $1,216,093 $1,082,439 38,397,409 37,482,661
Net Income 47,384 42,608 - -
Cash dividends declared on common stock (17,095) (15,021) - -
Change in net unrealized gain or loss on securities
available for sale 14,116 (14,566) - -
Common stock purchased and retired (36,807) (9,108) (807,000) (200,000)
Common stock issued:
For acquisition of financial institution 17 12,588 393 264,208
For dividend reinvestment plan 3,435 2,902 80,618 63,223
For performance equity plan 295 - 6,627 -
Upon exercise of stock options (including tax
benefit of $513 in 1995; $577 in 1994) 1,566 2,734 55,714 95,261
Upon conversion of debentures - 108 - 11,670
BALANCE, JUNE 30 $1,229,004 $1,104,684 37,733,761 37,717,023
Balance, January 1 $1,126,065 $1,062,477 37,331,213 37,515,671
Net Income 92,975 83,090 - -
Cash dividends declared on common stock (32,387) (27,404) - -
Cumulative effect of change in accounting for
securities available for sale - 32,209 - -
Change in net unrealized gain or loss on securities
available for sale 33,264 (53,040) - -
Common stock purchased and retired (61,289) (20,277) (1,394,200) (469,700)
Common stock issued:
For acquisition of financial institutions 52,634 12,588 1,317,789 264,208
For dividend reinvestment plan 6,391 5,417 155,701 123,367
For thrift and profit sharing plan 8,263 4,993 207,272 115,770
For directors' stock compensation plan 78 78 2,067 1,859
For performance equity plan 295 - 6,627 -
Upon exercise of stock options (including tax
benefit of $759 in 1995; $868 in 1994) 2,715 4,440 107,292 153,638
Upon conversion of debentures - 113 - 12,210
BALANCE, JUNE 30 $1,229,004 $1,104,684 37,733,761 37,717,023
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crestar Financial Corporation And Subsidiaries
(1) GENERAL
The consolidated financial statements conform to generally accepted
accounting principles and to general practices within the banking industry. The
accompanying interim statements are unaudited; however, in the opinion of
management, all adjustments necessary for a fair presentation of the
consolidated financial statements, including adjustments related to completed
acquisitions, have been included. All adjustments are of a normal nature.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 1995 presentation. The notes included
herein should be read in conjunction with the notes to consolidated financial
statements included in the Corporation's 1994 Annual Report and Form 10-K and
the Corporation's First Quarter 1995 Financial Supplement and Form 10-Q.
During the second quarter of 1995, Crestar adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS
122), effective January 1, 1995. In accordance with SFAS 122, the cost of
mortgage loans purchased or originated, with a definitive plan to sell the loans
and retain the mortgage servicing rights, is allocated between the loans and the
servicing rights based on their estimated fair values at the purchase or
origination date. A definitive plan to sell the loans exists if purchase
commitments, which include estimates of selling price, have been obtained either
prior to the purchase or origination date, or within a reasonable period
thereafter. The estimated fair value of mortgage loans is determined by
reference to quoted prices in active secondary markets. The estimated fair value
of mortgage servicing rights is determined by reference to the bid and ask
prices of recent trades of comparable servicing rights, if available. Otherwise,
such value is based on the expected future cash flows, discounted at a rate
commensurate with the risks involved. These recognition provisions have been
applied prospectively to transactions occurring on or after January 1, 1995.
For the purpose of evaluating and measuring impairment of capitalized
mortgage servicing rights, SFAS 122 requires that such rights be stratified
according to the risk characteristics of the underlying loans. For Crestar, such
characteristics include loan type, origination date and term. Impairment is
recognized through a valuation allowance for each stratum. The amount of
impairment recognized is the amount by which the capitalized mortgage servicing
rights for a stratum exceeds their fair value. Fair value in excess of the
amount capitalized, net of amortization, is not recognized subsequent to the
initial measurement of impairment. These impairment provisions apply to all
capitalized mortgage servicing rights. The initial adoption of these impairment
provisions did not require an increase to Crestar's valuation allowance, nor did
it require a significant change in Crestar's previous valuation techniques.
The effect of this adoption on Crestar's consolidated financial statements
for the three month and six month periods ended June 30, 1995, was an increase
in mortgage origination income of $847,000 and $1,675,000, respectively, with a
corresponding increase in capitalized, originated mortgage servicing rights.
Such additional income resulted from a lower adjusted cost basis, and
corresponding greater gains, on originated mortgage loans sold with servicing
rights retained during the first six months of 1995. The effect of adoption on
the three month period ended March 31, 1995, which was restated to reflect the
January 1, 1995 adoption date, was an increase in mortgage origination income of
$828,000 which, net of applicable income tax expense of $323,000, resulted in a
$.02 increase in earnings per common share for such period (from $1.18 to $1.20
net income per common share). In accordance with SFAS 122, no retroactive
application of its provisions has been made to the consolidated financial
statements for periods prior to January 1, 1995.
Mortgage servicing rights of $18,574,000 and $21,543,000 at June 30, 1995
and 1994, respectively, formerly classified as intangible assets, have been
reclassified as other assets in the consolidated financial statements. Purchased
mortgage servicing rights capitalized during the three months and six months
ended June 30, 1995 were $1.7 million and $6.2 million, respectively. At June
30, 1995, mortgage servicing rights were net of a related valuation allowance of
$213,000. The activity in such valuation allowance, which was unchanged from
March 31, 1995 and had a balance of $174,000 at December 31, 1994, was not
material to the consolidated financial statements for the three months and six
months ended June 30, 1995. The fair value of capitalized mortgage servicing
rights was approximately $30 million at June 30, 1995. Such fair value was
estimated using a discounted cash flow method, with discount rates based on
secondary market sources, adjusted for prepayment estimates and differences in
servicing and credit costs.
For the six months ended June 30, 1995 and 1994, amortization of mortgage
servicing rights of $2.8 million and $3.5 million, respectively, formerly
classified as noninterest expense, has been reclassified as a reduction of
mortgage servicing income, resulting in a net presentation of such income. For
the three months ended June 30, 1995 and 1994, amortization of mortgage
servicing rights of $1.4 million and $1.6 million, respectively, has been
reclassified as a reduction of mortgage servicing income.
<PAGE>
(2) SECURITIES HELD TO MATURITY
The amortized cost (carrying values) and estimated market values of securities
held to maturity at June 30 follow:
<TABLE>
<CAPTION>
In thousands 1995 1994
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 10,197 $ 10,137 $ 10,413 $ 10,221
Mortgage-backed obligations of Federal agencies 558,629 555,733 655,497 636,538
Other taxable securities 190,576 188,107 258,011 252,897
States and political subdivisions 64,153 64,784 72,117 72,383
Total securities held to maturity $ 823,555 $818,761 $ 996,038 $972,039
</TABLE>
(3) SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated market values (carrying values) of securities
available for sale at June 30 follow:
<TABLE>
<CAPTION>
In thousands 1995 1994
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 332,478 $ 330,322 $1,049,084 $1,033,644
Mortgage-backed obligations of Federal agencies 782,352 779,250 730,599 713,696
Other mortgage-backed obligations 272,378 272,203 207,437 207,310
Other taxable securities 5,139 5,141 5,621 5,665
Common and preferred stocks 95,450 95,761 33,738 33,598
Total securities available for sale $1,487,797 $1,482,677 $2,026,479 $1,993,913
</TABLE>
(4) MONEY MARKET INVESTMENTS
Money market investments at June 30 included:
In thousands 1995 1994
Trading account securities $ 4,195 $ 172
Federal funds sold 296,500 414,690
Securities purchased under agreements to resell 210,000 105,000
Domestic time deposits 30 25,138
U.S. Treasury 7,550 698,975
Total money market investments $518,275 $1,243,975
(5) NONPERFORMING ASSETS AND IMPAIRED LOANS
Nonperforming assets at June 30 were:
In thousands 1995 1994
Nonaccrual loans $69,474 $ 77,400
Foreclosed properties -- net 13,631 25,000
Total nonperforming assets $83,105 $102,400
Non-cash additions to foreclosed properties were $3.3 million and $3.6
million in the first six months of 1995 and 1994, respectively.
Effective January 1, 1995, Crestar adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS
114), and No. 118, "Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures" (SFAS 118). In accordance with SFAS 114, impaired
loans are measured and reported based on 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." Impaired
loans are specifically reviewed loans for which it is probable that the creditor
will be unable to collect all amounts due according to the terms of the loan
agreement. A valuation allowance is required to the extent that the measure of
the impaired loans is less than the recorded investment.
SFAS 114 does not apply to larger groups of homogeneous loans such as
consumer instalment, bank card and real estate mortgage loans, which are
collectively evaluated for impairment. Impaired loans are therefore primarily
business loans, which include commercial loans and income property and
construction real estate loans. Smaller balance populations of business loans,
which are not specifically reviewed in accordance with Crestar's normal credit
review procedures, are also excluded from the application of SFAS 114. Crestar's
impaired loans are non-accrual loans, as generally loans are placed in
nonaccrual status on the earlier of the date that principal or interest amounts
are 90 days or more past due or the date that collection of such amounts is
judged uncertain based on an evaluation of the net realizable value of the
collateral and the financial strength of the borrower.
Impaired loans and the applicable valuation allowance at June 30, 1995 were:
In thousands Related
Loan Valuation
Balance Allowance
Impaired with specific valuation allowance $37,570 $ 4,950
Impaired without specific valuation allowance - -
Total impaired loans $37,570 $ 4,950
Collateral dependent loans, which were measured at the fair value of the
collateral, constituted over 80% of impaired loans at June 30, 1995. Remaining
impaired loans were measured based on the present value of expected cash flows.
The valuation allowance for impaired loans at June 30, 1995, and activity
related thereto for the three months and six months ended June 30, 1995, is
included in the allowance for loan losses discussed in note (6).
