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 March 31, 1996
( ) 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 April 30, 1996
Common Stock, $5 par value 43,048,773
<PAGE>
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
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 6. Exhibits And Reports On Form 8-K:
During the first quarter of 1996, Crestar filed a Form 8-K,
amended by Form 8-K/A, relating to the consummation on
December 31, 1995 of the pooling of interests business
combination with Loyola Capital Corporation. The filing
included financial statements and applicable pro forma
financial information pertaining to the business
combination.
<PAGE>
CONSOLIDATED BALANCE SHEETS
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars in thousands
March 31,
December 31,
ASSETS 1996 1995 1995
<S> <C> <C> <C>
Cash and due from banks $ 703,078 $ 715,953 $ 1,084,047
Securities held to maturity (note 2) 81,328 1,161,245 85,368
Securities available for sale (note 3) 3,459,546 1,449,716 3,231,389
Money market investments (note 4) 355,738 685,089 516,268
Mortgage loans held for sale 758,848 254,683 688,218
Loans (note 5):
Business Loans:
Commercial 3,084,572 3,101,059 3,102,156
Real estate - income property 903,111 947,674 874,396
Real estate - construction 253,985 273,026 262,340
Consumer Loans:
Instalment 2,744,665 2,314,865 2,732,557
Bank card 1,587,114 1,540,940 1,686,765
Real estate - mortgage 2,950,506 3,586,828 3,148,214
- -------------------------------------------------------------------------------------------------------------------
Total Loans 11,523,953 11,764,392 11,806,428
Less: Allowance for loan losses (note 6) (238,847) (236,498) (240,285)
- -------------------------------------------------------------------------------------------------------------------
Loans - net 11,285,106 11,527,894 11,566,143
- -------------------------------------------------------------------------------------------------------------------
Premises and equipment - net 355,070 356,783 357,159
Customers' liability on acceptances 20,963 10,984 5,143
Intangible assets - net 181,819 167,543 186,732
Foreclosed properties - net (notes 5 and 7) 19,175 32,449 17,655
Other assets 696,335 558,859 564,563
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $17,917,006 $16,921,198 $18,302,685
===================================================================================================================
LIABILITIES
Demand deposits $ 2,448,085 $ 2,136,405 $ 2,665,888
Interest checking deposits 1,933,776 1,972,010 1,984,569
Money market deposit accounts 3,045,520 2,828,090 2,991,141
Regular savings deposits 1,307,549 1,517,379 1,310,903
Domestic time deposits 4,065,032 4,060,468 4,184,703
Certificates of deposit $100,000 and over 142,792 71,348 116,211
- -------------------------------------------------------------------------------------------------------------------
Total deposits 12,942,754 12,585,700 13,253,415
Short-term borrowings (note 8) 2,186,975 1,976,696 2,227,338
Liability on acceptances 20,963 10,984 5,143
Other liabilities 622,653 243,617 694,096
Long-term debt (note 9) 704,045 715,829 671,296
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 16,477,390 15,532,826 16,851,288
- -------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock. Authorized 2,000,000 shares; none issued - - -
Common stock, $5 par value. Authorized 100,000,000 shares;
outstanding 42,971,213 and 43,586,369 at March 31, 1996
and 1995, respectively; 42,809,761 at December 31, 1995 214,856 217,932 214,049
Capital surplus 384,343 357,579 371,075
Retained earnings 864,585 830,268 855,195
Net unrealized gain (loss) on securities available for sale (24,168) (17,407) 11,078
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,439,616 1,388,372 1,451,397
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,917,006 $16,921,198 $18,302,685
===================================================================================================================
</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 Ended March 31,
INCOME FROM EARNING ASSETS 1996 1995
<S> <C> <C>
Interest and fees on loans $252,945 $245,444
Interest on taxable securities held to maturity 234 17,920
Interest on tax-exempt securities held to maturity 863 1,004
Interest and dividends on securities available for sale 49,283 24,298
Income on money market investments 2,787 6,919
Interest on mortgage loans held for sale 14,294 4,375
- -----------------------------------------------------------------------------------
Total income from earning assets 320,406 299,960
- -----------------------------------------------------------------------------------
INTEREST EXPENSE
Interest checking deposits 9,519 10,933
Money market deposit accounts 27,530 26,632
Regular savings deposits 8,464 10,577
Domestic time deposits 54,841 43,825
Certificates of deposit $100,000 and over 1,449 857
- -----------------------------------------------------------------------------------
Total interest on deposits 101,803 92,824
Short-term borrowings 26,877 24,918
Long-term debt 12,713 12,495
- -----------------------------------------------------------------------------------
Total interest expense 141,393 130,237
- -----------------------------------------------------------------------------------
NET INTEREST INCOME 179,013 169,723
Provision for loan losses (note 6) 20,300 10,301
- -----------------------------------------------------------------------------------
NET CREDIT INCOME 158,713 159,422
- -----------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges on deposit accounts 21,610 21,908
Trust and investment advisory income 15,562 13,124
Bank card-related income 11,014 11,097
Other income 29,494 22,826
Securities gains (losses) 2,355 (2,410)
- -----------------------------------------------------------------------------------
Total noninterest income 80,035 66,545
- -----------------------------------------------------------------------------------
Net Credit And Noninterest Income 238,748 225,967
- -----------------------------------------------------------------------------------
Noninterest Expense
Personnel expense 84,231 82,667
Occupancy expense - net 12,754 12,201
Equipment expense 7,698 7,901
Other expense 47,522 47,141
- -----------------------------------------------------------------------------------
Total noninterest expense 152,205 149,910
- -----------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 86,543 76,057
Income tax expense (note 10) 31,121 26,398
- -----------------------------------------------------------------------------------
NET INCOME $ 55,422 $ 49,659
===================================================================================
EARNINGS PER COMMON SHARE $ 1.27 $ 1.14
===================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands Three Months Ended March 31,
1996 1995
<S> <C> <C>
OPERATING Net Income $ 55,422 $ 49,659
ACTIVITIES Adjustments to reconcile net income to net
cash provided (used) by operating activties:
Provisions for loan losses, foreclosed properties and
other losses 18,400 10,347
Depreciation and amortization of premises and equipment 9,633 9,793
Securities losses (gains) (2,355) 2,410
Amortization of intangible assets 4,047 2,974
Deferred income tax expense 2,220 1,836
Gain on foreclosed properties (27) (1,403)
Gain on sales of mortgage servicing rights (4,000) (5,900)
Net decrease (increase) in trading account 3,368 (4,677)
Origination and purchase of loans held for sale (869,828) (426,724)
Proceeds from sales of loans held for sale 799,198 412,487
Net decrease (increase) in accrued interest receivable,
prepaid expenses and other assets (65,717) 12,716
Net decrease in accrued interest payable, accrued expenses
and other liabilities (413,911) (11,509)
Other, net (4,413) 5,576
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (467,963) 57,585
- -------------------------------------------------------------------------------------------------------------------
INVESTING Proceeds from maturities and calls of securities held
ACTIVITIES to maturity 4,456 95,232
Proceeds from maturities and calls of securities
available for sale 117,428 85,269
Proceeds from sales of securities available for sale 1,513,238 579,440
Purchases of securities held to maturity (761) (3,926)
Purchases of securities available for sale (1,612,265) (289,729)
Net decrease (increase) in money market investments 157,162 (225,297)
Principal collected on non-bank subsidiary loans 5,409 6,773
Loans originated by non-bank subsidiaries (41,037) (61,323)
Net decrease (increase) in other loans 293,453 (54,761)
Purchases of premises and equipment (11,306) (19,798)
Proceeds from sales of foreclosed properties 2,983 8,127
Proceeds from sales of mortgage servicing rights 8,447 8,201
Purchases of net assets of financial institutions - (12,190)
Other, net (7,626) (1,859)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 429,581 114,159
- -------------------------------------------------------------------------------------------------------------------
FINANCING Net decrease in demand, interest checking, money market
ACTIVITIES and regular savings deposits (215,920) (403,868)
Net increase (decrease) in certificates of deposit (86,930) 7,657
Net increase in short-term borrowings 12,837 44,857
Proceeds from issuance of long-term debt 63 -
Principal payments on long-term debt (20,562) (10,945)
Cash dividends paid (19,480) (16,264)
Common stock purchased and retired (29,187) (20,284)
Proceeds from the issuance of common stock 16,592 12,457
- -------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (342,587) (386,390)
- -------------------------------------------------------------------------------------------------------------------
CASH AND Decrease in cash and cash equivalents (380,969) (214,646)
CASH Cash and cash equivalents at beginning of year 1,084,047 930,599
EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 703,078 $ 715,953
===================================================================================================================
</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
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance, January 1 $1,451,397 $1,295,159 42,809,761 42,509,900
Net Income 55,422 49,659 - -
Cash dividends declared on common stock (19,480) (16,264) - -
Change in net unrealized gain or loss on securities
available for sale (35,246) 19,148 - -
Common stock purchased and retired (29,101) (24,482) (510,000) (587,200)
Cash paid in lieu of fractional shares (86) - (1,484) -
Common stock issued:
For acquisition of financial institutions - 52,617 - 1,317,396
For dividend reinvestment plan 4,154 2,956 75,469 75,083
For thrift and profit sharing plan 6,300 8,263 110,526 207,272
For other stock compensation plans 118 78 2,128 2,067
Upon exercise of stock options (including tax
benefit of $4,373 in 1996; $246 in 1995) 6,138 1,238 484,813 61,851
- -------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31 $1,439,616 $1,388,372 42,971,213 43,586,369
===================================================================================================================
</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
business combinations, 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 1996 presentation. The notes
included herein should be read in conjunction with the notes to the consolidated
financial statements included in the Corporation's 1995 Annual Report and Form
10-K.
On December 31, 1995 Crestar Financial Corporation (Crestar) merged with
Loyola Capital Corporation (Loyola), a Maryland savings bank holding company, in
a transaction accounted for as a pooling of interests. Accordingly, historical
financial data for periods before the merger, including the first quarter of
1995, have been restated to include the combined results of Crestar and Loyola.
The Financial Accounting Standards Board's (FASB) Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121) became effective
on January 1, 1996. SFAS 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by a company be reviewed for
impairment whenever events or circumstances indicate that the carrying amount of
an asset may not be recoverable. In performing the review for recoverability, a
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 assets subject to disposal. Crestar adopted this
accounting standard in the first quarter of 1996; there was no impact to the
Corporation's net income or balance sheet upon implementation of SFAS 121.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), as issued by the FASB in 1995, also became
effective on January 1, 1996. SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans, including stock
option plans. While SFAS 123 defines a fair value based method of accounting for
an employee stock option or similar equity instrument, it also allows a company
to continue to measure compensation cost for those plans using the intrinsic
value method of accounting previously prescribed by Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." Crestar has
elected to continue to measure the costs of its stock-based compensation plans
under the intrinsic value method of APB 25. Accordingly, Crestar's compliance
with SFAS 123, effective January 1, 1996, had no impact on the Corporation's net
income or balance sheet.