SFAS 118 allows a creditor to use existing methods for recognizing interest
income on an impaired loan. Consistent with Crestar's method for non-accrual
loans, interest receipts on impaired loans are recognized as interest income or
are applied to principal when the ultimate collectibility of principal is in
doubt. The average recorded investment in impaired loans, the amount of interest
income recognized, and the amount of interest income recognized on a cash basis
during the first six months of 1995 were:
In thousands Six Months Ended June 30, 1995
Average recorded investment in impaired loans $39,680
Interest income recognized during impairment -
Interest income recognized on a cash basis
during impairment -
The balance of impaired loans at January 1, 1995 totaled approximately $40
million. The initial adoption of SFAS 114 and SFAS 118 did not require an
increase to Crestar's allowance for loan losses. The impact of SFAS 114 and SFAS
118 was immaterial to Crestar's consolidated financial statements as of and for
the three months and six months ended June 30, 1995. In accordance with SFAS
114, no retroactive application of its provisions has been made to the
consolidated financial statements for periods prior to January 1, 1995.
(6) ALLOWANCE FOR LOAN LOSSES
The following table sets forth the transactions in the consolidated
allowance for loan losses for the three months and six months ended June 30.
Loan charge-offs to the allowance are made when the loan, or a portion thereof,
is considered uncollectible or is transferred to foreclosed properties.
In thousands Three Months Six Months
1995 1994 1995 1994
Beginning balance $222,702 $226,577 $219,189 $210,958
Charge-offs (18,439) (15,936) (37,427) (34,689)
Recoveries 5,294 7,096 12,064 15,807
Net charge-offs (13,145) (8,840) (25,363) (18,882)
Provision for loan losses 13,500 8,850 23,600 18,882
Allowance from acquisitions -- net (175) 79 5,456 15,708
Net increase 180 89 3,693 15,708
Ending balance $222,882 $226,666 $222,882 $226,666
<PAGE>
(7) INTANGIBLE ASSETS
Intangible assets at June 30 included:
In thousands 1995 1994
Goodwill and deposit base intangibles $159,820 $124,448
Favorable lease rights 528 621
Total intangible assets -- net $160,348 $125,069
Accumulated amortization of goodwill was $28,268,000 and $18,855,000 for 1995
and 1994, respectively.
(8) ALLOWANCE FOR FORECLOSED PROPERTIES
Transactions in the allowance for losses on foreclosed properties for the three
months and six months ended June 30 were:
In thousands Three Months Six Months
1995 1994 1995 1994
Beginning balance $ 8,972 $5,433 $ 7,180 $ 5,574
Provision for foreclosed properties - (390) (500) (645)
Write-downs (3,098) - (4,000) (1,302)
Allowance from acquisitions -- net (500) 4,123 2,694 5,539
Net increase (decrease) (3,598) 3,733 (1,806) 3,592
Ending balance $ 5,374 $9,166 $ 5,374 $ 9,166
(9) SHORT-TERM BORROWINGS
Short-term borrowings, exclusive of deposits, with maturities of less than one
year at June 30 were:
In thousands 1995 1994
Federal funds purchased $ 881,562 $ 411,017
Securities sold under repurchase agreements 380,250 785,452
Notes payable 149,953 128,140
Other 1,954 2,387
Total short-term borrowings $1,413,719 $1,326,996
The Corporation paid $195,673,000 and $149,431,000 in interest on deposits and
short-term borrowings in the first six months of 1995 and 1994, respectively.
(10) LONG-TERM DEBT
Long-term debt at June 30 included:
In thousands 1995 1994
8 3/4% Subordinated notes due 2004 $149,634 $ -
8 1/4% Subordinated notes due 2002 125,000 125,000
8 5/8% Subordinated notes due 1998 49,971 49,960
7-8 1/4% Mortgage indebtedness maturing through 2009 9,742 12,648
8 5/8-14 3/8% Capital lease obligations maturing
through 2006 1,215 2,979
4 3/8-8% Federal Home Loan Bank obligations payable
through 2008 18,841 11,115
6 1/4-11 1/4% Collateralized mortgage obligation
bonds maturing through 2019 30,174 20,717
Total long-term debt $384,577 $222,419
The Corporation made payments of $15,766,000 and $9,134,000 in interest on
long-term debt in the first six months of 1995 and 1994, respectively. There
were no new capital lease agreements in the second quarter of 1995.
<PAGE>
(11) INCOME TAXES
The current and deferred components of income tax expense allocated to
continuing operations in the accompanying consolidated statements of income for
the three months and six months ended June 30 were:
In thousands Three Months Six Months
1995 1994 1995 1994
Current:
Federal $17,557 $20,940 $37,783 $37,185
State and local 390 (256) 1,617 882
Total current tax expense 17,947 20,684 39,400 38,067
Deferred:
Federal 4,922 (542) 7,230 2,098
State and local 438 739 330 313
Total deferred tax expense 5,360 197 7,560 2,411
Total income tax expense $23,307 $20,881 $46,960 $40,478
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 for the three months and six months ended June
30 were:
<TABLE>
<CAPTION>
In thousands Three Months Six Months
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Income before income taxes $70,691 $63,489 $139,935 $123,568
Tax expense at statutory rate 24,742 22,221 48,977 43,249
Increase (decrease) in taxes resulting from:
Tax-exempt interest and dividends (1,916) (1,843) (3,865) (3,558)
Nondeductible interest expense 166 107 314 212
Amortization of goodwill 930 219 1,640 506
State income taxes 538 314 1,266 776
Other -- net (1,153) (137) (1,372) (707)
Total decrease in taxes (1,435) (1,340) (2,017) (2,771)
Total income tax expense $23,307 $20,881 $ 46,960 $ 40,478
Effective tax rate 33.0% 32.9% 33.6% 32.8%
</TABLE>
The Corporation made income tax payments of $41,987,000 and $37,572,000
during the first six months of 1995 and 1994, respectively. At June 30, 1995,
the Corporation had a net deferred income tax asset of $86,361,000. There was no
valuation allowance relating to the net deferred income tax asset. 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.
(12) CONDENSED CRESTAR FINANCIAL CORPORATION (PARENT) INFORMATION
The Parent's Condensed Balance Sheets at June 30 were:
In thousands 1995 1994
Cash in banks $ 37,991 $ 39,231
Securities held to maturity 10,500 11,594
Securities available for sale 68,400 16,587
Securities purchased from subsidiary
under agreements to resell 1,004 908
Other money market investments 115,416 102,912
Notes receivable from subsidiaries 227,464 181,849
Investments in subsidiaries:
Bank subsidiaries 1,283,733 1,099,412
Non-bank subsidiaries 9,133 8,336
Other assets 13,878 11,944
Total Assets $1,767,519 $1,472,773
Securities sold to subsidiary under
repurchase agreements $ 2,016 $ 4,348
Other short-term borrowings 150,024 123,451
Other liabilities 61,870 65,309
Long-term debt 324,605 174,981
Total shareholders' equity 1,229,004 1,104,684
Total Liabilities and Shareholders' Equity $1,767,519 $1,472,773
The Parent's Condensed Statements of Income for the three months and six months
ended June 30 were:
<TABLE>
<CAPTION>
In thousands Three Months Six Months
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Cash dividends from bank subsidiaries $19,007 $23,492 $35,433 $37,110
Interest from subsidiaries 4,780 3,653 9,518 7,304
Interest on securities held to maturity 177 195 373 390
Interest on securities available for sale 671 50 1,294 52
Income on other money market investments 76 52 147 271
Interest on securities purchased under
agreements to resell 1,996 1,083 4,717 1,886
Other income 148 124 148 133
Total income 26,855 28,649 51,630 47,146
Interest on securities sold to
subsidiary under repurchase agreements 41 18 75 28
Interest on other short-term borrowings 1,899 955 3,758 1,629
Interest on long-term debt 6,949 3,657 13,899 7,317
Other expense 591 1,421 701 1,542
Total expense 9,480 6,051 18,433 10,516
Income before income taxes and equity in
undistributed net income of subsidiaries 17,375 22,598 33,197 36,630
Income tax benefit (926) (451) (1,407) (366)
Income before equity in undistributed net income
of subsidiaries 18,301 23,049 34,604 36,996
Equity in undistributed net income of subsidiaries 29,083 19,559 58,371 46,094
Net Income $47,384 $42,608 $92,975 $83,090
</TABLE>
<PAGE>
(13) COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are outstanding commitments,
contingent liabilities and other financial instruments that are not reflected in
the accompanying consolidated financial statements. These include commitments to
extend credit, standby letters of credit, interest rate caps, floors,
collars, swaps, and forward contracts. These items involve varying degrees of
credit and interest rate risk in excess of amounts recorded in the consolidated
balance sheets.
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. Similar to
direct lending, these commitments are subject to the Corporation's loan approval
and review procedures and policies. Based upon management's review, 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. Crestar receives a commitment fee for entering into such agreements.
Legally binding, unfunded commitments to extend credit were $6.2 billion and
$4.9 billion at June 30, 1995 and 1994, respectively.
Standby letters of credit, which are conditional commitments to extend
credit, guarantee the performance of customers to a third party. Crestar's
outstanding standby letters of credit were $350 million and $412 million at June
30, 1995 and 1994, respectively.
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 June 30, 1995, Crestar serviced a
total of $548.7 million of loans for which it had accepted a recourse liability.
Of this amount, approximately $160.2 million was insured by agencies of the
Federal government or private insurance companies.
As a financial institution, Crestar incurs 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 June 30, 1995, Crestar was
participating in interest rate swaps of $1.05 billion which were used to convert
certain floating rate commercial and real estate loans to fixed rates.
Unrealized gross gains and gross losses on such swaps were $267,000 and $15.1
million, respectively, at June 30, 1995. Notional balances of $753.3 million of
such swaps were indexed amortizing swaps, whose notional values amortize more
slowly as rates rise.
Crestar also had $245 million of interest rate cap and $250 million of
interest rate floor agreements outstanding at June 30, 1995, which were used to
minimize interest rate risk associated with certain floating rate deposits and
loans, respectively. Unrealized gross gains and gross losses on such caps and
floors were $5.5 million and $1.4 million, respectively, at June 30, 1995. In
addition, Crestar serves as a financial intermediary in interest rate swap, cap,
floor and collar agreements, providing risk management services to customers; at
June 30, 1995 Crestar had $81.6 million in offsetting swap, $94.3 million in
offsetting cap, and $37.6 million in offsetting collar agreements.