Intangible assets consisted of goodwill and deposit based intangibles, having
a combined balance of $181,350,000 and $166,993,000 at March 31, 1996 and 1995,
respectively, and favorable lease rights of $469,000 and $550,000, respectively.
Capitalized mortgage servicing rights of $30,574,000 and $21,445,000 at March
31, 1996 and 1995, respectively, were included in other assets in the
consolidated financial statements. Mortgage servicing rights of approximately
$10 million were capitalized during the first three months of 1996. At March 31,
1996 and 1995, mortgage servicing rights were net of a related valuation
allowance of $305,000 and $213,000, respectively. The activity in such valuation
allowance was not material to the consolidated financial statements for the
three months ended March 31, 1996 and 1995. The fair value of capitalized
mortgage servicing rights was approximately $44 million at March 31, 1996. 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. Amortization of capitalized mortgage
servicing rights was $2 million in the first three months of 1996.
<PAGE>
(2) SECURITIES HELD TO MATURITY
The amortized cost (carrying values) and estimated market values of securities
held to maturity at March 31 follow:
<TABLE>
<CAPTION>
In thousands 1996 1995
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ - $ - $ 71,924 $ 70,035
Mortgage-backed obligations of Federal agencies 22,308 23,604 803,756 775,270
Other taxable securities 2,250 2,250 221,126 213,759
States and political subdivisions 56,770 57,521 64,439 64,703
- -------------------------------------------------------------------------------------------------------------
Total securities held to maturity $81,328 $83,375 $1,161,245 $1,123,767
=============================================================================================================
</TABLE>
(3) SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated market values (carrying values) of securities
available for sale at March 31 follow:
<TABLE>
<CAPTION>
In thousands 1996 1995
Amortized Market Amortized Market
Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 428,447 $ 423,845 $ 478,391 $ 469,549
Mortgage-backed obligations of Federal agencies 2,288,976 2,259,078 699,030 682,829
Other taxable securities 626,581 623,547 189,828 187,399
Common and preferred stocks 152,951 153,076 109,912 109,939
- ------------------------------------------------------------------------------------------------------------
Total securities available for sale $3,496,955 $3,459,546 $1,477,161 $1,449,716
============================================================================================================
</TABLE>
At March 31, 1996, the amortized cost and market value of Mortgage-backed
obligations of Federal agencies includes the amortized cost and market value,
respectively, of interest rate caps purchased to hedge the market value of fixed
rate securities available for sale in a rising interest rate environment. The
interest rate caps, which have a notional balance of $1.0 billion, have a cost
basis of $11.8 million and a market value of $11.7 million at March 31, 1996.
The cost basis of the interest rate caps is being amortized as a reduction of
interest income on securities available for sale.
(4) MONEY MARKET INVESTMENTS
Money market investments at March 31 included:
In thousands 1996 1995
Federal funds sold $ 97,800 $487,985
Securities purchased under agreements to resell 117,388 182,000
Time deposits 125,000 -
U.S. Treasury 10,562 6,758
Trading account securities 3,771 8,250
Other 1,217 96
- -------------------------------------------------------------------------------
Total money market investments $355,738 $685,089
===============================================================================
(5) NONPERFORMING ASSETS AND IMPAIRED LOANS
Nonperforming assets at March 31 are shown below. Loans that are both (a) past
due 90 days or more and (b) not deemed nonaccrual due to an assessment of
collectibility are specifically excluded from the definition of nonperforming
assets. Such accruing loans past due 90 days or more not shown below totaled
$65.3 million and $37.4 million at March 31, 1996 and 1995, respectively.
In thousands 1996 1995
Nonaccrual loans $68,353 $ 79,301
Restructured loans - 1,458
- -----------------------------------------------------------------------
Total nonperforming loans 68,353 80,759
Foreclosed properties - net 19,175 32,449
- -----------------------------------------------------------------------
Total nonperforming assets $87,528 $113,208
=======================================================================
<PAGE>
Non-cash additions to foreclosed properties were $3.6 million and $1.4 million
in the first three months of 1996 and 1995, respectively. Included in Crestar's
non-performing loans above are certain impaired loans. Impaired loans and the
allocated valuation allowances at March 31 were:
<TABLE>
<CAPTION>
In thousands 1996 1995
Loan Valuation Loan Valuation
Balance Allowance Balance Allowance
<S> <C> <C> <C> <C>
Impaired with valuation allowance $31,620 $5,140 $40,290 $9,080
Impaired without valuation allowance - - - -
- ----------------------------------------------------------------------------------------------------------
Total impaired loans $31,620 $5,140 $40,290 $9,080
==========================================================================================================
</TABLE>
Collateral dependent loans, which were measured at the fair value of the
collateral, constituted $27.7 million or 88% of impaired loans at March 31,
1996. The remaining impaired loan of $3.9 million was measured based on the
present value of expected cash flows. The allocated valuation allowance for
impaired loans and activity related thereto is included in the allowance for
loan losses. The average recorded investment in impaired loans, the amount of
interest income recognized, and the amount of interest income recognized on a
cash basis for the three months ended March 31 were:
In thousands 1996 1995
Average recorded investment in impaired loans $29,790 $40,440
Interest income recognized during impairment - -
Interest income recognized on a cash basis during impairment - -
================================================================================
(6) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the three months ended March
31 were:
In thousands Three Months
1996 1995
Beginning balance $240,285 $232,922
- ------------------------------------------------------------------------------
Charge-offs (27,720) (19,660)
Recoveries 6,370 7,304
- ------------------------------------------------------------------------------
Net charge-offs (21,350) (12,356)
Provision for loan losses 20,300 10,301
Allowance from acquisitions - net (388) 5,631
- ------------------------------------------------------------------------------
Net increase (decrease) (1,438) 3,576
- ------------------------------------------------------------------------------
Ending balance $238,847 $236,498
==============================================================================
<PAGE>
(7) ALLOWANCE FOR FORECLOSED PROPERTIES
Transactions in the allowance for losses on foreclosed properties for the three
months ended March 31 were:
In thousands Three Months
1996 1995
Beginning balance $7,512 $16,188
- ----------------------------------------------------------------
Provision for foreclosed properties - (182)
Write-downs (22) (1,762)
Allowance from acquisitions - net (471) 3,194
- ----------------------------------------------------------------
Net increase (decrease) (493) 1,250
- ----------------------------------------------------------------
Ending balance $7,019 $17,438
================================================================
(8) SHORT-TERM BORROWINGS
Short-term borrowings, exclusive of deposits, with maturities of less than one
year at March 31 were:
In thousands 1996 1995
Federal funds purchased $1,414,763 $ 847,487
Securities sold under repurchase agreements 359,094 597,884
Federal Home Loan Bank borrowings 249,000 372,200
Notes payable 162,140 153,895
Other 1,978 5,230
- -------------------------------------------------------------------------------
Total short-term borrowings $2,186,975 $1,976,696
===============================================================================
The Corporation paid $124,523,000 and $119,821,000 in interest on deposits and
short-term borrowings in the first three months of 1996 and 1995, respectively.
(9) LONG-TERM DEBT
Long-term debt at March 31 included:
<TABLE>
<CAPTION>
In thousands 1996 1995
<S> <C> <C>
4 3/8-7 3/8% Federal Home Loan Bank obligations payable through 2015 $351,569 $348,875
8 3/4% Subordinated notes due 2004 149,664 149,625
8 1/4% Subordinated notes due 2002 125,000 125,000
8 5/8% Subordinated notes due 1998 49,979 49,968
7 7/8-11 1/4% Collateralized mortgage obligation bonds maturing through 2019 17,569 31,135
7-8 1/4% Mortgage indebtedness maturing through 2009 9,177 9,923
8 5/8-14 3/8% Capital lease obligations maturing through 2006 1,087 1,303
- ------------------------------------------------------------------------------------------------------------
Total long-term debt $704,045 $715,829
============================================================================================================
</TABLE>
The Corporation paid $11,835,000 and $10,508,000 in interest on long-term debt
in the first three months of 1996 and 1995, respectively. There were no new
capital lease agreements in the first quarter of 1996.
<PAGE>
(10) INCOME TAXES
The current and deferred components of income tax expense allocated to
continuing operations for the three months ended March 31 in the accompanying
consolidated statements of income were:
In thousands Three Months
1996 1995
Current:
Federal $27,320 $22,731
State and local 1,581 1,831
- ------------------------------------------------------------------------
Total current tax expense 28,901 24,562
- ------------------------------------------------------------------------
Deferred:
Federal 1,898 2,015
State and local 322 (179)
- ------------------------------------------------------------------------
Total deferred tax expense 2,220 1,836
- ------------------------------------------------------------------------
Total income tax expense $31,121 $26,398
========================================================================
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 ended March 31 were:
In thousands Three Months
1996 1995
Income before income taxes $86,543 $76,057
- ----------------------------------------------------------------------------
Tax expense at statutory rate 30,290 26,620
- ----------------------------------------------------------------------------
Increase (decrease) in taxes resulting from:
Tax-exempt interest and dividends (1,645) (1,949)
Nondeductible interest expense 163 148
Amortization of goodwill 1,003 710
State income taxes 1,237 1,073
Other - net 73 (204)
- ----------------------------------------------------------------------------
Total increase (decrease) in taxes 831 (222)
- ----------------------------------------------------------------------------
Total income tax expense $31,121 $26,398
- ----------------------------------------------------------------------------
Effective tax rate 36.0% 34.7%
============================================================================
The Corporation made income tax payments of $7,338,000 and $1,764,000 during the
first three months of 1996 and 1995, respectively. At March 31, 1996, the
Corporation had a net deferred income tax asset of $98,889,000. There was no
valuation allowance relating to the net deferred income tax asset. Crestar has
sufficient taxable income in the available carryback period to realize all of
its deferred income tax assets.
<PAGE>
(11) 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, swaps and forward
contracts. These instruments involve varying degrees of credit and interest rate
risk in excess of the 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, securities, real estate and inventory.
Crestar receives a commitment fee for entering into such agreements. Legally
binding, unfunded commitments to extend credit were $7.2 billion and $5.9
billion at March 31, 1996 and 1995, 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 $407 million at March 31, 1996.
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. Recourse obligations of $1.3 billion
at March 31, 1996 include $193 million of contractual recourse liability
accepted by Crestar on mortgage loan sales to the Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC). For the
period extending over the life of the loans, FNMA and FHLMC have the right to
sell any loans which become delinquent back to Crestar. Crestar maintained an
allowance included in other liabilities of $307,000 at March 31, 1996 based on
estimates of future losses on this contractual recourse liability. The remaining
notional balance of recourse obligations of $1.1 billion results from the
origination and acquisition by Crestar of mortgage servicing rights on Federal
Housing Association and Veterans' Association loans, which are serviced under
programs of the Government National Mortgage Association (GNMA). Approximately
$801 million of this notional balance was insured by agencies of the Federal
government or private insurance companies at March 31, 1996.