The notional amount of these over-the-counter traded interest rate swaps,
caps, floors and collars does not fully represent Crestar's credit exposure,
which the Corporation believes is a combination of current replacement cost of
approximately $10 million plus an amount for additional market movement. Four
counterparties constituted 19%, 15%, 14% and 13% of the estimated credit and
market exposure of $41 million at June 30, 1995.
During the second quarter of 1995, Crestar terminated an interest rate swap,
having a notional balance of $96.4 million, which hedged certain floating rate
commercial loans. The loss on termination of $2.7 million has been deferred and
will be amortized as a yield adjustment to commercial loans over five years, the
remaining contractual maturity of the swap.
Crestar had $520.4 million of forward agreements outstanding at June 30,
1995, which are primarily used 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.
Certain litigation incidental to its business 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.
<PAGE>
FINANCIAL COMMENTARY
Crestar Financial Corporation And Subsidiaries
OVERVIEW
(Tables 1, 2 and 16)
Crestar Financial Corporation (Crestar) reported net income of $47.4 million
for the quarter ended June 30, 1995, an increase of $4.8 million or 11% over net
income reported in the second quarter of 1994. For the first six months,
earnings were $93.0 million in 1995, an increase of 12% from the $83.1 million
reported in 1994. These increases reflected the continued positive effects of
improved net interest margins, growth in earning assets and noninterest income,
and management of controllable expenses. Earnings per common share were $1.24
for the second quarter of 1995, compared to $1.12 in 1994. For the first six
months of 1995, earnings per common share were $2.44, an increase of 11% from
the $2.19 per share recorded in the first six months of 1994. The predominant
items affecting the change in earnings per share are given in Table 2. Each item
is net of applicable federal income taxes.
Earnings per share for the six month period ended June 30, 1995 reflect a
restatement of the earnings previously reported for the first quarter of 1995,
due to Crestar's implementation of Statement of Financial Accounting Standards
No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122). SFAS No. 122,
issued by the Financial Accounting Standards Board in May 1995, mandates changes
in the accounting for servicing rights on mortgage loans originated for sale.
Crestar's adoption of SFAS 122 as of January 1, 1995 resulted in a restatement
of earnings per common share for the first three months of 1995, from the
previously reported $1.18 per share, to $1.20 per share (see "New Accounting
Standards").
MERGERS AND ACQUISITIONS
Two pending acquisitions were announced by Crestar during the second
quarter. On June 26, Crestar announced that it will purchase all the deposits
and customer accounts, plus selected loans, of six branches of the Chase
Manhattan Bank of Maryland. The transaction will bring to Crestar approximately
$450 million in deposits and $260 million in primarily consumer loans. The
transaction is expected to be completed during the fourth quarter of this year.
On April 28, Crestar announced an agreement to acquire Loyola Capital
Corporation (Loyola), a $2.5 billion-asset thrift institution holding company
headquartered in Baltimore, Maryland. Loyola is the holding company for Loyola
F.S.B., which operates 35 branches, primarily in central Maryland and Maryland's
Eastern Shore, including 15 branches in the Baltimore metropolitan area. Loyola
F.S.B. has total deposits of approximately $1.5 billion. Under terms of the
merger agreement, Loyola shareholders will receive Crestar common stock in
exchange for their Loyola holdings. The total value of the transaction will
approximate $260 million, and is expected to be completed in late 1995 or early
1996. The acquisition is subject to regulatory and Loyola shareholder approval.
PROFITABILITY MEASURES AND CAPITAL RESOURCES
(Table 1)
Increased earnings in both the second quarter and the first six months of
1995 resulted in improvements in key profitability measures over 1994. Return on
average assets was 1.35% in the second quarter and 1.33% for the first six
months of 1995, compared to 1.25% and 1.23%, respectively, for 1994. Return on
average equity was 15.69% for the second quarter of 1995, compared to 15.79% for
the second quarter of 1994. For the first six months of 1995, return on average
equity was 15.64%, compared to 15.31% for the first six months of the previous
year.
Average equity to assets of 8.61% for the second quarter of 1995 increased
71 basis points from 7.90% in the second quarter of 1994, reflecting higher
retained earnings and the impact of common stock issued for first quarter 1995
acquisitions. Average equity to assets for the first six months of 1995 was
8.53%, compared to 8.05% for the same period of 1994. Period-end equity to
assets of 8.40% at June 30, 1995 was 69 basis points above the June 30, 1994
ratio of 7.71%, also reflecting higher earnings and stock issued for
acquisitions.
Risk-based capital ratios are another measure of capital adequacy. At June
30, 1995, Crestar's consolidated risk-adjusted capital ratios were 8.9% for Tier
1 and 12.6% for total capital, well above the required minimums of 4.0% and
8.0%, respectively. The Tier 1 leverage ratio of 7.8% at June 30, 1995 also was
significantly above the regulatory minimum of 3.0%. Crestar's tangible leverage
ratio, defined as total equity less intangible assets divided by total assets
less intangible assets, was 7.4% at June 30, 1995. Under Federal Deposit
Insurance Corporation (FDIC) rules, each of Crestar's three subsidiary banks was
considered "well-capitalized" as of June 30, 1995, the highest category of
capitalization defined by regulatory authorities, allowing for the lowest level
of FDIC insurance premium payments. At June 30, 1995, approximately 60% 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.
<PAGE>
NET INTEREST MARGIN AND NET INTEREST INCOME
(Tables 3 and 17)
Crestar's net interest margin for the second quarter of 1995 was 4.93%, an
improvement of 17 basis points from the margin recorded in the second quarter of
1994. The improvement was due to favorable changes in the composition and yield
of balance sheet earning assets, which offset higher rates paid on deposits and
declines in interest income arising from off-balance sheet hedge transactions.
Changes in the earning asset mix increased the second quarter 1995 net
interest margin by approximately 33 basis points when compared to the second
quarter of 1994. Reflecting the impact of strong marketing efforts, increased
demand and completed bank and thrift acquisitions, loans as a percentage of
total earning assets increased from an average of 67% during the second quarter
of 1994 to 78% for the same period of 1995. Average total loans were $9.7
billion during the second quarter of 1995, compared to $8.2 billion during the
second quarter of 1994. Average bank card loans experienced significant growth,
with second quarter 1995 average balances up $498 million, or 46%, versus the
same period of 1994. The growth in bank card balances reflects Crestar's
promotional efforts outside of Virginia, Maryland and Washington, D.C. Average
consumer real estate loans were up $506 million, or 30%, from second quarter
1994, with average instalment loan balances increasing 16% during this period.
Average business loans for the second quarter were up 5% from prior year
balances, despite a reduction of 19% in average real estate-construction loan
balances, as average commercial loans increased $236 million, or 8%.
Funding for loan growth came in part from reductions in the average balances
of securities available for sale, which declined $717 million when compared to
1994 second quarter average balances. Average money market investments also
decreased, from $680 million in the second quarter of 1994 to $289 million for
the same quarter of 1995. Interest-bearing deposits represented 71% of total
funding sources in the second quarter of 1995, versus 73% of funding sources in
the same period of 1994. A higher rate environment, with increased competitive
pricing for deposits among financial institutions, resulted in decreases in
average balances for regular savings deposits and domestic time deposits, with
average total deposits experiencing a decrease of $94 million, or 1%, from the
second quarter of 1994. Average balances of short-term borrowings and long-term
debt increased by $148 million and $165 million, respectively, during this same
time period. When coupled with the impact of changes to Crestar's earning asset
mix, this resulted in a net 22 basis point improvement in the second quarter
1995 net interest margin arising from changes in Crestar's total balance sheet
mix.
The yield on average loans increased 67 basis points from the second quarter
of 1994, to 8.94%. Higher yields were experienced on all categories of loans,
with the exception of a decline on the average yields earned on Crestar's
expanding credit card loan portfolio, which reflects the effects of promotional
credit card rates. Higher rates on securities available for sale, which were
6.52% in second quarter 1995 versus 5.76% in the same period of 1994, were
partially offset by lower yields on securities held to maturity, which were
6.59% during the second quarter of 1995 versus 7.19% in the same period of 1994.
Yields on money market investments, reflecting steps taken by the Federal
Reserve Bank to increase rates during several of the preceding 18 months, were
6.05% for the second quarter of 1995 versus 3.95% for the second quarter of
1994. Also reflecting the higher rate environment, the average rate paid on
deposits increased in each category of interest-bearing core deposits. The
average rate paid on total interest bearing core deposits increased 70 basis
points, from 3.07% in the second quarter of 1994 to 3.77% in 1995. Increases in
rates paid on deposits, however, have lagged the increases in yields on variable
rate assets, such as prime-rate based loans and money market investments. This
has presented a favorable interest rate environment for many financial
institutions. In total, interest rate spreads had a positive impact of 20 basis
points on Crestar's second quarter 1995 net interest margin, when compared to
the second quarter of 1994.
Off-balance sheet hedge transactions, which had a favorable impact on the
net interest margin in 1994, experienced net negative interest rate spreads
between rates paid and rates received during the second quarter of 1995. In
comparison to second quarter 1994, such off-balance sheet transactions had a
negative impact of 26 basis points on second quarter 1995's net interest margin,
partially offsetting the combined favorable impact on Crestar's net interest
margin of 22 basis points from changes in balance sheet mix and 20 basis points
from favorable changes in interest rates. The impact of nonperforming assets on
second quarter 1995's net interest margin, in comparison to the same period of
1994, was not significant.
The extent to which Crestar will be able to maintain its current,
historically high net interest margin is significantly influenced by the
economic environment in our markets and the economic policy of the Federal
Reserve Board, in addition to competitive market conditions for both loans and
deposits. Competitive pressures, especially with regard to deposit rates, may
lead to decreases in net interest margin in future periods.
As a result of the 17 basis point increase in the net interest margin and a
2% increase in average earning assets, net interest income for the second
quarter of 1995 increased 6% over the second quarter of 1994. Tax-equivalent net
interest income similarly increased by 6% during this period. For the first six
months, tax equivalent net interest income increased 7% over 1994 as a result of
a 17 basis point increase in the net interest margin and a 3% increase in
average earning assets. Factors contributing to the increased year-to-date
margin mirror those previously discussed. Positive changes to the earning asset
mix for the year-to-date period had a favorable impact of 31 basis points, while
changes to the funding mix resulted in an 8 basis point negative impact to the
year-to-date margin. Favorable interest rate spreads for the comparable six
month period increased net interest margin by 24 basis points. Off-balance sheet
hedge transactions had a negative impact on the margin, in comparison to year-
to-date 1994 results, of approximately 31 basis points.
Acquisitions completed during the first quarter of 1995 (Jefferson Savings
and Loan Association, Independent Bank, and TideMark Bancorp, Inc.) added
approximately $3.7 million to Crestar's net interest income for the quarter
ended June 30, 1995. The effect on Crestar's net interest margin for the second
quarter, and the first six months of 1995, from the three acquisitions, while
negative, was not significant.
RISK EXPOSURES AND CREDIT QUALITY
(Tables 4-9)
Crestar's financial condition as of the end of the second quarter of 1995
exhibited satisfactory overall credit quality. The allowance for loan losses was
$223 million at June 30, 1995, representing 2.28% of period-end loans, 268% of
period-end nonperforming assets, and a 321% coverage of nonperforming loans.
Based on current expectations relative to portfolio characteristics and
performance measures, including loss projections, management considers the level
of the allowance adequate.
At June 30, 1995, nonperforming assets of $83.1 million were down $19.3
million or 19% from June 30, 1994, and down $11.8 million from December 31,
1994. These reductions were recorded despite $15.4 million in acquisition-
related balances acquired during the first quarter of 1995. The ratio of
nonperforming assets to loans and foreclosed properties at June 30, 1995 was
0.85%, down from 1.02% at December 31, 1994 and 1.19% at June 30, 1994. Tables 8
and 9 provide details of how nonperforming loans and foreclosed properties have
changed on a quarterly basis since the second quarter of 1994. Based on current
portfolio trends, and barring an unexpected deterioration in the economy,
management does not expect the ratio of non-performing assets to loans and
foreclosed properties to change significantly during the remainder of 1995.
However, interim periods could show increases in the total balance of
nonperforming assets due to loan growth, future acquisitions of financial
institutions, and the effect of higher interest rates on borrowers.
Reflecting the growth of Crestar's consumer loan portfolio, the provision
for loan losses was $13.5 million for the second quarter of 1995, compared to
$8.9 million in provision expense recorded in the second quarter of 1994. Net
charge-offs totaled $13.1 million in the second quarter of 1995, compared to
$8.8 million in the comparable period of 1994. Net charge-offs as a percentage
of average loans were 0.54% for the second quarter of 1995, compared to 0.52%
for the first quarter of 1995 and 0.43% in the second quarter of 1994. The
largest proportion of net loan charge-offs during the second quarter of 1995
occurred in the bank card loan portfolio. Net charge-offs for bank card loans
were $12.2 million for the three months ended June 30, 1995, compared to $5.7
million in 1994's second quarter. This increase in bank card net charge-offs is
in part attributable to the growth of Crestar's bank card loan portfolio. A
higher interest rate environment has also contributed to increased bankcard
charge-off levels. Crestar's expectations are that the ratio of net charge-offs
to average total loans for the full year 1995 will increase from the level
experienced 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 efforts to resolve remaining nonperforming loans. Changes in these
conditions may produce different results. Net charge-offs to average total loans
were 0.45% in 1994 and 0.95% in 1993.
In addition to other loan categories, Crestar closely manages its portfolio
of loans to real estate developers and investors (REDI). Table 5 provides the
property type and geographic diversification of the current REDI portfolio. As
shown in Table 4, despite additions to REDI loans caused by acquisitions of
financial institutions, REDI outstanding balances remained fairly constant and
totaled $1.1 billion at June 30, 1995. This balance represented 11% of the total
loan portfolio at that date. At June 30, 1994, REDI loans represented 13% of the
total loan portfolio. REDI nonperforming assets were $48.3 million at June 30,
1995, compared to $59.1 million at December 31, 1994 and $62.1 at June 30, 1994.
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 June 30, 1995, potential problem loans, not included in Table 7, amounted to
approximately $194 million. Potential problem loans were $210 million at
December 31, 1994 and $168 million at June 30, 1994. Increases in potential
problem loans, which are primarily commercial credits, should be viewed in the
context of Crestar's increase in commercial loans outstanding from June 30, 1994
to June 30, 1995.
NONINTEREST INCOME AND EXPENSE
(Table 10)
Noninterest income totaled $70.1 million in the second quarter of 1995, a
$3.6 million or 5% increase over the second quarter period of 1994. Excluding
securities losses, noninterest income increased $4.6 million or 7% over second
quarter 1994 results. This increase reflects growth in most noninterest income
categories, partially offset by a decline in mortgage income. Reflecting
promotional activities and increased merchant fee volume, bank card-related fee
income increased by $2.7 million, or 29%, in comparison to the second quarter of
1994. Trust and investment advisory income increased 5% from second quarter 1994
levels, while service charges on deposit accounts increased 3% in comparison to
the second quarter of 1994. A higher interest rate environment negatively
affected mortgage origination and servicing income. Mortgage income for the
second quarter of 1995 totaled $4.9 million, or $6.8 million less than the
results reported in the second quarter of 1994. Gains on sale of mortgage
servicing rights totaled $6.2 million in the second quarter of 1994, while there
were no such sales in the second quarter of 1995. During the second quarter of
1995, Crestar recorded a gain of $4.3 million from the annuitization of certain
pension obligations. This gain is included in "Other income" on the consolidated
statement of income.
Noninterest expense was relatively unchanged in the second quarter of 1995
when compared to the same period of 1994, totaling $139.0 million for the three
month period ended June 30, 1995 versus $139.1 million for the same period of
1994. Management continues to emphasize prudent control of noninterest expenses
and assimilation of recent acquisitions in a cost-effective manner. Second
quarter 1995 expenses arising from three first quarter 1995 acquisitions
approximated $4.9 million. Additional expenses incurred in the second quarter of
1995 related to Crestar's acquisitions completed in the first half of 1994
approximated $6.3 million. In the first six months of 1994, Crestar completed
six purchase acquisitions, which led to incremental noninterest expenses in the
second quarter of 1994 of approximately $8.1 million. Excluding these merger
related costs from second quarter 1995 and 1994 results, noninterest expenses
demonstrated a 2% decrease for the three month period ended June 30, 1995 in
comparison to the same period of 1994.
Reflecting improved credit conditions and real estate markets, foreclosed
properties expense for the quarter ended June 30, 1995 was $0.7 million,
compared to a $0.9 million expense in the quarter ended June 30, 1994. For the
six month period ended June 30, 1995, foreclosed properties expense totaled a
net credit of $0.9 million, with the credit balance arising from net gains
recorded on the sale of foreclosed properties during the first quarter of 1995.
Foreclosed properties expense for the six months ended June 30, 1994 was $0.9
million.
The effective tax rate for second quarter 1995 and the first six months was
33.0% and 33.6%, respectively, compared to 32.9% and 32.8% for 1994. Increased
provisions for state income taxes and higher amortization of goodwill, which is
non-deductible for tax purposes, contributed to the higher effective tax rates
for 1995. Financial statement note 11 contains additional information concerning
income taxes.
FINANCIAL CONDITION
(Table 11)
Crestar's assets totaled $14.6 billion at June 30, 1995, compared to $14.0
billion in assets at December 31, 1994, and $14.3 billion at June 30, 1994. The
increase from year-end 1994 is primarily due to acquisitions completed during
the first quarter of 1995. Loans net of unearned income increased $511 million,
or 5%, from year-end 1994 levels, reflecting growth from a combination of
acquisitions and internally generated lending. Total deposits increased $204
million or 2% over December 31, 1994 balances. Despite the impact of
acquisitions completed during the first quarter, total deposits were up only
marginally from year-end 1994, as a higher interest rate environment and
increased competition for deposits resulted in declines in some deposit
categories, including interest checking and regular saving deposits.
With respect to the securities held to maturity portfolio, carrying value
exceeded the market value at June 30, 1995 by $4.8 million, consisting of $3.5
million in unrealized gains and $8.3 million in unrealized losses. At June 30,
1995, the amortized cost of securities available for sale exceeded the fair
value of such securities by $5.1 million, consisting of $6.0 million in
unrealized gains and $11.1 million in unrealized losses. Shareholders' equity at
June 30, 1995 reflects a $3.3 million reduction for the excess, net of tax, of
amortized cost of securities available for sale over the fair value at quarter-
end, compared to reductions of $36.6 million and $20.8 million at December 31,
1994 and June 30, 1994, respectively. The net unrealized gain or loss on
securities available for sale, which is recorded as a component of shareholders'
equity, will continue to be subject to change in future periods due to
fluctuations in market value, acquisition activities, and purchases, sales,
maturities and calls of securities classified as available for sale.
During the second quarter of 1995, Crestar sold approximately $400 million
of securities classified as available for sale, generating securities losses of
$1.1 million. Such sales were consummated as part of the overall management of
interest rate risk for the Corporation.
Crestar purchased and retired 807,000 shares of common stock during the
second quarter of 1995, and has purchased and retired 1.4 million shares of
common stock during the first six months of 1995. Such purchases were primarily
made to offset common stock issued in the three acquisitions completed during
the first quarter of 1995. Purchases during the second quarter of 1995 were made
at an average price of $45.61 per common share. As of June 30, 1995, Crestar had
a remaining Board of Directors' authorization to purchase and retire up to 1.3
million shares of common stock in order to meet the needs of the dividend
reinvestment plan, thrift and profit sharing plan and the first quarter 1995
issuances related to acquisitions.
In April, Crestar announced a common stock dividend increase to $.45 per
share, effective with the dividend disbursed on May 19, 1995. This represented
a 12.5% increase over the previous quarterly rate of $.40 per share.
Debt ratings are presented in Table 11. On August 4, 1995, Thomson BankWatch
raised its rating on Crestar's subordinated notes from BBB+ to A -.
LIQUIDITY AND INTEREST SENSITIVITY
(Tables 12-15)
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 securities, and the ability to generate new deposits or
borrowings as needed. Crestar's liquidity position is actively managed and
monitored regularly by the Asset/Liability Management Committee (ALCO). 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.