As a financial institution, Crestar entails a degree of interest rate risk as
a provider of banking services to its customers. This risk can be managed
through derivative interest rate contracts, such as interest rate swaps and
caps. 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 March 31, 1996, Crestar was
participating in interest rate (fixed receive) swaps of $1.3 billion, of which
$850 million, $250 million and $200 million were used to convert certain
floating rate commercial, instalment and real estate mortgage loans,
respectively, to fixed rates. Unrealized gross gains and gross losses on such
swaps were $43,000 and $12.4 million, respectively, at March 31, 1996.
Crestar also had interest rate cap agreements outstanding at March 31, 1996,
$1 billion of which were used to hedge the market value of securities available
for sale. The remaining $40 million of interest rate caps were used to minimize
interest rate risk associated with rising rates on floating rate money market
deposits. Unrealized gross gains and gross losses on such caps were $670,000 and
$580,000, respectively, at March 31, 1996. In addition, Crestar serves as a
financial intermediary in interest rate swap, cap and collar agreements,
providing risk management services to customers. At March 31, 1996, Crestar had
$113.4 million in offsetting swap, $50 million in offsetting cap, and $30.8
million in offsetting collar agreements.
The notional amount of these over-the-counter traded interest rate swaps,
caps and collars does not fully represent Crestar's credit and market exposure,
which the Corporation believes is a combination of current replacement cost (any
unrealized gain plus accrued receivable) of approximately $13.3 million, less
collateral held of approximately $5.9 million, plus an amount for additional
market movement. Four counterparties constituted 16%, 16%, 12% and 10% of the
estimated credit and market exposure of $144 million at March 31, 1996.
Crestar had forward agreements of $979.0 million outstanding at March 31,
1996, 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.
Legislative efforts to resolve the undercapitalization of the Savings
Association Insurance Fund (SAIF) of the FDIC, and the disparity between deposit
insurance premiums for SAIF-insured deposits and deposits insured under the Bank
Insurance Fund (BIF), may result in a one-time special assessment on
SAIF-insured deposits. Earnings in 1996 may be impacted if a legislatively
proposed one-time assessment of approximately 80 basis points (0.80%) on
SAIF-insured deposits is enacted. Any one-time assessment on SAIF-insured
deposits would impact each of Crestar's three bank subsidiaries and its savings
bank subsidiary. Approximately 45% of Crestar's current deposit base is
SAIF-insured. An 80 basis point assessment, on an after-tax basis, would result
in a one-time charge to Crestar of approximately $25 million. As a consequence
of the one-time assessment, future earnings are expected to be augmented by a
substantial reduction in ongoing SAIF assessment rates. The estimated $25
million charge for Crestar reflects a proposed 20% reduction in the assessments
on certain SAIF-insured deposits (known as Oakar deposits) acquired by banks in
certain thrift acquisitions. Crestar would accrue such a liability if and when
such legislation is enacted into law.
Certain litigation is pending against Crestar. Management, after reviewing
this litigation with legal counsel, is of the opinion that these matters, when
resolved, will not have a material effect on the accompanying consolidated
financial statements.
<PAGE>
Financial Commentary
Crestar Financial Corporation And Subsidiaries
OVERVIEW
(Tables 1, 2 and 14)
Crestar Financial Corporation (Crestar) reported net income of $55.4 million for
the quarter ended March 31, 1996, an increase of $5.8 million or 12% over net
income reported in the first quarter of 1995. This increase reflects the
continued positive effects of improved net interest margins, growth in earning
assets and noninterest income, and management of controllable expenses. Earnings
per share were $1.27 for the first quarter of 1996, compared to $1.14 in 1995.
The predominant items affecting the change in earnings per share are given in
Table 2. Each item is net of applicable federal income taxes. On December 31,
1995 Crestar merged with Loyola Capital Corporation (Loyola), a Maryland savings
bank holding company, in a transaction accounted for as a pooling of interests.
Accordingly, historical financial data for periods before the merger, including
the first quarter and fourth quarter of 1995, have been restated to include the
combined results of Crestar and Loyola. Crestar's net income for the fourth
quarter of 1995 was reduced by $29.3 million in one-time merger expenses
associated with the merger with Loyola. Excluding the non-recurring charges, net
income for the fourth quarter of 1995 was $55.6 million, or $1.28 per share.
Crestar's subsidiaries provide banking and non-banking services throughout
Virginia, Maryland and Washington, DC, which compose Crestar's primary market
area. This market is characterized as economically diverse and stable. Crestar's
market area is characterized by active competition in all principal areas where
the Corporation provides services. In addition to banks, other firms competing
in the market area include savings associations, consumer finance companies,
national credit card companies, securities brokerage firms, credit unions and
mortgage banking companies.
MERGERS AND ACQUISITIONS
Crestar announced two pending acquisitions during the first quarter. In
February, Crestar announced an agreement to purchase the deposits and customer
accounts, plus selected loans, of ten branches of Mellon Bank (MD), a bank
operating in the Maryland suburbs of the metropolitan Washington, DC area. The
purchase, which is expected to be completed during the second quarter of this
year, will add approximately $150 million in deposits to Crestar's Maryland bank
subsidiary. Also in February, Crestar Mortgage Corporation announced an
agreement to purchase, in a cash transaction, Ryland Funding Group, a wholesale
mortgage banker. Ryland Funding Group operates out of four offices, and
originated approximately $750 million in real estate mortgages in 1995.
PROFITABILITY MEASURES AND CAPITAL RESOURCES
(Table 1)
Crestar's increased earnings in the first quarter of 1996 resulted in
improvements in key profitability measures when compared to the same period of
1995. Return on average assets was 1.28% in the first three months of 1996, up
from a ratio of 1.22% for the first three months of 1995. Return on average
equity was 15.41% for the quarter ended March 31, 1996, compared to 14.81% for
the first quarter of 1995.
Average equity to assets of 8.31% for the first quarter of 1996 increased 10
basis points from 8.21% in the first quarter of 1995, reflecting higher average
levels of retained earnings. Period-end equity to assets of 8.04% at March 31,
1996 was down slightly from a March 31, 1995 ratio of 8.20%. Total assets
increased by 6% from March 31, 1995 to March 31, 1996; growth in period-end
stockholders' equity was 4% during this period.
Risk-based capital ratios are another measure of capital adequacy. At March
31, 1996, Crestar's consolidated risk-adjusted capital ratios were 9.0% for Tier
1 and 12.2% for total capital, well above the required minimums of 4.0% and
8.0%, respectively. The Tier 1 leverage ratio of 7.5% at March 31, 1996 also was
significantly above the regulatory minimum of 3.0%. Crestar's tangible leverage
ratio, defined as total equity less all intangibles divided by total assets less
all intangibles, was 7.1% at March 31, 1996. Under Federal Deposit Insurance
Corporation (FDIC) rules, each of Crestar's three subsidiary banks and Crestar's
savings bank subsidiary were considered "well-capitalized" as of March 31, 1996,
the highest category of capitalization defined by regulatory authorities,
allowing for the lowest level of FDIC insurance premium payments. At March 31,
1996, approximately 45% 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.
Crestar has filed shelf registration statements with the Securities and
Exchange Commission pertaining to the possible future issuance of securities.
Under currently effective registration statements, Crestar may issue in the
future up to $324 million in subordinated debt securities, preferred stock or
common stock, or any combination thereof.
<PAGE>
NET INTEREST MARGIN AND NET INTEREST INCOME
(Tables 3 and 15)
Crestar's net interest margin for the first quarter of 1996 was 4.63%, an
improvement of 4 basis points from the margin recorded in the first quarter of
1995. The improvement was primarily due to favorable changes in the composition
of earning assets and to increased net interest income arising from off-balance
sheet hedge transactions. These factors served to offset the impact of higher
interest rates paid on domestic time deposits and changes in the composition of
funding sources. The net interest margin in the fourth quarter of 1995 was
4.55%.
Positive influences on the first quarter 1996 margin include favorable
changes in the composition of balance sheet earning assets. Changes in the
earning asset mix increased the first quarter 1996 net interest margin by
approximately 4 basis points when compared to the first quarter of 1995. A key
factor was the significant growth of consumer instalment and bank card loans,
reflecting Crestar's strong marketing efforts. Average balances of consumer
instalment loans increased 22% in the first quarter of 1996, or $488 million,
compared to first quarter 1995 average balances. Average bank card loans
increased $134 million, or 9%, during the same time period. Consumer real
estate-mortgage loans, which have historically been Crestar's lowest yielding
loan category, decreased $429 million or 12% from first quarter 1995 to first
quarter 1996. This reduction reflects efforts to re-balance the Corporation's
loan portfolio, through selected sales of residential mortgage loans, following
the 1995 acquisitions of three savings and loan institutions. Average business
loans for the first quarter were down $33 million, or 1% from prior year
balances.
Average balances of total securities increased $421 million, or 16%, from
first quarter 1995 to first quarter 1996. This increase was funded in part from
decreases in lower yielding money market investments during the same time
period. Average balances of securities classified as available for sale
constituted the majority of average total securities during first quarter of
1996, reflecting the transfer during the fourth quarter of 1995 of $963 million
(market value) of securities from the held to maturity classification to the
available for sale classification. Mortgage loans held for sale also exhibited
growth in average balances, increasing from $224 million in the first quarter of
1995 to $778 million in the first quarter of 1996, reflecting increased
origination volume at the Corporation's mortgage banking subsidiaries, and
transfers of selected mortgage loans from the loan portfolio to mortgage loans
held for sale.
Overall changes in the average balances of funding sources resulted in a
negative impact to the first quarter 1996 net interest margin of 4 basis points,
in comparison to first quarter 1995 results. Average total deposits for the
first quarter of 1996 increased by $491 million, to $12.8 billion, a 4% increase
over first quarter 1995 average balances. Significant increases in average
balances during this time period occurred in high-yielding certificate of
deposit balances and money market deposit balances. Average balances of domestic
time deposits, which are primarily composed of consumer certificates of deposit,
increased by $255 million or 7% from first quarter 1995 to first quarter 1996.
Other deposit categories exhibiting higher average balances were money market
deposit accounts, up 7%, and demand deposits, up 11% from the first quarter of
1995. Average balances of regular savings deposits declined $217 million during
the same time period. Average short-term borrowings increased 20% from the first
three months of 1995, in part reflecting the use of such borrowings to fund
higher levels of mortgage loans held for sale.
The yield on average total loans during the first three months of 1996
increased 15 basis points from the first quarter of 1995, to 8.83%, as higher
yields obtained on consumer loans and on real estate-income property business
loans offset declines in average rates on commercial and real
estate-construction loan portfolios. On a combined basis, yields on securities
held to maturity and securities available for sale increased 6 basis points in
the first quarter of the current year, compared to first quarter 1995 results.
During the same time period, yields on money market investments and mortgage
loans held for sale experienced declines in average rates earned. The average
rate earned on total earning assets was up 8 basis points, to 8.26% in the first
quarter of 1996, in comparison to first quarter 1995 results. Also reflecting a
higher interest rate environment, the average rate paid on time deposits
increased during this period. Average rates on domestic time deposits increased
72 basis points from first quarter 1995, to 5.37%. This was partially offset by
lower average rates on transaction oriented accounts such as interest checking
and money market deposit accounts. The average rate paid on total interest
bearing liabilities increased, however, from 4.19% in the first quarter of 1995
to 4.30% in the first quarter of 1996, or an increase of 11 basis points.
Excluding the impact of derivative instruments utilized as hedges, changes in
interest rate spreads had a negative impact of 3 basis points on Crestar's first
quarter 1996 net interest margin, when compared to the first quarter of 1995.
<PAGE>
Off-balance sheet interest rate hedges made a positive contribution to net
interest income of $703 thousand during the first quarter of 1996, which was
composed of a $694 thousand increase in interest income and a $9 thousand
decrease in interest expense, based on the underlying asset or liability being
hedged. The positive impact on the first quarter 1996 net interest margin
equated to 2 basis points. In the first quarter of 1995, the comparable impact
of hedging activity was a decrease to Crestar's total interest income of $1.6
million and an increase to interest expense of $10 thousand, resulting in a
negative impact of 4 basis points to that quarter's net interest margin. On a
comparative basis, derivative instruments utilized as hedges contributed 6 basis
points to Crestar's net interest margin in the first quarter of 1996, compared
to the same quarter of 1995. Declines in the average balances of nonperforming
assets contributed to a 1 basis point increase in net interest margin for the
first three months of 1996, compared to the same period of 1995.
The extent to which Crestar will be able to maintain its current 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. Competition among financial
institutions, in addition to acquisition strategies, may lead to further
pressures on the Corporation's net interest margin in future periods.
As a result of the increase in the net interest margin and a 6% increase in
average earning assets, net interest income for the first quarter of 1996
increased 5% over the first quarter of 1995. Tax-equivalent net interest income
similarly increased by 5% during this period.
RISK EXPOSURES AND CREDIT QUALITY (TABLES 4-7)
Crestar's financial condition continues to exhibit strong overall credit
quality. The allowance for loan losses was $239 million at March 31, 1996,
representing 2.07% of period-end loans, 273% of period-end nonperforming assets,
and a 349% 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. Under the
Corporation's criteria for classification of nonperforming loans, loans that are
both (a) past due 90 days or more and (b) not deemed nonaccrual due to an
assessment of collectibility are specifically excluded from the definition of
nonperforming assets. Accruing loans past due 90 days or more, and excluded from
classification as nonperforming assets, totaled $65.3 million at March 31, 1996,
with consumer loans representing 95% of this amount.
At March 31, 1996, nonperforming assets of $87.5 million were down $25.7
million or 23% from March 31, 1995, and down $5.8 million from December 31,
1995. The ratio of nonperforming assets to loans and foreclosed properties-net
at March 31, 1996 was 0.76%, down from 0.79% at December 31, 1995 and 0.96% at
March 31, 1995. Based on current portfolio trends, and barring an unexpected
deterioration in the economy, management does not expect the ratio of
nonperforming assets to loans and foreclosed properties to change significantly
during the remainder of 1996. However, interim periods in 1996 could show
increases in the total balance of nonperforming assets due to loan growth,
future acquisitions of financial institutions, and the impact of higher interest
rates on borrowers.
The provision for loan losses was $20.3 million for the first quarter of
1996, an increase of $10.0 million from the $10.3 million provision expense
recorded in the first quarter of 1995. Provision expense in the fourth quarter
of 1995 was $21.3 million. Net charge-offs totaled $21.4 million in the first
three months of 1996, compared to $12.4 million in the comparable period of
1995. Net charge-offs as a percentage of average loans were 0.74% for the first
quarter of 1996, compared to 0.43% in the same period of 1995, and 0.64% for the
fourth quarter of 1995. Business loans experienced net recoveries of $2.0
million in the first quarter of 1996, compared to net charge-offs of $444
thousand in the comparable quarter of 1995. Consumer loan net charge-offs
totaled $23.3 million in the first quarter of 1996, compared to net charge-offs
of $21.0 million in the fourth quarter of 1995 and $11.9 million in the first
quarter of 1995.
The largest proportions of net loan charge-offs during the first quarter of
1996 and 1995 occurred in the bank card loan portfolio. Net charge-offs for bank
card loans were $18.0 million in the first three months of 1996, compared to
$10.0 million in 1995's first quarter. Net bank card loan charge-offs as a
percentage of bank card loans (on an annualized basis) were 4.42% for the first
quarter of 1996, compared to 2.67% in the first quarter of 1995. The ratio was
4.05% for the fourth quarter of 1995. A primary reason for the increase in net
bank card loan charge-offs is the significant growth of Crestar's bank card
portfolio experienced during 1993 through 1995. In addition, increases in the
net bank card loan charge-off ratio (net bank card loan charge-offs as a
percentage of average bank card loans) reflect an industry-wide trend of adverse
payment performance by consumers, as evidenced by a nationwide rise in consumer
loan delinquencies. Crestar's recent bank card loan charge-off experience is
comparable to current industry-wide measurements.
<PAGE>
The delinquency and loss characteristics of newly underwritten bank card
portfolios typically do not reach their highest levels until after 24 months
from origination. Crestar's bank card outstandings, which experienced
considerable growth from 1993 through mid-1995, are expected to produce higher
net charge-off levels as the newer portfolios "season." Consequently, Crestar
believes that in the current economic environment the ratio of net charge-offs
to average total loans for the full year 1996 will increase from the level
achieved during 1995, when net charge-offs averaged 0.52% of average loans. This
expectation recognizes that a sizable percentage of Crestar's consumer loans,
particularly in the bank card loan portfolio, is reaching an average maturity
that should see loss rates peak. This expectation is based upon assumptions
regarding the general economic climate in Crestar's principal markets, the
performance characteristics of the loan portfolio, and moderate growth in
consumer loan portfolios. Changes in these conditions could produce different
results.
In addition to other loan categories, Crestar closely manages its portfolio
of loans to real estate developers and investors (REDI). As shown in Table 4,
REDI outstanding balances remained fairly constant and totaled $1.3 billion at
March 31, 1996. This balance represented 11% of the total loan portfolio at that
date. At March 31, 1995 and December 31, 1995, REDI loans also represented 11%
of the total loan portfolio. REDI nonperforming assets were $51.2 million at
March 31, 1996, compared to $50.1 million at December 31, 1995. Table 5 provides
the property type and geographic diversification of the current REDI portfolio.
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.
Potential problem loans at March 31, 1996, not included in Table 7, totaled
approximately $182 million. Over 90% of this balance represents commercial or
real estate-income property related loans. Depending on changes in the economy
and other future events, these loans and others not presently identified as
problem loans could be classified as nonperforming assets in the future.
Potential problem loans were $151 million at December 31, 1995 and $226 million
at March 31, 1995. Fluctuations in potential problem loan balances from quarter
to quarter should be viewed in the context of the size of Crestar's total loan
portfolio, which was $11.5 billion at March 31, 1996.
NONINTEREST INCOME AND EXPENSE
(Table 8)
Noninterest income totaled $80.0 million in the first quarter of 1996, a $13.5
million or 20% increase over the first quarter of 1995. Excluding securities
gains and losses, noninterest income increased $8.7 million or 13% over the
results for the first three months of 1995. This increase reflects growth in the
noninterest income categories of mortgage origination income and trust and
investment advisory income. Trust and investment advisory income increased $2.4
million or 19% from 1995. Mortgage income for the first quarter of 1996 totaled
$5.7 million, compared to $0.7 million in the first quarter of 1995. These
results for the first quarter of 1996 reflect a higher level of gains recorded
on the sale of mortgage loans originated through Crestar's mortgage banking
operations. Noninterest income from service charges on deposit accounts and from
bank card-related income experienced slight declines. Miscellaneous noninterest
income, however, increased by $3.9 million over the first quarter of 1995. Gains
recorded from sale of selected branch assets and liabilities, and selected
consumer real estate mortgage loans, contributed $2.1 million of this increase.
Automated teller machine revenue, securities brokerage fees, mutual fund and
insurance income also experienced gains during this period.
Noninterest expense increased $2.3 million, or 2%, in the first quarter of
1996 compared to the same period of 1995. Excluding foreclosed properties
expense, noninterest expense increased 1% in the quarter. Total personnel costs,
Crestar's largest expense category, were $84.2 million in the first quarter of
1996, a 2% increase over the same period of 1995. Management continues to
emphasize prudent control of noninterest expenses and assimilation of
acquisitions in a cost effective manner. Decreases in FDIC insurance premium
rates, instituted in the third quarter of 1995 for most bank depository
accounts, led to a lower FDIC premium expense compared to first quarter 1995
results.
Reflecting improved credit conditions and real estate markets, foreclosed
properties expense for the quarter ended March 31, 1996 was a net recovery of
$1.3 million, compared to a net recovery of $1.5 million in the quarter ended
March 31, 1995. The net recoveries are primarily a result of gains recorded from
sales of foreclosed properties exceeding foreclosed property operating expenses
during the periods presented.
<PAGE>
The effective tax rate for the first quarter of 1996 was 36.0%, compared to
34.7% in the first quarter of 1995. Reduced proportions of tax-exempt interest
and dividends, increased provisions for state income taxes and higher levels of
nondeductible goodwill contributed to the higher effective tax rate for 1996.
Financial statement note 10 contains additional information concerning income
taxes.
FINANCIAL CONDITION
(Table 9)
Crestar's assets totaled $17.9 billion at March 31, 1996, compared to $18.3
billion in assets at December 31, 1995, and $16.9 billion at March 31, 1995.
Loans net of unearned income totaled $11.5 billion at March 31, 1996 compared to
$11.8 billion at both December 31, 1995 and March 31, 1995. Total deposits were
$12.9 billion at the end of the first quarter of 1996, compared to $13.3 billion
at December 31, 1995 and $12.6 billion at March 31, 1995. Total deposits were
down slightly from year-end 1995, as a higher interest rate environment and
increased competition for deposits resulted in declines in several deposit
categories.
In the fourth quarter of 1995, Crestar transferred selected securities from
the held to maturity portfolio to the available for sale securities portfolio.
At the time of transfer, the securities reclassified had a fair market value of
approximately $963 million. The transfer further strengthened the liquidity
position of Crestar by increasing the balance of securities available for sale.