Core deposits provide a typically stable source of liquidity. Crestar's
interest-bearing core deposits represented 68% of total funding sources at June
30, 1995, compared to 69% of total funding sources at June 30, 1994. As an
additional indication of adequate liquidity, securities available for sale
represented 11%, and money market investments represented 4%, of Crestar's total
earning assets at June 30, 1995.
Interest sensitivity refers to the volatility of net interest income 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.
ALCO establishes limits on the earnings at risk for a twenty-four month period.
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 a consensus interest rate forecast, in
addition to high and low interest rate scenarios. 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 consensus scenario. At June
30, 1995, Crestar's projection of pre-tax earnings at risk, as a percentage of
the next twenty-four month's projected net interest income under the consensus
scenario, is approximately 3% for a high interest rate scenario, and 4% for a
low, or falling, interest rate scenario. The net interest income at risk
percentage does not consider all possible future discretionary actions,
including possible 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. A gap schedule is shown in Table 12, and reflects the earlier of the
maturity or repricing dates for various assets and liabilities at June 30, 1995.
At that point in time, Crestar had a cumulative negative six-month gap with $2.6
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 12 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 demand deposit balances to the level of interest
rates. On a cumulative six-month basis, Crestar had an asset sensitive "adjusted
gap" at June 30, 1995, with $299 million excess of interest-sensitive uses of
funds over sources of funds. The static gap and adjusted gap do not include $250
million (notional amount) of interest rate floors which Crestar has added to
potentially offset the effect that falling interest rates would have on $250
million of variable rate loans. In addition, Crestar has $245 million (notional
amount) of interest rate caps to potentially offset the effect of rising
interest rates on variable rate deposits.
Each of the three tools used to assess interest rate risk have strengths and
weaknesses. While Crestar believes that the 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 June 30, 1995 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, which the
Corporation believes is a combination of current replacement cost of those
instruments with a positive market value plus an amount for additional market
movement. 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 June 30, 1995, and Crestar has never experienced any
charge-offs related to the credit risk of derivative transactions.
During the second quarter of 1995, the Corporation terminated prior to
maturity an interest rate swap being utilized as a hedge against interest rate
risk. The loss upon termination has been deferred and is being amortized as a
yield adjustment over five years, the remaining term of the terminated swap
contract. At June 30, 1995, the unamortized balance of the deferred loss was
$2.7 million. The termination reflects a decision by ALCO to refine balance
sheet management strategies; additional terminations of interest rate swaps
prior to maturity may occur in the future in response to modifications of
interest rate risk management strategies.
The notional amount of Crestar's interest rate swaps, caps and floors
(excluding customer positions where Crestar acts as an intermediary) was $1.6
billion at June 30, 1995. Forward contracts with a notional amount of $520
million, primarily utilized to hedge lending commitments of Crestar's mortgage
banking subsidiary, were also outstanding at June 30, 1995, bringing the total
notional value of derivative financial instruments related to interest rate risk
management activities to $2.1 billion at June 30, 1995. Tables 13, 14, and 15
present information regarding fair values, maturity, average rates, and activity
as of and for the six month period ending June 30, 1995 for these off-balance
sheet derivative instruments. Net unrealized losses on these instruments totaled
$13.0 million as of June 30, 1995. Financial statement note 13 contains
additional information pertaining to these types of agreements.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" (SFAS 122) in May 1995. SFAS 122 requires that the cost of mortgage
loans originated or purchased with a definitive plan to sell the loans and
retain the servicing rights, be allocated between the loans and servicing rights
based on their estimated fair values at the purchase or originating date. In
compliance with the guidelines of SFAS 122, Crestar elected to adopt the new
accounting standard effective January 1, 1995. The provisions of SFAS 122 have
been applied prospectively to transactions occurring on or after January 1,
1995.
The effects of adopting SFAS 122 on Crestar's consolidated financial
statements for the three and six month periods ended June 30, 1995 were
increases in mortgage origination income of $847,000 and $1,675,000,
respectively, with corresponding increases in mortgage servicing rights
(classified as Other assets in the Consolidated Balance Sheets). Such additional
income resulted from a lower adjusted cost basis on mortgage loans sold by the
Company's mortgage servicing subsidiary during the first six months of 1995.
Adopting SFAS 122 as of January 1, 1995 resulted in a restatement of net income
per common share for the three months ended March 31, 1995, from the previously
reported $1.18, to $1.20 net income per common share. See Footnote (1) in the
consolidated financial statements for further information on SFAS 122.
The FASB issued Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (SFAS 114) in 1993. SFAS 114
was further amended by the FASB in 1994 through the issuance of Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan-Income Recognition and Disclosures" (SFAS 118). Effective January 1,
1995, SFAS 114, as amended by SFAS 118, requires that an impaired loan 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. Impaired loans are
specifically reviewed loans for which it is probable that the creditor will be
unable to collect all amounts due according to the terms of the loan agreement.
SFAS 118 allows a creditor to use existing methods for recognizing interest
income on an impaired loan. For Crestar's nonaccrual loans, including impaired
loans, interest receipts are recognized as interest revenue or are applied to
principal when management believes the ultimate collectibility of principal is
in doubt.
At June 30, 1995, impaired loans of $38 million were included in the
nonaccrual loan balances of Crestar. The balance of impaired loans at January 1,
1995 totaled $40 million. Because the majority of loans deemed impaired during
the first and second quarters were collateral dependent, valuations of impaired
loans did not vary materially from the values previously assigned to this
population of loans. The initial adoption of the new accounting standard did not
require an increase to Crestar's allowance for loan losses. The impact of
adopting SFAS 114, as amended by SFAS 118, was therefore immaterial to the
financial condition and operations of Crestar as of and for the six month period
ended June 30, 1995. The adoption had no impact on the comparability of data
regarding risk exposures and credit quality, disclosed in Tables 4-9.
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," was issued in March 1995. The Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by a company be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the company should estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. An impairment
loss would be recognized if the sum of the expected future cash flows,
undiscounted, is less than the carrying amount of the asset. The Statement also
establishes standards for recording an impairment loss for certain assets that
are subject to disposal. The Statement excludes financial instruments, long-term
customer relationships of financial institutions, mortgage and other servicing
rights, and deferred tax assets. Adoption of the new accounting standard is
expected to occur on January 1, 1996. At this time, Crestar does not expect any
impact to the Corporation's net income upon implementation of SFAS 121.
<PAGE>
TABLE 1 FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Dollars in millions, except per share data Three Months Six Months
% %
FOR THE PERIOD ENDED JUNE 30 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 47.4 $ 42.6 11 $ 93.0 $ 83.1 12
Dividends Declared on Common Stock 17.1 15.0 14 32.4 27.4 18
Per Common Share:
Net Income $ 1.24 $ 1.12 11 $ 2.44 $ 2.19 11
Dividends Declared .45 .40 13 .85 .73 16
Average Shares Outstanding (000s) 38,173 37,930 1 38,134 37,901 1
KEY RATIOS
Return on Average Assets 1.35% 1.25% 1.33% 1.23%
Return on Average Equity 15.69 15.79 15.64 15.31
Average Equity to Average Assets 8.61 7.90 8.53 8.05
Net Interest Margin 4.93 4.76 4.94 4.77
AT JUNE 30
Book Value Per Share 32.57 29.29 11
Equity to Assets 8.40% 7.71%
Risk Adjusted Capital Ratios:
Tier I 8.9 9.3
Total 12.6 12.0
Common Shares Outstanding (000s) 37,734 37,717
</TABLE>
TABLE 2 ANALYSIS OF PRIMARY EARNINGS PER SHARE
2nd Qtr. 1995 2nd Qtr. 1995
vs. vs.
2nd Qtr. 1994 1st Qtr. 1995
Earnings Per Share -- prior period $1.12 $1.20
Interest income .58 .13
Interest expense (.43) (.10)
Provision for loan losses (.08) (.06)
Securities gains or losses (.02) .02
Other noninterest income .05 .08
Foreclosed properties expense . - (.04)
Other noninterest expense .03 . -
Income taxes . - .02
Increased shares outstanding (.01) (.01)
Net increase .12 .04
Earnings Per Share -- current period $1.24 $1.24
<PAGE>
TABLE 3 AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS(1)
Dollars in thousands
<TABLE>
<CAPTION>
2nd Qtr. 1st Qtr.
Average
Average Balance Increase Balance
1995 1994 (Decrease) 1995
<S> <C> <C> <C> <C>
$ $ % $
3,017,662 2,782,059 8 2,999,159 Commercial
802,250 796,840 1 764,086 Real estate -- income property
182,905 225,441 (19) 187,239 Real estate -- construction
1,967,956 1,700,077 16 1,891,141 Instalment
1,573,073 1,075,560 46 1,492,890 Bank card
2,174,101 1,668,081 30 2,113,239 Real estate -- mortgage
9,717,947 8,248,058 18 9,447,754 Total loans -- net of unearned income2
852,398 953,249 (11) 887,414 Securities held to maturity
1,411,687 2,129,177 (34) 1,449,623 Securities available for sale
289,402 680,182 (57) 457,579 Money market investments
254,491 308,872 (18) 191,346 Mortgage loans held for sale
12,525,925 12,319,538 2 12,433,716 Total earning assets
1,868,312 1,893,459 (1) 1,874,912 Interest checking deposits
2,482,634 2,409,660 3 2,432,572 Money market deposit accounts
1,310,929 1,446,340 (9) 1,369,262 Regular savings deposits
3,187,239 3,263,356 (2) 3,042,769 Domestic time deposits
8,849,114 9,012,815 (2) 8,719,515 Total interest-bearing core deposits
1,227,230 1,061,155 16 1,329,862 Purchased liabilities
384,971 220,094 75 368,133 Long-term debt
10,461,315 10,294,064 2 10,417,510 Total interest-bearing liabilities
2,064,610 2,025,474 2 2,016,206 Other sources -- net
12,525,925 12,319,538 2 12,433,716 Total sources of funds
Net Interest Income
</TABLE>
(1) Tax-equivalent basis.
(2) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis.
(3) Includes tax-equivalent net loan fees of $382,000 and $670,000 for the
second quarter of 1995 and 1994, respectively, and $373,000 for the first
quarter of 1995.
<TABLE>
<CAPTION>
2nd Qtr.