With respect to the securities held to maturity portfolio, market value exceeded
the carrying value at March 31, 1996 by $2.0 million, consisting of $2.5 million
in unrealized gains and $0.5 million of unrealized losses. At March 31, 1996,
the amortized cost of securities available for sale exceeded the fair value of
such securities by $37.4 million, consisting of $7.1 million in unrealized gains
and $44.5 million in unrealized losses. Shareholders' equity at March 31, 1996
reflects a $24.2 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
an increase of $11.1 million at December 31, 1995 arising from net unrealized
gains on securities available for sale. At March 31, 1995, Crestar's
shareholders' equity reflected a $17.4 million reduction for the excess, net of
tax, of amortized cost of securities available for sale over fair value. 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
sales, purchases, maturities and calls of securities classified as available for
sale. Net unrealized losses in the securities available for sale portfolio
primarily reflect ongoing interest rate volatility, which is inherent in the
securities marketplace. Based on current market conditions, net unrealized
losses on securities are not expected to have a significant impact on the future
operating results or liquidity of Crestar.
All mortgage-backed securities in the securities available for sale and
securities held to maturity portfolios are subject to prepayment risk, since the
mortgage loans underlying these securities can prepay at any time without
penalty. This risk becomes apparent during periods of declining interest rates,
when refinancing of existing mortgage loans can accelerate. During these
periods, the expected maturity of mortgage-backed securities shortens due to
prepayments, reducing the expected stream of future interest payments to be
received. The interest rate and prepayment risk associated with mortgage-backed
securities is considered by management in assessing the overall asset/liability
structure of the Corporation.
All investment securities, including mortgage backed pass-through securities,
collateralized mortgage obligation (CMO) securities, and securitized credit card
receivables, are also managed with respect to their credit risk. Credit risk
arises because payments of interest and principal can be dependent on the
payment of the underlying mortgage or receivable payment where applicable, in
addition to the contractual obligation of the issuer to collect and remit such
payments to the individual security owners. The Corporation monitors credit risk
by assessing, and monitoring on an ongoing basis, the financial strength and
performance of the issuers of such securities. The "Other taxable securities"
classification of Crestar's securities available for sale portfolio (see
footnote 3 to the consolidated financial statements) at March 31, 1996 is
primarily composed of CMO securities with a fair value of approximately $406
million, and pass-through securities backed by credit card receivables of
approximately $78 million (fair value).
During the first quarter of 1996, Crestar sold approximately $1.5 billion of
securities classified as available for sale, generating securities gains of $2.4
million. Such sales were consummated in conjunction with the overall management
of interest rate risk for the Corporation. Securities losses recorded in the
first quarter of 1995 were $2.4 million.
Crestar purchased and retired 510,000 shares of common stock during the first
quarter of 1996, at an average price of $57.06 per share, for the ongoing needs
of its employee benefit plans. In April of this year, Crestar's Board of
Directors authorized the purchase and retirement of up to 1.0 million shares of
common stock in order to continue to meet the recurring needs of the
Corporation's dividend reinvestment plan, thrift and profit sharing plans and
other benefit programs. Also in April, Crestar announced a common stock dividend
increase, effective with the dividend payable on May 21, 1996, to $.52 per
share. This represents a 15.6% increase from the previous quarterly dividend
rate of $.45 per share. The increased dividend is intended to raise the
Corporation's ratio of dividends paid to shareholders as a percentage of net
income to the higher end of the Corporation's targeted range of 30% to 40%.
<PAGE>
LIQUIDITY AND INTEREST SENSITIVITY
(Tables 10-13)
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 on a daily basis, and
monitored regularly by the Asset/Liability Management Committee (ALCO). ALCO's
overall objective is to optimize net interest income after giving consideration
to capital adequacy, liquidity needs, interest rate risk, the economic outlook,
market opportunities, and customer needs. General strategies to accomplish these
objectives include maintaining a strong balance sheet, maintaining adequate core
deposit levels, taking an acceptable level of 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 64% of total funding sources at both
March 31, 1996 and December 31, 1995, compared to 68% at March 31, 1995. As an
additional indication of strong liquidity, securities available for sale
represented 21%, and money market investments an additional 2%, of Crestar's
total earning assets at March 31, 1996.
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.
The committee establishes a limit on the net interest income at risk for the
current planning period, generally either the current calendar year or the
remainder of the current year plus the next calendar year. The level of risk
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. A 9 to 24 month net interest income forecast is
prepared regularly based on a consensus interest rate forecast, in addition to
numerous high and low interest rate scenarios of up to and including 300 basis
points from current interest rates. The time period evaluated is linked to the
current planning horizon. The various interest rate scenarios represent a
reasonable range of interest rates. By its nature the simulation process
includes numerous assumptions, including assumptions on changes in average
balances and yields, changes in deposit and loan mix, and forecasts of interest
rate movements and speeds. The expected dynamics of the balance sheet, including
shifts in loans and deposits, are included in the simulations. Also taken into
account are the assumed effects of interest rate caps and floors, and variances
in the level of prepayment rates on loans and securities as a function of
interest rates. Prepayment assumptions are based on the expertise of management
along with input from external financial market sources. While the simulation
process is a powerful tool in analyzing interest sensitivity, many of the
assumptions used in the simulation process are both highly qualitative and
subjective, and subject to the risk that past historical activity may not
generate accurate predictions of future results.
The high rate and low rate estimates generated by this simulation process are
compared to the estimate generated under the consensus interest rate scenario.
At March 31, 1996, Crestar's projected net interest income under a consensus
interest rate scenario for the remainder of 1996 would decrease by 0.9% in a
high interest rate scenario, and would increase by 2.9% in a low interest rate
scenario. These projections were well within Crestar's tolerance for risk, and
indicate a sufficient liquidity position, and acceptable operating environment,
under the high, low and consensus interest rate scenarios.
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 statistical rate simulation techniques. The banking industry
and its regulatory authorities are considering 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. The
Corporation's measurement and interpretation process for market valuation models
is in a developmental stage.
<PAGE>
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 10, and reflects the earlier of the
maturity or repricing dates for various assets and liabilities at March 31,
1996. At that point in time, Crestar had a cumulative net liability sensitive
twelve-month gap with $3.2 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, interest
rate gap.
While most assets and liabilities reprice either at maturity or in accordance
with their contractual terms, some demonstrate characteristics that require
adjustments to more accurately reflect their repricing behavior or value to the
Corporation. Table 10 presents interest sensitivity on an adjusted basis to
reflect these characteristics. The first of these adjustments is made through
the use of beta factors, which are based on a ratio of actual changes in
interest rates on consumer deposits with no stated maturity (interest checking,
money market and regular savings deposits) 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
other funding sources, such as short-term borrowings, to movements in market
interest rates. For example, the beta adjustment for interest checking in Table
10 demonstrates that for any given increase or decrease in the prime loan rate,
Crestar expects the interest rates paid on interest checking deposits will
reprice much slower, in both a rising and falling rate environment, than the
prime rate. This is an industry wide characteristic of interest checking
deposits that Crestar must address for a more accurate gap analysis. The beta
adjustments, therefore, are used to quantify these deposits as sources of funds
that are less sensitive to interest rate changes than indicated by their
variable rate characteristics.
In addition to the beta adjustments, the table also incorporates an
adjustment to reflect the sensitivity of much of the Corporation's demand
deposit balances to the level of interest rates. In periods of rising interest
rates, average balances of non-interest bearing demand deposits will decrease
(all other factors being constant) as customers become more sensitive to
reducing debt or converting demand deposit balances to interest bearing
accounts. On a cumulative twelve-month basis, Crestar had a liability sensitive
"adjusted gap" at March 31, 1996, with $109 million excess of interest-sensitive
sources of funds over uses of funds. This generally indicates a relatively
neutral interest sensitivity, in comparison to the level of total earning assets
of $16.2 billion. The static gap and adjusted gap do not include $1.0 billion
(notional amount) of interest rate caps which Crestar has added to potentially
offset the effect that rising interest rates would have on the market value of
$1.0 billion of fixed-rate securities classified as securities available for
sale. No interest payments are received on interest rate caps if the applicable
interest index rate remains below the interest cap rate (see Table 11).
Each of the above three tools used to assess interest rate risk have
strengths and weaknesses. While Crestar believes that the above methodologies
provide a meaningful representation of the Corporation's interest rate
sensitivity, the methodologies do not necessarily take into account all business
developments which can have an impact on net interest income, such as changes in
credit quality or changes in the amount and composition of earning assets and
sources of funds.
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. Crestar's
outstanding interest rate swap instruments at March 31, 1996 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.
The majority of Crestar's outstanding interest rate cap instruments at March 31,
1996 are utilized to mitigate the declines in market value that can be
experienced by fixed rate securities in a rising interest rate environment.
Because financial derivatives typically do not have actual principal dollars
transferred between parties, notional principal amounts are used to express the
volume of such transactions. However, the notional amount of derivative
contracts does not represent direct credit exposure. Crestar's direct credit
exposure is generally limited to the estimated replacement cost of those
instruments in a gain position. Crestar has established policies governing
derivative activities, and the counterparties used by Crestar are considered an
acceptable credit risk. 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 losses at March 31, 1996. No interest rate
swaps, floors or caps used as hedges against interest rate risk were sold or
terminated prior to maturity during the first quarter of 1996, and at March 31,
1996 there were no deferred gains or losses arising from termination of hedged
transactions prior to maturity.
<PAGE>
The notional amount of Crestar's interest rate swaps and caps (excluding
customer positions where Crestar acts as an intermediary) was $2.3 billion at
March 31, 1996. Forward contracts with a notional amount of $979 million,
utilized to hedge lending commitments of Crestar's mortgage banking subsidiary,
were also outstanding at March 31, 1996, bringing the total notional value of
derivative financial instruments related to interest rate risk management
activities to $3.3 billion at March 31, 1996. Tables 11, 12, and 13 present
information regarding fair values, maturity, average rates, and activity as of
and for the three month period ending March 31, 1996 for these off-balance sheet
derivative instruments. Net unrealized gains on these instruments totaled $4.0
million as of March 31, 1996. Financial statement note 11 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. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" in 1995. Effective January
1, 1996, SFAS 121 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, a 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. SFAS 121 also established standards for recording
an impairment loss for certain assets that are subject to disposal. The
statement does not impact or change the accounting for financial instruments,
long-term customer relationships of financial institutions, mortgage servicing
rights and deferred income tax assets. Crestar adopted this accounting standard
in the first quarter of 1996; there was no impact to the Corporation's net
income or balance sheet upon implementation of SFAS No. 121.
The FASB also issued Statement of Financial Accounting Standards No 123,
"Accounting for Stock-Based Compensation" (SFAS 123), in 1995. This Standard
establishes financial accounting and reporting standards for stock-based
employee compensation plans, including stock option plans. While SFAS 123
defines a fair value based method of accounting for an employee stock option or
similar equity instrument, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value method of accounting
prescribed by Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees." Crestar has evaluated SFAS 123 and elected to
continue to measure the costs of its stock-based compensation plans under the
intrinsic value method of APB 25, and believes that this will be consistent with
a majority of public companies. Accordingly, Crestar's compliance with SFAS 123,
effective January 1, 1996, had no impact on the reported net income or earnings
per share of the Corporation.