1995 vs. 1994 2nd Qtr. 1995 vs. 1st Qtr/ 1995
1st Qtr.
Income/Expense(3) Change due to(4) Income/ Change due to(4)
Increase Expense(3) Increase
1995 1994 (Decrease) Rate(5) Volume 1995 (Decrease) Rate(5) Volume
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $ $ $
63,828 54,069 9,759 5,240 4,519 61,829 1,999 1,624 375
17,132 16,295 837 728 109 16,294 838 33 805
4,420 4,448 (28) 810 (838) 4,497 (77) 27 (104)
46,104 34,235 11,869 6,385 5,484 42,751 3,353 1,625 1,728
45,169 32,547 12,622 (2,105) 14,727 43,077 2,092 (196) 2,288
41,303 29,511 11,792 2,870 8,922 39,825 1,478 339 1,139
217,956 171,105 46,851 16,567 30,284 208,273 9,683 3,787 5,896
14,036 16,977 (2,941) (1,137) (1,804) 14,805 (769) (185) (584)
22,942 30,869 (7,927) 2,819 (10,746) 23,607 (665) (47) (618)
4,363 6,706 (2,343) 1,510 (3,853) 6,544 (2,181) 224 (2,405)
5,127 5,453 (326) 634 (960) 3,810 1,317 60 1,257
264,424 231,110 33,314 29,443 3,871 257,039 7,385 5,494 1,891
10,489 10,405 84 222 (138) 10,453 36 73 (37)
24,183 15,622 8,561 8,088 473 22,610 1,573 1,108 465
9,165 9,393 (228) 651 (879) 9,461 (296) 107 (403)
39,019 33,406 5,613 6,381 (768) 33,379 5,640 4,074 1,566
82,856 68,826 14,030 15,286 (1,256) 75,903 6,953 5,817 1,136
17,574 9,952 7,622 6,058 1,564 18,815 (1,241) 202 (1,443)
8,173 4,665 3,508 14 3,494 7,861 312 (48) 360
108,603 83,443 25,160 23,799 1,361 102,579 6,024 5,591 433
108,603 83,443 25,160 23,756 1,4O4 102,579 6,024 5,260 764
155,821 147,667 8,154 5,687 2,467 154,460 1,361 234 1,127
</TABLE>
(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.
<PAGE>
TABLE 4 LOANS TO REAL ESTATE DEVELOPERS AND INVESTORS (REDI)
In millions June 30, March 31, December 31,
1995 1994 1995 1994
Commercial -- developer lines $ 78.6 $ 87.5 $ 91.4 $ 98.7
Commercial -- other 63.2 75.7 64.7 67.7
Real estate -- income property 794.3 784.8 815.3 744.9
Real estate -- construction 134.4 200.8 145.8 152.0
Total REDI loans $1,070.5 $1,148.8 $1,117.2 $1,063.3
TABLE 5 LOANS TO REAL ESTATE DEVELOPERS AND INVESTORS--
GEOGRAPHIC DISTRIBUTION AND PROPERTY TYPE
June 30, 1995
In millions
<TABLE>
<CAPTION>
Region
Total Greater
Corporation Washington Eastern Western Capital
<S> <C> <C> <C> <C> <C>
Land acquisition and development $ 86.6 $ 48.7 $ 27.2 $ 5.1 $ 5.6
Residential developments 243.7 127.8 70.2 39.5 6.2
Commercial projects:
Office buildings 152.4 96.1 31.1 12.0 13.2
Retail stores and malls 208.9 150.4 42.8 8.2 7.5
Hotels and motels 120.9 43.4 47.0 22.8 7.7
Industrial buildings 123.8 90.0 14.3 4.0 15.5
Total commercial projects 606.0 379.9 135.2 47.0 43.9
Special use 54.8 25.2 14.3 13.5 1.8
Other 79.4 58.5 14.6 1.7 4.6
Total REDI loans $1,070.5 $640.1 $261.5 $106.8 $62.1
</TABLE>
TABLE 6 ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Dollars in thousands Second Quarter Six Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Beginning balance $222,702 $226,577 $219,189 $210,958
Allowance from acquisitions - net (175) 79 5,456 15,708
Provision for loan losses 13,500 8,850 23,600 18,882
Net charge-offs (recoveries):
Commercial (228) 2,321 420 3,196
Real estate -- income property (74) (619) 285 3,914
Real estate -- construction (403) 76 (966) (768)
Instalment 1,384 1,016 3,029 1,636
Bank card 12,211 5,709 22,160 10,282
Real estate -- mortgage 255 337 435 622
Total net charge-offs 13,145 8,840 25,363 18,882
Balance, June 30 $222,882 $226,666 $222,882 $226,666
Allowance for loan losses to
period-end loans 2.28% 2.64% 2.28% 2.64%
Annualized net charge-offs to
average loans .54 .43 .53 .48
</TABLE>
<PAGE>
TABLE 7 NONPERFORMING ASSETS AND PAST DUE LOANS
Dollars in thousands June 30, December 31,
Nonaccrual loans: 1995 1994 1994
Commercial $26,792 $ 34,698 $28,708
Real estate -- income property 25,907 25,145 21,872
Real estate -- construction 6,030 5,921 7,279
Instalment 2,738 1,162 3,408
Real estate -- mortgage 8,007 10,474 8,139
Total nonaccrual loans 69,474 77,400 69,406
Restructured loans - - 6,878
Total nonperforming loans 69,474 77,400 76,284
Foreclosed properties -- net 13,631 25,000 18,629
Total nonperforming assets $83,105 $102,400 $94,913
Past due loans:
Commercial $ 3,425 $ 4,170 $ 1,608
Real estate -- income property 1,041 974 1,071
Real estate -- construction 1,083 140 198
Instalment
Student 8,932 6,533 14,705
Other 2,589 2,905 1,368
Bank card 12,914 6,850 10,831
Real estate -- mortgage 8,857 11,724 5,920
Total past due loans $38,841 $ 33,296 $35,701
Nonperforming assets to:
Loans and foreclosed properties -- net .85% 1.19% 1.02%
Total assets .57 .71 .68
Allowance for loan losses to:
Nonperforming assets 268 221 231
Nonperforming loans 321 293 287
Allowance for loan losses plus shareholders'
equity to nonperforming assets 17.47x 13.00x 14.17x
TABLE 8 NONPERFORMING LOANS-QUARTERLY ACTIVITY
<TABLE>
<CAPTION>
In millions Three Months Ended
1995 1994
June 30 Mar. 31 Dec. 31 Sept. 30 June 30
<S> <C> <C> <C> <C> <C>
Beginning balance $ 73.0 $ 76.3 $ 62.9 $ 77.4 $ 89.5
Acquisition additions .- 8.7 .- .- 4.0
Other additions 7.9 12.3 27.6 20.9 19.2
Payments, sales and reductions (5.9) (8.5) (10.0) (18.9) (22.1)
Charge-offs (2.0) (4.7) (2.7) (4.8) (6.6)
Reinstatements to accrual status (1.0) (10.3) (0.8) (5.5) (4.1)
Transfers to foreclosed properties (2.5) (0.8) (0.7) (6.2) (2.5)
Net increase (decrease) (3.5) (3.3) 13.4 (14.5) (12.1)
Ending balance $ 69.5 $ 73.0 $ 76.3 $ 62.9 $ 77.4
</TABLE>
TABLE 9 FORECLOSED PROPERTIES-QUARTERLY ACTIVITY
<TABLE>
<CAPTION>
In millions Three Months Ended
1995 1994
June 30 Mar. 31 Dec. 31 Sept. 30 June 30
<S> <C> <C> <C> <C> <C>
Beginning balance $ 21.7 $ 18.6 $ 23.6 $ 25.0 $ 24.5
Acquisition additions - net .5 6.7 .- .- 6.1
Other additions 3.1 2.0 1.5 7.4 2.7
Market write-downs (0.1) .- (0.2) (0.1) (0.2)
Reductions (11.6) (6.1) (6.3) (7.7) (8.1)
Provision for losses .- .5 .- (1.0) .-
Net increase (decrease) (8.1) 3.1 (5.0) (1.4) .5
Ending balance $ 13.6 $ 21.7 $ 18.6 $ 23.6 $ 25.0
</TABLE>
TABLE 10 SUMMARY OF NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
In thousands
First Six Months Ended
Second Quarter Quarter June 30,
NONINTEREST INCOME 1995 1994 1995 1995 1994
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 21,765 $ 21,116 $ 21,591 $ 43,356 $ 41,895
Trust and investment advisory 15,151 14,441 13,538 28,689 29,444
Bank card-related 11,919 9,247 11,058 22,977 16,975
Mortgage servicing - net 2,722 3,485 3,080 5,802 6,418
Mortgage origination - net 2,151 1,921 783 2,934 5,968
Trading account activities 657 302 624 1,281 395
Commissions on letters of credit 1,059 1,352 1,274 2,333 2,750
Gain on sale of mortgage servicing rights - 6,230 5,900 5,900 9,332
Gain on pension settlement 4,340 - - 4,340 -
Miscellaneous 11,378 8,481 8,692 20,070 16,704
Securities losses (1,050) (49) (2,410) (3,460) (1,767)
Total noninterest income $ 70,092 $ 66,526 $ 64,130 $134,222 $128,114
NONINTEREST EXPENSE
Salaries $ 60,876 $ 60,735 $ 61,196 $122,072 $119,925
Benefits 15,432 15,257 15,120 30,552 30,864
Total personnel 76,308 75,992 76,316 152,624 150,789
Occupancy - net 10,616 10,061 10,960 21,576 20,855
Equipment 6,904 6,069 7,012 13,916 11,997
Communications 7,074 6,086 7,214 14,288 12,097
Stationery, printing and supplies 1,956 2,250 2,106 4,062 4,095
Professional fees and services 2,522 3,318 3,375 5,897 5,807
Loan expense 1,933 2,876 1,843 3,776 5,624
FDIC premiums 6,644 6,402 6,369 13,013 12,287
Advertising and marketing 3,811 4,623 4,360 8,171 8,481
Transportation 1,505 1,451 1,491 2,996 2,879
Outside data services 4,879 4,729 5,008 9,887 9,189
Amortization of purchased intangibles 3,429 3,475 2,800 6,229 6,437
Miscellaneous 10,728 10,900 9,165 19,893 19,829
Subtotal 138,309 138,232 138,019 276,328 270,366
Foreclosed properties 694 884 (1,549) (855) 893
Total noninterest expense $139,003 $139,116 $136,470 $275,473 $271,259
</TABLE>
TABLE 11 DEBT RATINGS
(AS OF AUGUST 8, 1995)
Standard Thomson
Security Moody's & Poor's BankWatch
8 3/4% Subordinated Notes due 2004 Baa1 BBB+ A-
8 1/4% Subordinated Notes due 2002 Baa1 BBB+ A-
8 5/8% Subordinated Notes due 1998 Baa1 BBB+ A-
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
TABLE 12 INTEREST SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
June 30, 1995
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 $ 2,236.3 $ 54.3 $ 71.8 $ 80.1 $ 657.4 $ 3,099.9