DEPOSIT INSURANCE RECAPITALIZATION PROPOSAL
Legislative efforts to resolve the undercapitalization of the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation
(FDIC), and the disparity between deposit insurance premiums for SAIF-insured
deposits and deposits insured under the Bank Insurance Fund (BIF), may result in
a one-time special assessment on SAIF-insured deposits. Future earnings may be
impacted by a legislatively proposed one-time assessment of approximately 80
basis points (0.80%) on SAIF-insured deposits. Any one-time assessment on
SAIF-insured deposits would impact each of Crestar's three bank subsidiaries and
its savings bank subsidiary. Approximately 45% of Crestar's current deposit base
is SAIF-insured. An 80 basis point assessment, on an after-tax basis, would
result in a one-time charge to Crestar of approximately $25 million. As a
consequence of any one-time assessment, future earnings would be expected to be
augmented by a reduction in ongoing SAIF deposit insurance assessment rates. The
estimated $25 million charge for Crestar reflects a proposed 20% reduction in
the assessments on certain SAIF-insured deposits (known as Oakar deposits)
acquired by banks in certain thrift acquisitions. Crestar would accrue such a
liability if and when such legislation is enacted into law.
<PAGE>
TABLE 1 FINANCIAL HIGHLIGHTS
Dollars in millions, except per share data Three Months
%
FOR THE PERIOD ENDED MARCH 31 1996 1995 CHANGE
Net Income $ 55.4 $ 49.7 12
Dividends Declared on Common Stock 19.5 16.3 20
Per Common Share:
Net Income $ 1.27 $ 1.14 12
Dividends Declared .45 .40 13
Average Shares Outstanding (000s) 43,607 43,641 -
==============================================================================
KEY RATIOS
Return on Average Assets 1.28% 1.22%
Return on Average Equity 15.41 14.81
Average Equity to Average Assets 8.31 8.21
Net Interest Margin 4.63 4.59
AT MARCH 31
Book Value Per Share $ 33.50 $ 31.85 5
Equity to Assets 8.04% 8.20%
Risk Adjusted Capital Ratios:
Tier I 9.0 9.2
Total 12.2 12.7
Common Shares Outstanding (000s) 42,971 43,586
==============================================================================
TABLE 2 ANALYSIS OF EARNINGS PER COMMON SHARE
1st Qtr. 1996 1st Qtr. 1996
vs. vs.
1st Qtr. 1995 4th Qtr. 1995
Earnings Per Common Share - prior period $1.14 $ .61
- --------------------------------------------------------------------------------
Interest income .30 .05
Interest expense (.17) .04
Provision for loan losses (.15) (.05)
Securities gains or losses .07 .01
Other noninterest income .13 (.01)
Loyola one-time merger costs - .67
Other noninterest expense (.03) (.02)
Income taxes (.02) (.03)
- -------------------------------------------------------------------------------
Net increase .13 .66
- -------------------------------------------------------------------------------
Earnings Per Common Share - current period $1.27 $1.27
===============================================================================
<PAGE>
TABLE 3 AVERAGE BALANCES, NET INTEREST INCOME AND RATE/VOLUME ANALYSIS(1)
<TABLE>
<CAPTION>
Dollars in thousands
1st Qtr.
4th Qtr.
Average Balance Average
Increase Balance
1996 1995 (Decrease) 1995
<S> <C> <C> <C> <C>
$ $ % $
Commercial 3,000,689 3,024,523 (1) 2,991,304
Real estate - income property 903,330 895,594 1 911,154
Real estate - construction 252,562 269,533 (6) 263,736
Instalment 2,741,657 2,254,019 22 2,619,528
Bank card 1,626,601 1,492,890 9 1,624,399
Real estate - mortgage 3,050,951 3,480,302 (12) 3,382,392
- -----------------------------------------------------------------------------------------------------------
Total loans - net of unearned income(2) 11,575,790 11,416,861 1 11,792,513
- -----------------------------------------------------------------------------------------------------------
Securities held to maturity 83,039 1,214,448 (93) 739,775
Securities available for sale 3,040,679 1,488,270 104 2,169,769
Money market investments 203,278 479,863 (58) 279,302
Mortgage loans held for sale 777,637 224,039 247 491,094
- -----------------------------------------------------------------------------------------------------------
Total earning assets 15,680,423 14,823,481 6 15,472,453
===========================================================================================================
Interest checking deposits 1,931,893 1,955,738 (1) 1,886,810
Money market deposit accounts 3,031,642 2,828,365 7 2,971,862
Regular savings deposits 1,298,559 1,515,826 (14) 1,321,318
Domestic time deposits 4,114,545 3,859,741 7 4,122,028
- -----------------------------------------------------------------------------------------------------------
Total interest-bearing core deposits 10,376,639 10,159,670 2 10,302,018
- -----------------------------------------------------------------------------------------------------------
Purchased liabilities 2,152,087 1,775,402 21 2,061,027
Long-term debt 716,142 705,703 1 671,661
- -----------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 13,244,868 12,640,775 - 13,034,706
Other sources - net 2,435,555 2,182,706 12 2,437,747
- -----------------------------------------------------------------------------------------------------------
Total sources of funds 15,680,423 14,823,481 6 15,472,453
- -----------------------------------------------------------------------------------------------------------
Net Interest Income
===========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1st Qtr.
1996 vs. 1995
Income/Expense(3) Increase Change due to(4)
1996 1995 (Decrease) Rate(5) Volume
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
Commercial 60,360 62,105 (1,745) (1,261) (484)
Real estate - income property 20,266 18,861 1,405 1,244 161
Real estate - construction 6,420 6,971 (551) (113) (438)
Instalment 60,857 50,086 10,771 (38) 10,809
Bank card 48,196 43,077 5,119 1,303 3,816
Real estate - mortgage 58,541 66,588 (8,047) 133 (8,180)
- ---------------------------------------------------------------------------------------------------------
Total loans - net of unearned income(2) 254,640 247,688 6,952 3,529 3,423
- ---------------------------------------------------------------------------------------------------------
Securities held to maturity 1,890 19,453 (17,563) 1,427 (18,990)
Securities available for sale 49,283 24,298 24,985 611 24,374
Money market investments 2,800 6,922 (4,122) (132) (3,990)
Mortgage loans held for sale 14,294 4,375 9,919 (892) 10,811
- ---------------------------------------------------------------------------------------------------------
Total earning assets 322,907 302,736 20,171 2,772 17,399
=========================================================================================================
Interest checking deposits 9,519 10,933 (1,414) (1,281) (133)
Money market deposit accounts 27,530 26,632 898 (1,016) 1,914
Regular savings deposits 8,464 10,577 (2,113) (597) (1,516)
Domestic time deposits 54,841 43,825 11,016 8,150 2,866
- ---------------------------------------------------------------------------------------------------------
Total interest-bearing core deposits 100,354 91,967 8,387 6,405 1,982
- ---------------------------------------------------------------------------------------------------------
Purchased liabilities 28,326 25,775 2,551 (2,893) 5,444
Long-term debt 12,713 12,495 218 33 185
- ---------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 141,393 130,237 11,156 4,897 6,259
Other sources - net
- ---------------------------------------------------------------------------------------------------------
Total sources of funds 141,393 130,237 11,156 3,584 7,572
- ---------------------------------------------------------------------------------------------------------
Net Interest Income 181,514 172,499 9,015 (812) 9,827
=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
4th Qtr. 1st Qtr. 1996 vs. 4th Qtr. 1995
Income/
Expense(3) Increase Change due to(4)
1995 (Decrease) Rate(5) Volume
<S> <C> <C> <C> <C>
$ $ $ $
Commercial 62,546 (2,186) (2,383) 197
Real estate - income property 19,923 343 513 (170)
Real estate - construction 6,671 (251) 30 (281)
Instalment 58,730 2,127 (626) 2,753
Bank card 44,383 3,813 3,752 61
Real estate - mortgage 66,836 (8,295) (1,758) (6,537)
- ------------------------------------------------------------------------------------------
Total loans - net of unearned income2 259,089 (4,449) 324 (4,773)
- ------------------------------------------------------------------------------------------
Securities held to maturity 11,940 (10,050) 550 (10,600)
Securities available for sale 35,348 13,935 (253) 14,188
Money market investments 4,227 (1,427) (277) (1,150)
Mortgage loans held for sale 9,164 5,130 (228) 5,358
- ------------------------------------------------------------------------------------------
Total earning assets 319,768 3,139 (1,168) 4,307
==========================================================================================
Interest checking deposits 9,910 (391) (628) 237
Money market deposit accounts 28,470 (940) (1,513) 573
Regular savings deposits 8,793 (329) (178) (151)
Domestic time deposits 56,041 (1,200) (1,102) (98)
- ------------------------------------------------------------------------------------------
Total interest-bearing core deposits 103,214 (2,860) (3,610) 750
- ------------------------------------------------------------------------------------------
Purchased liabilities 29,128 (802) (2,086) 1,284
Long-term debt 12,067 646 (153) 799
- ------------------------------------------------------------------------------------------
Total interest-bearing liabilities 144,409 (3,016) (5,349) 2,333
Other sources - net
- ------------------------------------------------------------------------------------------
Total sources of funds 144,409 (3,016) (4,961) 1,945
- ------------------------------------------------------------------------------------------
Net Interest Income 175,359 6,155 3,793 2,362
==========================================================================================
</TABLE>
<PAGE>
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 $641,000 and $918,000 for the first
quarter of 1996 and 1995, respectively, and $1.2 million for the fourth
quarter of 1995.