Real estate - income property 332.9 3.9 22.2 69.5 365.8 794.3
Real estate - construction 141.6 1.0 4.2 2.0 30.3 179.1
Instalment 779.2 47.4 270.5 138.0 758.7 1,993.8
Bank card 450.6 42.7 83.4 173.0 855.7 1,605.4
Real estate - mortgage 102.8 162.1 371.3 647.0 840.5 2,123.7
Securities held to maturity 35.9 37.1 67.5 114.5 568.6 823.6
Securities available for sale 280.5 79.3 78.3 139.6 905.0 1,482.7
Money market investments 513.3 .1 4.9 - - 518.3
Mortgage loans held for sale 352.0 - - - - 352.0
Total earning assets 5,225.1 427.9 974.1 1,363.7 4,982.0 12,972.8
Interest sensitivity hedges on
assets (750.0) (290.6) 78.3 123.6 838.7 -
Total uses $ 4,475.1 $ 137.3 $ 1,052.4 $ 1,487.3 $5,820.7 $12,972.8
SOURCES OF FUNDS
Interest checking deposits $ 1,858.0 $ - $ - $ - $ - $ 1,858.0
Money market deposit accounts 2,486.0 - - - - 2,486.0
Regular savings deposits 1,284.8 - - - - 1,284.8
Domestic time deposits 306.6 354.4 533.1 1,034.1 973.5 3,201.7
Certificates of deposit
$100,000 and over 24.6 15.7 12.8 8.8 5.7 67.6
Short-term borrowings 1,413.7 - - - - 1,413.7
Long-term debt 5.1 .3 .3 3.6 375.3 384.6
Total interest-bearing
liabilities 7,378.8 370.4 546.2 1,046.5 1,354.5 10,696.4
Other sources - net - - - - 2,276.4 2,276.4
Total sources $ 7,378.8 $ 370.4 $ 546.2 $ 1,046.5 $3,630.9 $12,972.8
Cumulative maturity/
rate sensitivity gap $(2,903.7) $(3,136.8) $(2,630.6) $(2,189.8) $ - $ -
ADJUSTMENTS
Beta adjustments:
Interest checking
(beta factor .18) $ 1,523.5
Money market accounts
(beta factor .55) 1,118.7
Regular savings
(beta factor .12) 1,130.7
Demand deposit sensitivity (843.1)
Cumulative adjusted maturity/
rate sensitivity gap $ 26.1 $ (207.0) $ 299.2 $ 740.0 $ - $ -
</TABLE>
TABLE 13 OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS(1)
<TABLE>
<CAPTION>
June 30, 1995
Dollars in thousands Weighted Average
Average Fixed Unrealized
Notional Expected Receive Gain
Balance Maturity Rate (Loss) Comments
<S> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS
Generic interest rate swaps $ 300,000 2.4 yrs. 5.83% Convert floating rate
Unrealized gross gains $ 205 loans to fixed rate.
Unrealized gross losses (3,200)
Net unrealized loss (2,995)
Amortizing interest rate swaps 753,270 .6 yrs. 5.12% Convert floating rate
Unrealized gross gains 62 loans to fixed rate.
Unrealized gross losses (11,905)
Net unrealized loss (11,843)
Interest rate caps 245,000 1.8 yrs. 7.49%(2) Minimize interest rate
Unrealized gross gains 20 risk associated with
Unrealized gross losses (1,391) rising rates on floating
Net unrealized loss (1,371) rate deposits. Tied to
London Interbank
Offered Rate (LIBOR).
Interest rate floors 250,000 2.7 yrs. 6.80%(3) Minimize interest rate
Unrealized gross gains 5,477 risk associated with
Unrealized gross losses - falling rates on floating
Net unrealized gain 5,477 rate loans. Tied to
London Interbank
Offered Rate (LIBOR).
HEDGES OF LENDING COMMITMENTS
Forward contracts 520,418 .1 yrs. n/a Hedges of residential
Unrealized gross gains 881 mortgage lending
Unrealized gross losses (2,955) commitments.
Net unrealized loss (2,074)
Total hedges against
interest rate risk $2,068,688 $ (12,806)
</TABLE>
(1) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
(2) Represents average strike rate. For interest rate caps purchased, Crestar
will receive interest if a specified market index rate rises above a fixed
strike rate duing the term of the contract. Any interest received is based
on the difference between a higher index interest rate and the contractual
cap rate, applied to the underlying notional balance. No interest payments
are received if the index rate ramains below the cap rate.
(3) Represents average strike rate. For interest rate floors purchased, Crestar
will receive interest if a specified market index rate falls below a fixed
strike rate duing the term of the contract. Any interest received is based
on the difference between a lower index interest rate and the contractual
floor rate, applied to the underlying notional balance. No interest payments
are received if the index rate ramains above the floor rate.
n/a - Not applicable.
TABLE 14 OFF-BALANCE SHEET DERIVATIVES-EXPECTED MATURITIES(1)
<TABLE>
<CAPTION>
June 30, 1995
Dollars in thousands Within One to Three to
One Year Three Years Five Years Total
<S> <C> <C> <C> <C>
ASSET RATE CONVERSIONS
Generic interest rate swaps:
Notional amount $ 100,000 $ - $ 200,000 $ 300,000
Average fixed receive rate 6.32% - 5.59% 5.83%
Unrealized gain (loss) $ 205 $ - $ (3,200) $ (2,995)
Amortizing interest rate swaps:
Notional amount $ 753,270 $ - $ - $ 753,270
Average fixed receive rate 5.12% - - 5.12%
Unrealized gain (loss) $ (11,843) $ - $ - $ (11,843)
Interest rate caps
Notional amount $ 5,000 $ 235,000 $ 5,000 $ 245,000
Average strike rate 5.00% 7.57% 6.00% 7.49%
Unrealized gain (loss) $ 20 $ (1,238) $ (153) $ (1,371)
Interest rate floors
Notional amount $ - $ 250,000 $ - $ 250,000
Average strike rate - 6.80% - 6.80%
Unrealized gain (loss) $ - $ 5,477 $ - $ 5,477
HEDGES OF LENDING COMMITMENTS
Forward contracts:2
Notional amount $ 520,418 $ - $ - $ 520,418
Unrealized gain (loss) (2,074) - - (2,074)
Total hedges against
interest rate risk:
Notional amount $1,378,688 $ 485,000 $ 205,000 $2,068,688
Unrealized gain (loss) (13,692) 4,239 (3,353) (12,806)
</TABLE>
(1) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
(2) Hedges of residential mortgage lending commitments.
TABLE 15 OFF-BALANCE SHEET DERIVATIVES ACTIVITY(1)
<TABLE>
<CAPTION>
In thousands Asset Rate Conversions Liability Rate
Interest Rate Swaps Conversions Hedges of
Generic Amortizing Interest Interest Lending
Receive Receive Rate Rate Commit-
Fixed Fixed Floors Caps ments(2) Total
<S> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1995 $ 300,000 $858,519 $ 250,000 $245,000 $ 305,374 $ 1,958,893
Additions from acquisitions - - - - - -
Other additions - - - - 538,413 538,413
Termination - (96,400) - - - (96,400)
Maturities/Amortizations - (8,849) - - (323,369) (332,218)
Balance, June 30, 1995 $ 300,000 $753,270 $ 250,000 $245,000 $ 520,418 $ 2,068,688
Balance, January 1, 1995 $ 600,000 $860,166 $ 200,000 $ - $ 266,439 $ 1,926,605
Additions from acquisitions - - - 45,000 - 45,000
Other additions - - 250,000 200,000 920,273 1,370,273
Termination - (96,400) - - - (96,400)
Maturities/Amortizations (300,000) (10,496) (200,000) - (666,294) (1,176,790)
Balance, June 30, 1995 $ 300,000 $753,270 $ 250,000 $245,000 $ 520,418 $ 2,068,688
</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.
TABLE 16 SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Dollars in thousands, except per share data
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Results of operations: 1995 1995 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Net interest income(1) $155,821 $154,460 $149,689 $152,020 $147,667
Provision for loan losses 13,500 10,100 2,700 8,100 8,850
Net credit income 142,321 144,360 146,989 143,920 138,817
Securities gains (losses) (1,050) (2,410) (9,021) 12 (49)
Other noninterest income 71,142 66,540 65,037 63,726 66,576
Net credit and noninterest income 212,413 208,490 203,005 207,658 205,344
Noninterest expense 139,003 136,470 135,594 138,453 139,117
Income before taxes 73,410 72,020 67,411 69,205 66,227
Tax-equivalent adjustment 2,719 2,776 2,746 2,742 2,738
Book tax expense 23,307 23,653 22,280 22,859 20,881
Income tax expense 26,026 26,429 25,026 25,601 23,619
Net Income $ 47,384 $ 45,591 $ 42,385 $ 43,604 $ 42,608
Per common share:
Net income $ 1.24 $ 1.20 $ 1.13 $ 1.15 $ 1.12
Dividends declared .45 .40 .40 .40 .40
Average shares outstanding (000s) 38,173 38,097 37,637 38,063 37,930
Selected ratios and other data:
Return on average assets 1.35% 1.32% 1.24% 1.26% 1.25%
Return on average equity 15.69 15.60 15.22 15.70 15.79
Net interest margin(1) 4.93 4.92 4.81 4.82 4.76
Net charge-offs as % of average loans .54 .52 .42 .42 .43
Allowance as % of period-end loans 2.28 2.28 2.36 2.61 2.64
Overhead ratio 61.53 62.43 65.92 64.17 64.95
Average total equity to assets 8.61 8.44 8.14 8.02 7.90
Equity leverage 11.61X 11.84x 12.29x 12.47x 12.66x
Full-time equivalent employees (period end) 6,434 6,623 6,747 6,817 6,868
</TABLE>
(1) Tax-equivalent basis.