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
March 31, December 31,
1996 1995 1995
Commercial - developer lines $ 118.1 $ 89.9 $ 105.2
Commercial - other 52.0 66.0 51.5
Real estate - income property 905.1 949.5 910.2
Real estate - construction 176.8 235.1 182.7
- -------------------------------------------------------------------------------
Total REDI loans $1,252.0 $1,340.5 $1,249.6
===============================================================================
TABLE 5 LOANS TO REAL ESTATE DEVELOPERS AND INVESTORS--
GEOGRAPHIC DISTRIBUTION AND PROPERTY TYPE
<TABLE>
<CAPTION>
March 31, 1996
Region
In millions
Total Greater
Corporation Washington Maryland Eastern Western Capital
<S> <C> <C> <C> <C> <C> <C>
Land acquisition and development $ 87.4 $ 37.3 $ 19.0 $ 24.0 $ 2.8 $ 4.3
Residential developments 327.0 120.5 91.2 62.7 34.1 18.5
Commercial projects:
Office buildings 188.8 91.6 46.6 31.3 8.1 11.2
Retail stores and malls 217.0 131.9 37.0 26.1 10.8 11.2
Hotels and motels 118.8 35.9 12.6 40.0 17.3 13.0
Industrial buildings 132.5 70.8 27.7 13.4 5.7 14.9
- ------------------------------------------------------------------------------------------------------------
Total commercial projects 657.1 330.2 123.9 110.8 41.9 50.3
- ------------------------------------------------------------------------------------------------------------
Special use 65.6 24.1 16.2 16.7 7.6 1.0
Other 114.9 71.1 11.0 13.2 2.3 17.3
- ------------------------------------------------------------------------------------------------------------
Total REDI loans $1,252.0 $583.2 $261.3 $227.4 $88.7 $91.4
============================================================================================================
</TABLE>
TABLE 6 ALLOWANCE FOR LOAN LOSSES
Dollars in thousands First Quarter
1996 1995
Beginning balance $240,285 $232,922
- -------------------------------------------------------------------------------
Allowance from acquisitions - net (388) 5,631
Provision for loan losses 20,300 10,301
Net charge-offs (recoveries):
Commercial (640) 699
Real estate - income property (1,255) 308
Real estate - construction (78) (563)
Instalment 4,563 1,674
Bank card 17,980 9,949
Real estate - mortgage 780 289
- -------------------------------------------------------------------------------
Total net charge-offs 21,350 12,356
- -------------------------------------------------------------------------------
Balance, March 31 $238,847 $236,498
===============================================================================
Allowance for loan losses to period-end loans 2.07% 2.01%
Annualized net charge-offs to average loans .74 .43
===============================================================================
<PAGE>
TABLE 7 NONPERFORMING ASSETS(1) AND PAST DUE LOANS
<TABLE>
<CAPTION>
Dollars in thousands March 31, December 31,
Nonaccrual loans: 1996 1995 1995
<S> <C> <C> <C>
Commercial $21,774 $ 27,037 $21,731
Real estate - income property 22,855 26,879 23,913
Real estate - construction 6,267 7,710 4,712
Instalment 2,775 4,855 5,425
Real estate - mortgage 14,682 12,820 19,925
- --------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 68,353 79,301 75,706
Restructured loans - 1,458 -
- --------------------------------------------------------------------------------------------------------------
Total nonperforming loans(1) 68,353 80,759 75,706
Foreclosed properties - net 19,175 32,449 17,655
- --------------------------------------------------------------------------------------------------------------
Total nonperforming assets(1) $87,528 $113,208 $93,361
==============================================================================================================
Nonperforming assets(1) to:
Loans and foreclosed properties - net .76% .96% .79%
Total assets .49 .67 .51
Allowance for loan losses to:
Nonperforming assets(1) 273 209 257
Nonperforming loans(1) 349 293 317
Allowance for loan losses plus shareholders' equity to
nonperforming assets(1) 19.18x 14.35x 18.12x
==============================================================================================================
Accruing loans past due 90 days:
Commercial $ 3,220 $ 1,514 $ 5,992
Real estate - income property 59 1,110 19
Real estate - construction 16 989 926
Instalment
Student 19,379 10,879 9,101
Other 7,318 1,846 3,448
Bank card 21,364 11,685 20,430
Real estate - mortgage 13,974 9,349 10,304
- --------------------------------------------------------------------------------------------------------------
Total accruing loans past due 90 days $65,330 $ 37,372 $50,220
==============================================================================================================
</TABLE>
1\ Loans which are both past due 90 days or more and not deemed nonaccrual due
to an assessment of collectibility are specifically excluded form the
definition of nonperforming.
<PAGE>
TABLE 8 SUMMARY OF NONINTEREST INCOME AND EXPENSE
In thousands
First Quarter Fourth
Quarter
NONINTEREST INCOME 1996 1995 1995
Service charges on deposit accounts $ 21,610 $ 21,908 $ 22,143
Trust and investment advisory 15,562 13,124 15,877
Bank card-related 11,014 11,097 12,387
Mortgage servicing - net 4,459 4,236 4,132
Mortgage origination - net 5,654 721 4,368
Trading account activities 52 624 833
Commissions on letters of credit 1,470 1,367 1,019
Gain on sale of mortgage servicing rights 4,000 5,900 5,100
Miscellaneous 13,859 9,978 7,026
Securities gains (losses) 2,355 (2,410) 1,316
- ------------------------------------------------------------------------------
Total noninterest income $ 80,035 $ 66,545 $ 74,201
==============================================================================
NONINTEREST EXPENSE
Salaries $ 66,376 $ 66,192 $ 73,939
Benefits 17,855 16,475 18,700
- ------------------------------------------------------------------------------
Total personnel 84,231 82,667 92,639
Occupancy - net 12,754 12,201 12,805
Equipment 7,698 7,901 7,879
Communications 8,152 7,685 7,904
Stationery, printing and supplies 2,286 2,462 3,489
Professional fees and services 4,224 3,962 8,246
Loan expense 2,268 1,900 2,457
FDIC premiums - net 3,378 7,207 4,066
Advertising and marketing 5,190 4,938 2,703
Transportation 1,569 1,674 1,665
Outside data services 5,724 5,967 7,544
Amortization of purchased intangibles 4,047 2,974 3,756
Miscellaneous 12,029 9,833 17,565
- -------------------------------------------------------------------------------
Subtotal 153,550 151,371 172,718
Foreclosed properties (net recoveries) (1,345) (1,461) (3,851)
- -------------------------------------------------------------------------------
Total noninterest expense $152,205 $149,910 $168,867
===============================================================================
TABLE 9 DEBT RATINGS
(AS OF APRIL 30, 1996)
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
================================================================================
<PAGE>
TABLE 10 INTEREST SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
March 31, 1996
In millions Maturity/Rate Sensitivity
0-3 3-6 6-12 one to over
USES OF FUNDS months months months five years five years Total
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 2,140.6 $ 51.1 $ 76.5 $ 88.0 $ 728.4 $ 3,084.6
Real estate - income property 493.5 .4 .6 1.1 407.5 903.1
Real estate - construction 228.8 .5 1.5 3.5 19.7 254.0
Instalment 1,170.2 139.0 243.5 313.6 878.4 2,744.7
Bank card 570.1 132.3 204.3 430.2 250.2 1,587.1
Real estate - mortgage 156.6 348.6 481.2 668.9 1,295.2 2,950.5
Securities held to maturity 3.0 2.4 3.0 4.6 68.3 81.3
Securities available for sale 565.8 59.6 90.3 156.7 2,587.1 3,459.5
Money market investments 350.8 4.9 - - - 355.7
Mortgage loans held for sale 758.8 - - - - 758.8
- -------------------------------------------------------------------------------------------------------------
Total earning assets 6,438.2 738.8 1,100.9 1,666.6 6,234.8 16,179.3
Interest sensitivity hedges on assets (450.0) (850.0) - - 1,300.0 -
- -------------------------------------------------------------------------------------------------------------
Total uses $ 5,988.2 $ (111.2) $ 1,100.9 $ 1,666.6 $7,534.8 $16,179.3
=============================================================================================================
SOURCES OF FUNDS
Interest checking deposits $ 1,933.8 $ - $ - $ - $ - $ 1,933.8
Money market deposit accounts 3,045.5 - - - - 3,045.5
Regular savings deposits 1,307.5 - - - - 1,307.5
Domestic time deposits 369.5 496.3 753.1 1,117.3 1,328.8 4,065.0
Certificates of deposit $100,000
and over 41.5 36.5 29.1 30.8 4.9 142.8
Short-term borrowings 2,187.0 - - - - 2,187.0
Long-term debt 6.3 8.2 19.5 36.1 633.9 704.0
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 8,891.1 541.0 801.7 1,184.2 1,967.6 13,385.6
Other sources - net - - - - 2,793.7 2,793.7
Interest sensitivity hedges on liabilities - (40.0) - - 40.0 -
- -------------------------------------------------------------------------------------------------------------
Total sources $ 8,891.1 $ 501.0 $ 801.7 $ 1,184.2 $4,801.3 $16,179.3
=============================================================================================================
Cumulative maturity/rate
sensitivity gap $(2,902.9) $(3,515.1) $(3,215.9) $(2,733.5) $ - $ -
=============================================================================================================
ADJUSTMENTS
Beta adjustments:
Interest checking (beta factor .23) $ 1,489.0
Money market accounts
(beta factor .50) 1,522.8
Regular savings (beta factor .13) 1,139.0
Demand deposit sensitivity (1,043.6)
- -------------------------------------------------------------------------------------------------------------
Cumulative adjusted maturity/rate
sensitivity gap $ 204.3 $ (407.9) $ (108.7) $ 373.7 $ - $ -
=============================================================================================================
</TABLE>
<PAGE>
TABLE 11 OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS(1)
<TABLE>
<CAPTION>
March 31, 1996 Average
Weighted Fixed Estimated
Dollars in thousands Notional Average Receive Fair
Balance Maturity-bate Value Comments
<S> <C> <C> <C> <C> <C>
INTEREST RATE CONVERSIONS
Generic interest rate swaps $1,300,000 3.3 yrs. 5.83% Notional amounts of
Carrying amount(2) $ 514 $850 million, $250
Commercial loan program million and $200 million
Unrealized gross gains 43 convert floating rate
Unrealized gross losses (9,345) commercial, instalment
Instalment loan program and real estate mortgage
Unrealized gross losses (2,007) loans, respectively, to
Real estate mortgage loan fixed rate. Floating rates
program paid tied to LIBOR.
Unrealized gross losses (1,018)
Estimated fair value (11,813)
Interest rate caps 1,040,000 3.9 yrs. 7.44%(3) Notional balance of $1
Carrying amount(2) 11,845 billion hedges the market
Securities available for sale value of fixed rate
program(4) securities available for sale
Unrealized gross gains 467 (strike rate tied to yield on
Unrealized gross losses (580) 5 year constant maturity
Money market deposit program U.S. Treasury security).
Unrealized gross gains 203 Notional balance of $40
Estimated fair value 11,935 million hedging interest
rate risk associated with
rising interest rates
on floating rate money
market deposits (strike
rate tied to LIBOR).
HEDGES OF LENDING COMMITMENTS
Forward contracts 979,010 .1 yrs. n/a Hedges of residential
Unrealized gross gains 16,283 mortgage lending
Estimated fair value 16,283 commitments.
- -------------------------------------------------------------------------------------------------------------------
Total hedges against
interest rate risk $3,319,010 $16,405
===================================================================================================================
</TABLE>
1\ Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
2\ Includes any accrued interest receivable and or payable balances, and
unamortized premiums paid for interest rate caps.
3\ 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 during 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 remains below the cap rate.
4\ The fair value of derivative interest rate caps hedging securities classified
as available for sale is included in the total fair value of the securities
available for sale portfolio. The unamortized premiums paid for such interest
rate caps are included in the amortized cost basis of securities available
for sale, with any unrealized gain or loss (net of tax) pertaining to these
interest rate caps included in shareholders' equity as "Net unrealized gain
(loss) on securities available for sale."
n/a - Not applicable
LIBOR - London Interbank Offered Rates
<PAGE>
TABLE 12 OFF-BALANCE SHEET DERIVATIVES--EXPECTED MATURITIES(1)
<TABLE>
<CAPTION>
March 31, 1996
Dollars in thousands Within One to Three to
One Year Three Years Five Years Total
<S> <C> <C> <C> <C>
INTEREST RATE CONVERSIONS
Generic interest rate swaps:
Notional amount $ - $600,000 $ 700,000 $1,300,000
Average fixed receive rate - 5.69% 5.94% 5.83%
Estimated fair value $ - $ (4,256) $ (7,557) $ (11,813)
Interest rate caps
Notional amount $ 5,000 $ 35,000 $1,000,000 $1,040,000
Average strike rate 5.50% 5.93% 7.50% 7.44%
Estimated fair value $ 7 $ 198 $ 11,730 $ 11,935
HEDGES OF LENDING COMMITMENTS
Forward contracts:(2)
Notional amount $979,010 $ - $ - $ 979,010
Estimated fair value 16,283 - - 16,283
Total hedges against
interest rate risk:
Notional amount $984,010 $635,000 $1,700,000 $3,319,010
Estimated fair value 16,290 (4,058) 4,173 16,405
=============================================================================================================
</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 13 OFF-BALANCE SHEET DERIVATIVES ACTIVITY(1)
<TABLE>
<CAPTION>
In thousands Liability Rate
Asset Rate Conversions Conversions Hedges of
Interest Interest Interest Lending
Rate Rate Rate Commit-
Swaps Caps Caps ments(2) Total
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $1,200,000 $ - $40,000 $ 547,790 $1,787,790
Additions 200,000 1,000,000 - 997,232 2,197,232
Maturities (100,000) - - (566,012) (666,012)
- ------------------------------------------------------------------------------------------------------------
Balance, March 31, 1996 $1,300,000 $1,000,000 $40,000 $ 979,010 $3,319,010
============================================================================================================
</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.
<PAGE>
TABLE 14 SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Dollars in thousands, except per share data
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Results of operations: 1996 1995 1995 1995 1995
<S> <C> <C> <C> <C> <C>
Net interest income(1) $181,514 $175,359 $172,475 $173,744 $172,499
Provision for loan losses 20,300 21,302 14,231 13,736 10,301
- -------------------------------------------------------------------------------------------------------------
Net credit income 161,214 154,057 158,244 160,008 162,198
Securities gains (losses) 2,355 1,316 (69) (1,050) (2,410)
Other noninterest income 77,680 72,885 75,044 73,871 68,955
- -------------------------------------------------------------------------------------------------------------
Net credit and noninterest income 241,249 228,258 233,219 232,829 228,743
Noninterest expense 152,205 168,867 148,570 152,087 149,910
- -------------------------------------------------------------------------------------------------------------
Income before taxes 89,044 59,391 84,649 80,742 78,833
- -------------------------------------------------------------------------------------------------------------
Tax-equivalent adjustment 2,501 2,568 3,198 2,719 2,776
Book tax expense 31,121 30,526 29,375 26,258 26,398
- -------------------------------------------------------------------------------------------------------------
Income tax expense 33,622 33,094 32,573 28,977 29,174
- -------------------------------------------------------------------------------------------------------------
Net Income $ 55,422 $ 26,297 $ 52,076 $ 51,765 $ 49,659
=============================================================================================================
Per common share:
Net income $ 1.27 $ .61 $ 1.19 $ 1.18 $ 1.14
Dividends declared .45 .45 .45 .45 .40
Average shares outstanding (000s) 43,607 43,634 43,686 43,782 43,641
=============================================================================================================
Selected ratios and other data:
Return on average assets 1.28% .62% 1.25% 1.25% 1.22%
Return on average equity 15.41 7.28 14.74 14.98 14.81
Net interest margin1 4.63 4.55 4.57 4.61 4.59
Net charge-offs as % of average loans .74 .64 .58 .42 .43
Allowance as % of period-end loans 2.07 2.04 2.00 2.01 2.01
Overhead ratio 58.19 67.67 60.04 61.68 62.71
Average equity to assets 8.31 8.46 8.51 8.36 8.21
Equity leverage 12.04x 11.82x 11.75x 11.96x 12.17x
Full-time equivalent employees (period end) 6,705 6,712 7,018 7,172 7,385
=============================================================================================================
</TABLE>
1\ Tax-equivalent basis.
<PAGE>
Table 15 Consolidated Average Balances/Net Interest Income/Rates(1)
<TABLE>
<CAPTION>
Three Months Ended March 31, Three Months Ended December 31,
1996 1995 1995
Dollars in thousands Income/ Yield/ Income/ Yield/ Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets $ $ % $ $ % $ $ %
Securities held to maturity(2) 83,039 1,890 9.11 1,214,448 19,453 6.72 739,775 11,940 6.46
Securities available for sale(2) 3,040,679 49,283 6.48 1,488,270 24,298 6.31 2,169,769 35,348 6.51
Money market investments(2) 203,278 2,800 5.54 479,863 6,922 5.85 279,302 4,227 6.00
Mortgage loans held for sale(2) 777,637 14,294 7.37 224,039 4,375 7.81 491,094 9,164 7.48
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial 3,000,689 60,360 8.09 3,024,523 62,105 8.27 2,991,304 62,546 8.32
Real estate - income property 903,330 20,266 9.00 895,594 18,861 8.48 911,154 19,923 8.64
Real estate - construction 252,562 6,420 10.21 269,533 6,971 10.46 263,736 6,671 10.00
Instalment 2,741,657 60,857 8.92 2,254,019 50,086 8.89 2,619,528 58,730 9.00
Bank card 1,626,601 48,196 11.94 1,492,890 43,077 11.45 1,624,399 44,383 10.99
Real estate - mortgage 3,050,951 58,541 7.67 3,480,302 66,588 7.63 3,382,392 66,836 7.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans(2),(3) 11,575,790 254,640 8.83 11,416,861 247,688 8.68 11,792,513 259,089 8.78
Allowance for loan losses (240,615) (236,693) (236,412)
- ------------------------------------------------------------------------------------------------------------------------------------
Loans - net 11,335,175 11,180,168 11,556,101
Cash and due from banks 811,209 754,073 800,770
Premises and equipment - net 355,684 349,986 358,426
Customers' liability on acceptances 14,264 9,165 7,085
Intangible assets - net 184,172 135,177 175,393
Foreclosed properties - net 17,592 33,014 18,796
Other assets 489,561 456,806 487,158
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 17,312,290 16,325,009 17,083,669
Total Earning Assets 15,680,423 322,907 8.26 14,823,481 302,736 8.18 15,472,453 319,768 8.26
Liabilities and Shareholders' Equity
Interest checking deposits 1,931,893 9,519 1.98 1,955,738 10,933 2.27 1,886,810 9,910 2.08
Money market deposit accounts 3,031,642 27,530 3.65 2,828,365 26,632 3.82 2,971,862 28,470 3.80
Regular savings deposits 1,298,559 8,464 2.62 1,515,826 10,577 2.83 1,321,318 8,793 2.64
Domestic time deposits 4,114,545 54,841 5.37 3,859,741 43,825 4.65 4,122,028 56,041 5.39
Certificates of deposit $100,000 and over 109,364 1,449 5.33 68,550 857 5.08 84,504 1,180 5.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total savings and time deposits2 10,486,003 101,803 3.90 10,228,220 92,824 3.70 10,386,522 104,394 3.99
Demand deposits 2,355,997 2,123,067 2,330,684
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 12,842,000 12,351,287 12,717,206
Short-term borrowings2 2,042,723 26,877 5.28 1,706,852 24,918 5.90 1,976,523 27,948 5.60
Long-term debt2 716,142 12,713 7.10 705,703 12,495 7.08 671,661 12,067 7.19
Liability on acceptances 14,264 9,165 7,085
Other liabilities 258,982 210,661 265,696
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 15,874,111 14,983,668 15,638,171
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,438,179 1,341,341 1,445,498
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity 17,312,290 16,325,009 17,083,669
Total interest-bearing liabilities 13,244,868 141,393 4.30 12,640,775 130,237 4.19 13,034,706 144,409 4.41
Other sources - net 2,435,555 2,182,706 2,437,747
- ------------------------------------------------------------------------------------------------------------------------------------
Total Sources of Funds 15,680,423 141,393 3.63 14,823,481 130,237 3.59 15,472,453 144,409 3.71
Net Interest Spread 3.96 3.99 3.85
Net Interest Income/Margin 181,514 4.63 172,499 4.59 175,359 4.55
====================================================================================================================================
</TABLE>
1\ Income and yields are computed on a tax-equivalent basis using the statutory
federal income tax rate exclusive of the alternative minimum tax and
nondeductible interest expense.
2\ Indicates earning asset or interest-bearing liability.
3\ Nonaccrual loans are included in the average loan balances and income on such
loans is recognized on a cash basis.
<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 May 15, 1996 /s/ JAMES D. BARR
James D. Barr
Executive Vice President,
Controller and Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 703,078 715,953
<INT-BEARING-DEPOSITS> 10,494,669 10,449,295
<FED-FUNDS-SOLD> 215,188 669,985
<TRADING-ASSETS> 3,771 8,250
<INVESTMENTS-HELD-FOR-SALE> 3,459,546 1,449,716
<INVESTMENTS-CARRYING> 81,328 1,161,245
<INVESTMENTS-MARKET> 83,375 1,123,767
<LOANS> 11,523,953 11,764,392
<ALLOWANCE> 238,847 236,498
<TOTAL-ASSETS> 17,917,006 16,921,198
<DEPOSITS> 12,942,754 12,585,700
<SHORT-TERM> 2,186,975 1,976,696
<LIABILITIES-OTHER> 643,616 254,601
<LONG-TERM> 704,045 715,829
0 0
0 0
<COMMON> 214,856 217,932
<OTHER-SE> 1,224,760 1,170,440
<TOTAL-LIABILITIES-AND-EQUITY> 17,917,006 16,921,198
<INTEREST-LOAN> 252,945 245,444
<INTEREST-INVEST> 50,380 43,222
<INTEREST-OTHER> 17,081 11,294
<INTEREST-TOTAL> 320,406 299,960
<INTEREST-DEPOSIT> 101,803 92,824
<INTEREST-EXPENSE> 141,393 130,237
<INTEREST-INCOME-NET> 179,013 169,723
<LOAN-LOSSES> 20,300 10,301
<SECURITIES-GAINS> 2,355 (2,410)
<EXPENSE-OTHER> 152,205 149,910
<INCOME-PRETAX> 86,543 76,057
<INCOME-PRE-EXTRAORDINARY> 55,422 49,659
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 55,422 49,659
<EPS-PRIMARY> 1.27 1.14
<EPS-DILUTED> 1.27 1.14
<YIELD-ACTUAL> 4.63 4.59
<LOANS-NON> 68,353 80,759
<LOANS-PAST> 65,330 37,372
<LOANS-TROUBLED> 0 1,458
<LOANS-PROBLEM> 182,000 226,000
<ALLOWANCE-OPEN> 240,285 232,922
<CHARGE-OFFS> 27,720 19,660
<RECOVERIES> 6,370 7,304
<ALLOWANCE-CLOSE> 238,847 236,498
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