TABLE 17 CONSOLIDATED AVERAGE BALANCES/NET INTEREST INCOME/RATES(1)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1995 1994
Dollars in thousands Income/ Yield/ Income/ Yield/
Balance Expense Rate Balance Expense Rate
ASSETS $ $ % $ $ %
<S> <C> <C> <C> <C> <C> <C>
Securities held to maturity(2) 852,398 14,036 6.59 953,249 16,977 7.02
Securities available for sale(2) 1,411,687 22,942 6.52 2,129,177 30,869 5.82
Money market investments(2) 289,402 4,363 6.05 680,182 6,706 3.95
Mortgage loans held for sale(2) 254,491 5,127 8.06 308,872 5,453 7.06
Commercial 3,017,662 63,828 8.47 2,782,059 54,069 7.72
Real estate - income property 802,250 17,132 8.55 796,840 16,295 8.12
Real estate - construction 182,905 4,420 9.67 225,441 4,448 7.90
Instalment 1,967,956 46,104 9.27 1,700,077 34,235 8.16
Bank card 1,573,073 45,169 11.36 1,075,560 32,547 11.91
Real estate - mortgage 2,174,101 41,303 7.60 1,668,081 29,511 7.06
Total loans - net of unearned(2,3) 9,717,947 217,956 8.94 8,248,058 171,105 8.27
Allowance for loan losses (223,544) (230,687)
Loans - net 9,494,403 8,017,371
Cash and due from banks 764,796 713,487
Premises and equipment - net 333,987 319,630
Customers' liability on acceptances 12,555 9,651
Intangible assets - net 162,874 122,657
Foreclosed properties - net 17,274 23,480
Other assets 430,914 386,778
TOTAL ASSETS 14,024,781 13,664,534
TOTAL EARNING ASSETS 12,525,925 264,424 8.42 12,319,538 231,110 7.48
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking deposits 1,868,312 10,489 2.25 1,893,459 10,405 2.20
Money market deposit accounts 2,482,634 24,183 3.91 2,409,660 15,622 2.60
Regular savings deposits 1,310,929 9,165 2.80 1,446,340 9,393 2.60
Domestic time deposits 3,187,239 39,019 4.95 3,263,356 33,406 4.13
Certificates of deposit
$100,000 and over 71,068 954 5.38 52,594 572 4.37
Total savings and time deposits(2) 8,920,182 83,810 3.78 9,065,409 69,398 3.08
Demand deposits 2,127,089 2,075,899
Total deposits 11,047,271 11,141,308
Short-term borrowings(2) 1,156,162 16,620 5.75 1,008,561 9,380 3.74
Long-term debt(2) 384,971 8,173 8.49 220,094 4,665 8.48
Liability on acceptances 12,555 9,651
Other liabilities 215,704 205,762
Total liabilities 12,816,663 12,585,376
Total shareholders' equity 1,208,118 1,079,158
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 14,024,781 13,664,534
Total interest-bearing liabilities 10,461,315 108,603 4.17 10,294,064 83,443 3.26
Other sources - net 2,064,610 2,025,474
TOTAL SOURCES OF FUNDS 12,525,925 108,603 3.49 12,319,538 83,443 2.72
NET INTEREST SPREAD 4.25 4.22
NET INTEREST INCOME/MARGIN 155,821 4.93 147,667 4.76
</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.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended June 30,
1995 1995 1995
Income/ Yield/ Income Yield/ Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
$ $ % $ $ % $ $ %
<S> <C> <C> <C> <C> <C> <C>
887,414 14,805 6.67 869,809 28,841 6.63 742,051 27,969 7.49
1,449,623 23,607 6.60 1,430,550 46,549 6.56 2,536 781 71,118 5.65
457,579 6,544 5.80 373,026 10,907 5.90 575,128 10,832 3.80
191,346 3,810 7.96 223,093 8,937 8.01 387,797 12,877 6.64
2,999,159 61,829 8.26 3,008,463 125,656 8.39 2,742,194 105,064 7.69
764,086 16,294 8.58 783,274 33,426 8.58 793,639 31,488 7.96
187,239 4,497 9.71 185,060 8,918 9.70 223,174 8,404 7.59
1,891,141 42,751 9.03 1,929,760 88,855 9.18 1,663,155 68,127 8.23
1,492,890 43,077 11.45 1,533,203 88,246 11.44 1,021,203 63,116 12.27
2,113,239 39,825 7.50 2,143,837 81,128 7.55 1,465,357 51,846 7.06
9,447,754 208,273 8.80 9,583,597 426,229 8.89 7,908,722 328,045 8.30
(222,852) (223,200) (224,668)
9,224,902 9,360,397 7,684,054
738,970 751,954 716,099
325,480 329,757 313,853
9,165 10,869 11,734
130,995 146,601 102,546
21,767 19,508 23,635
408,110 420,001 394,191
13,845,351 13,935,565 13,487,869
12,433,716 257,039 8.27 12,480,015 521,463 8.36 12,150,479 450,841 7.43
1,874,912 10,453 2.26 1,871,593 20,942 2.26 1,855,844 20,146 2.19
2,432,572 22,610 3.77 2,457,743 46,793 3.84 2,356,124 29,371 2.51
1,369,262 9,461 2.80 1,339,934 18,627 2.80 1,381,585 17,714 2.59
3,042,769 33,379 4.50 3,115,403 72,397 4.72 3,075,725 62,611 4.12
68,550 857 5.08 69,815 1,811 5.23 50,497 1,057 4.22
8,788,065 76,760 3.56 8,854,488 160,570 3.67 8,719,775 130,899 3.03
2,056,184 2,091,832 2,045,467
10,844,249 10,946,320 10,765,242
1,261,312 17,958 5.75 1,208,447 34,578 5.76 1,215,982 19,993 3.32
368,133 7,861 8.54 376,598 16,034 8.51 211,781 8,915 8.42
9,165 10,869 11,734
193,583 204,707 197,730
12,676,442 12,746,941 12,402,469
1,168,909 1,188,624 1,085,400
13,845,351 13,935,565 13,487,869
10,417,510 102,579 4.00 10,439,533 211,182 4.08 10,147,538 159,807 3.18
2,016,206 2,040,542 2,002,941
12,433,716 102,579 3.35 12,480,075 211,182 3.42 12,150,479 159,807 2.66
4.27 4.28 4.25
154,460 4.92 310,281 4.94 291,034 4.77
</TABLE>
(2) Indicates earning asset or interest-bearing liability.
(3) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Crestar Financial Corporation was held on
April 28, 1995 for the purpose of electing five Class II directors for a term of
three years and ratifying the Board of Directors' appointment of independent
auditors for the year. Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities Exchange Act of 1934 and there were no
solicitations in opposition to the recommendations of the Board of Directors on
the matters voted on.
Five Class II directors were elected for three-year terms as follows:
SHARES VOTED SHARES VOTED
"FOR" "WITHHELD"
DIRECTOR
CLASS II - THREE-YEAR TERM:
Bonnie Guiton Hill 30,285,001 490,407
Frank E. McCarthy 30,310,074 465,334
G. Gilmer Minor III 30,311,527 463,881
Eugene P. Trani 30,289,358 486,050
James M. Wells III 30,317,408 458,000
The following Class III directors' terms expire in 1996:
Richard M. Bagley Richard G. Tilghman
Charles R. Longsworth L. Dudley Walker
Frank S. Royal Karen Hastie Williams
The following Class I directors' terms expire in 1997:
J. Carter Fox Patrick J. Maher
Gene A. James Gordon F. Rainey, Jr.
H. Gordon Leggett, Jr.
The appointment of KPMG Peat Marwick LLP as the Corporation's independent
auditors for 1995 was ratified as follows:
SHARES VOTED SHARES VOTED SHARES VOTED
"FOR" "AGAINST" "ABSTAIN"
30,569,232 89,723 116,453
There were no "broker non-votes" in connection with the annual meeting. All
matters voted on were considered "routine" under New York Stock Exchange rules.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Crestar Financial Corporation
Registrant
Date August 14, 1995 /s/ James D. Barr
James D. Barr
Executive Vice President,
Controller and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 792,741
<INT-BEARING-DEPOSITS> 8,898,167
<FED-FUNDS-SOLD> 506,500
<TRADING-ASSETS> 4,195
<INVESTMENTS-HELD-FOR-SALE> 1,482,677
<INVESTMENTS-CARRYING> 823,555
<INVESTMENTS-MARKET> 818,761
<LOANS> 9,796,143
<ALLOWANCE> 222,882
<TOTAL-ASSETS> 14,631,859
<DEPOSITS> 11,116,666
<SHORT-TERM> 1,413,719
<LIABILITIES-OTHER> 487,893
<LONG-TERM> 384,577
<COMMON> 188,669
0
0
<OTHER-SE> 1,040,335
<TOTAL-LIABILITIES-AND-EQUITY> 14,631,859
<INTEREST-LOAN> 421,791
<INTEREST-INVEST> 74,341
<INTEREST-OTHER> 19,836
<INTEREST-TOTAL> 515,968
<INTEREST-DEPOSIT> 160,570
<INTEREST-EXPENSE> 211,182
<INTEREST-INCOME-NET> 304,786
<LOAN-LOSSES> 23,600
<SECURITIES-GAINS> (3,460)
<EXPENSE-OTHER> 275,473
<INCOME-PRETAX> 139,935
<INCOME-PRE-EXTRAORDINARY> 92,975
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,975
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.43
<YIELD-ACTUAL> 4.94
<LOANS-NON> 69,474
<LOANS-PAST> 38,841
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 194,000
<ALLOWANCE-OPEN> 219,189
<CHARGE-OFFS> 37,427
<RECOVERIES> 12,064
<ALLOWANCE-CLOSE> 222,882
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
